Williams Serv. Group v. Nat'l Union Fire Ins. Co. of Pittsburgh

• Decision Date: 20 June 2011
• Docket Number: CIVIL ACTION FILE NO. 1:09-CV-832-TWT
• Parties: WILLIAMS SERVICE GROUP, LLC as successor to Williams Service Group, Inc., Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, et al., Defendants.
• Court: U.S. District Court — Northern District of Georgia

WILLIAMS SERVICE GROUP, LLC as successor to Williams Service Group, Inc., Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, et al., Defendants.

CIVIL ACTION FILE NO. 1:09-CV-832-TWT

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

Dated: June 17, 2011
Dated: June 20, 2011

ORDER

This is a breach of contract action arising out of insurance policies issued by the Defendants. It is before the Court on the Defendants' Motion for Summary Judgment on Count Three of the Amended Complaint [Doc. 74], the Plaintiff's Motion for Partial Summary Judgment [Doc. 76], and the Defendants' Motion for Summary Judgment on Their Counterclaim and Count Two of the Amended Complaint [Doc. 75]. For the reasons set forth below, the Court GRANTS the Defendants' Motion for Summary Judgment on Count Three of the Amended Complaint [Doc. 74], GRANTS IN PART and DENIES IN PART the Plaintiff's Motion for Partial Summary Judgment [Doc. 76], and GRANTS IN PART and DENIES IN PART the Defendants'

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Motion for Summary Judgment on Their Counterclaim and Count Two of the Amended Complaint [Doc. 75].

I. Background

This lawsuit arises out of a series of insurance contracts between Williams Service Group, LLC ("Williams") and four insurance companies (the "Defendants"). Between 1990 and 1997, the Defendants provided more than 45 workers' compensation and general liability policies to Williams. The primary insurance relationship was defined by several agreements: the 1990-1995 policies, and the 19951997 policies, along with related schedules, policies, and Large Risk Rating Plan Endorsements (collectively, the "Program Agreements"). The 1990-1995 policies were subject to a $250,000 deductible. The 1995-1997 policies were subject to a $350,000 deductible. Further, under the Program Agreements, Williams was obligated to reimburse the Defendants for premiums, losses, and Allocated Loss Adjusting Expenses ("ALAE")¹ incurred in defending and administering claims.

The policy premiums were adjusted based on the amount of loss actually incurred. These adjustments were calculated pursuant to the Large Risk Rating Plan Endorsements ("LRRPE"). Although the Defendants initially paid the full value of

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all claims, including losses and ALAE, Williams agreed to reimburse the Defendants for all losses up to the deductible amount. Finally, the Program Agreements required the Defendants to invoice Williams monthly [see Docs. 77-1; 77-2; 77-3; 77-4; 77-5; 77-8; 77-9].

On or about March 31, 1995, Williams and Nation Union Fire Insurance Company of Pittsburgh ("National Union"), acting on behalf of all the Defendants, entered into a buyout agreement (the "Buyout Agreement") [Doc. 77-14]. Under the Buyout Agreement, Williams paid a premium of $3,800,000 and National Union provided coverage for claims up to $4,200,000. Id. Williams was required to reimburse the Defendants for payments above the $4,200,000 aggregate limit. On February 9, 1999, payments under the Buyout Agreement exceeded $4,200,000. (Kessel Dep. at 13; Doc. 77-18.) The Defendants, however, did not bill Williams for this excess amount until October 2009.

In December 1997, the parties entered into another agreement (the "Collateral Agreement") [see Doc. 77-35]. The Collateral Agreement "detail[ed] the security arrangements for all 'deductible program' or 'note plan' policies of insurance for the years" 1990 through 1997. Id. Thus, the Collateral Agreement listed the current collateral securing Williams' obligations under the Program Agreements. An attachment to the Collateral Agreement provided that AON Risk Services, Inc.

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("AON") would periodically review losses to calculate necessary adjustments to the amount of collateral held under the Program Agreements [Doc. 97-9]. The attachment also provided a dispute resolution mechanism if the Defendants disagreed with AON's proposed adjustments. On April 6, 2009, AON conducted a collateral review and recommended that Williams post $92,202 in collateral [see Doc. 77-38].

Williams filed this suit on March 26, 2009, seeking a declaratory judgment, recoupment, and claims for negligence [Doc. 40]. Specifically, the Plaintiff claims that the Defendants negligently supervised the adjustment of two workers' compensation claims. Further, Williams claims that it overpaid $548,471 under the 1995-1997 policies. On April 8, 2009, the parties signed an agreement tolling the statute of limitations on all claims (the "Tolling Agreement") [Doc. 75-6]. The Defendants then counterclaimed [Doc. 58], seeking to recover $1,850,572.26 under the 1990-1995 policies and $166,662.26 under the 1995-1997 policies [Doc. 58]. This amount includes $126,209.98 in claims expense and ALAE that were incurred before, but paid after the March 31 Buyout Agreement. The Defendants have moved for summary judgment as to their counterclaims as well as Williams' negligent supervision and recoupment claims [Docs. 74 & 75]. The Plaintiff has moved for summary judgment as to the Defendants' counterclaims [Doc. 76].

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II. Summary Judgment Standard

Summary judgment is appropriate only when the pleadings, depositions, and affidavits submitted by the parties show that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The court should view the evidence and any inferences that may be drawn in the light most favorable to the nonmovant. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970). The party seeking summary judgment must first identify grounds that show the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). The burden then shifts to the nonmovant, who must go beyond the pleadings and present affirmative evidence to show that a genuine issue of material fact does exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).

III. Discussion

A. Negligent Supervision

Williams claims that the Defendants negligently supervised the administration of Joseph Fahy's and Jimmy Gee's workers' compensation claims [see Doc. 40]. The Defendants argue that the Plaintiff's claims are barred by the statute of limitations. Negligence claims must be filed within two years of the date the claim accrues. O.C.G.A. § 9-3-33. A negligence claim accrues at "the time when the plaintiff could

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first have maintained his action to a successful result." Sandy Springs Toyota v. Classic Cadillac Atlanta Corp., 269 Ga. App. 470, 471 (2004).

Williams asserts that the Defendants failed to properly investigate Fahy's injury and improperly paid for medical procedures and permanent disability benefits. The Defendants allegedly mishandled Fahy's claim between 1997 and 2003. Further, the Plaintiff argues that the Defendants settled Gee's claim without authorization. Gee's claim was settled in 1997. Thus, if the claims accrued at the time of the Defendants' negligent conduct, Williams' claims are time barred. Williams argues, however, that the Fahy claim did not accrue until 2009, when the Defendants demanded payment from Williams.²

In Gingold v. Allen, 272 Ga. App. 653 (2005), the plaintiff sued for legal malpractice, claiming his attorney's negligent advice resulted in the plaintiff's arrest. The plaintiff argued that the claim had not arisen until he was arrested. The court, however, held that "a legal malpractice action accrues and the applicable statute of limitation commences to run from the date that the alleged wrongful act breached the attorney-client relationship." Id. at 655. "[S]ince nominal damages arise upon the commission of the wrongful act, such nominal damages are sufficient as a triggering

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device for the statute of limitation and thus the cause of action then arises." Id. (quoting Hamilton v. Powell, Goldstein, Frazer & Murphy, 167 Ga. App. 411, 414415 (1983)).

By contrast, in Hoffman v. Insurance Co. of North America, 241 Ga. 328 (1978), the plaintiff sued an insurance agent for negligently failing to obtain adequate coverage. The plaintiff argued that the claim did not accrue until he was sued by a third party. The court ruled that the claim did not accrue until the plaintiff was subjected to liability for which he was not covered. Without the subsequent lawsuit, unrelated to the defendant's negligent conduct, the plaintiff would have suffered no damages.

Here, unlike Hoffman, the Plaintiff was subjected to additional liability at the moment the Defendants negligently paid Fahy's claim. Under the Program Agreements, Williams was required to reimburse the Defendants for losses. This obligation attached as soon as the Defendants paid Fahy's claim. Although Williams did not actually pay for the Fahy claim until it was billed in 2009, as in Gingold, the Defendants' wrongful act was directly connected to Williams' damages.³ Unlike Hoffman, Williams' obligation was not contingent on an intervening event. Although

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the Defendants' demand controlled the timing of Williams' payment, the Defendants' negligence exposed the Plaintiff to increased liability the moment the Defendants negligently paid Fahy's claim. Thus, Williams' claim accrued, at the latest, in 2003, six years before the Tolling Agreement. For this reason, the Defendants are entitled to summary judgment on Williams' negligence claims.

B. Recoupment

Williams seeks recoupment of $548,471 it claims the Defendants wrongfully charged it under the 1995-1997 policies....