INSURERS'FUND v. Leviton Mfg. Co., Inc.

• Citation: 763 A.2d 590
• Decision Date: 13 December 2000
• Docket Number: No. 99-410-Appeal.,99-410-Appeal.
• Parties: RHODE ISLAND INSURERS' INSOLVENCY FUND v. LEVITON MANUFACTURING COMPANY, INC.
• Court: Rhode Island Supreme Court

763 A.2d 590

RHODE ISLAND INSURERS' INSOLVENCY FUND v. LEVITON MANUFACTURING COMPANY, INC.

No. 99-410-Appeal.

Supreme Court of Rhode Island.

December 13, 2000.

Present: WEISBERGER, C.J., and LEDERBERG, BOURCIER, FLANDERS, and GOLDBERG, JJ.

Joseph C. Tanski, Allan Cooke, V. James Santaniello, for Plaintiff.

Deming E. Sherman, Kimberly Ann O'Connell, Rebecca Tedford Partington, Providence, for Defendant.

OPINION

GOLDBERG, Justice.

This case represents the next chapter in the previously decided Rhode Island Insurers' Insolvency Fund v. Leviton Manufacturing Co., 716 A.2d 730 (R.I.1998) (Leviton I). The defendant, Leviton Manufacturing Company, Inc. (Leviton), is appealing from the entry of summary judgment and the imposition of sanctions in favor of the plaintiff, Rhode Island Insurers' Insolvency Fund (the Fund). Leviton and its wholly owned subsidiary corporation, American Insulated Wire Corporation (AIW), were insured for workers' compensation liability by American Mutual Life Insurance Company (American Mutual) during the period from March 15, 1953, through 1986. On March 9, 1989, however, American Mutual was declared insolvent. Thereafter, the Fund assumed American Mutual's obligations and, pursuant to G.L.1956 § 27-34-11, sought reimbursement from Leviton. We affirm the entry of summary judgment and the imposition of sanctions, but sustain the appeal as it relates to the award of pre-judgment interest.

Facts and Procedural History

The basic facts remain unchanged. The Fund is a nonprofit unincorporated legal entity established by the Legislature as a means to guarantee payment to an insured in the event an insurer becomes insolvent and is unable to discharge its obligations. See § 27-34-2. Created to protect both claimants and policyholders from the catastrophic consequences of an insurer's insolvency, the Fund's income is derived from assessments made upon all insurers transacting business in Rhode Island. See McGuirl v. Anjou International Co., 713 A.2d 194, 197 (R.I.1998)

; Medical Malpractice Joint Underwriting Association of Rhode Island v. Rhode Island Insurers' Insolvency Fund, 703 A.2d 1097, 1100 (R.I.1997). See also § 27-34-2. We have consistently construed the act in accordance with the public-policy considerations that support the objectives of the statute. See Medical Malpractice Joint Underwriting Association, 703 A.2d at 1102; Bassi v. Rhode Island Insurers' Insolvency Fund, 661 A.2d 77, 80 (R.I.1995).

On May 13, 1993, the Fund filed a complaint in Providence County Superior Court, alleging that it had made payments in excess of $1 million on Leviton and AIW's behalf. After it was determined that Leviton and AIW had a combined net worth in excess of $50 million, the Fund, pursuant to § 27-34-11(b)(1),¹ demanded full recovery for the sums previously paid as a result of American Mutual's insolvency. Leviton defended, asserting numerous affirmative defenses, including several challenges to the constitutionality of § 27-34-11(b)(1). The Fund moved for partial summary judgment with respect to the constitutional claims, and sought a monetary judgment against Leviton. The trial justice granted the Fund's motion concerning the constitutional defenses and this Court affirmed in Leviton I. However, referring to the non-constitutional defenses, the trial court found that summary judgment on the amount owed by Leviton presented an issue of fact that was at the very least premature. The trial justice then permitted Leviton additional time to review the Fund's claim files relative to payment amounts and the reasonableness of settlements made by the Fund. It is from this point that the current controversy proceeds.

The Fund's claim files were not reviewed by Leviton,² and on February 24, 1998, approximately a year and a half after the entry of the order denying summary judgment, the Fund sought to compel Leviton to review the claim files and respond to the Fund's request for admissions. The motion was granted on March 18, 1998, and Leviton was ordered to review the claim files and respond to the request for admissions within seventy-five days from the entry of the order. In its amended response, filed on June 22, 1998, Leviton averred that it was unable to respond because it believed the requests called for conclusions of law. Dissatisfied with these responses, the Fund again moved to compel more responsive answers on August 6, 1998.

In addition, on August 13, 1998, the Fund moved to specially assign the case for final resolution. The trial justice assigned to the case immediately directed that all discovery be completed by December 16, 1998, and scheduled a pretrial conference for December 17, 1998.

The Fund also served Leviton with interrogatories requiring Leviton to identify its expert witness. At this point, Leviton identified Global Risk Consultants (Global) as its expert witness and requested that Global be allowed to review the Fund's files. Global reviewed the files in October 1998.

On December 2, 1998, the Fund again moved to compel Leviton to supplement its answers to interrogatories and to disclose Global's opinion based upon its review of the claim files. On December 17, 1998, at the pretrial conference, Leviton stipulated that it did not intend to call an expert witness or offer any expert testimony at trial, but rather intended to rely on the testimony of a Leviton employee. As a result, the Fund's request for discovery of the expert's opinion was denied. At the pretrial conference, Leviton also stipulated that if the Fund was entitled to any interest, it should be calculated under the statutory rate of 12 percent, thus precluding the need for discovery on the matter. However, Leviton maintained that it never relinquished its position that no pre-judgment interest should be awarded in this case. Leviton was granted an additional opportunity to review the Fund's claim files before December 31, 1998. On January 5, 1999, Leviton served its second amended response to the Fund's request for admissions. In its amended response, with respect to sixty-two of the sixty-three claims at issue, Leviton admitted that payment of compensation benefits by the Fund was required by the Workers' Compensation Act (the Act); that the payments made by the Fund satisfied Leviton's liability obligations under the Act; and that the claims arose out of and did not exceed the limits of the underlying workers' compensation policy. Notwithstanding these admissions, Leviton argued to the trial justice, as it does now, that the issue of the reasonableness of the amounts paid by the Fund for each individual claim presented an issue of material fact.

On January 7, 1999, Leviton requested that its witness, Leviton employee Stephen J. Pierce (Pierce), be deposed in Boston, where the claim files were located, so that he could have access to the files during questioning. This request was denied. On January 11, 1999, Pierce, a Leviton employee for at least six years, was deposed and admitted that he personally had never reviewed the Fund's claim files.

Following this deposition, without seeking leave of court as required by Rule 36 of the Superior Court Rules of Civil Procedure, Leviton served its third amended response to the Fund's request for admissions and purported to withdraw more than fifty of Leviton's previous admissions. In addition, Leviton produced 5,000 pages of personnel files that were originally requested by the Fund during discovery, but were not timely produced.³ The Fund moved to strike Leviton's third amended response. This motion was heard and granted on February 5, 1999. At that time, the court also denied Leviton's request for additional review of the Fund's claim files stating "there has been ample opportunity in this now six-year-old case to [review the claim files]."

On February 11, 1999, the Fund renewed its motion for summary judgment, relying on Leviton's admissions and three affidavits submitted by the Fund. In opposition of the Fund's motion, Leviton submitted two affidavits, an affidavit prepared by Donald J. Jubin, and Pierce's affidavit. Although the Fund's motion to strike or disregard the Pierce affidavit was denied, the trial justice granted summary judgment, reasoning that the Pierce and Jubin affidavits failed to raise a genuine issue of material fact concerning the Fund's handling of the workers' compensation claims.

On May 12, 1999, the Fund moved for sanctions due to the "numerous frivolous, inconsistent, and indefensible" positions taken by Leviton in this action. The court conducted a hearing and entered judgment on July 2, 1999. The judgment ordered that the Fund recover: $2,839,023.58 for claims paid by the Fund on Leviton's behalf through December 31, 1998; $2,544,235.76 in pre-judgment interest through December 31, 1998, and, $946.95 per diem thereafter. Costs and attorneys fees were also ordered, totaling $125,000. In imposing these sanctions the court found that, "[t]his case * * * should not have even been a case * * *. And some sanctions would be warranted for [the] filing of any document that suggested that there were any meritorious substantive defenses on the part of Leviton, because at the time this matter was resolved there were none." On appeal, defendant raises four issues in support of its argument that summary judgment was improperly granted.

Summary Judgment

It is well settled that this Court reviews the granting of a summary judgment motion on a de novo basis. Marr Scaffolding Co. v. Fairground Forms, Inc., 682 A.2d 455, 457 (R.I.1996). "In its review of the granting of a motion for summary judgment, this Court applies the same rules and analysis as those applied by the trial justice." Accent Store Design, Inc. v. Marathon House, Inc., 674 A.2d 1223, 1225 (R.I.1996) (citing Mallane v. Holyoke Mutual Insurance Company in Salem, 658 A.2d 18, 19-20 (R.I.1995)). "Accordingly, if our review of the admissible evidence viewed in the light most...