Temploy, Inc. v. National Council On Compensation

• Decision Date: 12 August 2009
• Docket Number: Civil Action No. 08-689-KD-C.
• Citation: 650 F.Supp.2d 1145
• Parties: TEMPLOY, INC., and Hard Hitters, Inc., Plaintiffs, v. NATIONAL COUNCIL ON COMPENSATION INSURANCE, Defendant.
• Court: U.S. District Court — Southern District of Alabama

650 F.Supp.2d 1145

TEMPLOY, INC., and Hard Hitters, Inc., Plaintiffs, v. NATIONAL COUNCIL ON COMPENSATION INSURANCE, Defendant.

Civil Action No. 08-689-KD-C.

United States District Court, S.D. Alabama, Southern Division.

August 12, 2009.

COPYRIGHT MATERIAL OMITTED

Richard L. Watters, Mobile, AL, for Plaintiffs.

Robert Austin Huffaker, Jr., Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, AL, for Defendant.

ORDER

KRISTI K. DuBOSE, District Judge.

This matter is before the Court on Defendant's motion to dismiss or in the alternative for summary judgment and supplemental motion for summary judgment (Docs. 5, 6, 28, 29), Plaintiffs' responses thereto (Docs. 12, 34) and Defendant's replies (Docs. 14, 35); and Plaintiff's motion to amend the complaint (Doc. 30), Defendant's opposition (Doc. 32) and Plaintiffs' reply (Doc. 33). For the reasons set forth herein, the Defendant's motion for summary judgment (Doc. 5) is GRANTED and Defendant's supplemental motion summary judgment (Doc. 28) is MOOT. Plaintiffs' motion for leave to amend (Doc. 30) is DENIED.

I. Background

A. Procedural

This is the second action in the Southern District of Alabama brought by the Plaintiffs concerning Temploy, Inc.'s ("Temploy") participation in the Alabama Worker's Compensation Insurance Plan ("AWCIP"), the state-sponsored assigned-risk mechanism available to Alabama employers who cannot obtain workers' compensation insurance in the voluntary market. In the first action, Temploy, Inc. and Hard Hitters, Inc. v. Companion Property and Casualty Insurance Co., CV 07-632-KD, ("the CPCI action"), the Plaintiffs sought damages due to Companion Property and Casualty Insurance Company's ("CPCI") allegedly negligent, wanton, and defamatory conduct and breach of contract, as it concerned the servicing and administration of a workers' compensation insurance policy obtained from the AWCIP in September 2002. The CPCI action was resolved in December 2008, after the Plaintiffs accepted Offers of Judgment tendered by CPCI. (Docs. 75, 76 (CV 07-632-KD)).

Subsequently, Plaintiffs filed the present action against Defendant National Council on Compensation Insurance, Inc. ("NCCI"), the administrator of the AWCIP and a non-profit licensed rating organization, alleging that NCCI should be held liable for not ensuring that CPCI abided by its obligations under the AWCIP, and asserting claims for negligence and wantonness regarding Temploy and defamation concerning Hard Hitters.¹ (Doc. 1-2). On December 4, 2008, Defendant filed a responsive pleading by filing a Motion to Dismiss (or in the alternative motion for summary judgment (Docs. 5, 6)) in response to Plaintiffs' original Complaint. Plaintiff then responded to Defendant's motion to dismiss. (Doc. 12). On May 6, 2009, at a hearing before U.S. Magistrate Judge Cassady, the merits of Defendant's motion were argued by both parties; at no time did Plaintiffs assert that they intended to file an amended complaint. At that hearing, Defendant notified Judge Cassady that it intended to supplement its motion to dismiss with an argument based on the satisfaction and discharge defense. Accordingly, the Court set forth a briefing schedule for such supplemental filing. (Doc. 27). Judge Cassady also converted the motion to dismiss to a motion for Summary Judgment. (Id.)

On May 29, 2009, Defendant filed a Supplemental Motion for Summary Judgment. (Docs. 5, 6, 28, 29, 35). On June 1, 2009— after Defendant had already filed both a motion to dismiss and motion for summary judgment—Plaintiffs sought leave of Court to file an amended complaint. (Doc. 30). Plaintiffs contend that the amendment is necessary to correct an "inadvertent omission" of claims for negligence and wantonness by Plaintiff Hard Hitters, Inc.: namely, to "make the acts of negligence and wantonness more clearly stated[]" because "[i]n the counts of Negligence and Wantonness [in the original Complaint] relief was requested by both Plaintiffs but in the allegations as to the acts of negligence and wantonness by the Defendant Hard Hitters was inadvertently omitted." (Id.) Defendant objects to this amendment on the grounds of undue prejudice and futility. (Doc. 32).

B. Factual²

This case arises out of a dispute stemming from an insurance contract between Plaintiff Temploy, Inc. ("Temploy") and non-party CPCI, through which CPCI contracted to provide Temploy with workers' compensation coverage for employees it leased to its clients, and then reported certain non-compliance information about Temploy, to the National Council on Compensation Insurance ("NCCI"). The NCCI subsequently provided to various entities this non-compliance information in response to inquires regarding Hard Hitters and Temploy.

Plaintiff Temploy is a temporary employment agency; Jessica Ulmer ("Ulmer") was the Vice-President (an employee), but not a shareholder. Plaintiff Hard Hitters, Inc. ("Hard Hitters") is a temporary employment agency; Ulmer is the President and Owner. Non-party CPCI was the servicing carrier for Temploy's workers' compensation coverage with NCCI in 2002 and 2003.

NCCI is the state-approved and designated administrator for the Alabama Workers' Compensation Insurance Plan ("AWCIP").³ (Doc. 1-2). NCCI is responsible for filing with the Alabama Department of Insurance, on behalf of the assigned-risk pool, the proposed rates and procedures used to determine premiums. (Id.) NCCI also administers the rules and regulations of the AWCIP via its state-approved Basic Manual and supplemental rules, which govern every aspect of the AWCIP. (Id.)⁴ The AWCIP contains detailed provisions authorizing the pool administrator to establish written performance requirements for servicing carriers regarding premium audit and collection, claims services, loss control and safety services, and resolution of complaints. (Doc. 5-13 (Section V)). See also Birmingham Hockey Club, Inc., 827 So.2d 73, 76 (Ala. 2002).

On or about August 20, 2002, Temploy applied for coverage under the AWCIP by submitting an application to NCCI. On August 29, 2002, NCCI acknowledged to Temploy that coverage was effective September 1, 2002 and that CPCI was appointed as the servicing carrier. Temploy then entered into an insurance contract with CPCI, for workers' compensation benefits for its temporary workers, and on September 10, 2002, CPCI issued a policy to Temploy, which was to be effective September 1, 2002 through September 1, 2003. On May 2, 2003, Temploy's insurance policy was cancelled due to non-payment of premiums.

In early July 2003, CPCI retained Overland Solutions, Inc. (then known as CP Commercial Specialists), to perform an independent audit in order to determine the final premium due by Temploy. Overland's auditor Jacqueline Ellis scheduled the audit of Temploy for July 24, 2003. Ellis concluded that Temploy was noncompliant with the audit, and on August 19, 2003, notified CPCI of the alleged noncompliance with a close out report. On August 27, 2003, CPCI reported to NCCI Temploy's alleged noncompliance with the audit. Plaintiffs dispute that they were non-compliant with the audit.

In April 2006, CPCI determined that Temploy owed $13,465.87 in premium payments. Temploy accepted the bill, and paid the balance effective March 6, 2007.

On March 6, 2007, Ulmer formed Hard Hitters⁵ and attempted to obtain workers' compensation coverage for the company. On April 2, 2007, NCCI analyst Kathy Dowdy faxed Able & Associates a "Final Notice" letter regarding its application for insurance for Hard Hitters, stating that additional information was required by April 4, 2007 in order to determine Hard Hitters' eligibility for the Plan. (Doc. 12-3 at 2). Specifically, NCCI requested, in relevant part, the following information:

REQUESTED INFORMATION

1a. We have found an entity that Jessica Ulmer had manage/owned in the past. Temploy Inc and this entity has an outstanding noncompliance issue with a prior carrier. According to Basic Manual Rule 4-A-3 and the Assigned Risk Supplement, eligibility rules extend to any commonly manage[d] or owned interests 1b COMPANION has advised us the related entity, Temploy Inc, has not complied with the terms of a prior policy. Coverage cannot be assigned until we receive confirmation from the carrier that this audit issue has been resolved. Please contact COMPANION at (800) 845-2724 X40005 OR X40006 and reference policy number WALO073894 to resolve.

(Id.) A handwritten note on this letter states "She did comply with audit." (Id.) An undated document created by insurance agent John Chambliss then states:

Able Insurance tried to place workers compensation insurance for our client, Hard Hitters, LLC. We were denied a quote due to the following reason: 1a. We have found an entity that Jessica Ulmer had managed/owned in the past. Temploy Inc. and this entity has an outstanding noncompliance issue with a prior carrier.

(Id. at 3 (emphasis added)).

On April 5, 2007, Kathy Dowdy, underwriting analyst at NCCI, sent a letter/notice to Shelley Nobles, an insurance agent at Able & Associates, in response to the application for insurance for Hard Hitters, stating that coverage was being denied either due to outstanding debt or noncompliance history, referencing Jessica Ulmer and noting that her company Temploy has an outstanding noncompliance issue (audit issue) with CPCI. (Doc. 12-3 at 1).

On December 7, 2007, NCCI generated a Residual Market Risk Profile⁶ regarding Hard Hitters, showing in the Final Review section an uncollectible and noncompliant history and that the prior policy history showed the business name was Temploy. (Doc. 12-4). This December 2007 document also shows the Application Diary for Hard Hitters from March 26, 2007 to April 5, 2007; the March 29, 2007 entry states that Jessica Ulmer was found to be part owner of Temploy under a FEIN number and that the prior history shows noncompliance for debt and therefore, "this risk is ineligible for coverage[...