Cone Financial Group Inc v. Employers Insurance Company of Wausau

Filing 64

ORDER granting 41 Motion for Extension of Time to Complete Discovery; finding as moot 49 Motion for Judgment on the Pleadings; granting in part and denying in part 56 Motion for Leave to File. Ordered by Judge Hugh Lawson on November 4, 2010. (mbh)

Cone Financial Group Inc v. Employers Insurance Company of Wausau

Doc. 64

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF GEORGIA V AL 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 AU S AU , Defendant. ORDER P la in tiff's Motion for Leave of Court to File Second Supplemental and Amended Complaint (Doc. 56) and Motion for Extension of Time to Complete D is c o ve ry (Doc. 41) are before the Court. Also pending is Defendant's Motion for J u d g m e n t on the Pleadings as to Counts II and III. (Doc. 49). I. FACTS AND PROCEDURAL HISTORY T h e background of this case has been outlined in a number of previously filed pleadings and orders. Defendant was Plaintiff's workers' compensation insurer fro m about November 30, 2001 until November 30, 2002. The policy which was in e ffe c t during this period is known as a "Large Deductible Policy" (the "Policy"). The P o lic y provided that Plaintiff was responsible for costs and expenses of individual c la im s up to $250,000, and Defendant had the right and duty to defend any claim, p ro c e e d in g , or suit against Plaintiff for benefits payable by the insurance. Defendant w a s to serve as the claims administrator, and would provide adjusters, medical p ro vid e rs , and attorneys as necessary to defend, adjust, and/or administer workers'

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compensation claims filed by Plaintiff's employees. According to Plaintiff's original c o m p la in t, during the policy period 40 individual workers' compensation claims were file d and administered by Defendant. Plaintiff states that none of the claims ever a p p ro a c h e d the $250,000 large deductible limit and all claims and associated costs w e re paid with funds belonging to Plaintiff. C o u n t I of Plaintiff's original complaint was for breach of contract. Plaintiff a lle g e d that Defendant was required, based on either an implied duty arising from th e insurance contract or an independent fiduciary duty, to act for the benefit of and in the best interests of Plaintiff as Defendant administered workers' compensation c la im s under the Policy. On August 13, 2010, this Court granted Defendant's Motion fo r Judgment on the Pleadings (Doc. 23) and Amended Motion for Judgment on the P le a d in g s as to Count I (Doc. 24) because the Court found that there was no in d e p e n d e n t cause of action for breach of good faith and fair dealing, and the in s u re r-in s u re d relationship does not itself impose fiduciary responsibilities upon the in s u re r. (Doc. 47). Plaintiff has moved for leave to file a second supplemental and amended c o m p la in t. In the Motion, Plaintiff seeks leave of court to amend its complaint p u rs u a n t to Rules 15(a)(2) and 15(d) of the Federal Rules of Civil Procedure. Plaintiff s e e k s to assert the following claims related to Defendant's claims administration a c tivitie s : Count I - Bad Faith/Negligent Claims Handling; Count II - Breach of F id u c ia ry Duty/Improper Claims Handling; Count III - Breach of Contract/Improper B illin g ; Count IV- Breach of Contract/Refusal to Remit SITF Funds; Count V - Breach
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of Fiduciary Duty/Refusal to Remit Refund from SITF; Count VI - Money Had and R e c e ive d ; and Count VII - Conversion. Counts VI and VII are alternatives to Count III. Plaintiff seeks leave to file this second amended and supplemental complaint fo r two reasons. First, Plaintiff alleges that it recently discovered that Defendant re c e ive d a reimbursement of $120,120.10 from the Georgia Subsequent Injury Trust F u n d ("SITF"), related to the reimbursement of costs paid by Plaintiff on a selfin s u re d workers' compensation claim. Plaintiff contends that it is entitled to that m o n e y, but Defendant has refused to give it to Plaintiff. Thus, Plaintiff wishes to state a d d itio n a l claims relating to the reimbursement. Second, because of the Court's d is m is s a l of Count I of Plaintiff's original complaint, Plaintiff seeks leave to recast o th e r claims related to Plaintiff's allegation that Defendant's actions in settling and a d m in is te rin g worker's compensation claims damaged Plaintiff. Defendant has filed a response to Plaintiff's Motion, in which it states that the c la im s in the proposed complaint fail to state a claim upon which relief may be granted, and consequently, granting leave to amend would be futile. (Doc. 62). II. AN AL Y S IS A. P la in tiff's Motion of Leave of Court to File Second S u p p le m e n ta l and Amended Complaint

P la in tiff has moved to amend its complaint under Rules 15(a)(2) and 15(d). Rule 15(a)(2) provides that leave to amend shall be granted when justice so requires. However, a denial of a party's leave to amend is warranted when the

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proposed amendment is futile. W ilm o re v. Arnold, No. 5:08-cv-261, 2009 W L 2 4 1 3 1 1 3 , at *1 (M.D. Ga. Aug. 4, 2009). An amendment is futile when the

a m e n d m e n t's factual allegations are insufficient to withstand a Rule 12(b)(6) motion to dismiss. Id. Rule 15(d) provides, in part, as follows: "Upon motion of a party the court may, u p o n reasonable notice and upon such terms as are just, permit the party to serve a supplemental pleading setting forth transactions or occurrences or events which h a ve happened since the date of the pleading sought to be supplemented." Nevertheless, new claims may only be added pursuant to Rule 15(d) if the claims a re adequately related to the originally stated claims. Klos v. Haskell, 835 F. Supp. 7 1 0 , 715 (W .D .N .Y . 1993), aff'd 48 F.3d 81 (2nd Cir. 1995). 1. B a d Faith / Negligent Claims Handling (Count I)

P la in tiff contends that Defendant owed a duty to Plaintiff to manage, disburse, and account for Plaintiff's money, and to act for the benefit of and in the best in te re s ts of Plaintiff, its insured. Defendant argues that Plaintiff's allegation of duty is unsustainable. P la in tiff is attempting to revive the claim it brought as Count I of its original complaint. W h ile Plaintiff cites to case law which states that an insurance company o w e s an independent duty to its insured, the facts giving rise to such a duty are not b e fo re this Court. The cases cited by Plaintiff all involve third party tort claims; here, th e re is no similar claim. For the reasons stated in the Court's Order on Defendant's M o tio n for Judgment on the Pleadings and Amended Motion for Judgment on the
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Pleadings (Doc. 47), Plaintiff's Motion for Leave to File Second Supplemental and A m e n d e d Complaint as to Count I ­ Bad Faith/Negligent Claims Handling ­ is d e n ie d . 2. B re a c h of Fiduciary Duty / Improper Claims Handling (Count II)

P la in tiff contends that Defendant was an agent of Plaintiff and owed a fiduciary duty to Plaintiff. Plaintiff alleges that because of the fiduciary relationship, D e fe n d a n t was required to manage, disburse, and account for Plaintiff's money and to act for the benefit of and in the best interest of Plaintiff as Defendant administered w o rk e rs ' compensation claims. In previously dismissing the breach of contract claim based on an alleged fid u c ia ry relationship contained in the original complaint, the Court stated that "G e o rg ia courts have repeatedly held that the insurer-insured relationship does not its e lf impose fiduciary responsibilities upon the insurer." (Doc. 47). Although Plaintiff h a s now recast its claim for breach of fiduciary duty in tort instead of contract, P la in tiff's claim still cannot stand under Georgia law. "The only time Georgia courts a llo w an insured to bring an action for breach of fiduciary duties against his insurer is when there are allegations of the violation of the insurer's fiduciary duties of good fa ith when defending or settling a third-party tort claim on behalf of the insured." (D o c . 47). Because these circumstances are not before this Court, the claim in p ro p o s e d Count II would be futile. Therefore, Plaintiff's Motion for Leave to File

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Second Supplemental and Amended Complaint as to Count II ­ Breach of Fiduciary D u ty/Im p ro p e r Claims Handling ­ is denied. 3. B re a c h of Contract / Improper Billing (Count III)

A document called the Workforce Personnel Services Workers' Compensation Paid Deductible Plan ("Large Deductible Plan") describes certain terms and c o n d itio n s of the Policy related to claims administration procedures. Plaintiff claims th a t Defendant breached the Large Deductible Plan by charging Plaintiff at a higher ra te than that presented to and accepted by Plaintiff. Specifically, Plaintiff contends th a t Defendant's monthly invoices for claims administration services under the Policy h a ve charged Plaintiff a fee of 19.5%, rather than the 10% administration fee to w h ic h the parties agreed. Defendant states that the Large Deductible Plan did not c o n s titu te a valid contract because the parties never agreed to the essential terms, s h o w n by the fact the alleged contract contains two options, handwritten notations, a n d strikeouts. Plaintiff does not contend that the Large Deductible Plan was a c o n tra c t; rather, its position is that the document is evidence of the terms and c o n d itio n s of the parties' agreement, which along with oral testimony and other e vid e n c e , forms the enforceable agreement between the parties. Under Georgia law, a valid contract requires: competent contracting parties; c o n s id e ra tio n ; assent of the parties to the terms; and a subject matter on which the c o n tra c t can operate. O.C.G.A. § 13-3-1. W h e n a contract is unambiguous, parol e vid e n c e is inadmissible to add to, take from, vary, or contradict the terms of a w ritte n contract. Jordan v. Tri Count AG, Inc., 248 Ga. App. 661, 663, 546 S.E.2d
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528, 531 (2001). However, parol evidence is admissible to complete the agreement o f the parties "[i]f the writing appears on its face to be an incomplete contract and if th e parol evidence offered is consistent with and not contradictory of the terms of the w ritte n instrument." Id. W h ile the Large Deductible Plan cannot be construed to be a contract b e c a u s e the terms of the Plan are unclear, the document is evidence of the parties' a g re e m e n t. Consequently, Plaintiff could use this written instrument along with other c o n s is te n t parol evidence, if any exists, to show that there was an enforceable a g re e m e n t between the parties. Thus, proposed Count III does not fail to state a c la im as a matter of law. Accordingly, Plaintiff's Motion for Leave to File Second S u p p le m e n t a l and Amended Complaint as to Count III ­ Breach of

C o n tra c t/Im p ro p e r Billing ­ is granted. 4. B re a c h of Contract / Refusal to Remit SITF Funds and B re a c h of Fiduciary Duty / Refusal to Remit Refund from S IT F (Counts IV and V)

P la in tiff contends that one of Defendant's contractual duties as claims a d m in is tra to r for Plaintiff was to evaluate whether individual claims filed by Plaintiff's e m p lo ye e s qualified for reimbursement from SITF. According to Plaintiff's proposed a m e n d e d complaint, Defendant received a refund from SITF related to costs paid on o n e of Plaintiff's self-insured workers' compensation claims. Plaintiff believes it is e n title d to that money, but Defendant has refused to give it to Plaintiff. Thus, Plaintiff c la im s that Defendant breached the parties' agreement, making Plaintiff entitled to dam ages.
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Defendant was not contractually obligated to evaluate whether claims may q u a lify for SITF reimbursement. The Policy provides that Defendant, as insurer, is c o n tra c tu a lly obligated to administer the workers' compensation claims of Plaintiff's in ju re d employees. It does not impose on Defendant the obligation to administer th e s e claims pursuant to any express standards or instructions. Instead, the Policy ve s ts in Defendant the right to investigate and settle claims, proceedings, and suits. Plaintiff cannot point to a specific contract term that has been breached that is the c a u s e of harm. Therefore, Count IV ­ Breach of Contract/ Refusal to Remit SITF F u n d s ­ fails to state a claim on which relief may be granted, and Plaintiff's Motion fo r Leave to File Second Supplemental and Amended Complaint as to Count IV is d e n ie d . Plaintiff also alleges that the failure to remit the SITF funds to Plaintiff is a b re a c h of Defendant's fiduciary duty to Plaintiff as its claims administration agent. P la in tiff characterizes Defendant as a "claims administrator" rather than an insurer. D e s p ite this characterization, the Defendant was the Plaintiff's insurer, and as p re vio u s ly discussed, the Plaintiff cannot bring an action for breach of fiduciary d u tie s against its insurer under the facts of this case. Further, as shown by the in vo ic e attached to the proposed second amended complaint as Exhibit C, the m o n e y allegedly owed to Plaintiff has been credited to Plaintiff's account. Plaintiff h a s pointed the Court to no obligation on Defendant's part to pay that money directly to Plaintiff rather than credit it against Plaintiff's account, especially as all of the c la im s filed under the Policy have not been finalized according to Defendant, which
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means the parties' obligations to each other are not finalized. Therefore, Plaintiff's M o tio n for Leave to File Second Supplemental and Amended Complaint as to Count V ­ Breach of Fiduciary Duty/Refusal to Remit Refund from SITF ­ is denied. 5. M o n e y Had and Received and Conversion (Counts VI and V II)

C o u n t VI ­ Money Had and Received ­ and Count VII ­ Conversion ­ are a lte rn a tive s to Count III - Breach of Contract/Improper Billing. Because the Court h a s granted Plaintiff's Motion to Amend as to Count III, the Court need not consider th e merits of Counts VI and VII, and the Motion to Amend to add those two counts is denied as moot. B. D e fe n d a n t's Motion for Judgment on the Pleadings as to Counts II and III

In light of the Court's decision to allow Plaintiff to amend its complaint as d is c u s s e d above, Defendant's Motion for Judgment on the Pleadings as to Counts II and III (Doc. 49) is denied as moot. C. P la in tiff's Motion for Extension of Time to Complete Discovery

P la in tiff's Motion for Extension of Time to Complete Discovery (Doc. 41) is g ra n te d . The new deadlines are as follows: 1. 2. 3. 2011. 4. P la in tiff's expert witnesses shall be designated by November 19, 2010.
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T h e deadline for the completion of discovery is December 27, 2010. A ll dispositive motions must be filed on or before January 26, 2011. M o tio n s to amend the pleadings shall be filed not later than January 11,

Defendant's expert witnesses shall be designated by December 3, 2010.

If a

d e fe n d a n t designates an expert that Plaintiff has not previously designated as an e x p e r t , Plaintiff shall have 10 days from the designation of Defendant's expert to d e s ig n a te a rebuttal expert witness. The designation of an expert witness must be a c c o m p a n ie d by a written report prepared and signed by the expert in accordance w ith Rule 26(a)(2)(B). Any designated expert witness must be available to be d e p o s e d during the discovery period. III. C O N C L U S IO N In view of the forgoing, the Court grants, in part, and denies, in part, Plaintiff's Motion for Leave to File Second Supplemental and Amended Complaint. (Doc 56). The only count remaining for further consideration in this case is Count III ­ Breach o f Contract/Improper Billing. Defendant's Motion for Judgment on the Pleadings as to Counts II and III (Doc. 49) is denied as moot. Plaintiff's Motion for Extension of T im e to Complete Discovery (Doc. 41) is granted.

SO ORDERED, this the 4th day of November, 2010.

/s / Hugh Lawson HUGH LAWSON, SENIOR JUDGE wcj

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