American Home Assurance Co. v. Phineas Corp.

• Decision Date: 15 September 2004
• Docket Number: No. 8:02-CV-736-T-26EAJ.,8:02-CV-736-T-26EAJ.
• Citation: 347 F.Supp.2d 1231
• Parties: AMERICAN HOME ASSURANCE CO., a New York corp., Plaintiff, v. THE PHINEAS CORP., a Florida corp., et al., Defendants.
• Court: U.S. District Court — Middle District of Florida

347 F.Supp.2d 1231

AMERICAN HOME ASSURANCE CO., a New York corp., Plaintiff, v. THE PHINEAS CORP., a Florida corp., et al., Defendants.

No. 8:02-CV-736-T-26EAJ.

United States District Court, M.D. Florida, Tampa Division.

September 15, 2004.

Order Amending Judgment on Rehearing, August 27, 2004.

Order Amending Judgment, September 15, 2004.

Christopher Brian Lunny, Edward Bates Cole, Radey Thomas Yon & Clark, John Radey, Katz, Kutter, Haigler, Alderman, Bryant & Yon, P.A., Tallahassee, FL, for Plaintiff.

Steven Murray Weinger, Helena M. Tetzeli, Kurzban, Kurzban & Weinger, Miami, FL, for Defendant.

Arden M. Siegendorf, Miami, FL, pro se.

Steven J. Chackman, Bernstein & Chackman, P.A., Hollywood, FL, for Movant.

ORDER

LAZZARA, District Judge.

Before the Court is Plaintiff's Amended Motion for Summary Judgment (dkt.314) and Defendants' Response thereto (dkt.334). Also before the Court are the parties Statements of Unopposed Facts (dkts. 315 & 335) and supporting exhibits (dkts. 316-323 & 336-340)

Background & Factual Allegations

Plaintiff, American Home Assurance Company ("American Home"), is an insurer authorized to provide workers' compensation and employer liability insurance in the State of Florida. Defendant, The Phineas Corporation ("Phineas"), is a large, multi-state organization that provides certain outpatient and in-patient assistance to its developmentally challenged clients. Phineas is essentially the parent company for all of the other Defendants in this action.

On or about July 15, 2000, American Home issued a workers' compensation and employer liability insurance policy (WC 477-98-14) ("the Policy") to Phineas for a coverage period of one year. Each of the Defendants was covered by the Policy and was provided a benefit by American Home. Defendants admit that the Policy is a valid and binding contract between American Home and Phineas. Pursuant to the Policy, American Home provided Defendants and their employees with certain coverages throughout the Policy term and otherwise performed in compliance with all material terms and requirements of the Policy. In accordance with the Policy, Phineas was obligated to remit estimated premiums to American Home, subject to a final audit by American Home to determine the total premium owed.

The Policy's first page (the "Information Page") shows that the "Estimated Premium" is calculated by means of "Classifications," "Code Number," "Estimated Total Remuneration," and a "Rate Per $100 of Remuneration." (See dkt. 240, tab B(1), p. AIG-PH 242; dkt. 41, ex. C.) The Policy's "Total Estimated Premium" is shown as $860,941.00. (See id. at p. AIG-PH 242.) The last page of the Policy is a "Binder Confirmation" showing a "total due" of $869,148.00 (the sum of $8,207.00 ("surcharge") and $860,941.00 ("premium")). (See id. at AIG-PH 289.) It is undisputed that Phineas fulfilled its obligation to pay $869,148.00, the estimated premium amount due under the "Binder Confirmation."

However, the Policy later provides that:

The final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classification and rates that lawfully apply to the business and work covered under this policy. If the final premium is more than the premium you paid us, you must pay us the balance....

(See id. at AIG-PH 250-51.) The Policy further provides that Phineas is obligated to make certain documentation available for examination by American Home so that the final audit can be completed. In pertinent part, the Policy requires Phineas to:

... let us [American Home] examine and audit all of your records that relate to this policy. These records include ledgers, journals, registers, vouchers, tax reports, payroll and disbursement records, and programs for storing and retrieving data. We may conduct the audits during regular business hours during the policy period and within three years after the policy period ends. Information developed by audit will be used to determine final premium.

(See id.) The Policy was specifically approved by the State of Florida, Office of Insurance Regulation ("OIR"), and was not subject to negotiation. (Dkt. 240, tab C, ¶ 4; Certified Copy of Policy Forms.)

After the Policy term expired, American Home, required an audit of Phineas to determine the final premium owed. On July 19, 2001, American Home's auditor, Nat Ardoin, communicated by phone with Michael Aguilar ("Aguilar"), the agent for Phineas and Defendant Sunrise Community, Inc.'s ("Sunrise") Risk Manager, to discuss the on-site audit. Mr. Aguilar was listed by Phineas as the "Inspection Contact" and "Accounting Records Contact" in Phineas' application for insurance from American Home. During the phone conversation, Mr. Aguilar informed American Home's auditor that he would produce a report containing all requested audit information once Sunrise's computer system became operational. Mr. Aguilar transmitted the system report to American Home's auditor via email on August 17, 2001. (Dkt.41, Ex. F) The report contained payroll information, employee job descriptions, classification codes, a breakdown of corporate officers, and other material data for final premium determination. (Dkt.41, Ex. G)

Based on the audit materials submitted, American Home determined that Defendants owed an additional earned premium of $2,418,648.00 under the Policy and therefore, demanded said amount from Phineas. Phineas has not paid any additional premium for the Policy. Defendants argue that American Home lulled them into the contract for insurance through fraudulent misrepresentations and a "low-ball" quote. Defendants maintain that American Home misrepresented that they should only expect a slight increase in the final premium due to the 4% increase in payroll. Defendants take issue with the magnitude of the additional premium requested in light of American Home's alleged oral misrepresentations and conduct. They assert that the final premium requested is the result of improper changes to employee classifications, based on job duties and risk exposure, which were made without a formal endorsement.

Plaintiff's Claims & Defendants' Counterclaims

American Home brings this action under the Court's diversity jurisdiction. In Count I of the Amended Complaint, American Home states a claim for breach of contract against Phineas for failing to fulfill its obligation of payment of the premium balance due under the Policy. Count Two also sets forth a claim of breach of contract against Phineas, but for submitting inaccurate and false audit materials. American Home raises a statutory claim for penalty, pursuant to Section 440.318, Florida Statutes, against Phineas and Sunrise in Count Three. This Count is also based on allegations that Defendants submitted false or inaccurate audit materials. In Count Four, American Home states a claim for unjust enrichment, arguing that Defendants voluntarily accepted and retained benefits under the Policy and have not compensated American Home for the fair value of services provided. Defendants' counterclaims include fraud (Count I), negligent misrepresentation (Count II), and recision (Count IV). These arguments are also raised in more detail in Defendants' Response to the Motion for Summary Judgment.

Summary Judgment Standard

In the instant Motion, American Home seeks entry of summary judgment in its favor on Count I of the Amended Complaint and Counts I, II, and IV of Defendants' counterclaims, the granting of which will necessarily resolve all remaining issues in this case. Summary judgment is appropriate where there is no genuine issue of material fact. Fed.R.Civ.P. 56(c). Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation omitted). On a motion for summary judgment, the court must review the record, and all its inferences, in the light most favorable to the nonmoving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). Having done so, the Court now finds that Plaintiff is entitled to entry of final summary judgment in its favor and against Defendants.

Discussion

Count I of the Amended Complaint: Breach of Contract Against Phineas

Count I of the Amended Complaint alleges that Phineas' failure or refusal to tender complete payment of the additional premium due is a substantial, material breach of the Policy. Phineas admits that the Policy is a valid and binding contract. (See dkt. 240, tab A, ¶ 35, and Tab I, ¶ 14.) The Policy's plain language, as previously set forth, and Florida law require American Home to conduct an audit and to calculate the final premium "to ensure that the appropriate premium is charged for workers' compensation coverage." § 440.381(3), Fla. Stat. (2000); F.A.C. Rule 4-189.003(4) (2000). Final premium must be based on actual, not estimated, payroll or remuneration paid during the Policy term and must be based on a lawful allocation of that payroll between classification code Numbers 8861 and 9110. (Dkt. 240, tab B(1) at p. 5); § 440.381, Fla. Stat. (2000); see also 1995 NCCI Basic Manual, Rule XV(A). After the policy term expired, American Home requested materials from Phineas to conduct an audit and Phineas complied. American Home then verified the information, calculated the final premium owed under the Policy, and notified Phineas of that amount. The admittedly "binding" Policy expressly requires that "[i]f the final premium is more than the premium you [Phineas] paid to us [American Home], you must pay us the balance". (See dkt. 240, tab B(1) at AIG-PH 250.)

The undisputed evidence shows that American Home performed its calculation of the final premium in good faith and determined that Phineas owes an additional premium for the Policy in the amount of...