ZURICH AMERICAN INSURANCE COMPANY OF ILLINOIS v. ALL COUNTY EMPLOYMENT SERVICES, INC.
MEMORANDUM OPINION. SIGNED BY HONORABLE JOSEPH F. LEESON, JR ON 12/20/16. 12/22/16 ENTERED AND COPIES E-MAILED.(mas, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
ZURICH AMERICAN INSURANCE
COMPANY OF ILLINOIS,
ALL COUNTY EMPLOYMENT
Plaintiff’s Motion for Summary Judgment, ECF No. 28 – Granted
Joseph F. Leeson, Jr.
United States District Judge
December 20, 2016
Plaintiff Zurich American Insurance Company of Illinois issued Defendant All County
Employment Services, Inc. a one-year workers’ compensation insurance policy. Zurich claims
that All County failed to pay the full amount of the insurance premium, and it has sued All
County for breach of contract. Zurich now moves for summary judgment. All County did not
respond. Because the undisputed facts show that All County breached its obligation to pay
Zurich, summary judgment is granted in Zurich’s favor.
Zurich issued All County a one-year workers’ compensation insurance policy in July
2014. At that time, it prepared an estimate of the cost of the policy based on All County’s
anticipated exposure to workers’ compensation obligations over the coming year. See Totzke
Aff. ¶ 7, ECF No. 28-4; Totzke Aff. Ex. B, at 4, 1 ECF No. 28-6 [hereinafter Policy]. Under the
terms of the policy, All County was to make premium payments based on that estimate, and at
the end of the term, Zurich would review All County’s records and calculate the true cost of the
policy based on All County’s actual exposure over the prior year. Totzke Aff. ¶ 7; Policy § 5(E)1
The insurance policy documents contained in Exhibit B to Sheryl Totzke’s affidavit are not uniformly
numbered, so all page number citations to the policy correspond to the pages of the Exhibit, not to any numbering on
the documents themselves. Citations to sections of the policy, however, do correspond to the policy’s internal
(G). If the final cost turned out to exceed the original estimate, All County owed Zurich the
difference, and vice versa. Id.
The one-year term ended on July 23, 2015. As contemplated by the policy, Zurich then
performed an audit of All County’s records and concluded that All County’s exposure during the
period had been higher than anticipated. Totzke Aff. ¶ 8. Accordingly, it issued All County an
invoice for $160,634, which represented the difference between Zurich’s calculation of the final
cost of the policy and the amount of premium payments that All County had made based on the
policy’s estimated cost. Id.; Totzke Aff. Ex. C, ECF No. 28-7. The invoice was dated January 11,
2016, and called for payment by January 29, 2016. Totzke Aff. Ex. C, at 5. Included with the
invoice was an audit report that Zurich prepared, which explained how Zurich arrived at the final
premium. Id. at 1-4.
Between January 22 and February 18, the two sides exchanged a series of emails about
the invoice; in one of them, All County stated that it had “some fundamental questions” about
Zurich’s calculation and had “engag[ed] an expert in these areas to help [it] validate or invalidate
[Zurich’s] claim,” but All County did not further elaborate. Totzke Aff. Ex. D, at 2, ECF No.
28-8. Zurich asked All County to describe its concerns in greater detail, but it appears that All
County did not respond. Id. at 1. Zurich filed this suit soon after.
Discovery closed without All County either identifying any particular error in Zurich’s
audit report or submitting any expert reports to challenge Zurich’s calculation of the final
premium. Kadian Aff. ¶¶ 7-8, ECF No. 9. The $160,634 invoice still has not been paid. Totzke
Aff. ¶ 10.
Zurich moved for summary judgment on this record. All County did not respond.
Legal standard – Summary judgment
Summary judgment is appropriate if the moving party “shows that there is no genuine
dispute as to any material fact”—that is, that no reasonable jury could return a verdict for the
nonmoving party—and that “the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “[A] party seeking summary
judgment . . . bears the initial responsibility of informing the district court of the basis for its
motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any,’ which it believes demonstrate the
absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
Where, as here, the moving party bears the burden of proof at trial, it “must show that it has
produced enough evidence to support the findings of fact necessary to win.” El v. Se. Pa. Transp.
Auth. (“SEPTA”), 479 F.3d 232, 237 (3d Cir. 2007) (citing Marzano v. Comput. Sci. Corp., 91
F.3d 497, 502 (3d Cir. 1996); Sorba v. Pa. Drilling Co., 821 F.2d 200, 202-03 (3d Cir. 1987)).
All County has not responded to Zurich’s motion, but that does not mean that it may be
granted automatically. See Fed. R. Civ. P. 56(e)(3) advisory committee’s note to 2010
amendment (recognizing that “summary judgment cannot be granted by default even if there is a
complete failure to respond to the motion”). Instead, the court must still ensure that “the motion
and supporting materials . . . show that the movant is entitled to it.” Fed. R. Civ. P. 56(e)(3).
“Where the moving party has the burden of proof on the relevant issues, this means that the
district court must determine that the facts specified in or in connection with the motion entitle
the moving party to judgment as a matter of law.” Anchorage Assocs. v. V.I. Bd. of Tax Review,
922 F.2d 168, 175 (3d Cir. 1990).
Summary judgment is warranted in Zurich’s favor.
To make out its breach of contract claim, Zurich must prove that “there was a contract,
[All County] breached it, and [Zurich] suffered damages from the breach.” McShea v. City of
Phila., 995 A.2d 334, 340 (Pa. 2010). 2 All County has admitted that the policy was a valid
contract between the parties and that it has not paid Zurich the additional $160,634 that it
demanded following its audit of All County’s records. See Kadian Aff. Ex. B, ¶¶ 6, 18, ECF No.
28-11. 3 The only question, then, is whether All County’s failure to pay amounts to a breach of the
policy such that Zurich “is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
The policy provides that the premium stated on the face of the policy is simply an
estimate, and “[t]he final premium will be determined after [the] policy ends by using the actual,
not the estimated, premium basis and the proper classifications and rates that lawfully apply to
the business and work covered by [the] policy.” Policy § 5(E). The policy contemplated that
Zurich would audit All County’s records after the end of the policy term and that “[i]nformation
developed by audit [would] be used to determine [the] final premium.” See id. § 5(G). The policy
then provides that “[i]f the final premium is more than the premium you paid to us, you must pay
us the balance. If it is less, we will refund the balance to you,” id. § 5(E), and an endorsement to
the policy provides that “[t]he due date for audit and retrospective premiums is the date of the
billing,” id. at p. 19.
The evidence Zurich has produced shows that it audited All County’s records, determined
the final premium based on All County’s actual exposure during the period (as evidenced by the
audit report that Zurich prepared, see Totzke Aff. Ex. C), concluded that the final premium was
greater than the premium that All County had paid, and billed All County for the difference.
Under the terms of the policy, that would appear to trigger All County’s obligation to pay the
difference by the date specified in the invoice.
All County’s explanation for its failure to do so is that it disagrees with Zurich’s
calculation of the final premium. See Answer ¶ 13, ECF No. 6; Kadian Aff. Ex. B, ¶ 18. But
even assuming that the policy affords All County some right to dispute Zurich’s calculation, 4 the
In its complaint, Zurich also stated two other claims, but Zurich seeks summary judgment only on this one.
All three claims seek the same relief: the $160,634 that All County failed to pay.
Exhibit B to Dennis Kadian’s affidavit contains a series of requests for admission that Zurich served and
All County’s responses to them.
The policy does not expressly provide All County with any mechanism to dispute Zurich’s calculation of
the final premium—it simply states that Zurich will determine the final premium after the policy ends, and All
record shows that All County failed to produce any evidence to call Zurich’s calculation into
question or even identify any particular error that it believes that Zurich made. Accordingly, the
undisputed facts show that All County was obligated to pay Zurich the amount it demanded and
that All County did not do so. Zurich is therefore entitled to summary judgment on its breach of
Under the terms of the insurance policy that Zurich issued, All County was obligated to
pay an additional premium to Zurich at the end of the policy term if Zurich determined that the
actual cost of the policy exceeded the payments that All County made during the life of the
policy. The undisputed facts show that Zurich determined, consistent with the policy, that the
final premium was $160,634 higher than the payments All County had already made. They also
show that All County has failed to pay that amount. Accordingly, Zurich is entitled to summary
judgment on its breach of contract claim.
A separate order entering judgment in Zurich’s favor follows.
BY THE COURT:
/s/ Joseph F. Leeson, Jr.____________
JOSEPH F. LEESON, JR.
United States District Judge
County is required to pay the difference if that final premium exceeds the premium payments All County made
during the life of the policy. Presumably, Zurich was obligated to calculate the final premium in accordance with the
methodology specified in the policy—that is, to calculate the premium by using “the actual, not the estimated,
premium basis and the proper classifications and rates that lawfully apply to the business and work covered by [the]
policy,” see Policy § 5(E), and to follow the procedures in Zurich’s “manuals of rules, rates, rating plans and
classifications,” see id. § 5(A)—and presumably, All County could challenge whether Zurich’s calculation
conformed to that framework. But the policy does not appear to afford All County any broader right to second-guess
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