MEMORANDUM OPINION AND ORDER The plaintiffs1 bring this action against the defendants2 for allegedly selling insurance policies that charged the plaintiffs rates not approved by New York State regulators. Two of the plaintiffs, National Convention Services, LLC, and Exserv, Inc., seek to certify a class of of New York businesses that purchased workers’ compensation coverage from the defendants. For the reasons explained below, the plaintiffs’ motion for class certification is denied.I.This case concerns contracts for the purchase of workers’ compensation insurance. (Am. Compl. 2.) Workers’ compensation insurance covers employers for medical costs and a portion of lost wages if an employee becomes injured or sick as a result of the employee’s employment. (Id. 25.) The plaintiffs state that under New York law, all employers in New York State must secure workers’ compensation benefits for their employees. (Id. 2.) They also state that employers must file with the New York State Department of Financial Services (“DFS”) all workers’ compensation insurance rates, rating plans, rating rules, rate manuals, and policy forms. (Id.
2-3.) Once an insurance rate is approved by DFS, the insurance carrier may not deviate from the approved rates without approval from DFS. (Id. 3.)Typically, employers purchase either “guaranteed cost” policies or “retrospective rating plan” policies. (Id. 33.) Both policies transfer underwriting risk to the insurer, which means that if an employer’s workers’ compensation claims exceed the amount of premium paid, the insurer pays the excess amount. (Id.) However, the plans differ in how the costs are fixed. Traditionally, a guaranteed cost policy fixes the premium at the outset of the policy period, meaning that the premium does not change regardless of how many claims are filed during the policy period. (Id.) Retrospective rating plan policies, on the other hand, are loss-sensitive, meaning that the premium charged at the beginning of the policy period is subject to change depending on the claims filed during the policy period. (Id. 34.)The plaintiffs claim that the defendants sold them guaranteed cost policies and that the defendants submitted those policies for approval to DFS. (Id. 37.) However, after DFS approved the guaranteed cost policies, the defendants entered into agreements with the plaintiffs called “reinsurance participation agreements.” (Id. 4.) The defendants did not file the reinsurance participation agreements with DFS or receive approval by DFS to enter into these agreements. (Id. 37.) The reinsurance participation agreements altered the terms and conditions of the guaranteed cost insurance policies by converting those policies into quasi retrospective rating plans. (Id.
