Cone Financial Group Inc v. Employers Insurance Company of Wausau

Filing 47

ORDER granting 23 Motion for Judgment on the Pleadings; granting 24 Amended Motion; dismissing Count I of Plaintiff's complaint. Ordered by Judge Hugh Lawson on 8/13/2010. (nbp)

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF GEORGIA V A L D O S T A DIVISION C O N E FINANCIAL GROUP, INC., P la in tiff, C iv il Action: 7:09-CV-118 (HL) v. E M P L O Y E R S INSURANCE COMPANY OF W AUSAU, Defendant. ORDER T h is matter is before the Court on Defendant's Motion for Judgment on the P le a d in g s (Doc. 23) and Amended Motion for Judgment on the Pleadings (Doc. 24). F o r the following reasons, the Court grants the Motions, and dismisses Count I of P la in tiff's complaint. I. BACKGROUND O n or about November 30, 2001, Defendant issued a Workers Compensation a n d Employer's Liability Policy to Plaintiff. The policy, which was in effect from N o v e m b e r 30, 2001 through November 30, 2002, is known as a "Large Deductible P o lic y ." The policy provided that indemnity costs and expenses for individual claims u p to $250,000 would remain the responsibility of Plaintiff. Under the policy, D e fe n d a n t had the right and duty to defend at Defendant's expense any claim, p ro c e e d in g or suit against Plaintiff for benefits payable by the insurance. Defendant a ls o had the right to investigate and settle any claims, proceedings or suits. D e fe n d a n t was to serve as the claims administrator, and would provide adjusters,

medical providers, and attorneys as necessary to defend, adjust, or administer w o rk e rs ' compensation claims filed by Plaintiff's employees. According to Plaintiff's c o m p la in t, from November 1, 2001 to October 31, 2002, forty individual workers' c o m p e n s a tio n claims were filed and administered by Defendant. Plaintiff states that n o n e of the claims approached the $250,000 large deductible limit, and all claims a n d associated costs were paid with funds belonging to Plaintiff. C o u n t I of Plaintiff's complaint is for breach of contract. Plaintiff alleges that D e fe n d a n t was required, based on either an implied duty arising from the insurance c o n tra c t or an independent fiduciary duty, to act for the benefit of and in the best in te re s t of Plaintiff as Defendant administered workers' compensation claims under th e policy. Plaintiff alleges that Defendant failed to perform its obligations or b re a c h e d its duties under the policy by failing to properly investigate claims, by fa ilin g to properly monitor claims, by failing to properly monitor and supervise the w o rk of attorneys assigned to the claims, and by placing Defendant's financial in te re s ts above those of Plaintiff. Defendant has moved for judgment on the pleadings on Count I. Defendant c o n te n d s that Georgia substantive law does not recognize Plaintiff's breach of c o n tra c t claim based on either an implied or fiduciary duty.1

As this is a diversity case, state substantive law applies. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822 (1938). To determine which state's substantive law applies, courts use the choice of law rules of the forum state, which in this case is Georgia. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021 (1941). In determining which state's law applies in contracts cases, Georgia courts follow the doctrine of lex loci contractus, which provides that contracts "are to be governed as to their nature, validity, and interpretation by the law of the place
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II.

A N A L Y S IS "J u d g m e n t on the pleadings under Rule 12(c) is appropriate when there are

n o material facts in dispute, and judgment may be rendered by considering the s u b s ta n c e of the pleadings and any judicially noticed facts." Horsley v. Rivera, 292 F .3 d 695, 700 (11th Cir. 2002) (citation omitted). "If upon reviewing the pleadings it is clear that the plaintiff would not be entitled to relief under any set of facts that c o u ld be proved consistent with the allegations, the court should dismiss the c o m p la in t." Id. (citation omitted). A. Implied Duty

P la in tiff contends that Defendant breached its implied duty to act for the b e n e fit of and in the best interest of Plaintiff. Georgia law provides that: E v e ry contract implies a covenant of good faith and fair d e a lin g in the contract's performance and enforcement. T h e implied covenant modifies and becomes a part of the p ro v is io n s of the contract, but the covenant cannot be b re a c h e d apart from the contract provisions it modifies a n d therefore cannot provide an independent basis for lia b ility . O n b ra n d Media v. Codex Consulting, Inc., 301 Ga. App. 141, 147, 687 S.E.2d 168, 1 7 4 (2009).

where they were made, except when it appears from the contract itself that it is to be performed in a State other than that in which it was made, in which case . . . the laws of that sister State will be applied." Convergys Corp. v. Keener, 276 Ga. 808, 811 n. 1, 582 S.E.2d 84, 86 n.1 (2003) (citation omitted). Here, the insurance contract was entered into in Georgia, and it does not appear from the policy that the contract was to be performed in another state. Georgia law applies to this case.
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The law is clear that there exists no independent cause of action for breach o f good faith and fair dealing outside of a claim for breach of contract. Id.; Morrell v. W e lls ta r Health Sys., 280 Ga. App. 1, 5(2), 633 S.E.2d 68 (2006). Here, Plaintiff d o e s not allege in Count I that Defendant breached an express term of the policy. In s te a d , Plaintiff alleges general allegations of breach of the implied duty of good fa ith and fair dealing which are not tied to a specific contract provision. Under G e o rg ia law, such allegations are not actionable. See American Casual Dining, L.P. v . Moe's Southwest Grill, LLC, 426 F.Supp.2d 1356, 1370 (N.D.Ga. 2006). D e fe n d a n t is entitled to judgment on the pleadings in connection with Plaintiff's claim o f breach of implied duty under Count I of the complaint. B. Fiduciary Duty

P la in tiff also contends in Count I that Defendant breached its fiduciary duty to P la in tiff under the insurance contract. Defendant argues in response that insurers in Georgia do not owe fiduciary duties to their insureds. Georgia courts have repeatedly held that the insurer-insured relationship does n o t itself impose fiduciary responsibilities upon the insurer. See Nash v. Oh. Nat. Life In s . Co., 266 Ga. App. 416, 422, 597 S.E.2d 512, 518 (2004); Walsh v. Campbell, 1 3 0 Ga. App. 194, 198, 202 S.E.2d 657, 661 (1973). The relationship is instead g o v e rn e d by the insurance contract. The only time Georgia courts allow an insured to bring an action for breach of fiduciary duties against his insurer is when there are a lle g a tio n s of the violation of the insurer's fiduciary duties of good faith when d e fe n d in g or settling a third-party tort claim on behalf of the insured. See e.g.,
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Thomas v. Atlanta Cas. Co., 253 Ga. App. 199, 203, 558 S.E.2d 432, 438 (2001). T h o s e circumstances are not before the Court. Plaintiff's breach of contract claim b a s e d on an alleged fiduciary duty must be dismissed since the action cannot stand u n d e r Georgia law. III. C O N C L U S IO N F o r the reasons discussed above, Defendant's Motion for Judgment on the P le a d in g s (Doc. 23) and Amended Motion for Judgment on the Pleadings as to C o u n t I (Doc. 24) are granted. Count I of Plaintiff's complaint is dismissed.

S O ORDERED, this the 13 th day of August, 2010. s / Hugh Lawson HUGH LAWSON, SENIOR JUDGE kl

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