United States District Court, D. South Carolina, Columbia Division
OPINION AND ORDER ON CROSS-MOTIONS FOR PARTIAL
SUMMARY JUDGMENT AND RELATED MOTIONS TO STRIKE OR EXCLUDE
TESTIMONY, EXHIBITS, AND ARGUMENTS (ECF Nos. 199, 201, 202,
CAMERON McGOWAN CURRIE SENIOR UNITED STATES DISTRICT JUDGE
matter is before the court on cross-motions for partial
summary judgment and several related motions. The motions and
resolution are as follows:
Defendants' Motion for Partial Summary Judgment, ECF No.
201, is granted in part and denied in part;
Plaintiff's Motion for Partial Summary Judgment, ECF No.
202, is granted in part and denied in part;
Defendants' Motion to Exclude Opinion Testimony of
Charles L. McGimsey, ECF No. 199, is denied;
Defendants' Motion to Strike Declaration of Charles L.
McGimsey, ECF No. 239, is denied;
Plaintiff's Motion to Strike Certain Exhibits and
Arguments, ECF No. 252, is denied.
action arises out of a contractual relationship between
Plaintiff, Companion Property and Casualty Insurance Company
(“Companion”), and a group of interrelated
businesses. The latter include Defendants AMS Staff Leasing
Inc., d/b/a AMS Staff Leasing Corporation
(“AMS”), Breckenridge Enterprises, Inc., d/b/a
AMS Staff Leasing II (“Breckenridge”); AMS Staff
Leasing II, Inc., (“AMS II”), and Aspen
Administrators, Inc. (“Aspen”), each of which is
a party to two related agreements referred to as the
“2006 Coverage Agreement” and the “Claims
Agreement.” The 2006 Coverage Agreement provided, inter
alia, for the issuance of Workers Compensation policies to or
on behalf of AMS, Breckenridge, and AMS II (collectively
“PEO Defendants”). The Claims Agreement authorizes
Aspen to act as third-party claims administrator for claims
made under the 2006 Coverage Agreement.
three PEO Defendants and Aspen are owned by Defendant Charles
David Wood, Jr. (“Wood”). Wood signed a Guaranty
and Indemnity Agreement (“Wood Guaranty”) in
favor of Companion guaranteeing full performance under the
2006 Coverage and Claims Agreements.
also owns Defendant Highpoint Risk Services, LLC
(“Highpoint”). Highpoint is not a party to the
Coverage Agreement, Claims Agreement, or Wood Guaranty but
allegedly played a role in issuing policies on which certain
claims are based.
previously owned Dallas National Insurance Company
(“Dallas National”), an additional signatory to
the 2006 Coverage Agreement that acted as reinsurer for
policies issued under that agreement. Wood sold Dallas
National to a third-party in March 2013. After that sale,
Companion, Dallas National, and Dallas National's new
owner entered into agreements referred to as the 2013 Program
Agreement and 2013 Guaranty. Dallas National was placed into
receivership during or after April 2014 and is not a party to
around July 2013, Companion terminated Defendants'
authority to write new business or renew policies under the
2006 Coverage Agreement. The relationship between the parties
was not, however, ended as claims continued to be processed
and paid during the run-off period (“RunOff”)
that followed. Much, but not all, of the present litigation
relates to Companion's handling of claims and collateral
and Defendants' payment (or non-payment) of claims and
collateral obligations (and related obligations under the
Wood Guaranty) during Run-Off, which continues to this day.
Highpoint first initiated litigation against Companion in the
Northern District of Texas (“Texas Action”) on
August 20, 2014. See ECF No. 23-1 at 1 (motion to
dismiss identifying Highpoint Risk Services, LLC v.
Companion Property & Casualty Insurance Company, No.
3:14-cv-3398-L (N.D. Tex. filed Aug. 20, 2014) as first filed
action). That action sought return of certain funds relating
to what the court and parties have referred to as a
“PayGo” line of business.
then initiated this action on September 19, 2014, seeking a
declaratory judgment as to the same subject matter and
asserting additional claims as to other lines of business.
This court stayed claims to the extent related to the PayGo
line of business, in deference to the first filed action in
the Northern District of Texas.
matter has proceeded as to all other claims and counterclaims
with discovery concluding for most purposes on August 1,
2016. The court extended discovery for limited purposes
through mid-October 2016. The parties filed cross-motions for
partial summary judgment on October 28, 2016. Briefing on
those motions and several related evidentiary motions is now
judgment should be granted if “the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). It is well established that summary
judgment should be granted “only when it is clear that
there is no dispute concerning either the facts of the
controversy or the inferences to be drawn from those
facts.” Pulliam Inv. Co. v. Cameo Properties,
810 F.2d 1282, 1286 (4th Cir. 1987). The party moving for
summary judgment has the burden of showing the absence of a
genuine issue of material fact, and the court must view the
evidence before it and the inferences to be drawn therefrom
in the light most favorable to the non-moving party.
United States v. Diebold, Inc., 369 U.S. 654, 655
56(c)(1) provides as follows:
(1) A party asserting that a fact cannot be or is genuinely
disputed must support the assertion by:
(A) citing to particular parts of materials in the record,
including depositions, documents, electronically stored
information, affidavits or declarations, stipulations . . .,
admissions, interrogatory answers or other materials; or
(b) showing that the materials cited do not establish the
absence or presence of a genuine dispute, or that an adverse
party cannot produce admissible evidence to support the fact.
Fed. R. Civ. P. 56(c)(1).
discussion that follows considers all arguments relating to a
given subject matter together. Thus, where Companion and
Defendants have moved for summary judgment on the same claims
or counterclaims or filed related evidentiary motions, the
related portions of the various motions are considered
Claims Relating to Above-Deductible Payments
seeks summary judgment on its second cause of action and
Defendants' fifth counterclaim. See ECF No. 88
¶¶ 50-58 (second cause of action); ECF No. 90
¶¶ 249-57 (fifth counterclaim). As to both the
claim and counterclaim, Companion seeks a ruling that it has
no obligation to reimburse Defendant AMS for payments made
from AMS's funds for claims exceeding AMS's
deductible (“Above-Deductible Payments”).
Alternatively, Companion asks the court to rule that its
obligation does not exceed $66, 141.
fifth counterclaim suggests AMS is seeking in excess of $9
million in unreimbursed Above-Deductible Payments. However,
shortly before the dispositive motions deadline, AMS
stipulated it is seeking no more than $1, 826, 145 on this
counterclaim. ECF No. 196 (filed October 19, 2016). Companion
argues even this amount is overstated. In support of this
argument, Companion relies on a Declaration by McGimsey (ECF
No. 214-6 (“McGimsey Declaration”)), which
challenges the accuracy of a spreadsheet prepared by Kara
Childress (“Childress Spreadsheet”) and
corresponding opinion by Defendants' expert, Key
Coleman.McGimsey explains in detail what he
believes are multiple errors in Childress's analysis,
including a failure to take into account various adjustments.
Ultimately, he opines the maximum amount of unreimbursed
payments is $66, 141.
further argues that, regardless of the amount of unreimbursed
Above-Deductible Payments, AMS is entitled to no recovery
because AMS's co-Defendant and owner, Wood, is ultimately
responsible under the Wood Guaranty for any failure by Dallas
National to reimburse AMS for Above-Deductible Payments.
Finally, Companion argues Defendants are equitably estopped
from seeking relief on this counterclaim because they failed
to alert Companion to any concerns about reimbursements when
Companion might have corrected the problem (most critically
before Dallas National went into receivership).
their memorandum in opposition to summary judgment (ECF No.
235), as well as in a separate motion to strike (ECF No.
239), Defendants argue McGimsey's Declaration should not
be considered. The latter argument is based largely on
Companion's failure to offer such opinions prior to the
close of discovery. Defendants also argue the Childress
Spreadsheet and Coleman's opinion are valid and based on
objective, verifiable data and assert McGimsey concedes at
least some funds are due.
respond to the alternative argument that Wood is ultimately
responsible for any failure by Dallas National to reimburse
AMS for Above-Deductible Payments by noting Companion still
holds collateral to fulfill Dallas National's
obligations. They also argue, inter alia, any shortfall in
that collateral is the fault of either Companion, or Dallas
National's new owner, relieving Wood of any
responsibility. Finally, as to the equitable estoppel
argument, Defendants argue there is no evidence AMS lulled
Companion into believing the Above-Deductible Payments would
all be settled by Wood or Dallas National.
reply, Companion argues the timing and circumstances relating
to Childress's deposition justify any delay in proffering
McGimsey's Declaration opinions. It challenges arguments
Coleman's opinion and the Childress Spreadsheet are
admissible. The latter argument is also addressed in
Companion's later Motion to Strike (ECF No. 252).
Companion argues it has no obligation to pursue Dallas
National or deplete Dallas National's collateral (which
Companion maintains is already underfunded) before pursuing
Wood on his Guaranty. Finally, it argues silence may support
equitable estoppel, and it was given no notice of any concern
before December 2013.
court has fully considered arguments made in the parties'
memoranda in support of and in opposition to Companion's
summary judgment motion on its second cause of action and
Defendants' fifth counterclaim, as well as related
arguments in support of and opposition to Defendants'
motions to exclude opinion testimony of McGimsey and to
strike his Declaration, and Companion's motion to strike
the Childress Spreadsheet. Having done so and for reasons
explained below, the court concludes Companion's motion
for partial summary judgment should be denied as to this
claim and counterclaim because there are genuine issues of
material fact as to whether Defendants were fully reimbursed
for Above-Deductible Payments made from AMS-funded accounts
or received other recoveries offsetting any such payments.
are subjects that require analysis of complex and extensive
data and on which both sides have offered expert testimony.
The court has, therefore, considered the parties' related
evidentiary motions in resolving this aspect of
Companion's motion for partial summary judgment. Those
motions are denied for reasons explained below as they relate
to the Above-Deductible Payments issue.
Motions to Strike or Exclude.
concerns identified by Defendants in both their motion to
exclude McGimsey's opinion testimony (as it relates to
the issue of Above-Deductible Payments) and motion to strike
McGimsey's Declaration are primarily matters for cross
examination at trial. The court is, moreover, persuaded that
the nature of McGimsey's Declaration (as rebuttal to
Coleman's expert opinion), combined with Companion's
delayed opportunity to question Childress about her
spreadsheet (and, consequently, the foundation for
Coleman's opinion), support consideration of the McGimsey
Declaration for purposes of summary judgment.
Motion to Strike.
court also denies Companion's motion to strike the
Childress Spreadsheet (and implicit challenge to
Coleman's opinion to the extent it relies on that
spreadsheet). ECF No. 252 § IV. The concerns Companion
and McGimsey raise are appropriate for cross examination at
trial but do not, at least at this stage, support exclusion.
Neither do they warrant a declaratory judgment that the
maximum amount of unreimbursed Above-Deductible Payments is
$66, 141 as asserted by McGimsey, given that Defendants have
had no opportunity to test McGimsey's analysis through
the rulings as to the evidentiary motions leave both sides
with challenged expert testimony on the amount, if any, of
unreimbursed Above-Deductible Payments. In making these
rulings, the court has resolved any close questions (as to
both sides' motions) in favor of allowing rather than
excluding expert testimony at this stage and deferring any
final determination of admissibility until the court may
consider the proffered testimony in context at trial.
Grounds for Summary Judgment.
alternative arguments also fail to support summary judgment.
The argument Wood is ultimately responsible fails to
recognize that, despite common ownership, Wood and AMS are
separate entities. Thus, even if Wood must ultimately
reimburse Companion for any amount Companion owes to AMS, it
would not defeat this counterclaim. Defendants' arguments
as to the continued availability of Dallas National
collateral, and the possible reasons for any deficiencies,
also raise concerns which preclude summary judgment. See
also infra § V (addressing related argument
regarding application of the Wood Guaranty to Dallas
court also finds the equitable estoppel argument unavailing
as a basis for summary judgment. To the extent and for
whatever period AMS was receiving timely and adequate
reimbursement or credit from Dallas National, it presumably
had no reason to alert Companion to any concern. While AMS
concedes some amounts may have been unpaid prior to June
2013, it suggests the problem with non-payment (particularly
for Florida policies) arose after that date. Thus, any claim
for estoppel would presumably have to arise during this
period. There is, however, no specific evidence or argument
advanced to support a claim of estoppel arising during this
period, and certainly no evidence or argument that supports a
ruling as a matter of law.
reasons set forth above, the court (1) denies Companion's
motion for summary judgment on its second cause of action and
Defendants' fifth counterclaim; (2) denies
Defendants' motion to strike McGimsey's Declaration;
(3) denies Defendants' motion to exclude opinion
testimony of McGimsey (to the extent his testimony relates to
this subject matter); and (4) denies Companion's motion
to strike to the extent it relates to the Childress
Spreadsheet (or Coleman's related opinion). The rulings
on evidentiary motions do not preclude the parties from
testing and challenging the adequacy of expert testimony and
underlying foundation at trial.
Claims Relating to Below-Deductible Payments
sides seek summary judgment on Companion's third cause of
action for breach of contract. ECF No. 202 Argument §
II; ECF No. 201-1§ II.C. This cause of action seeks
damages for Defendants' alleged failure to reimburse
Companion for payments made for Below-Deductible claims
(“Below-Deductible Payments”). ECF No. 88
¶¶ 59-65. Companion also seeks summary judgment on
Defendants' related first through third
counterclaims. Those counterclaims seek relief for
Companion's alleged misuse or improper retention of
collateral held for the purpose of satisfying Defendants'
Below-Deductible obligations. ECF No. 90 ¶¶ 231-35
(asserting claims for breach of contract, breach of special
relationship, and conversion). The arguments in these motions
and related aspects of Defendants' motion to exclude
McGimsey's expert opinions (ECF No. 199) are summarized
argues the 2006 Coverage Agreement requires Defendants to
regularly reimburse Companion for amounts disbursed for
Below-Deductible Payments. While Companion agrees it has the
right to use collateral to pay claims under that agreement,
it argues it is not required to do so. Companion asserts it
has made over $15 million in unreimbursed Below-Deductible
Payments. It does not, however, assert it is out-of-pocket
for this amount. Companion, instead, asserts that it has, at
Defendants' insistence, paid claims from AMS's
collateral account since roughly October 2013. This has
resulted in the collateral account being underfunded by over
$2 million as of June 30, 2015, after which date over $2
million in additional claims have been paid. Companion relies
on McGimsey's proffered expert opinion and an underlying
actuarial report for the collateral account calculations.
on these arguments, Companion seeks three alternative summary
judgment rulings: (1) Defendants be found liable for $15
million in unreimbursed Below-Deductible Payments; (2)
Defendants be found liable for the amount the collateral
account was underfunded as of June 30, 2015 (over $2
million), plus additional claims (also over $2 million) paid
since that date; or (3) Defendants be found liable on
Companion's third cause of action and the matter proceed
to trial only as to damages. Companion also asks the court to
grant summary judgment that it has no liability on
Defendants' first through third counterclaims because it
properly took funds from the collateral account to make
Below-Deductible Payments. Companion argues there is no
support for any claim it improperly paid non-AMS claims with
AMS funds, and it has no obligation to release any remaining
collateral at this time.
argue the parties agreed sums in the collateral account could
be used to reimburse Companion for claims payments. They
maintain Companion has no injury because it has made all
Below-Deductible Payments from AMS collateral and over $12
million remains in the collateral account. Defendants further
argue some disbursements from the AMS collateral account
($873, 000) were improper because they were used to pay
non-AMS claims. Defendants also argue McGimsey's
testimony should be excluded, leaving Companion with no
support for its claim the collateral account is underfunded.
reply in support of their own motion for partial summary
judgment, Defendants argue Companion has understated the
collateral held and overstated what may be required to cover
future claims. They note the estimate is outdated and suggest
subsequent events (including closure of some claims) should
reduce the required collateral.
Motion to Exclude Opinion Testimony of McGimsey.
also seek to exclude McGimsey's testimony as to
Below-Deductible Payments and related collateral through
their separate motion to exclude. They argue McGimsey's
opinion Companion was injured by Defendants'
non-reimbursement of Below-Deductible Payments is barred by
his admission Companion reimbursed itself from collateral
funds. They argue McGimsey's opinion as to any collateral
deficiency lacks an adequate foundation because he relied on
the actuarial report of another (thus is improperly seeking
to offer one expert's opinion through another expert).
also argue the actuarial report provides an inadequate
foundation because it is marked “draft.”
Companion responds with a Declaration from the individual who
prepared the actuarial report, Patrick L. Whatley, who
explains the “draft” designation is used within
the industry even for documents that are final reports.
Whatley avers the document at issue reflects his final
analysis. Companion also asserts it was proper for McGimsey
to rely on this report because the 2006 Coverage Agreement
allowed Companion to require actuarial reports based on
whatever methodology it approved. Thus, the very fact
Companion received the report supports McGimsey's
reliance on it.
reasons explained below, the court finds genuine issues of
material fact preclude summary judgment on Companion's
third cause of action and Defendants' first through third
counterclaims. The court, nonetheless, notes one subordinate
issue that is no longer in dispute, assuming it ever was:
Companion did not breach a contract, breach a special
relationship, or convert AMS's funds (counterclaims
I-III) simply because it used AMS collateral to make
AMS's Below-Deductible Payments. This conclusion
does not resolve any claim or counterclaim, because issues
remain as to whether (1) Companion improperly paid claims
from the AMS collateral account (e.g., by paying
non-AMS claims or making Above-Deductible Payments that were
not later reimbursed); and (2) the collateral account was,
ultimately, under or over-funded as a result. Resolving these
issues is largely dependent on expert witness testimony and
analysis of detailed underlying claims and payment data as
well as calculation of required collateral.
to Reimburse Claims.
Companion argues, the 2006 Coverage Agreement requires
Defendants both to maintain fully-funded collateral accounts,
which are to be reviewed and adjusted quarterly, and to
reimburse claims paid on a periodic or monthly
basis. This agreement does not expressly
address how claims are to be handled in Run-Off (that is, if
new or renewal policies are not being written). Most
critically, it does not suggest Defendants may stop
reimbursing Companion or the third party administrator for
claims paid, and insist that claims be paid from collateral.
However, as Defendants argue and Companion effectively
concedes, the amount of collateral required to satisfy future
claims goes down during Run-Off as claims are satisfied,
though there may not be a direct correlation between claims
paid and collateral required for future
payments. Thus, while Run-Off may not excuse a
failure to strictly comply with the claims-reimbursement
provisions of the 2006 Coverage Agreement, it may mean a
failure of strict compliance causes no injury.
Use of ...