Applied Underwriters Captive Risk Assurance Company, Inc. v. Beemac Driver Management, LLC et al

Filing 62

MEMORANDUM AND ORDER - Defendants' motion for summary judgment (filing 48 ) is denied. Defendants' motion to strike the opinions, testimony and affidavit of Ellen Gardiner (filing 52 ) is denied. Ordered by Chief Judge John M. Gerrard. (KLF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
APPLIED UNDERWRITERS
CAPTIVE RISK ASSURANCE
COMPANY, INC., an Iowa
Corporation,

8:16-CV-382

Plaintiff and
Counterclaim
defendant,
MEMORANDUM AND ORDER
vs.
BEEMAC DRIVER MANAGEMENT,
LLC, a Pennsylvania Limited
Liability Company, and DRIVERS
MANAGEMENT SOLUTIONS, LLC
a Pennsylvania Limited Liability
Company,
Defendants and
Counterclaimants.
The defendants entered into an agreement with the plaintiff for workers'
compensation insurance coverage that included a "reinsurance participation
agreement." Filing 1-1. The plaintiff alleges that the defendants breached the
reinsurance participation agreement for their failure to pay an amount due
and owing, as well as the defendants' failure to pay an early cancellation fee
assessed as a consequence of the alleged breach. The defendants moved for
summary judgment asserting that the plaintiff's response to two requests for
admission preclude the plaintiff from proving the defendants' breach as a
matter of law. Filing 48. In addition, the defendants moved to strike the
opinion, testimony and affidavit of what the defendants assert is plaintiff's
expert, claiming she was not timely disclosed. Filing 52.

The Court concludes that there are genuine issues of material fact
precluding summary judgment regarding calculation of the amount the
plaintiff claims is due and owing. The Court also concludes that the plaintiff's
witness is not testifying as an expert, but instead is the plaintiff's employee
testifying based on her personal knowledge of the plaintiff's business practices.
I. STANDARD OF REVIEW
Summary judgment is proper if the movant shows that there is no
genuine dispute as to any material fact and that the movant is entitled to
judgment as a matter of law. See Fed. R. Civ. P. 56(a).
On a motion for summary judgment, facts must be viewed in the light
most favorable to the nonmoving party only if there is a genuine dispute as to
those facts. Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011)
(en banc). Credibility determinations, the weighing of the evidence, and the
drawing of legitimate inferences from the evidence are jury functions, not those
of a judge. Id.
II. BACKGROUND
On August 15, 2013, the parties entered into a reinsurance participation
agreement in connection with the defendants' workers' compensation
insurance coverage needs. Filing 1-1; filing 25 at 4-5. The agreement was for a
three-year term that could be extended by the parties. Filing 1-1 at 4. In
January 2015, the plaintiff sent an account statement to the defendants
representing that the total due for its workers' compensation program,
together with other charges, was $142,797.91. Filing 1-1 at 14-15. As of
February 10, 2015, the plaintiff had cancelled the defendants' insurance plan
and early cancelation charges were incurred in the amount of $253,287.00.
Filing 1-1 at 12.
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III. DISCUSSION
1. DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
In their motion for summary judgment, the defendants dispute the
amounts owed and how those amounts were calculated. The defendants assert
that the plaintiff's unequivocal response to two requests for admission
precludes proof of the amount the plaintiff claims is due. Filing 49 at 1. The
requests are identical in substance, but specific as to each defendant:
REQUEST NO. 26: Admit that the $142,897.91 you contend is
past due under the [reinsurance participation agreement] was not
calculated

on

the

payroll

of

[defendant

Beemac

Driver

Management, LLC].
RESPONSE: Admit.
REQUEST NO. 27: Admit that the $142,897.91 you contend is
past due under the [reinsurance participation agreement] was not
calculated on the payroll of [defendant Drivers Management
Solutions, LLC].
RESPONSE: Admit.
Filing 49-2 at 9.
The defendants assert that the amount due cannot be correctly
calculated pursuant to the parties' agreement without using the defendants'
payroll, and the defendants could not have breached the parties' agreement by
refusing to pay an incorrect billing – that is, not paying an amount that wasn't
calculated pursuant to the terms of the agreement. Filing 49 at 5-6. In support
of their argument, the defendants posited a formula that they claim is derived
from the parties' agreement and represents how the amount that was due
pursuant to the agreement should have been calculated.

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The plaintiff responds that the amount the defendants owe is calculated
based on several factors – and not directly from the defendants' payroll. Thus,
their admission is both accurate and, as a matter of law, does not entitle the
plaintiff to judgment. In support, the plaintiff offered an affidavit from Ellen
M. Gardiner, who is identified as the Chief Actuary for the plaintiff and a
Fellow of the Casualty Actuarial Society. Filing 51-1. Gardiner avers that the
defendants' payroll is used to determine the premium due under the "Policies"
– not just under the reinsurance participation agreement. Moreover, Gardiner
says the defendants are wrong about the formula which, they say, was used by
the plaintiffs to calculate the amount due.
It is apparent that calculation of the amount due pursuant to the parties'
agreement is not as simple as the defendants want to make it seem. Indeed, it
is not at all apparent from the pleadings and evidence how the plaintiff
calculated the amount due – only that the plaintiff claims there is an amount
due and owing. In a word, calculation of the amount that may or may not be
due under the parties' agreement is abstruse.
It is also worth noting that the defendants' argument rests on the
premise that failure to calculate the amount due, accurate down to the penny,
was a prior material breach of the agreement, excusing their own subsequent
failure to perform. See filing 49 at 6 (citing Siouxland Ethanol, LLC v. Sebade
Bros., LLC, 859 N.W.2d 586, 592 (Neb. 2015)). But a "material breach" is "a
failure to do something that is so fundamental to a contract that the failure to
perform that obligation defeats the essential purpose of the contract or makes
it impossible for the other party to perform under the contract." Siouxland
Ethanol, 859 N.W.2d at 592. The defendants offer no authority to suggest that
any miscalculation of the amount owed under a contract is necessarily a
material breach of the contract. The defendants have, in fact, not proffered any
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calculation of how much was owed under the contract, according to them. It's
apparent, then, that the Court can't conclude as a matter of law that the
plaintiff's billing, even if inaccurate, was a material breach.
The plaintiff will require detailed proof and explanation at trial to prove
its case. However, in a motion for summary judgment it is the moving party –
here the defendants – who bear the burden of showing no genuine dispute of a
material fact entitling them to judgment as a matter of law. Calculation of the
amount due, if any, pursuant to the parties' agreement is clearly in dispute,
thus precluding summary judgment.
2. MOTION TO STRIKE PLAINTIFF'S EXPERT
The defendants argue that Gardiner was not disclosed as an expert prior
to the expert disclosure deadline in the scheduling order. According to the
defendants, "it is apparent Ellen Gardiner is testifying as an expert concerning
the meaning of the Reinsurance Participation Agreement at issue in this case."
Filing 53 at 2. Additionally, the defendants argue that even if Gardiner is not
testifying as an expert, her testimony concerns contract interpretation, which
is determined by the Court as a matter of law.
The defendants fail to perceive the distinction between a witness who is
an expert, and a witness testifying as an expert. An expert witness testifies in
the form of opinions and conclusions based on such person's knowledge, skill,
experience, training or education. Fed. R. Evid. 702. That is not the substance
of Gardiner's affidavit. Gardiner, as the plaintiff's employee and presumably
an expert in the field of casualty actuarial science, explained the way Applied
Underwriters calculated the amount due pursuant to the parties' agreement.
She was someone who likely is an expert in her field, testifying about her
personal knowledge of her employer's business practices. To the extent that
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she provided an opinion, it was a lay opinion derived from her work experience
for the plaintiff. Personal knowledge or perception acquired in industry
experience or in the ordinary course of business is a sufficient foundation for
lay opinion testimony. Warner Bros. Entertainment, Inc. v. X One X
Productions, 644 F.3d 584, 592 (8th Cir. 2011); Burlington N. R.R. Co. v.
Nebraska, 802 F.2d 994, 1004-05 (8th Cir. 1986).1
IV. CONCLUSION
There are genuine issues of material fact regarding the amount due
pursuant to the parties' agreement precluding summary judgment. There is no
present basis to strike the opinions, testimony or affidavit of Ellen Gardiner
on the ground that she was not timely disclosed as an expert witness.
IT IS ORDERED:
1.

Defendants' motion for summary judgment (filing 48) is
denied.

2.

Defendants' motion to strike the opinions, testimony and
affidavit of Ellen Gardiner (filing 52) is denied.

1

It is also worth noting that while the Court may exclude expert testimony that wasn't timely

disclosed, the exclusion of evidence is a harsh penalty and should be used sparingly. Wegener
v. Johnson, 527 F.3d 687, 692 (8th Cir. 2008). In deciding whether exclusion is warranted,
the Court must consider, among other things, the reason for nondisclosure, the surprise or
prejudice to the opposing party, the extent to which allowing the testimony would disrupt the
proceedings, and the importance of the testimony. See id. And the defendants have offered
neither argument nor evidence as to any of those considerations. See filing 53.

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Dated this 6th day of December, 2018.
BY THE COURT:

John M. Gerrard
Chief United States District Judge

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