Rosen v. Protective Life Ins. Co.

• Decision Date: 23 September 2011
• Docket Number: No. 1:09–cv–3620–WSD.,1:09–cv–3620–WSD.
• Parties: Jonathan D. ROSEN, Plaintiff, v. PROTECTIVE LIFE INSURANCE COMPANY, American Guarantee and Liability Insurance Company, Zurich American Insurance Company, and Insurance Specialties Services, Inc., Defendants.
• Court: U.S. District Court — Northern District of Georgia

817 F.Supp.2d 1357

Jonathan D. ROSEN, Plaintiff,

v.PROTECTIVE LIFE INSURANCE COMPANY, American Guarantee and Liability Insurance Company, Zurich American Insurance Company, and Insurance Specialties Services, Inc., Defendants.

No. 1:09–cv–3620–WSD.

United States District Court,N.D. Georgia,Atlanta Division.

Sept. 23, 2011.

John Earl Floyd, Tiana Scogin Mykkeltvedt, Bondurant Mixson & Elmore, LLP, Prescott Lane Nottingham, The Nottingham Firm, Michael J. Warshauer, Warshauer Law Group PC, Atlanta, GA, for Plaintiff.

C. Bradford Marsh, Myrece Rebecca Johnson, Swift, Currie, McGhee & Hiers, LLP, Atlanta, GA, for Defendants.

OPINION AND ORDER

WILLIAM S. DUFFEY, JR., District Judge.

This matter is before the Court on Defendant Zurich American Insurance Company and Defendant American Guarantee and Liability Insurance Company's (collectively, “Zurich”) Motion for Summary Judgment [172], Plaintiff Jonathan D. Rosen's (“Rosen”) Motion for Partial Summary Judgment [176], Zurich's Motion for an Oral Hearing on its Motion for Summary Judgment [175], Zurich's Motion and Amended Motion for Leave to File a Surreply [214, 215], Rosen's Motion to Exclude Testimony of Stephen Darr [169], and Rosen's Motion to Exclude Testimony of Marshall Reavis, III, Ph.D. [170].

I. BACKGROUND

This lawsuit arises from a Settlement and Release Agreement (the “Settlement Agreement”) that resolved an earlier lawsuit between Rosen and his former insurer, Zurich. The Settlement Agreement provides that “the terms of this Release and the terms of the settlement of this claim shall not be used to the detriment of the parties, shall remain confidential, and shall not be disclosed to any person not a party or privy to this settlement except as may be required by law.” Rosen asserts a scattershot of claims against Zurich including that Zurich breached the Settlement Agreement by disclosing the terms of the Agreement and by using the Settlement Agreement terms to his detriment. Rosen further claims that Zurich fraudulently induced him to enter into the Settlement Agreement, fraudulently sold him insurance for which he was ineligible, and fraudulently overstated the insurance losses it incurred that were attributable to claims against Rosen. Finally, Rosen claims that Zurich's underwriting of Rosen's insurance coverage was part of a criminal racketeering enterprise.

A. The Protective Errors & Omissions Insurance Program

During the periods relevant to this lawsuit, Rosen was the CEO and chairman of Entaire Global Companies, Inc. (“Entaire”), as well as a board member for several Entaire subsidiaries. (Rosen I Dep. 10:2–12:10). Entaire provides retirement programs to business professionals and executives. ( Id.). Rosen was also the principal of Wealth Builders Foundation for Economic Planning (“Wealth Builders”), a corporation that provides personal financial consulting services. ( Id.).

In 2001, Rosen entered into an agency contract with Protective Life Insurance Company (“Protective Life Insurance”),¹ which permitted Rosen to sell Protective Life Insurance's insurance products. (Defs.' Statement of Undisputed Material Facts (“DSMF”) [172–2] ¶ 1; Pl.'s Resp. Defs.' Statement of Undisputed Material Facts (“RDSMF”) [189–1] ¶ 1). Rosen also had insurance agency contracts with other insurance companies, which authorized him to sell those companies' insurance policies. (Am. Compl. ¶ 49). The agency contracts with Protective Life Insurance and the other companies required Rosen to carry Errors and Omissions Insurance (“E & O Insurance”). ( Id. ¶¶ 48–49).

Between 2002 and 2008, Rosen purchased E & O Insurance through a program that Protective Life Insurance sponsored for its agents (the “Protective E & O Program” or “Program”). (DSMF ¶¶ 2, 35; RDSMF ¶ 2). The Protective E & O Program was administered by Insurance Specialties Services, Inc. (“ISSI”), ² and underwritten by Zurich. (DSMF ¶ 3; RDSMF ¶ 3). ISSI was responsible for enrolling agents, collecting premiums, and issuing certificates of insurance for the Program. (Smith I Dep. 43:9–:22). ISSI annually would bill agents for the premiums for their E & O coverage, hold the payments in a fiduciary account until the premium payment deadline, and then remit the payments, minus a commission, to Zurich. (DSMF ¶¶ 31, 37; RDSMF ¶¶ 31, 37).

When participants joined the Program, ISSI issued a certificate of insurance that Zurich had approved, but it was not ISSI's practice to send the actual insurance policy. (Pl.'s Statement Undisputed Material Facts (“PSMF”) [176–2] ¶¶ 9–11; Defs.' Resp. Pl.'s Statement Undisputed Material Facts (“RPSMF”) [188–1] ¶ 10). Agents were eligible for coverage under the Protective E & O Program only if they maintained an active agency contract with Protective Life Insurance. (DSMF ¶ 32; RDSMF ¶ 32). In the certificates of insurance issued for policy years 2002–2003 through 2006–2007, “Covered Agents” were defined as “Producers with a current contract with Protective Life.” (Smith I Dep. 312:1–:15 & Ex. 14). The program further provided that “Full coverage ceases on the date agent contract with the sponsor is terminated or agent retires. There is no premium refund. Agent will be able to report claims for one year after the date of termination.” ( Id.). The certificate of insurance issued to Rosen for the policy period February 2007 to February 2008 did not contain language indicating that coverage ceased upon termination of the agency contract with Protective Life Insurance. (Certificate of Insurance, Pl.'s Resp. Summ. J. Ex. A).

B. The Griffin Lawsuit

In July 2006, Loretta Griffin sued Rosen and several others, alleging that she was damaged by a financial product she purchased through Entaire (the “Griffin Action”). (DSMF ¶ 4; RDSMF ¶ 4). Zurich, under a reservation of rights, provided indemnity and defense for Rosen and the other defendants under the Protective E & O Program and similar programs, and allowed Rosen to select a law firm to represent him individually. (DSMF ¶ 5; RDSMF ¶ 5). Zurich did not, however, timely pay Rosen's defense firm, which Rosen alleges caused his defense counsel to cease providing defense services and to threaten to withdraw as Rosen's counsel. (DSMF ¶ 7; RDSMF ¶ 7; Pl.'s Resp. Mot. Summ. J. 12). The Griffin Action settled in August 2007, with Zurich paying $202,000 in indemnity on Rosen's behalf. (DSMF ¶ 6; RDSMF ¶ 6).

C. Rosen's Bad Faith Lawsuit Against Zurich

In June 2007, before the Griffin Action settled, Rosen, another defendant in the Griffin Action, and two Entaire entities that were also Griffin defendants filed a lawsuit against Zurich in Georgia state court, alleging that Zurich's failure to timely pay defense legal fees in the Griffin Action was done in bad faith (the “Bad Faith Action”). (Pl.'s Resp. Mot. Summ. J. Ex. X). Zurich failed to answer Rosen's complaint in the Bad Faith Action and was found by the trial court to be in default. (Rule Nisi and Notice of Bench Trial on Plaintiffs' Damages, Pl.'s Resp. Mot. Summ. J. Ex. M). A bench trial on the issue of damages was scheduled for March 25, 2008. ( Id.).

On December 13, 2007, Rosen, Rosen's counsel, Entaire's corporate counsel, and Zurich's counsel met to discuss settling the Bad Faith Action. (DSMF ¶ 12; RDSMF ¶ 12). According to declarations from Rosen, Rosen's counsel, and Entaire's corporate counsel, Rosen stated at the meeting that he would only settle the Bad Faith Action if Zurich agreed not to use any facts relating to the Griffin Action or Bad Faith Action to Rosen's detriment. (Rosen Aff. ¶ 19; Veith Aff. ¶ 6; Bahr Aff. ¶ 22).

On December 21, 2007, Zurich's counsel sent the following email to Rosen's counsel:

I got your voice message and we have a deal for $350,000 with the other mutual terms we discussed. I will do a more formal letter confirming next week and will get to you a draft of the closing papers (settlement agreement and release, dismissal, withdrawal of the default and consent to open, etc) as soon as possible.”

(Email from Brad Marsh, Dec. 21, 2007, 6:01 PM, Pl.'s Resp. Mot. Summ. J. Ex. N).

On January 9, 2008, Zurich provided a draft written agreement to Rosen's counsel. (DSMF ¶ 14; RDSMF ¶ 14). Rosen's counsel added language to the agreement making the release bilateral, requiring that the terms of the release and settlement be kept confidential, and prohibiting either party from using the terms to the detriment of the other party. (DSMF ¶ 15; RDSMF ¶ 15).

On January 21, 2008, Zurich approved the modified draft agreement, which contained the confidentiality and no-detriment provisions added by Rosen's counsel, and the Bad Faith Action was settled for $350,000. (DSMF ¶ 17). The agreement, titled “SETTLEMENT AND RELEASE AGREEMENT,” states in relevant part:

[T]he parties hereby declare, represent and warrant ... [t]hat no promise or inducement or agreement not herein expressed has been made by the Parties and that this Release contains the entire agreement between the Parties, and that the terms of this agreement are contractual and not a mere recital.

...

IT IS FURTHER UNDERSTOOD AND AGREED that the terms of this Release and terms of the settlement of this claim shall not be used to the detriment of the Parties, shall remain confidential, and shall not be disclosed to any person not a party or privy to this settlement except as may be required by law....

In entering into this Release, Parties represent that they have read all the terms hereof and understand and voluntarily accept all the terms hereof, and that they have been adequately represented and advised by their own legal counsel.

This Release shall be construed and interpreted in accordance with the laws of the State of Georgia.

(Settlement Agreement, Pl.'s Resp. Mot. Summ. J. Ex. O).

The parties dispute the effective date of the Settlement Agreement. (RDSMF ¶ 17). Rosen contends the Settlement Agreement memorialized the “deal for $350,000 with the other mutual terms” that Zurich accepted on ...