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compensation insurance policy related to liability for claims
below $250,000 are not deductible as premiums.60
Respondent does not argue that the terms of the controlling
documents are insufficient to constitute insurance or that the
contractual terms of Liberty Mutual's reinsurance with OPL negate
the existence of insurance. Rather, respondent argues that
although petitioner had a formal insurance agreement with Liberty
Mutual, "in practice" petitioner and Liberty Mutual disregarded
the transactional documents in subsequent years and allowed OPL,
through Liberty Mutual, to collect an increased premium when
losses increased in subsequent years. There is no evidence that
this alleged "practice" in later years was part of any agreement
in 1984.
Pursuant to the workers' compensation arrangement, Liberty
Mutual accepted a measurable degree of risk in entering the
insurance contract with petitioner.61 Apparently, respondent's
only complaint is that in the 10 years after the year in issue,
petitioner paid Liberty Mutual additional amounts as premiums
(based on loss experience) that it was not required to pay under
60Respondent questions the validity of $11,151,675 of a
total payment to Liberty Mutual of $14,241,915.
61Liberty Mutual was also required to investigate and adjust
all claims made under the policy. Consequently, petitioner
avoided the costs inherent in administrating its own self-
insurance program and avoided the regulatory requirements of that
activity.
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