Berkley Assurance Company v. Expert Group International Inc.
Filing
77
ORDER granting 45 Motion for summary judgment; denying 49 Motion for summary judgment. The Clerk is directed to terminate any pending motions/deadlines and to close the case. Signed by Judge William F. Jung on 9/27/2018. (CCB)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
BERKLEY ASSURANCE COMPANY,
Plaintiff,
v.
CASE NO. 8:16-cv-3466-T-02JSS
EXPERT GROUP INTERNATIONAL INC.
d/b/a Expert Au Pair,
Defendant.
/
ORDER GRANTING FINAL SUMMARY JUDGMENT
This matter comes before the Court on cross motions for summary judgment filed
by Plaintiff Berkley Assurance Company (“Berkley”) and Defendant Expert Group
International Inc. d/b/a Expert Au Pair (“EAP”). The Court grants Berkley’s Motion
(Dkt. 45) and denies EAP’s motion (Dkt. 49).
EAP is one of several businesses in the country that recruits, arranges, brokers,
sponsors, and pays foreign au pairs for services to families in the United States. EAP and
several other au pair broker services were sued in 2014 in a “wage suppression” class
action in Colorado United States District Court, 1:14-cv-03074-CMA (D. Co.). This
federal Colorado action is the “underlying suit” in this insurance coverage dispute.
Berkley filed this declaratory action to establish that it owed no duty to defend or
indemnify to its insured EAP in the underlying suit. The underlying original complaint
was expanded twice by amendment, but each of the three complaints at issue asserted the
same gravamen against EAP: a nationwide conspiracy to suppress au pair wages illegally.
It is uncontested that at the time EAP applied for the policy at issue1 [which was after the
first amended complaint] EAP knew of circumstances that could result in a potential
future claim, yet indicated “No,” it did not.
A simple time line shows why the “prior knowledge” exclusion bars EAP’s request
for coverage:
Nov. 13, 2014
EAP is named in underlying Colorado federal
class action law suit. EAP’s CEO Gaulter heard
“rumors” of the suit prior to its service on EAP
in early 2015. The complaint’s allegations were
detailed and wide-ranging.
Feb. 2, 2015
EAP puts its then-insurer [not Berkley] on
notice of the suit and requests a
defense/indemnification. The then-insurer
provides a defense under reservation of rights,
by letter 4/5/2015.
Feb. 4, 2015
EAP’s Gaulter prepares the first Berkley
insurance application, stating “No” as to
whether EAP or agents were “aware of any fact,
circumstance, situation, incident or allegation of
negligence or wrongdoing, which might afford
grounds for any claim such as would fall under
the proposed insurance.”
Feb. 14, 2015 - Feb. 14, 2016
The first Berkley 12-month policy is issued and
expires.
1
Policy VUMC0080321, coverage date February 14, 2016 - February 14, 2017.
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March 13, 2015
EAP is served with a First Amended Complaint
in the underlying suit. It expanded theory of
liability and parties, but basically kept the
original “au pair wage suppression conspiracy”
theme. Individual au pairs are added as wage
claimants, but none sponsored by EAP.
Nov. 15, 2015
The EAP former insurer Colony [not Berkley]
followed up on the April reservation of rights
and filed a declaratory judgment action against
EAP seeking to avoid coverage for the
underlying suit. EAP contested the matter.
January 2016
A second prior EAP insurer (Burlington) denied
coverage for the Colony declaratory suit.
January 2016
EAP sent notice and demand to Berkley seeking
a defense from Berkley in the Colony
declaratory judgment action. Berkley declined
coverage of the Colony declaratory action, on
January 15, 2016. In this letter Berkley noted it
had reviewed the underlying au pair wage suit.
Berkley noted the inception of this suit was
prior to Berkley’s coverage; thus Berkley told
EAP no coverage would exist for the
underlying, preexisting au pair wage suit.
Feb. 12, 2016
EAP’s Gaulter prepared a renewal application
for coverage with Berkley. He again answered
“No” to the prior knowledge question, denying
EAP’s awareness “of any fact, circumstance,
situation, incident or allegation of negligence or
wrongdoing, which might afford grounds for
any claim such as would fall under the proposed
insurance.”
Feb. 14, 2016 - Feb. 14, 2017
The term of the renewal Berkley policy that is at
issue.
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August 17, 2016
EAP was served with a Second Amended
Complaint in the underlying au pair wage suit.
Plaintiffs’ same theory of liability existed. A
new au pair plaintiff (Miss Mapledoram) was
added. Miss Mapledoram was sponsoree of
EAP. This addition permitted Plaintiffs’
counsel to include EAP as defendant in six
additional wage-related counts for the first time.
EAP reported these new counts to Berkley,
contending the new counts were “claims” within
the renewed Berkley policy.
The main part of Defendants’ argument is that EAP could not and did not know in
advance that an EAP au pair would sue EAP for personal wage claims and negligent
misrepresentation in the third version of the underlying complaint. This point is devoid of
merit.
The prior knowledge limitation of the policy is that:
As of the inception date of this policy, no insured, had any
knowledge of any circumstance likely to result in or give rise
to a “claim” nor could have reasonably foreseen that a
“claim” might likely be made.
This is broad language: “any knowledge of any circumstance.”
At the time CEO Gualter stated “No” to this prior knowledge question, on
February 12, 2016, in applying for policy VUMC0080321, Gaulter and EAP and any
percipient observer knew the following eight points:
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1) EAP had been sued in an initial complaint on 11/13/14 as “an illegal cartel . . .
that set wage rates for the industry for below the market rate . . .” 1:14-cv-03094-CMA
(D. Co.) (Dkt. 1-2). This Sherman Act conspiracy was alleged to be nationwide.
2) That the named plaintiff in the initial underlying complaint was suing on behalf
of “others similarly situated” in the price-fixing (wage suppression) class that included
the au pairs sponsored or brokered by EAP. Plaintiff estimated this class size, seeking
class representative status, to include 50,000 au pairs.
3) The plaintiff’s initial complaint sought treble damages, injunctive relief and
fees against EAP for an illegal restraint of trade, i.e., collusive au pair wages suppression.
Back wages were the underlying damages sought. Id. (Dkt. 1-2, at 18-21).
4) That EAP’s recruiting/marketing website was described in the initial complaint
as part of the anti-competitive wage-reduction cartel, alleged to be violative of various
state laws where the au pairs worked, and the Fair Labor Standards Act.
5) Besides class representation status, the individual named plaintiff in the initial
complaint sought her personal back wages against her sponsoring company (not EAP)
based on the state law where she worked, also alleging breach fiduciary duty to the au
pairs.
6) On 3/13/15 EAP was served with a First Amended Complaint. (Dkt. 47-3, Ex.
Ex. 35; Dkt. 47-1, Gual at 54-55, 87-88). This complaint made similar wage-suppression
claims as the original. Four additional individual au pairs joined the original one as
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named plaintiffs, and sued their sponsoring companies (none were EAP) for similar
wage-related claims.
7) By April 2015 CEO Gaulter stated EAP was “exposed to millions of dollars in
damages” by the wage-suppression claim. (Dkt. 46-2, Ex. 6, at 3). EAP was actively
fighting in Court the allegations that it conspired to suppress the wages of its au pairs.
8) By January 2016 one prior insurer, Colony, had filed a declaratory action to
avoid coverage. Both Berkley and a second insurer, Burlington, denied EAP’s request to
defend EAP in this Colony declaratory action. Berkley told EAP then in writing no
Berkley coverage existed for this underlying wage suppression law suit.
It is uncontested that all the facts in items 1-8 above were known by EAP and its
CEO. It defies credence that in February 2016, CEO Gaulter, knowing all these facts, and
with the benefit of two very lengthy, serious underlying complaints, could indicate “No”
to application No. VUMC0080321 that EAP was unaware of “any fact, circumstance,
situation, incident or allegation of negligence or wrongdoing, which might afford grounds
for any claim . . . .”
As could be expected given the underlying case trajectory, in August 2016 the
complaint alleging wage-suppression conspiracy was amended yet again, and this time to
add four other au pairs individually, including an EAP sponsoree, Miss Mapledoram.
Mapledoram’s presence permitted the plaintiffs to expand the complaint against EAP
beyond Count I [Sherman Act § 1] to Counts III [fiduciary duty], IV [negligent
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misrepresentation], V [constructive fraud or fraudulent concealment], VI [consumer
protection], VIII [unpaid wages/overtime Fair Labor Standards Act], and IX [unpaid
wages – state law]. Each of these new counts were expressly asserting the original claim
– unlawful wage suppression.
EAP is correct that the addition of Miss Mapledoram in August 2016 allowed the
underlying plaintiffs to bring “new” legal claims against EAP. But those counts just
sought new remedies against the same original claim: wage cheating by EAP.
Moreover, that those counts might be “new” ignores the issue. The issue, which is
not in doubt, is that prior to the February 2016 application for insurance policy
VUMC0080321, there were evident “any circumstances” or allegations of EAP
wrongdoing which might give rise to a claim.
EAP notes that its CEO Gaulter is “a former university professor with a PhD in
statistics, author of at least six advanced-level statistics books.” (Dkt. 49, at 13). This
brilliant man was assisted by a number of able EAP lawyers. Even an unschooled and
unskilled observer could tell there were “any circumstances” in early February 2016 and
allegations of EAP wrongdoing that “might likely” lead to claims against EAP.
Berkley also contends that no commercial general liability coverage exists because
the “wage and suppression conspiracy” alleged is not “bodily injury” or “property
damage” as defined by the policy terms. It is unnecessary to reach this issue as this
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portion of the insurance also has a prior knowledge provision which controls and bars
coverage.
LEGAL STANDARD
A. Summary Judgment
Summary judgment is appropriate when the movant can show there is no genuine
issue of material fact and that the movant is entitled to judgment as a matter of law.
Fennell v. Gilstrap, 559 F.3d 1212, 1216 (11th Cir. 2009) (citing Welding Servs., Inc. v.
Forman, 509 F.3d 1351, 1356 (11th Cir. 2007)). Which facts are material depends on the
substantive law applicable to the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the burden of
showing that no genuine issue of material fact exists. Clark v. Coats & Clark, Inc., 929
F.2d 604, 608 (11th Cir. 1991). Evidence is reviewed in the light most favorable to the
non-moving party. Fennell, 559 F.3d at 1216 (citing Forman, 509 F.3d at 1356). A
moving party discharges its burden by showing that there is an absence of evidence to
support the non-moving party’s case. Denney v. City of Albany, 247 F.3d 1172, 1181
(11th Cir. 2001) (citation omitted). When a moving party has discharged its burden, the
non-moving party must then go beyond the pleadings, and by its own affidavits, or by
depositions, answers to interrogatories, and admissions on file, designate specific facts
showing there is a genuine issue for trial. Porter v. Ray, 461 F.3d 1315, 1320 (11th Cir.
2006) (citation omitted). The party opposing a motion for summary judgment must rely
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on more than conclusory statements or allegations unsupported by facts. Evers v. Gen.
Motors Corp., 770 F.2d 984, 986 (11th Cir. 1985) (“conclusory allegations without
specific supporting facts have no probative value.”).
In the context of cross motions for summary judgment, the denial of one does not
require the grant of another. Ernie Haire Ford, Inc. v. Universal Underwriters Ins. Co.,
541 F.Supp.2d 1295, 1297 (M.D. Fla. 2008). Summary judgment is always inappropriate
if disputes remain as to any material facts. Id. at 1298.
B. Contract Interpretation
As noted by the parties, “[t]he interpretation of an insurance contract is a question
of law.” Kattourn v. N.H. Indem. Co., 968 So.2d 602, 604 (Fla.Dist.Ct.App. 2007). It is
undisputed that Florida law governs the interpretation of Defendant’s insurance policy in
this case. “Florida law provides that insurance contracts are construed in accordance with
the plain language of the policies as bargained for by the parties.” Auto-Owners Ins. Co.
v. Anderson, 756 So.2d 29, 34 (Fla. 2000). Accordingly, the scope and extent of
coverage are determined by the language and terms of the policy, and the policy terms are
given their plain and ordinary meaning. “It is a cardinal principle of insurance law that
where the provisions of an insurance policy are clear and unambiguous, the terms of the
policy will be accorded their plain meaning and enforced as written.” Northland Cas. Co.
v. HBE Corp., 160 F.Supp.2d 1348, 1358 (M.D. Fla. 2001); see also Ernie Haire Ford,
541 F.Supp.2d at 1298.
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Courts routinely affirm the denial of coverage where an insurance policy contains
an unambiguous “prior knowledge” provision and where an insured has knowledge, prior
to the effective date of the policy, of acts or omissions that might reasonably provide the
basis for a claim. See, e.g., Lawyers Prof’l Liab. Ins. Co. v. Dolan, Fertig & Curtis, 524
So.2d 677, 678 (Fla.Dist.Ct.App. 1988) (holding prior knowledge provision clearly and
unambiguously barred coverage for claim of which insureds were aware before policy’s
effective date); Coregis Ins. Co. v. McCollum, 961 F. Supp. 1572, 1579 (M.D. Fla. 1997)
(same); see also Cuthill & Eddy, LLC v. Continental Cas. Co., 784 F.Supp.2d 1331 (M.D.
Fla. 2011). However, if the asserted policy language is susceptible of more than one
reasonable interpretation, the policy is considered ambiguous and strictly construed
against the policy’s drafter. Anderson, 756 So.2d at 34. “[E]xclusionary clauses are
construed even more strictly against the insurer than coverage clauses.” Id. While the
insured has the burden of proving that a claim against it is covered by the insurance
policy, the insurer has the burden of proving an exclusion to coverage. LeFarge Corp. v.
Travelers Indem. Co., 118 F.3d 1511, 1516 (11th Cir. 1997). According to the majority
view, the burden of proving an exception to a policy exclusion is on the insured. Id.
This is not a close case. The policy language is not ambiguous.
WHEREFORE, the Court enters Final Summary Judgment for Berkley on its
complaint. The relevant policy (VUMC0080321) and Florida law provide no duty of
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Berkley to indemnify or defend EAP on any part of the underlying federal au pair wage
case.
DONE AND ORDERED at Tampa, Florida, on September 27, 2018.
s/William F. Jung
WILLIAM F. JUNG
UNITED STATES DISTRICT JUDGE
COPIES FURNISHED TO:
Counsel of Record
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