Sullivan's Administrative Managers II, LLC v. Guarantee Insurance Company et al

Filing 94

ORDER denying Plaintiff's 30 Motion for Summary Judgment; granting Defendant Patriot's 43 Motion for Summary Judgment; denying Defendant Guarantee's 48 and 51 Motions for Summary Judgment. Signed by Chief Judge Lisa G. Wood on 8/23/2013. (ca)

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for the boutbtrn Dtttitt of otor&
abannab Dtbtion
SULLIVAN'S ADMINISTRATIVE
MANAGERS II, LLC,
Plaintiff,
vs.
GUARANTEE INSURANCE CO.,
ULLICO CASUALTY CO., and
PATRIOT NATIONAL INSURANCE
GROUP, INC.,
Defendants.

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CV 412-212

ORDER

Presently before the Court are multiple motions for Summary
Judgment filed by Plaintiff and Defendants. See Dkt. Nos. 30;
43; 48; 51. Upon due consideration, Plaintiff's Motion for
Partial Summary Judgment is DENIED (Dkt. No. 30). Defendant
Patriot's Motion for Summary Judgment on Plaintiff's claims
against it is GRANTED (Dkt. No. 43). Defendant Guarantee's
Motion for Summary Judgment on Plaintiff's claims against it is
DENIED

(Dkt. No. 51). Defendant Guarantee's Motion for Summary

Judgment on its counterclaims is DENIED (Dkt. No. 48).

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I. FACTUAL BACKGROUND

This action is predicated on alleged overbilling and
misrepresentations related to workers' compensation policies.
See Dkt. No. 1. The relevant facts are taken principally from
the parties' Statements of Material Facts and responses thereto.
See Dkt. Nos. 30-1; 37-2; 43-2; 48-5; 51-1; 57-1; 61-1; 65_1.1
Pursuant to Federal Rule of Civil Procedure 56(e) and Local Rule
56.1, all material facts not specifically controverted by
specific citation to the record are deemed admitted, unless
otherwise inappropriate.
A. Parties
Plaintiff, Sullivan Administrative Managers II, LLC, is a
professional employer organization that provides health
insurance, payroll, human resources, and workers' compensation
insurance for its customers' employees.
Defendant Guarantee Insurance Company ("Defendant
Guarantee") is an insurance company authorized to provide

1

The Court did not credit alleged facts that were unsupported by a party's
citation to the record.
2
Defendant Ullico Casualty Co. was voluntarily dismissed from this action.
See Dkt. No. 86.

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workers' compensation and employer liability insurance in
Georgia, Florida, and other states. Dkt. Nos. 51-1 ¶ 1; 65-1
¶ 1. Defendant Guarantee is a member of the National Council on
Compensation Insurance ("NCCI") .

Dkt. Nos. 51-1 ¶ 1; 65-1 ¶ 1.

Defendant Guarantee provides standard policies and high
deductible policies for workers' compensation insurance.
Defendant Patriot National Insurance Group, Inc.
("Defendant Patriot") is Defendant Guarantee's parent company.
Dkt. No. 48-2 ¶ 2.
B. The NCCI
The NCCI is the ratemaking entity in Georgia, Florida, and
other states. See Dkt. Nos. 51-1 ¶ 9; 65-1 ¶ 9. In those
states, the NCCI files classifications, rates, and rules that
the respective state's departments or commissioners of insurance
have approved. Dkt. Nos. 51-1 ¶ 9; 65-1 ¶ 9.
In states where workers' compensation carriers provide
coverage, such carriers must follow the directives and
determinations of that state's department or commissioner of
insurance. Dkt. Nos. 51-1 ¶ 11; 65-1 ¶ 11. Thus, Defendant
Guarantee must follow and use the classifications, rates, and
rules filed by the NCCI. Dkt. Nos. 51-1 ¶ 9; 65-1 ¶ 9.
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Defendant Guarantee must also comply with the rating plans that
are filed with and approved by the applicable state's regulatory
authority. Dkt. Nos. 51-1 ¶ 10; 65-1 ¶ 10.
C. The Policies
In June 2008, June 2009, June 2010, and June 2011,
Defendant Guarantee issued workers' compensation policy numbers
GPE0176000001-108 ("2008 Policy") , GPE0176000001-109 ("2009
Policy"), GPE0176000001-110 ("2010 Policy"), and GPE0176000001111 ("2011 Policy") . Dkt. Nos. 51-1 ¶ 2-5; 65-1 ¶ 2-5. The
policies had the same terms.
Plaintiff is an additional named insured on all four (4)
policies (hereinafter "the Policies") . Dkt. Nos. 51-1 ¶ 6; 65-1
¶ 6. The parties dispute who the principal named insured is on
the Policies. Defendant Guarantee asserts that the Policies
were issued to Sullivan Administrative Managers I, LLC
("SAM I"). Dkt. No. 51-1 ¶JJ 2-5. Plaintiff asserts that the
Policies were issued to it. Dkt. Nos. 30-3 ¶I 3-4; 62-4 ¶I 4-5.
Arthur J. Gallagher RMS, Inc. ("Gallagher") was the agent
at the time that SAM I (or Plaintiff) executed the Policies on
behalf of itself and the additional named insureds. Dkt. Nos.
51-1 ¶ 7; 65-1 ¶ 7.
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The Policies have multiple sections. See, e.g., Dkt. No.
30-6; 30-7. The Policies' General Section contains standard
language drafted by the NCCI. Dkt. No. 51-1 ¶ 16. It is part
of the standard workers' compensation policy that carriers are
required to use. Id. The terms and conditions of the Policies'
General Section do not vary. The Policies state
All premium for [these Policies] will be determined by
our manuals of rules, rates, rating plans and
classifications. We may change our manuals and apply
the changes to [these Policies] if authorized by law
or a governmental agency regulating this insurance.
Dkt. Nos. 51-1 ¶ 14; 65-1 ¶ 14. The Policies also state
We have the right and duty to defend at our expense
any claim, proceeding or suit against you for benefits
payable by this insurance. We have the right to
investigate and settle these claims, proceedings or
suits. We have no duty to defend a claim, proceeding
or suit that is not covered by this insurance.
Dkt. Nos. 51-1 ¶ 15; 65-1 ¶ 15.
The Policies' Workers Compensation Insurance Section states
We will also pay these costs, in addition to other
amounts payable under this insurance, as part of any
claim, proceeding or suit we defend:
1. reasonable expenses incurred at our request, but
not loss of earnings.
and
5. expenses we incur.
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See, e.g., Dkt. No. 30-6, at 487.
The Policies have multiple endorsements. The Policies'
Benefits Deductible Endorsements state, in part:
[The insurer] will pay the deductible amount for [the
insured] . . . but [the insured] must reimburse [the
insurer] within 30 days after [the insurer] send[s]
[the insured] notice that payment is due. . . . [The
insurer] may keep the amount of unearned premium that
will reimburse [the insurer] for the payment [the
insurer] made. These rights are in addition to other
rights [the insurer] gave to be reimbursed.
Dkt. Nos. 51-1 ¶ 23; 65-1 ¶ 23.
D. Loss Reimbursement Plan (a/k/a Rating Plan
The Policies were written pursuant to Defendant Guarantee's
Loss Reimbursement Plan (also known as the "rating plan") that
the NCCI filed with Georgia and Florida. Dkt. Nos. 51-1 ¶ 18;
65-1 ¶ 18. The parties dispute whether the Loss Reimbursement
Plan was incorporated into the Policies.
Assuming that the Loss Reimbursement Plan was incorporated
into the Policies, the parties dispute which option of that plan
was incorporated into the Policies. Specifically, the parties
dispute who is responsible for paying allocated loss adjustment
expenses ("ALAE"). With respect to ALAE expenses, the Loss
Reimbursement Plan has two (2) options: Option A and Option B.

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See Dkt. No. 36, at 24-25. With respect to these options, the
Loss Reimbursement Plan states
Option A: The insured must reimburse the insurer for
the combined amount of all Benefits and Damages and
all ALAE paid by the insurer because of one accident
or one claim for disease, up to the Loss Reimbursement
Amount.
Option B: The insured must reimburse the insurer only
for the amount of all Benefits and Damages paid by the
insurer because of one accident or one claim for
disease, up to the Loss Reimbursement Amount. The
insured shall not reimburse the insurer for ALAE paid
by the insurer.
See Id. at 25. The Loss Reimbursement Plan also states, "[I]f
the Insured does not select an Option, then Option A shall apply
where available; otherwise, Option B shall apply." See Id.
II. PROCEDURAL BACKGROUND

Plaintiff asserts multiple claims. 3 First, Plaintiff
asserts that Defendant Guarantee negligently misreported and
overbilled Plaintiff for claims and expenses. See Dkt. No. 1-1
191 23-28. Second, Plaintiff asserts a claim of negligence per
se for Defendant Guarantee's alleged violation of O.C.G.A. § 33-

Plaintiff's claim that Defendants violated Georgia's RICO statute was
dismissed. See Dkt. No. 29.

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24-47(b). See Id. 91 27. Third, Plaintiff asserts that
Defendant Guarantee breached its express and/or implied
contracts with Plaintiff. See id. IT 29-33. Fourth, Plaintiff
asserts a claim of unjust enrichment against Defendant
Guarantee. See id. ¶ 32. Fifth, Plaintiff asserts a claim of
fraud based on Defendants' alleged representations to the NCCI.
See id. IT 34-37. Sixth, Plaintiff asserts that Defendant
Guarantee wrongly converted its funds. See id. 9191 29-33.
Plaintiff also seeks punitive damages, attorney's fees, and
expenses. See id. 9191 46-52.
Defendant Guarantee brought four (4) counterclaims against
Plaintiff. See Dkt. No. 7, at 14-20. These counterclaims
assert that Plaintiff breached its contracts dated 2008, 2009,
2010, and 2011 by failing to pay deductible premiums. See id.
Defendant Guarantee also seeks attorney's fees and expenses.
See id. 191 29-30.
Plaintiff filed a motion for partial summary judgment on
its claim that it does not owe ALAE. See Dkt. No. 30.
Defendants filed motions for summary judgment on Plaintiff's
claims. See Dkt. Nos. 43; 51. Defendant Guarantee filed a
motion for summary judgment on its counterclaims. See Dkt.
No. 48. These motions are fully briefed. See Dkt.. Nos. 37; 40;

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57; 71; 61; 79; 65; 80. The Court heard oral argument regarding
the motions on January 17, 2013 and May 8, 2013.
III. LEGAL STANDARD

Summary judgment is appropriate "if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law." Fed. R.
Civ. P. 56(a) . A fact is "material" if it "might affect the
outcome of the suit under the governing law." FindWhat Investor
Grp. v. FindWhat.com , 658 F.3d 1282, 1307 (11th Cir. 2011)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). A dispute over such a fact is "genuine" if the
"evidence is such that a reasonable jury could return a verdict
for the nonmoving party." Id. In making this determination,
the court is to view all of the evidence in the light most
favorable to the nonmoving party and draw all reasonable
inferences in that party's favor. Johnson v. Booker T.
Washington Broad. Serv., Inc., 234 F.3d 501, 507 (11th Cir.
2000)
The party seeking summary judgment bears the initial burden
of demonstrating the absence of a genuine issue of material
fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) . To

AO 72A
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satisfy this burden, the movant must show the court that there
is an absence of evidence to support the nonmoving party's case.
Id. at 325. If the moving party discharges this burden, the
burden shifts to the nonmovant to go beyond the pleadings and
present affirmative evidence to show that a genuine issue of
fact does exist. Anderson, 477 U.S. at 257.
The standard of review for cross-motions for summary
judgment does not differ from the standard applied when only one
party files a motion. Am. Bankers Ins. Grp. v. United States
408 F.3d 1328, 1331 (11th Cir. 2005) . "Cross-motions for
summary judgment will not, in themselves, warrant the court in
granting summary judgment unless one of the parties is entitled
to judgment as a matter of law on facts that are not genuinely
disputed." United States v. Oakley, 744 F.2d 1553, 1555 (11th
Cir. 1984). The court must consider each motion on its own
merits, resolving all reasonable inferences against the party
whose motion is under consideration. Am. Bankers Ins. Grp.,
408 F.3d at 1331.
IV. DISCUSSION

Prior to evaluating the parties' motions for summary
judgment, the Court notes that the facts are largely contested.
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Indeed, Plaintiff and Defendant Guarantee dispute with credible
evidence multiple critical facts, including the parties to the
Policies and the express and incorporated terms of the Policies.
The disagreement over these critical facts looms over both
Plaintiff's and Defendant Guarantee's attempt to receive summary
judgment.
The Court also notes that, at oral argument regarding the
various motions, the parties agreed that the Court should apply
Georgia law for the purposes of evaluating their motions for
summary judgment.
A. Claims AQainst Defendant Guarantee
1. Negligence
Plaintiff asserts that Defendant Guarantee negligently
misreported and overbilled Plaintiff for claims and expenses.
See Dkt. No. 1-1 ¶I 23-28. In particular, Plaintiff asserts
that Defendant Guarantee negligently billed Plaintiff for ALAE.
See Dkt. No. 65, at 7-9. Plaintiff also asserts that Defendant
Guarantee negligently billed Plaintiff above the agreed upon
discounted rate for manual premium. See id. at 9-10. Plaintiff
further asserts that, as a result of Defendant Guarantee's
overbilling, Defendant Guarantee negligently reported
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Plaintiff's claim and losses to NCCI. See Dkt. No. 1-1 191 13,
15, 25. Defendant Guarantee seeks summary judgment on these
claims.
a. Contracting Parties
Viewing the facts in Plaintiff's favor, the Policies are
contracts between Plaintiff and Defendant Guarantee. See Dkt.
No. 62-4 191 4-5. Defendant Guarantee maintains that the Polices
are contracts between it at SAM I. There is evidence to support
Defendant Guarantee's assertion. See infra Parts IV.0 and IV.D.
However, for the purposes of Defendant Guarantee's motion for
summary judgment on Plaintiff's claims, the Court must construe
the evidence in Plaintiff's favor. In so doing, the Court must
conclude that the Policies are contracts between Plaintiff and
Defendant Guarantee.
b. ALAE
Construing the facts in Plaintiff's favor, Defendant
Guarantee billed Plaintiff for certain costs that Plaintiff was
not contractually obligated to pay. In particular, the record
reflects that Defendant Guarantee billed Plaintiff for ALAE.
See Dkt. No. 62-1 ¶ 6; see also Dkt. No. 35 ¶ 10 (noting that
12

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ALAE was billed). The record also reflects that Plaintiff paid

the amounts billed. See Dkt. No. 65-6.
Moreover, viewing the record in Plaintiff's favor,
Plaintiff was not responsible for paying ALAE prior to June
2010. See Dkt. No. 30-11, at 12. In fact, Defendant Guarantee
was responsible for paying ALAE.

See Dkt. No. 30-6, at 487

(noting that the insurer will pay "expenses [it] incur[s]").
Defendant Guarantee asserts that, notwithstanding the
Policies' express terms, a "Loss Reimbursement Plan" (also
referred to as a "rating plan") was incorporated into the
Policies and the Loss Reimbursement Plan required Plaintiff to
pay ALAE.

See Dkt. No. 51, at 7. With respect to ALAE charges,

the Loss Reimbursement Plan to which Defendant Guarantee
directed the Court has two (2) options: Option A and Option B.
See Dkt. No. 36, at 24-25. Option A requires the insured to
reimburse the insurer for ALAE.

See id. at 25. Option B does

not require the insured to reimburse the insurer for ALAE.

See

id. If the insured does not select an option, Option A applies,
where available; otherwise, Option B applies. See id.
Construing the evidence in Plaintiff's favor, the Loss
Reimbursement Plan is not incorporated into the Policies. See
Dkt. No. 61-2 191 6-8 (noting that.a Loss Reimbursement Plan is
13

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"neither an insurance policy nor [a part] of an insurance
policy") . Thus, based on the express terms of the Policies,
Defendant Guarantee is obligated to pay all expenses it
incurred, which would include ALAE. Moreover, even if the Loss
Reimbursement Plan were incorporated into the Policies, 4 the
facts viewed in Plaintiff's favor are that Plaintiff elected
terms consistent with Option B, which required Defendant
Guarantee to pay ALAE. See id. 191 9-10.
Defendant Guarantee directed the Court to Deductible
Endorsements appended to the Policies and asserted that those
pages required Plaintiff to pay ALAE. The Deductible
Endorsements explicitly state that they apply to "benefits
in excess of the deductible amount." See, e.g., Dkt. No. 30-7,
at 393, 397, 400. Construing the facts in Plaintiff's favor,
"benefits" paid by Defendant Guarantee under the Policies are

The Court notes that, if a Loss Reimbursement Plan was incorporated into the
Policies, Defendant Guarantee failed to direct the Court to evidence of how a
contracting party would know that the Loss Reimbursement Plan cited in
Defendant Guarantee's briefs and filed on the docket was the Loss
Reimbursement Plan incorporated into the Policies. The evidence indicates
that Plaintiff never received a copy of any Loss Reimbursement Plan. See,
e.g., Dkt. Nos. 61-2 ¶ 7; 61-4 ¶ 11. Moreover, the Loss Reimbursement Plan
provided to the Court states that "[t]he application of this Plan is optional
and may be used only upon election by the insured and acceptance by the
insurer . . . ." Dkt. No. 36, at 24. Defendant Guarantee did not provide
evidence as to when and how Plaintiff elected to use this particular Loss
Reimbursement Plan.

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distinct from the "costs" which Defendant Guarantee agreed to
pay by virtue of the plain text of the Policies themselves.
Viewing the facts in Plaintiff's favor, Defendant Guarantee
billed Plaintiff for ALAE. These acts were inconsistent with
the express terms of the Policies. Consequently, Defendant
Guarantee's motion for summary judgment on Plaintiff's
negligence claim related to overbilling for ALAE is DENIED.
c. Manual Premium Overcharge
Construing the facts in Plaintiff's favor, Defendant
Guarantee billed Plaintiff above the agreed upon discounted rate
for manual premium. See Dkt.

No.

61-2 ¶ 17. In particular, the

record indicates that the parties agreed that Defendant
Guarantee would bill Plaintiff at seventeen percent (17%) of
manual premium. See id. ¶ 17; Dkt. No. 61-4 ¶ 7. The record
also indicates that Defendant Guarantee billed Plaintiff at
approximately twenty-six percent (26%) of manual premium. See
Dkt.

Nos.

61-2 ¶ 17; 61-4 ¶ 7. The record also reflects that

Plaintiff paid the amounts billed. See Dkt.

No.

65-6.

Because the facts can be construed to show that Defendant
Guarantee billed Plaintiff at a rate higher than the parties'
agreement, Defendant Guarantee's motion for summary judgment on
15

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(Rev. 8/82)

Plaintiff's negligence claim related to overbilling for manual
premium is DENIED.
d. Misreporting to NCCI
Construing the facts in Plaintiff's favor, Defendant
Guarantee overbilled Plaintiff. Moreover, Defendant Guarantee
necessarily reported Plaintiff's billed costs and expenses to
the NCCI. See Dkt. No. 80, at 8-9 (arguing only that any
reporting of the billed costs and expenses to the NCCI did not
affect Plaintiff's experience modifier). Consequently,
Defendant Guarantee's motion for summary judgment on Plaintiff's
negligent reporting claim is DENIED.
2. Negligence per se
Plaintiff alleges that Defendant Guarantee violated
"O.C.G.A. § 33-24-47(b) by failing to provide Plaintiff with
adequate notice of [a] rate increase." See Dkt. No. 1-1 ¶ 27.
Defendant Guarantee seeks summary judgment on this claim. See
Dkt. No. 51, at 5.
OC.G.A. § 33-24-47(b) requires an insurer to provide
notice of termination, cancellation, nonrenewal, change that
limits or restricts coverage, or increase in certain premiums,
16

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including a certain changes in experience modifications. Such
notice must be provided in person or by first-class mail fortyfive (45) days prior to the effective date of such policy
change. See O.C.G.A. § 33-24-47(b). Where the premium
increases by more than fifteen percent (15%), the notice must
provide the dollar amount of the increase. See id.
Defendant Guarantee maintains that the rates were in the
Policies. Dkt. No. 51, at 5. Defendant Guarantee further
maintains that it "will issue an endorsement advising the
insured" of any pending rate changes. Dkt. No. 51, at 5. Even
assuming that Defendant Guarantee's assertions are true, they do
not establish that, in this case, Defendant Guarantee satisfied
the notice requirements in O.C.G.A. § 33-24-47(b).
In particular, Defendant Guarantee failed to direct the
Court to any evidence that it delivered such notice to Plaintiff
in person or via first-class mail. Moreover, Defendant
Guarantee failed to direct the Court to any evidence as to
either the date that the notice was provided or the date that
the rate increases went into effect. Finally, there is no
indication that the alleged endorsement provided the dollar
amount of the rate increase. Nor is there any evidence that the
rate increase was less than fifteen percent (15%) such that
17

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Defendant Guarantee was not required to provide notice of the
dollar amount of the rate increase. Without evidence that the
statutory notice requirements were satisfied, the Court cannot
conclude that Plaintiff's claim of negligence per se for
violation of O.C.G.A. § 33-24-47(b) fails as a matter of law.
Consequently, Defendant Guarantee's motion for summary judgment
on that claim is DENIED.
3. Breach of Contract
Plaintiff asserts that Defendant Guarantee breached its
express and/or implied contracts with Plaintiff. See Dkt. No.
1-1 ¶I 29-33. Defendant Guarantee seeks summary judgment on
these claims. See Dkt. No. 51, at 5-8.
For the same reasons that Plaintiff's claims of negligent
overbilling survive Defendant Guarantee's motion for summary
judgment (see supra Part IV.A.l.), Plaintiff's claims for breach
of contract survive. That is, the facts construed in
Plaintiff's favor suggest that: the Policies were contracts
between Plaintiff and Defendant Guarantee, Defendant Guarantee
failed to pay the costs that it incurred under the contract, and
Defendant Guarantee billed Plaintiff for those costs. The facts
construed in Plaintiff's favor also suggest that Plaintiff and

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Defendant Guarantee agreed that Plaintiff would pay seventeen
percent (17%) of manual premium and that Defendant Guarantee
billed Plaintiff above this agreed-upon rate. Such facts
prevent the Court from granting Defendant Guarantee's motion for
summary judgment. Consequently, Defendant Guarantee's motion
for summary judgment on Plaintiff's breach of contract claims is
.J4iJ

4. Unjust Enrichment
Plaintiff asserts that Defendant Guarantee was unjustly
enriched. See Dkt. No. 1-1 ¶ 32. Defendant Guarantee seeks
summary judgment on this claim. See Dkt. No. 51, at 6-7.
For the same reasons that Plaintiff's claims of negligent
overbilling survive Defendant Guarantee's motion for summary
judgment (see supra Part IV.A.1.),. Plaintiff's claim for unjust
enrichment survives. 5 Consequently, Defendant Guarantee's motion
for summary judgment on Plaintiff's unjust enrichment claim is
DENIED.

Plaintiff's unjust enrichment claim is merely an alternative argument to
Plaintiff's breach of contract claims. It applies only to the extent that no
legal contract existed between Plaintiff and Defendant Guarantee. See Ades
v. Werther, 567 S.E.2d 340, 342 (Ga. Ct. App. 2002) ("[T]he theory of unjust
enrichment applies only when there is no legal contract.").

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5.

Fraud
Plaintiff asserts a claim of fraud based on Defendants'

alleged representations to the NCCI. See Dkt. No. 1-1 ¶I 34-37.
Defendant Guarantee seeks summary judgment on this claim. See
Dkt. No. 51, at 8-9.
The "elements of fraud and deceit in Georgia are[]
(1) false representation made by the defendant; (2) scienter;
(3) an intention to induce the plaintiff to act or refrain from
acting in reliance by the plaintiff; (4) justifiable reliance by
the plaintiff; (5) damage to the plaintiff." Johnson v. GAPVT
Motors, Inc., 663 S.E.2d779, 783 (Ga. Ct. App. 2008) (quoting
City Dodge v. Gardner, 208 S.E.2d 794 (Ga. 1974)) . "For
purposes of summary judgment, scienter and intent to deceive are
determined on the basis of the seller's knowledge of the falsity
of his representations at the time made to the prospective
purchaser." Id. (quoting Hudson v. Pollock, 598 S.E.2d 811 (Ga.
Ct. App. 2004)).
Defendant Guarantee's brief supporting its motion appears,
at least in part, to challenge the sufficiency of the
allegations in Plaintiff's Complaint. However, on motion for
summary judgment, the Court must consider the evidence
supporting the nonmovant's claims.
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Plaintiff brings its fraud claim in the alternative to its
other claims. That is, should the facts reveal that Defendant
Guarantee properly billed Plaintiff for ALAE and manual premium,
Plaintiff maintains that Defendant Guarantee fraudulently
induced Plaintiff to enter into insurance policies that required
it to pay such costs. See Dkt. No. 65, at 10.
Assuming that Defendant Guarantee correctly interpreted the
parties' duties under the Policies, Plaintiff points to the
following facts to support its fraud claim: First, Defendant
Guarantee made false statements regarding Plaintiff's
obligations to pay ALAE and the discounted manual premium rate.
Second, Defendant Guarantee failed to disclose that it would use
Nurse Case Managers on every claim. Third, Defendant Guarantee
failed to deliver the Policies and incorporated Loss
Reimbursement Plan. Fourth, Defendant Guarantee failed to
itemize invoices, thus "hiding" the fact that it was charging
Plaintiff for ALAE, billing at an increased premium rate, and
incurring Nurse Case Manager expenses. See Dkt. Nos. 30-3; 612; 61-4. Taking these facts as true, a factfinder could
conclude that—to induce Plaintiff to enter into the Policies at
issue—Defendant Guarantee knowingly and falsely represented
(1) what it would charge and (2) how it would use Nurse Case
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Managers. A factfinder could also conclude that Plaintiff
justifiably relied on Defendant Guarantee's representations.
Finally, if Plaintiff paid ALAE, was billed at an increased
manual rate, and/or incurred additional Nurse Case Manager
expenses as a result of Defendant Guarantee's false
representations, a factfinder could conclude that those
representations caused Plaintiff financial harm. 6
After construing the facts in Plaintiff's favor, the Court
cannot say that Defendant Guarantee is entitled to judgment as a
matter of law. Consequently, Defendant Guarantee's motion for
summary judgment on Plaintiff's fraud claim is DENIED.
6. Conversion
Plaintiff asserts that Defendant Guarantee wrongly
converted its funds. See Dkt. No. 1-1 191 29-33. Defendant

6

Defendant Guarantee asserts that reporting costs and expenses, including
ALAE, to the NCCI could not have increased Plaintiff's experience modifier or
resulted in Plaintiff's increased costs. See Dkt. No. 80, at 8-9. This may
be true. However, if a factfinder believes Plaintiff's evidence and finds
that Defendant Guarantee misrepresented the Policies' costs from the outset,
the simple fact that Plaintiff paid more than it would have paid without such
misrepresentation is sufficient to meet the "damages" element of Plaintiff's
fraud claim. Thus, even if Defendant Guarantee is correct about the lack of
effect of the alleged fraud on Plaintiff's experience modifier, the evidence
construed in Plaintiff's favor is sufficient to survive Defendant Guarantee's
motion for summary judgment.

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Guarantee seeks summary judgment on this claim. See Dkt. No.
51, at 9-10.
In Georgia, "'[c]onversion consists of an unauthorized
assumption and exercise of the right of ownership over personal
property belonging to another, in hostility to his rights; an
act of dominion over the personal property of another
inconsistent with his rights; or an unauthorized appropriation."
Capital Fin. Servs. Grp., Inc. v. Hummel, 721 S.E.2d 108, 110
(Ga. Ct. App. 2011) (citation omitted).

"[I]t is immaterial

that such dominion was exercised in good faith . . . ." Id. To
establish a claim for conversion, "the complaining party must
show (1) title to the property or the right of possession, (2)
actual possession in the other party, (3) demand for return of
the property, and (4) refusal by the other party to return the
property.
Viewing the evidence in Plaintiff's favor, Plaintiff
established a claim for conversion. Specifically, there is
evidence to support Plaintiff's assertion that (1) Plaintiff
gave Defendant Guarantee more money than required under the
Policies; (2) upon learning of this fact, Plaintiff demanded
return of the excess payments; and (3) Defendant Guarantee

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refused to return the excess funds to Plaintiff. See Dkt. No.
61-4.
Defendant Guarantee argues that "'[c]onversion is not a
viable claim where there is nothing more than a failure by the
defendant to pay money owed to the plaintiff." Dkt. No. 51, at
10. Defendant Guarantee is correct that, while "[t]angible
personalty or specific intangible property may be the subject
for an action for conversion," money is not generally subject to
a conversion claim because it is fungible, intangible
personalty. Trey Inman & Assoc., P.C. v. Bank of Am., N.A., 702
S.E.2d 711, 717 (Ga. Ct. App. 2010) (citation omitted)
However, exceptions to this Georgia common law rule exist. For
example, in Decatur Auto Ctr., Inc. v. Wachovia Bank, N.A., the
Supreme Court of Georgia held that checks and other negotiable
instruments can be the subject of a conversion claim. 583
S.E.2d 6 (Ga. 2003). In so holding, the court reasoned that
"[c]onversion of checks is actionable because checks designate
specific amounts of money for use for specific purposes."
Decatur Auto Ctr., 583 S.E.2d at 9 (citations omitted).
Applying the rationale employed by the Supreme Court of
Georgia in Decatur Auto Center, the allegedly excess funds that
Plaintiff disbursed to Defendant Guarantee were specific and
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identifiable. See, e.g., Dkt. No. 61-7 (referencing specific
bank reference numbers for each disbursement). Therefore, such
funds are proper subjects of Plaintiff's conversion claim. See
Decatur Auto Ctr., 583 S.E.2d at 9 (recognizing "that a
plaintiff in a conversion action does not need to identify the
specific dollars and coins represented by the face value of
checks and other negotiable instruments" to sustain a conversion
claim); accord Trey Inman, 702 S.E.2d at 717 ("In this day and
age when funds are commonly transferred via wire and other
electronic means, we see no logical reason for treating specific
and identifiable funds that are transferred electronically .
differently from checks."). Accordingly, to the extent that the
funds allegedly paid in excess of the proper amount owed were
specifically identifiable through identification to a particular
check, wire or electronic transfer, or similar modern transfer
technology, Plaintiff's conversion claim is not subject to
judgment as a matter of law.
For completeness, the Court notes that several Georgia
courts have held that a conversion claim in an inappropriate
method for claiming that money is due under a contract. See,
e.g., Decatur Auto Ctr., 583 S.E.2d 6, 9 n.8 ("[A] cause of
action for conversion 'does not lie on account of a mere failure
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to pay money due under a contract.'" (quoting Morris v. Nat. W.
Life Ins. Co., 430 S.E.2d 813, 814 (Ga. Ct. App. 1993))).
However, Plaintiff is not claiming that Defendant Guarantee owes
it unpaid money under the Policies. Plaintiff is claiming that
it gave Defendant Guarantee more money that it owed, and that it
is entitled to the return of those allegedly converted funds.
Thus, the Georgia case law pertaining to paying money owed under
a contract is inapplicable to Plaintiff's claim.
Because the evidence, when viewed in Plaintiff's favor,
supports Plaintiff's conversion claim, Defendant Guarantee's
motion for summary judgment on Plaintiff's conversion claim is
DENIED.

B. Claims Aaainst Defendant Patriot
Plaintiff asserts a claim of fraud based on Defendants'
alleged representations to the NCCI. See Dkt. No. 1-1 ¶I 34-37.
Defendant Patriot seeks summary judgment on this claim. See
Dkt. No. 43, at 6-7. Specifically, Defendant Patriot asserts
that it did not insure Plaintiff, did not misrepresent claims
and losses to Plaintiff or the NCCI, never induced Plaintiff to
act or refrain from acting, and never intended to induce
Plaintiff to act or refrain from acting. See id. at 6-7; see
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also Dkt. Nos. 43-1; 48-2 (providing factual basis for Defendant
Patriot's assertions). Plaintiff appears to agree. See Dkt.
No. 57.
However, Plaintiff argues that summary judgment is
inappropriate because Defendant Patriot is liable under a theory
of veil-piercing or agency. See Dkt. No. 57. In turn,
Defendant Patriot argues that Plaintiff failed to plead a veilpiercing or agency theory in its Complaint and should not be
allowed to expand the Complaint to survive a motion for summary
judgment. See Dkt. No. 71. Defendant Patriot is correct.
Plaintiff failed to allege facts in its Complaint
sufficient to state a claim for veil-piercing or agency. See
generally Dkt. No. 1-1. Thus, Plaintiff cannot raise such
theories at this stage to defeat Defendant Patriot's motion for
summary judgment. Accord Steed v. Wellington HealthCare Servs.,
LLC, 646 S.E.2d 517, 520 (Ga. Ct. App. 2007) (denying the
plaintiff's attempt to present a veil-piercing theory at the
summary judgment stage where she "framed her claims against [the
defendant] as ones for direct liability" rather than failure to
maintain the corporate form).
Moreover, even if Plaintiff had brought veil-piercing or
agency-based claims against Defendant Patriot, the evidence
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supporting such claims is insufficient to withstand Defendant
Patriot's motion for summary judgment.
For example, Plaintiff asserts that Defendant Patriot
admitted to holding monies related to Plaintiff's alleged
overpayment to Defendant Guarantee. Dkt. No. 57, at 5.
Plaintiff also asserts that Defendant Patriot managed various
aspects of Defendant Guarantee's business, including demanding
payment and answering questions related to the Policies and
disputes at issue. Id. at 5-7. Plaintiff also asserts that
Defendant Patriot provided deponents and affiants to help answer
Plaintiff's questions regarding the disputes in this case. Id.
at 7-8.
Even viewing these facts in Plaintiff's favor, the facts
are insufficient to show that the corporate forms of Defendants
Patriot and Guarantee were disregarded for an improper purpose.
See Baillie Lumber Co. v. Thompson, 612 S.E.2d 296, 299 (Ga.
2005) ("Under the alter ego doctrine in Georgia, the corporate
entity may be disregarded for liability purposes when it is
shown that the corporate form has been abused."). In fact,
there is no evidence that the corporate forms were disregarded
at all. There is only evidence that Defendant Patriot performed
certain administrative functions for Defendant Guarantee.

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Moreover, given that Defendant Guarantee employs Defendant
Patriot to perform certain administrative tasks, the fact that
they share a corporate representative to explain administrative
matters does not destroy their corporate form. Without evidence
sufficient to infer that the corporate form was abused,
Plaintiff's veil-piercing claim fails as a matter of law.
Furthermore, "the theory of apparent or ostensible agency
[applies] . . . if the plaintiff can establish (1) that the
alleged principal held out another as its agent; (2) that the
plaintiff justifiably relied on the care or skill of the alleged
agent based upon the alleged principal's representation; and
(3) that this justifiable reliance led to the injury." Kissuri
v. Humana, Inc., 479 S.E.2d 751, 752 (Ga. 1997) (citation
omitted). Plaintiff did not direct the Court to any evidence
that Defendant Patriot held out Defendant Guarantee as its
agent. Nor did Plaintiff direct the Court to any evidence that
Plaintiff relied on such representations to its detriment.
Without such facts, Plaintiff's agency claim fails as a matter
of law.
In summary, the facts would not allow a factfinder to
conclude that Defendant Patriot committed fraud against
Plaintiff. Moreover, Plaintiff failed to allege facts
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sufficient to assert a veil-piercing or agency claim and, thus,
cannot raise such claims now. Finally, even if Plaintiff
alleged facts sufficient to assert a veil-piercing or agency
claim, the facts would not allow a factfinder to conclude that
Defendant Patriot is liable under either theory. Consequently,
Defendant Patriot's motion for summary judgment is GRANTED.
C. Counterclaims Against Plaintiff
Defendant Guarantee brought breach of contract claims for
each of the four (4) Policies. Specifically, Defendant
Guarantee asserts that Plaintiff failed to pay deductible
premiums owed under the Policies. See Dkt. No. 7, at 14-20.
Viewing the facts in Plaintiff's favor, no contract exists
between Plaintiff and Defendant Guarantee. In particular, the
Court takes the following facts as true for the purposes of
Defendant Guarantee's motion for summary judgment on its
counterclaims: First, the Policies are contracts between
Defendant Guarantee and SAM I. See Dkt. No. 30-7, at 1.
Second, Plaintiff and SAN I are separate entities. Compare id.,
at 1 (providing FEIN of SAM I), with id. at 146 (providing FEIN
of SAN II). Third, Defendant Guarantee billed SAN I for the

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deductible premiums owed. See Dkt. No. 48-2 ¶ 16. Fourth, SAN
I allegedly failed to pay the premiums owed. See id. 191 14-16.
Viewing the facts in Plaintiff's favor, the Policies are
not contracts between Defendant Guarantee and Plaintiff.
Rather, the Policies are contracts between Defendant Guarantee
and SAN I. If Plaintiff was not a party to the Policies,
Plaintiff could not have breached the terms of those Policies as
a matter of law. See O.C.G.A. § 9-2-20 ("As a general rule, an
action on a contract . . . shall be brought in the name of the
party in whom the legal interest in the contract is vested, and
against the party who made it in person or by agent.").
Consequently, Defendant Guarantee's motion for summary judgment
on its counterclaims is DENIED.
D. Plaintiff's Motion for Summary Judgment
Plaintiff moved for partial summary judgment. See Dkt.
No. 30. Specifically, Plaintiff seeks judgment "that
[Plaintiff] did not owe any claims costs for any policy issued
by [Defendant Guarantee] between January 1, 2008 and June 30,
2010." Id. ¶ 10. Thus, Plaintiff asks the Court to interpret
part of the contract between Plaintiff and Defendant Guarantee.

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Viewing the facts in Defendant Guarantee's favor, the
Policies are not contracts between Plaintiff and Defendant
Guarantee. The Policies state that SAM I is the insured. See
Dkt. No. 30-7, at 1. The Policies state that Plaintiff is an
additional named insured. Id. at 146. Viewing the plain text
of the Policies, SAM I and Plaintiff are separate entities, each
with their own FEIN5. Compare Id. at 1, with id. at 146. Thus,
for the purposes of Plaintiff's motion for summary judgment,
Plaintiff is not a party to the Policies.
Even if Plaintiff were a party to the Policies, viewing the
facts in Defendant Guarantee's favor, Plaintiff was responsible
for paying claims costs, including ALAE. In particular, the
record can be construed to support Defendant Guarantee's
assertion that the Loss Reimbursement Plan was incorporated into
the Policies by reference. See, e.g., id. at 381 (noting that
the policy premium is determined, in part, by the "rating
plan"); Dkt. No. 36 ¶ 5 (connecting the policy provision to the
particular Loss Reimbursement Plan allegedly incorporated into
the Policies). The record can also be construed to support
Defendant Guarantee's assertion that Plaintiff never elected
Option B of the Loss Reimbursement Plan. See, e.g., Dkt. No.

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48-2. Thus, Option A was incorporated by default, and Plaintiff
owed ALAE. See Dkt. No. 36, at 25.
Viewing the facts in Defendant Guarantee's favor, Plaintiff
was not a party to the Policies. Moreover, even if Plaintiff
was a party to the Policies, the Policies required Plaintiff to
pay claims costs, including ALAE. Consequently, Plaintiff's
partial motion for summary judgment is DENIED.
V. CONCLUSION

For the reasons stated above, Plaintiff's Motion for
Partial Summary Judgment is DENIED (Dkt. No. 30). Defendant
Patriot's Motion for Summary Judgment on Plaintiff's claims
against it is GRANTED (Dkt. No. 43). Defendant Guarantee's
Motion for Summary Judgment on Plaintiff's claims against it is
DENIED

(Dkt. No. 51). Defendant Guarantee's Motion for Summary

Judgment is on its counterclaims is DENIED (Dkt. No. 48).

SO ORDERED, this 23rd day of August, 2013.

0~

L~

SA GODBEY OOD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
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