Composite Co. v. Am. Int'l Grp., Inc.
| Decision Date | 16 September 2013 |
| Docket Number | Civil Action No. 13–10491–FDS. |
| Parties | COMPOSITE COMPANY, INC., individually and on behalf of others similarly situated, Plaintiffs, v. AMERICAN INTERNATIONAL GROUP, INC.; Chartis, Inc.; and American Home Assurance Co., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
OPINION TEXT STARTS HERE
Christian F. Uehlein, Michael P. Thornton, Thornton & Naumes LLP, Boston, MA, for Plaintiffs.
Daniel S. Savrin, Francesca L. Miceli, Bingham McCutchen LLP, Boston, MA, Jennifer J. Barrett, Kevin S. Reed, Quinn, Emanuel Urquhart & Sullivan, LLP, New York, NY, for Defendants.
MEMORANDUM AND ORDER ON DEFENDANTS' MOTIONS TO DISMISS AND TO STRIKE AND PLAINTIFF'S MOTION TO REMAND
This is an action based on the alleged failure of defendants to revise underwritingfigures and adjust reserves for workers' compensation insurance policies. Defendant American Home Assurance Company (“AHAC”) is the nominal issuer of the policies at issue. According to the complaint, the policies were actually administered by holding company defendants Chartis, Inc. and American International Group, Inc. (“AIG”). Plaintiff Composite Company, Inc. brought suit in state court on behalf of itself and a class of other similarly situated companies, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and violation of Mass. Gen. Laws, ch. 93A. The suit was subsequently removed to this Court.
Defendants AIG and Chartis have moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction. Defendant AHAC has moved pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss for failure to state a claim and pursuant to Fed.R.Civ.P. 12(f) to strike plaintiff's claim for exemplary damages. Plaintiff Composite has cross-moved to remand the action to state court.
For the reasons set forth below, defendants' motion to dismiss for lack of personal jurisdiction will be denied; defendant's motion to dismiss for failure to state a claim will be granted in part and denied in part; defendants' motion to strike will be granted in part and denied in part; and plaintiff's motion to remand will be denied.
I. BackgroundA. Legal Framework
The National Council on Compensation Insurance (“NCCI”) and the Massachusetts Workers' Compensation Rating and Inspection Bureau (“WCRIB”), pursuant to Mass. Gen. Laws ch. 152, § 52C, serve as the workers' compensation statistical agents and rating organizations for Massachusetts, depending on whether the workers' compensation risk is interstate or intrastate, respectively.
A policyholder's annual workers' compensation insurance premium is determined by finding the corresponding “manual premium,” which is calculated using the “manual rate” (that is, rates obtained from a manual) uniformly applicable to a particular job classification (for example, clerical or construction work), and adjusting that rate based on a policyholder's specific experience modifier. The manual rate itself has two components based on data collected by NCCI and WCRIB—“loss costs” and an “expense component.” SeeMass. Gen. Laws ch. 152, § 52C(f).
Under Massachusetts law, the WCRIB determines both loss costs and the expense component for Massachusetts policyholders. See id. Once the manual premium for a particular policy is calculated, it is adjusted by factors specific to the policyholder, including its experience modifier, which is derived from the policyholder's past-loss history. Accordingly, a claim made under a policy, and any subsequent third-party reimbursement for that claim, has an impact on the experience modifier and premium due under policies for future years.
The WCRIB and NCCI manage databases of workers' compensation insurance information, including financial, premium, and claim information collected pursuant to insurers' data-reporting requirements. See 211 CMR 110.00. Loss history for a particular policyholder is among the data required to be reported by the insurer to NCCI and/or the WCRIB in the form of “unit statistical reports.” In certain circumstances, NCCI's and the WCRIB's reporting manuals require insurers to report any third-party reimbursement for losses incurred under workers' compensation insurancepolicies previously in effect in the form of corrected unit statistical reports.
B. Factual Background
AIG is a Delaware holding corporation for subsidiaries and affiliates that underwrite various types of insurance; its principal place of business is in New York. Chartis is also a Delaware holding corporation with its principal place of business in New York. AHAC is a subsidiary of AIG and Chartis that underwrites commercial liability and workers' compensation insurance; it is a New York corporation with a principal place of business in New York. It is also licensed to transact business in the Commonwealth of Massachusetts.
Composite Company, Inc. is a Massachusetts corporation with a principal place of business in Massachusetts. It obtained a workers' compensation insurance policy in 2005 that was issued by defendant AHAC. (Compl. ¶¶ 1, 20). The policy covered the period from August 2, 2005, to August 2, 2006. (Def. Mot. Dismiss 3 n. 3; Pl. Opp. at 3).
The complaint asserts claims against all three defendants for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and violation of Mass. Gen. Laws ch. 93A. The central allegation of the complaint is that defendants failed to revise the data they submitted to the WCRIB concerning the amount of reimbursement received from responsible third parties, resulting in the failure to issue a premium reimbursement and the incorrect calculation of future premiums. (Compl. ¶¶ 24, 27).
Specifically, the complaint alleges that a lawsuit regarding an injury sustained on June 29, 2006, involved a settlement payment to AIG from responsible third parties in the amount $20,000. (Compl. ¶¶ 23–24). According to the complaint, if defendants had revised the data they submitted to WCRIB in 2008 to reflect that reimbursement, Composite would have been entitled to a $1,200 premium reimbursement and lower premiums going forward. (Compl. ¶¶ 27–28). The complaint further alleges that other similarly situated companies that had workers' compensation insurance policies underwritten by AIG subsidiaries suffered from the same improper treatment and that defendants persist in their failure to properly revise data submitted to the WCRIB and NCCI. ( See Compl. ¶¶ 28–30).
Composite alleges that its policy with AHAC states as follows:
All premiums for this policy will be determined by our manuals of rules, rates, rating plans and classifications. We may change our manuals and apply the changes to this policy if authorized by law or governmental agency regulating this insurance....
The final premium will be determined after this 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.
Composite further alleges that defendants breached these provisions by failing to revise a unit statistical report they submitted to the WCRIB in 2008 and to adjust reserves to reflect a third-party recovery for a claim made by Composite and paid under the policy. ( Id. at ¶¶ 21–26, 50). According to Composite, this alleged failure resulted in the application of an allegedly inflated experience modifier to a subsequently-issued workers' compensation policy with an effective date in 2008, artificially inflating the premium due underthe 2008 policy and depriving Composite of a $1,200 premium reimbursement. ( Id. at ¶ 27). Those allegations also undergird the claims for breach of the implied covenant, unjust enrichment, and Chapter 93A. ( Id. at ¶¶ 54–72).
As noted, the policy at issue was issued by AHAC. The complaint alleges that AIG and its insurance subsidiaries, including Chartis and AHAC, operate as a “unified entity” for the purpose of administering property and casualty insurance policies. ( See Compl. ¶¶ 31–35). It further alleges that “AIG, Chartis, [AHAC], and other unnamed subsidiary insurance companies of Chartis were under common control and centralized operations,” and that “[c]ontracts for workers compensation insurance entered into under the name of an AIG and/or Chartis subsidiary were entered into by, and on behalf of[,] AIG, Chartis, and its subsidiaries and in furtherance of the property casualty business of AIG.” ( Id. at ¶ 33). According to the complaint, “responsibility for all reporting and revising of data to NCCI and/or WCRIB, including unit statistical reports, was held by a single unit owned by AIG,” and “[d]ecisions regarding reporting and revising of data to NCCI and/or WCRIB were made by the same entity and applicable to all AIG subsidiaries.” ( Id. at ¶ 34).
C. Procedural Background
On January 24, 2013, Composite filed this suit against AFAC, Chartis, and AIG in Massachusetts Superior Court on behalf of itself and other similarly situated companies. On March 5, defendants removed the case to this Court on the basis of diversity of citizenship. See28 U.S.C. §§ 1332(d), 1441(b).
Defendants Chartis and AIG have moved to dismiss the claims against them for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2). Defendant AFAC has moved to dismiss the complaint for failure to state a claim upon which relief can be granted under Fed.R.Civ.P. 12(b)(6) and to strike plaintiff's claim for exemplary damages under Fed.R.Civ.P. 12(f). Plaintiff Composite has moved to remand the case to state court.
II. AnalysisA. Personal Jurisdiction
The plaintiff bears the burden of showing that a court has personal jurisdiction over a defendant. Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 50 (1st Cir.2002). A district court faced with a ...
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