LIBERTY INSURANCE CORPORATION v. PGT TRUCKING, INC. et al

Filing 78

MEMORANDUM OPINION AND ORDER denying 63 Motion to preclude discovery filed by Plaintiff; and denying 74 "Cross-Motion" to strike affirmative defenses filed by Defendants. Signed by Judge Terrence F. McVerry on 8/8/11. (mh, )

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

LIBERTY INSURANCE CORPORATION,
Plaintiff,
v.
PGT TRUCKING, INC., and
SUDBURY EXPRESS, INC.,
Defendants.

)
)
)
) 2:11-cv-151
)
)
)

MEMORANDUM OPINION AND ORDER
Pending before the Court is the MOTION, PURSUANT TO FED. R. CIV. P. 16,
SEEKING TO PRECLUDE DEFENDANTS FROM CHALLENGING ANY ASPECT OF
PLAINTIFF'S CLAIMS HANDLING RELATING TO SETTLEMENTS, RESERVE
CHANGES, AND/OR SIGNIFICANT CLAIMS HANDLING DECISIONS WITH WHICH
DEFENDANTS AGREED; AND/OR FROM CHALLENGING PLAINTIFF’S CLAIMS
HANDLING WITH REGARD TO ANY ISSUE THAT AROSE FROM OR RELATES TO
DEFENDANTS’ SELF-ADMINISTRATION OF WORKERS’ COMPENSATION CLAIMS
AND/OR FROM THE IMPROPER EMPLOYMENT AGREEMENTS THAT DEFENDANTS
REQUIRED THEIR TRUCK DRIVING EMPLOYEES TO SIGN AS A CONDITION OF
EMPLOYMENT (Document No. 63). Plaintiff Liberty Insurance Corporation (“Liberty”) has
filed a brief, a Declaration of Jon Helegda, Liberty’s Account Manager, and exhibits in support
of the motion. Defendants-Counterclaimants PGT Trucking, Inc. and Sudbury Express, Inc.
(collectively “PGT”) have filed a response1 and brief in opposition to the motion and a

1

PGT’s “response” purports to also assert a “cross-motion” to strike several affirmative defenses asserted by Liberty
(Document No. 74). PGT’s filing does not comport with Local Rule 5.1F, which requires all motions to be set forth
in a separate document. In any event, PGT has not articulated a valid basis to strike those defenses prior to
discovery. Accordingly, PGT’s “cross-motion” will be DENIED.

1

Declaration from Paul Vargo, PGT’s Risk Manager. Liberty has filed a reply brief, and the
motion is ripe for disposition.

Factual and Procedural Background
This case involves a retrospective insurance premium arrangement by which Liberty
administered PGT’s workers compensation program from December 2005 through December
2009. In such an arrangement, the insurance premium is adjusted after-the-fact based on the cost
of claims actually paid by the insurer under the policy during the relevant time period. In the
underlying four-count Complaint, Liberty seeks a declaration of its rights under the insurance
policies it provided to PGT, and recovery of unpaid premiums of $183,495.00, as calculated
pursuant to the Large Risk Alternative Rating Option Endorsement/Retrospective Rating Plan
(“LRARO”) set forth in the parties’ contract. PGT filed an Answer, Affirmative Defenses and a
three-count Counterclaim against Liberty. By Order dated June 27, 2011, the Court dismissed
PGT’s “bad faith” and breach of fiduciary duty theories, but permitted the breach of contract
claim to proceed. A case management conference was held on July 18, 2011. An ADR
mediation conference is to be concluded prior to October 17, 2011.

Standard of Review
Liberty filed the instant motion pursuant to Fed. R. Civ. P. 16 by invoking the Court’s
authority to manage the case and to prevent wasteful pretrial activities. In essence, Liberty seeks
to preclude PGT from engaging in any discovery on certain issues because – in its view -- the
“core facts,” as itemized at page 3 of Liberty’s Reply Brief, are not subject to meaningful
challenge. Because discovery has not yet commenced, the Court must accept the “facts” set

2

forth in the parties’ pleadings. The instant motion is akin to a motion for judgment on the
pleadings, which will be analyzed under the Twombly and Iqbal standard. See, e.g. Pumphrey v.
Smith, 2010 WL 4983675 (W.D. Pa. 2010). At this stage of the case, the Court will not adopt
Liberty’s version of the facts, as set forth in the Declaration of Jon Helegda, because PGT has
not yet had an opportunity to contest those alleged “facts.”

Legal Analysis
Liberty asks the Court to preclude PGT from seeking relief with regard to: (1) “any
aspect of Plaintiff’s claims handling that relates to decisions with which Defendants agreed (such
as settlements or reserve charges or significant claims handling decisions)”; (2) “issues relating
to Defendants’ own improper conduct (such as requiring their truck driving employees to sign, as
a condition of employment, an improper employment agreement the intent of which was to
require the employees to waive their rights relating to workers’ compensation claims)”; and (3)
Defendants’ self-administration of workers’ compensation claims.” Motion at ¶ 7. In other
words, Liberty “seeks to remove from the discovery process, from the consideration by experts
and from trial” aspects of the claims handling process that PGT contemporaneously agreed with
or which arose from PGT’s own conduct. Liberty avers that, unlike a typical retrospective
premium insurance arrangement, PGT (and its team of professionals) participated in nearly every
significant decision at issue in this case. Thus, Liberty argues that PGT’s ability to recover is
barred by the doctrines of unclean hands and estoppel.
PGT contends that Liberty’s claims handling and actions directly resulted in increased
costs which inflated the retrospective premiums. PGT further contends that Liberty did not
properly perform its contractual duties, which led PGT to engage outside claims consultants.

3

PGT contends that although it was advised of significant activity and participated in numerous
meetings, Liberty retained full control over decisions impacting claims management and
adjustment process. PGT avers that its alleged agreement as to claims handling decisions was
based on the representations made to it by Liberty. PGT contends that the employment
agreements it executed with truck drivers in Indiana were lawful and appropriate. In sum, PGT
argues that Liberty’s motion is premature and that discovery is essential to determine whether or
not the affirmative defenses raised by Liberty are meritorious.
This Court has previously explained that retrospective premium arrangements are
“qualitatively different” and create a unique duty of good faith and reasonableness for the insurer
which extends to claims handling. It is readily apparent that the parties have substantial
disagreements as to whether Liberty properly performed its contractual duties and whether the
estoppel and unclean hands defenses are applicable. PGT is entitled to engage in discovery in
pursuit of its legal theories. After development of an appropriate factual record, Liberty will
have an opportunity to re-raise these contentions (if warranted) at the summary judgment stage
of the case. It is premature to unilaterally strike these issues from the case at this juncture.
An appropriate Order follows.

McVerry, J.

4

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
LIBERTY INSURANCE CORPORATION,
Plaintiff,
v.
PGT TRUCKING, INC., and
SUDBURY EXPRESS, INC.,
Defendants.

)
)
)
) 2:11-cv-151
)
)
)
)

ORDER OF COURT
AND NOW this 8th day of August, 2011, in accordance with the foregoing Memorandum
Opinion, it is hereby ORDERED, ADJUDGED and DECREED:
The MOTION, PURSUANT TO FED. R. CIV. P. 16, SEEKING TO PRECLUDE
DEFENDANTS FROM CHALLENGING ANY ASPECT OF PLAINTIFF'S CLAIMS
HANDLING RELATING TO SETTLEMENTS, RESERVE CHANGES, AND/OR
SIGNIFICANT CLAIMS HANDLING DECISIONS WITH WHICH DEFENDANTS
AGREED; AND/OR FROM CHALLENGING PLAINTIFF’S CLAIMS HANDLING WITH
REGARD TO ANY ISSUE THAT AROSE FROM OR RELATES TO DEFENDANTS’ SELFADMINISTRATION OF WORKERS’ COMPENSATION CLAIMS AND/OR FROM THE
IMPROPER EMPLOYMENT AGREEMENTS THAT DEFENDANTS REQUIRED THEIR
TRUCK DRIVING EMPLOYEES TO SIGN AS A CONDITION OF EMPLOYMENT
(Document No. 63) filed by Plaintiff Liberty Insurance Corporation is DENIED; and
Defendants’ “CROSS MOTION” (Document No. 74) is DENIED.

BY THE COURT:
s/Terrence F. McVerry
United States District Judge
5

cc:

Jonathan M. Kuller, Esquire
Email: [e-mail]
Matthew R. Shindell, Esquire
Email: [e-mail]
John T. Pion, Esquire
Email: [e-mail]
Timothy R. Smith, Esquire
Email: [e-mail]

6