Liverman Metal Recycling, Inc. et al v. Arthur J. Gallagher & Co.
Filing
42
ORDER denying 25 Motion for Summary Judgment. Signed by District Judge Terrence W. Boyle on 5/25/2018. (Downing, L.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
EASTERN DIVISON
No. 4:16-CV-291-BO
LIVERMAN METAL RECYCLING, INC. and
EMPIRE SERVICES, INC.,
Plaintiffs,
)
)
)
)
)
)
)
)
v.
ARTHUR J. GALLAGHER & CO.,
Defendant.
ORDER
This matter is before the Court on defendant's motion for summary judgment [DE 25].
The matters are fully briefed and are ripe for ruling. A hearing was held before the undersigned
on April 6, 2018 at Raleigh, North Carolina. For the following reasons, the motion is denied.
BACKGROUND
Plaintiffs are two companies, Empire and Liverman, that process scrap metal. At the time
of the events giving rise to this case, they were in the process of merging. Empire was acquiring
Liverman, and a management plan was established. As a part of this plan, Empire's employees
were moved on to Liverman's payroll processing system. Concurrently, Liverman renewed its
workmen's compensation insurance policy. The defendant, Arthur J. Gallagher & Co., an
insurance broker, handled the renewal. The insurer was a company called Bridgefield Insurance
Company.
In December 2013, an employee suffered an onsite injury at one of the processing
locations and filed a claim for workmen's compensation. Bridgefield, the insurer, denied the
claim. Bridgefield's justification for the denial was that the injured employee worked for Empire,
and their insurance policy only covered Liverman. Plaintiffs brought the case to the North
1
Carolina Industrial Commission, which rules on workmen's compensation claims. The
Commission found that Bridgefield owed coverage. The Commission found that defendant,
acting as Bridgefield's agent, had knowledge of the merger and the location in question where
the employee worked when renewing plaintiff Liverman's policy. That knowledge was imputed
to Bridgefield and it was required to pay out the coverage. The Commission found that since
Bridgefield's refusal to provide coverage was reasonable, it did not owe attorneys' fees. Empire
and Liverman jointly brought this action to recover those fees, on the grounds that defendant's
actions caused Bridgefield to wrongly disclaim coverage, leading to the proceeding before the
Industrial Commission. Plaintiffs have alleged the following causes of action: negligent failure to
procure workmen's compensation insurance; negligent failure to advise plaintiffs of the need to
procure workmen's compensation insurance; fraud; constructive fraud; and a violation of North
Carolina's Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat.§ 75-1.l(a). This Court
has jurisdiction as the parties are diverse. Following discovery, defendant moved for summary
judgment.
DISCUSSION
A motion for summary judgment may not be granted unless there are no genuine issues
of material fact for trial and the movant is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56(a). In determining whether a genuine issue of material fact exists for trial, a trial court
views the evidence and the inferences in the light most favorable to the non-moving party. Scott
v. Harris, 550 U.S. 372, 378 (2007). However, "[t]he mere existence of a scintilla of evidence"
in support of the non-moving party's position is not sufficient to defeat a motion for summary
judgment; "there must be evidence on which the [fact finder] could reasonably find for the [nonmoving party] on the evidence presented." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252
2
(1986). Speculative or conclusory allegations will not suffice. Thompson v. Potomac Elec.
Power Co., 312 F.3d 645, 649 (4th Cir. 2002). Here, there are genuine issues of material fact still
left to be resolved.
This case is about attorneys' fees. Plaintiffs seek the fees they incurred before the
Industrial Commission from defendant, on the grounds that it is defendant's fault they had to
argue the claim before the Commission. Defendant argues plaintiffs ended up before the
Commission because of their failure to properly procure coverage, and it is not defendant's fault.
Defendant has moved for summary judgment on three grounds. First, that there is no proximate
cause between defendant's alleged actions and Bridgefield's claim denial. Second, that there was
no breach of a duty such that defendant acted negligently. Third, that there was no detrimental
reliance by plaintiff on any misrepresentation by defendant to support a fraud or deceptive trade
practices claim.
I.
Proximate Cause
Defendant's proximate cause argument is misplaced. Proximate cause is "a cause that
produced the result in continuous sequence and without which it would not have occurred, and
one from which any man of ordinary prudence could have foreseen that such a result was
probable under all the facts as they existed." F.D.JC. ex rel. Co-op. Bank v. Rippy, 799 F.3d 301,
316 (4th Cir. 2015) (quoting Mattingly v. North Carolina R.R. Co., 253 N.C. 746, 117 S.E.2d
844, 847 (1961)) (citation and internal quotation marks omitted). Plaintiffs' tort claims require a
showing of proximate cause, as does their claim that defendant violated North Carolina's Unfair
and Deceptive Trade Practices Act. Strafes Shows, Inc. v. Amusements ofAm., Inc., 646 S.E.2d
418, 424 (2007); N.C. Gen. Stat.§ 75-1.l(a); Restatement (Second) of Torts§ 9 (1965).
3
Defendant argues that it did not cause the injury because Bridgefield's denial of the
workmen's compensation claim was not wrongful: Bridgefield evaluated the claim, determined,
to its knowledge, that the injured employee wasn't a covered employee, and denied it.
But plaintiffs' argument is that defendant's conduct is what led to Bridgefield reasonably
finding a distinction between Liverman employees and Empire employees in the first place.
Defendant's proximate cause defense begs the question. The inquiry is not whether what
Bridgefield did was reasonable, but why it was done. Accordingly, defendant's motion for
summary judgment on these grounds is denied.
II.
Negligence
Next, defendant argues that there was no breach of its duties as an insurance broker. An
insurance broker can be liable for the failure to procure insurance when he "promises or gives
some affirmative assurance" that he will do so. Barnett v. Security Ins. Co. of Hartford, 352S.E.2d 855, 857 (1987). But the broker is not obligated to "procure a policy for the insured
which has not been requested." Phillips v. State Farm Mut. Auto. Ins. Co., 429 S.E.2d 325, 327
(1998).
The dispute here is over what was requested. According to plaintiffs, in April 2013,
defendant's agent Theobald was informed about the transaction between Liverman and Empire.
When it was time to renew the workmen's compensation policy in August of2013, Theobald
confirmed that additional payroll and locations, including Empire locations, were added to the
workmen's compensation renewal. [DE 24 at 8-9; DE 35-5 at 178-79]. Defendant claims that
Theobald was informed of a potential transaction in April 2013, but nothing further, and that the
renewal discussions in August of2013 only concerned Liverman employees. [DE 27 at 2-3, 4;
DE 28-1 at 13].
4
Viewing all inferences in light of the non-moving party, summary judgment cannot be
granted. The acquisition process between plaintiffs was lengthy and involved several steps.
Whether, in that context, the above discussions constituted an affirmative representation that the
requested insurance had been procured has not been firmly established in any party's favor at
this juncture. Nor has what insurance was, in fact, requested. Accordingly, the issue is not
appropriate for resolution on summary judgment. Defendant's motion is denied.
III.
Fraud and Deceptive Trade Practices Claims
Defendant also argues that plaintiffs' fraud and deceptive trade practices claims cannot be
sustained because there was no detrimental reliance on a fraudulent misrepresentation or
omission. In North Carolina, claims of fraud or unfair and deceptive trade practices both have as
an element detrimental reliance. Pearce v. Am. Def Life Ins. Co., 343 S.E.2d 174, 180 (1986);
Bumpers v. Cmty. Bank ofN Va., 747 S.E.2d 220, 226 (2013). Plaintiff must demonstrate actual
reliance on the alleged misrepresentation, and that reliance must be reasonable and to their
detriment. Id.; Tucker v. The Boulevard at Piper Glen, LLC, 564 S.E.2d 248, 251 (2002).
As above, viewing all inferences in the light of the non-moving party, genuine disputes of
material fact still exist. Plaintiffs have argued they relied on the understanding that both Empire
and Liverman employees in North Carolina were covered by the policy in question. This is
bolstered by their procurement of a separate Virginia policy. But the issue, again, is whether
Theobald's communications constitute fraudulent misrepresentations or omissions such that
plaintiffs' behavior was induced by defendant. Defendant, in its motion, argues that they clearly
were not. This has not been resolved such that summary judgment may be granted. Accordingly,
it is denied.
CONCLUSION
5
For the above reasons, defendant's motion for summary judgment [DE 25] is DENIED.
SO ORDERED, this
6y
of May, 2018.
TERRENCE W. BOYLE
UNITED STATES DISTRICT JUDG
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?