Jewelers Mutual Insurance Company v. Mangalam, LLC
Filing
23
ORDER granting in part and denying in part 16 Motion for Summary Judgment. Signed by Judge Thomas W. Thrash, Jr on 6/30/2015. (ss)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
JEWELERS MUTUAL INSURANCE
COMPANY,
Plaintiff,
v.
CIVIL ACTION FILE
NO. 1:14-CV-2493-TWT
MANGALAM, LLC,
Defendant.
OPINION AND ORDER
This is a declaratory judgment action. It is before the Court on the Plaintiff
Jewelers Mutual Insurance Company’s Motion for Summary Judgment [Doc. 16]. For
the reasons set forth below, the Plaintiff Jewelers Mutual Insurance Company’s
Motion for Summary Judgment [Doc. 16] is GRANTED in part and DENIED in part.
I. Background
The Defendant Mangalam, LLC is in the business of, inter alia, selling jewelry
on exhibition trips throughout the United States.1 The Defendant is operated primarily
by its Principal Vinod Desai, as well as one or two employees.2 The Plaintiff Jewelers
1
Pl.’s Statement of Facts ¶ 4.
2
Id.
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Mutual Insurance Company issued an insurance policy (the “Policy”) to the
Defendant3 which provided coverage for losses that occurred on the Defendant’s
premises and, subject to limitations, losses that occurred outside of the Defendant’s
premises.4
This case arises out of an incident in which the Defendant lost a portion of its
inventory. On October 24, 2013, Vinod Desai, Tarlika Desai (Vinod’s wife and an
employee of the Defendant), and Sunit Patel (an employee of the Defendant) traveled
to Ohio for business.5 On October 27, 2013, during their return trip, they were robbed
at gunpoint in Lexington, Kentucky.6 Afterwards, the Defendant gave the Plaintiff
notice of the incident.7 The Plaintiff then investigated the incident and began
processing the Defendant’s claim.8
On March 3, 2014, the Defendant submitted a sworn statement setting forth the
damages it was claiming as a result of the theft.9 In particular, the Defendant claimed
3
Id. ¶ 1.
4
Id. ¶ 2.
5
Id. ¶ 6.
6
Id. ¶ 7.
7
Id. ¶ 10.
8
Id. ¶ 11.
9
Id. ¶ 12.
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that the lost property was worth roughly $790,000.10 The Plaintiff, however, informed
the Defendant that, under the Policy, the Defendant was entitled to only $200,000.11
Consequently, the Plaintiff issued payment to the Defendant for that amount.12 On
July 17, 2014, the Defendant’s attorney sent a letter to the Plaintiff disputing the
Defendant’s assessment of the Policy terms and demanding an additional $300,000
– for a total of $500,000. The Plaintiff brought suit against the Defendant, seeking “a
judicial declaration that coverage for the October 27, 2013 loss is limited to the
$200,000 already paid.”13 In response, the Defendant asserted counterclaims for (1)
breach of contract and (2) bad faith refusal to tender payment (O.C.G.A. § 33-4-6).
The Plaintiff now moves for summary judgment.
10
Pl.’s Mot. for Summ. J., Ex. 6.
11
Pl.’s Statement of Facts ¶ 14.
12
Id.
13
Compl. ¶ 29.
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II. Legal Standard
Summary judgment is appropriate only when the pleadings, depositions, and
affidavits submitted by the parties show that no genuine issue of material fact exists
and that the movant is entitled to judgment as a matter of law.14 The court should view
the evidence and any inferences that may be drawn in the light most favorable to the
nonmovant.15 The party seeking summary judgment must first identify grounds that
show the absence of a genuine issue of material fact.16 The burden then shifts to the
nonmovant, who must go beyond the pleadings and present affirmative evidence to
show that a genuine issue of material fact does exist.17 A “mere ‘scintilla’ of evidence
supporting the opposing party’s position will not suffice; there must be a sufficient
showing that the jury could reasonably find for that party.”18
14
FED. R. CIV. P. 56(c).
15
Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970).
16
Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).
17
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
18
Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir.1990).
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III. Discussion
A. Declaratory Judgment
If “there is an underlying ground for federal court jurisdiction, the Declaratory
Judgment Act allow[s] parties to precipitate suits that otherwise might need to wait for
the declaratory relief defendant to bring a coercive action.”19 The Plaintiff is seeking
a declaration concerning the Defendant’s rights under the Policy. The declaration is
intended to resolve a dispute between the parties arising out of the losses suffered by
the Defendant during the October 27, 2013 robbery. To be precise, the parties disagree
on the interpretation of the Policy provision concerning losses that occur outside of
the Defendant’s premises. This provision states, in relevant part:
d. Property in the custody of you, your
employee, a commissioned
salesperson, or a person you hire for a
short time when traveling off the
described premises:
19
Household Bank v. JFS Grp., 320 F.3d 1249, 1253 (11th Cir. 2003)
(internal quotation marks omitted).
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[Subsection 1] The most we will pay
for any one loss involving an
individual is . . .
a) You, your employees, or a person
you hire for a short time who carry
property valued at more than $25,000:
$200,000
Name, City, State, ZIP
Mitesh Thakkar
Duluth, GA 30096
And/Or
Narendrabhai R. Patel
Lilburn, GA 30047
And/Or
Vinod Desai
. . . [Subsection 2] The most we will
pay for any one loss involving two or
more individuals traveling together is
the lesser of the sum of their limits or
$500,000
The Plaintiff believes that under subsection 1(a), coverage does not extend to all
“employees” or “person[s] . . . hire[d] for a short time” who carry “property valued
at more than “$25,000,” but only to the three individuals specifically listed: Thakkar,
Patel, and Desai. Thus, according to the Defendant, since Desai was the only listed
individual who was on the business trip when the robbery occurred, the Defendant’s
recovery is capped at $200,000. Conversely, the Defendant argues that subsection 1(a)
broadly provides coverage – up to $200,000 per person – for “[the Defendant’s]
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employees, or a person [the Defendant] hire[s] for a short time who carry property
valued at more than $25,000.” According to the Defendant, certain names were listed
under the broad language of subsection 1(a) merely to provide examples of who would
be covered. The list was not meant to be exhaustive. Thus, the Defendant claims that
Desai, Tarlika (an employee of the Defendant), and Sunit (also an employee of the
Defendant) are all covered under subsection 1(a). Although this would amount to
$600,000 of total coverage, subsection 2 limits the Plaintiff’s liability to $500,000 for
losses “involving two or more individuals traveling together.” Consequently, the
Defendant claims that it is entitled to $500,000 under the Policy.
Under Georgia law, courts interpreting an insurance contract “must first
consider the ordinary and legal meaning of the words employed.”20 If “the terms of the
contract are plain and unambiguous, the contract must be enforced as written.”21 If “a
term in a contract is ambiguous, Georgia courts apply the rules of contract
construction to resolve the ambiguity.”22 If “the ambiguity remains after the court
applies the rules of construction, the issue of what the ambiguous language means and
20
St. Paul Mercury Ins. Co. v. F.D.I.C., 774 F.3d 702, 708 (11th Cir. 2014).
21
Id.
22
Id.
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what the parties intended must be resolved by the finder of fact.”23 And generally, “if
an insurance contract is capable of being construed two ways, it will be construed
against the insurance company and in favor of the insured.”24
Here, the terms of subsection 1(a) are not plain and unambiguous. Subsection
1(a) opens with a general clause concerning who is covered – “your employees, or a
person you hire for a short time who carry property valued at more than $25,000” –
and then ends with a list of three specific names. There is no express language
explaining whether the list is meant to qualify the general clause, or simply to provide
examples of who would be covered. Consequently, the Court must turn to rules of
construction.25 In moving for summary judgment, the Plaintiff invokes two.
23
Id.
24
Id. at 709 (internal quotation marks omitted).
25
In its Reply Brief, the Plaintiff makes a number of arguments to show
that the Policy terms are unambiguous. These arguments are without merit. For
example, the Plaintiff argues that the terms and phrases “employees” and “a person
you hire for a short time when traveling . . . applying their ordinary meaning, are not
susceptible to more than one reasonable interpretation” because subsections 1 and 2
“limit[] the application of these terms and phrases by specifically listing by name the
persons who fall within the . . . categories of individuals for which coverage is
provided when an off-premises loss occurs.” Reply Br., at 6-7. This is not an argument
for why there is no ambiguity. The Plaintiff is simply asserting that its reading is
clearly the correct one. The problem, of course, is that it is not clear that the broad
terms of the general clause are defined by – or limited by – the list of names that
follows it. There is no express indication in the Policy of whether the list is meant to
limit the general clause or to provide examples of people that fall within it.
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First, the Plaintiff argues that the Defendant’s reading of subsection 1(a) would
render the list of names irrelevant.26 After all, if the general clause incorporates the
names on the list, then there would be no reason for the list. Generally, “a contract
must be interpreted to give the greatest effect possible to all provisions rather than to
leave any part of the contract unreasonable or having no effect.”27 Thus “a court
should, if possible, construe a contract so as not to render any of its provisions
meaningless.”28 Here, the Plaintiff’s argument cuts both ways. If the Plaintiff’s
reading were accepted, then part of the general clause would be rendered meaningless.
Indeed, what would the point be of broadly stating “your employees, or a person you
hire for a short time” if coverage only extended to the three people listed afterwards?
Additionally, the Defendant’s reading does not necessarily render the list meaningless.
For example, the list forecloses any dispute regarding whether the named individuals
fit into the broad category described by the general clause. If the list were absent, the
Defendant would have to litigate the issue of whether the individuals were indeed
“employees” or “person[s] . . . hire[d] for a short time who carry property valued at
26
Pl.’s Mot. for Summ. J., at 16.
27
Young v. Stump, 294 Ga. App. 351, 353 (2008).
28
Id. (emphasis added).
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more than $25,000” in the event that the Defendant was seeking recovery for losses
suffered by those individuals.
Second, the Plaintiff argues – invoking the maxim of expressio unius est
exclusio alterius – that when a list is present, the Court must assume it is exclusive.29
The interpretive canon “[e]xpressio unius est exclusio alterius” posits that “[t]he
express mention of one thing implies the exclusion of another.”30 However, for “the
[expressio unius] doctrine to apply, it must appear that a complete enumeration or list
normally would have included that which was omitted, thus making omission from
the [contract] significant.”31 Here, given the general clause, it is not clear that the list
would have included additional people if coverage was meant to extend to them. To
be sure, although its facts are dissimilar from those here, the case of City of Atlanta
v. Southern States Police Benevolent Association of Georgia32 is instructive. In that
case, the court was interpreting statutory provisions “to determine whether [certain]
pension boards [had] authority independent of the City to hire a third-party
29
Pl.’s Mot. for Summ. J., at 14-15.
30
Krogh v. Pargar, LLC, 277 Ga. App. 35, 39 (2005) (internal quotation
marks omitted).
31
City of Atlanta v. Southern States Police Benev. Ass’n of Georgia, 276
Ga. App. 446, 455 (2005).
32
276 Ga. App. 446 (2005).
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administrator and outside legal counsel.”33 The relevant statutory provisions broadly
stated that the pension boards had the power to “manage [pension funds]” and “make
all rules for the payment of [pension benefit] funds to those entitled to receive the
same.”34 Despite this broad mandate, the City nonetheless argued that the pension
boards lacked the power to independently hire third-party administrators or outside
legal counsel. It “emphasize[d] that the . . . pension boards [had] been given specific
statutory authority to contract for [1] an independent actuary and [2] an independent
investment counselor.”35 Thus, the City “argue[d] that the express mention of
independent actuarial and investment services in the pension statutes implies the
exclusion of the authority in the boards of contract for a third-party administrator.”36
In rejecting this argument, the court noted:
Given the expansive language found in the pension statutes regarding
broad authority . . . we do not believe that the omission of a specific
reference to board authority to contract for a third-party administrator is
significant since there would be no reason for the [legislature] to believe
that such a reference was even necessary. The [legislature] could assume
that the more narrow power was implicitly included in the award of the
33
Id. at 453.
34
Id. at 454 (internal quotation marks omitted).
35
Id. at 455 (emphasis added).
36
Id.
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broader power. Thus, we reject the City's contention that the doctrine of
expressio unius applies in this context.37
Here, similarly, the list of names must be read in light of the broad, general clause
preceding it. Due to the general clause, it is possible that the parties failed to refer to
Tarlika and Sunit in the list because they did not “believe that such a reference was
even necessary.”38 And although Southern States Police dealt with statutory
interpretation, the expressio unius “principle of construction . . . appli[es] to statutes
and contracts alike.”39 Accordingly, the Plaintiff has failed to establish that it is
entitled to judgment as a matter of law in favor of its declaratory judgment claim.
B. Bad Faith
The Defendant asserts a counterclaim, under O.C.G.A. § 33-4-6, based upon the
Plaintiff’s alleged failure to tender sufficient payment within sixty days of receiving
the Defendant’s demand letter.40 The Defendant claims that the Plaintiff’s failure to
pay was motivated by bad faith.41 To “prevail on a claim for an insurer’s bad faith
under OCGA § 33-4-6, the insured must prove: (1) that the claim is covered under the
37
Id. at 455-56.
38
Id.
39
Miller Cnty. Bd. of Educ. v. McIntosh, 326 Ga. App. 408, 413 (2014).
40
Am. Countercl. ¶ 27.
41
Am. Countercl. ¶ 28.
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policy, (2) that a demand for payment was made against the insurer within 60 days
prior to filing suit, and (3) that the insurer’s failure to pay was motivated by bad
faith.”42 The “the insured bears the burden of proving that the refusal to pay the claim
was made in bad faith.”43 Bad faith “is shown by evidence that under the terms of the
policy upon which the demand is made and under the facts surrounding the response
to that demand, the insurer had no good cause for resisting and delaying payment.”44
Section 33-4-6 must be “strictly construed.”45 Thus, an “insurer is entitled to judgment
as a matter of law if it has reasonable grounds to contest the claim or the question of
liability is close.”46
Here, there is no genuine issue of material fact concerning whether the Plaintiff
acted in bad faith when it failed to tender payment in the amount demanded by the
Defendant. On July 17, 2014, the Defendant made an official demand for payment of
42
BayRock Mortgage Corp. v. Chicago Title Ins. Co., 286 Ga. App. 18, 19
(2007).
43
Atlantic Title Ins. Co. v. Aegis Funding Corp., 287 Ga. App. 392, 393
(2007) (internal quotation marks omitted).
44
Id. (internal quotation marks omitted).
45
Howell v. Southern Heritage Ins. Co., 214 Ga. App. 536 (1994).
46
Atlantic Title Ins. Co., 287 Ga. App. at 393.
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$500,000 under the Policy.47 On July 18, 2014, the Plaintiff tendered payment in the
amount of $200,000, but refused to pay the full $500,000.48 The Plaintiff based its
refusal on its interpretation of the Policy. As explained above, the Policy terms are
ambiguous on this issue. Consequently, the Plaintiff had reasonable grounds for
contesting the Defendant’s demand. Because the Defendant has failed to meet its
burden in establishing that the Plaintiff acted in bad faith, the latter is entitled to
judgment as a matter of law on the bad faith counterclaim.
IV. Conclusion
For these reasons, the Court GRANTS in part and DENIES in part the Plaintiff
Jewelers Mutual Insurance Company’s Motion for Summary Judgment [Doc. 16].
SO ORDERED, this 30 day of June, 2015.
/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge
47
“A demand made under OCGA § 33-4-6 must give the insurer notice that
it is facing a bad faith claim.” BayRock Mortgage Corp., 286 Ga. App. at 20. The “the
language must be sufficient to alert the insurer that bad faith is being asserted.”
Primerica Life Ins. Co. v. Humfleet, 217 Ga. App. 770, 772 (1995). Here, the only
“demand” that satisfies this requirement was the letter sent by the Defendant’s
attorney on July 17, 2014. Pl.’s Mot. for Summ. J., Ex. 8.
48
Pl.’s Statement of Facts ¶ 14.
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