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Trusted Transportation Solutions, LLC v. Guarantee Insurance Co.

United States District Court, D. New Jersey

September 27, 2019

TRUSTED TRANSPORTATION SOLUTIONS, LLC, Plaintiff,
v.
GUARANTEE INSURANCE COMPANY, et al., Defendants.

          WILLIAM B. IGOE CASEY GENE WATKINS WILLIAM J. DESANTIS BALLARD SPAHR LLP On behalf of Plaintiff

          CHRISTINA M. RIEKER LARRY C. GREEN, JR. ANDREW N. JANOF WINGET, SPADAFORA & SCHWARTZENBERG LLP On behalf of Defendants

          OPINION

          NOEL L. HILLMAN, U.S.D.J.

         In this matter that concerns claims of broker malpractice, pending before the Court are Defendants’ Motion for Summary Judgment (Docket Item 138) and Plaintiff’s Cross-Motion for Summary Judgment (Docket Item 147). For the reasons expressed below, both parties’ motions will be denied because genuine issues of material facts exist.

         BACKGROUND[1]

         In this action, Plaintiff Trusted Transportation Solutions (“Plaintiff”) alleges that Defendants Brown & Brown of New Jersey (“Brown & Brown”) and John F. Corbett (“Corbett” and collectively “Defendants”) misrepresented the terms of a workers’ compensation insurance policy that Plaintiff purchased through Defendants. (See generally Docket Item 38.[2])

         Plaintiff is a temporary staffing service solely owned by Brian Davis that provides truck drivers and warehouse personnel to its clients. Defendant Corbett is a licensed insurance producer who works for Defendant Brown & Brown. Defendant Corbett began serving as one of Plaintiff’s insurance brokers in 2010. Guarantee Insurance Company (“Guarantee”), another defendant in this case, was the insurance company that issued the workers’ compensation policy in question to Plaintiff in 2015. Patriot Underwriters Inc. (“Patriot”), another defendant in this case, had a contract with Guarantee to market and underwrite policies issued by Guarantee. Douglas Cook, the final defendant in this case, was an employee of Patriot in 2015.

         From 2010 to 2014, Defendant Brown & Brown procured guaranteed cost workers’ compensation insurance from the commercial market for Plaintiff. However, Plaintiff’s business is considered “high risk” and “difficult to place” for workers’ compensation insurance purposes. As a result, in 2014, Plaintiff’s commercial insurer refused to renew Plaintiff’s coverage. Therefore, Plaintiff was forced to get insurance from the state-run assigned risk pool, which requires higher premiums than the commercial market. A year later, in 2015, Plaintiff notified Defendants that it did not want to obtain insurance through the pool anymore. Plaintiff’s goal in finding a new policy was “[t]o find the best insurance that makes the most sense for” Plaintiff. (See Docket Item 153-1 ¶ 19.) The parties disagree over whether Plaintiff required getting a policy outside of the pool or merely preferred as much. (See Docket Item 147-4 ¶ 19; Docket Item 153-1 ¶ 19.)

         In searching for a new policy, Plaintiff, via Defendants and another broker, was unable to obtain from the commercial market a guaranteed cost policy, which tends to be less expensive than other policies. Defendants were only able to secure a proposal from Guarantee for a large deductible workers’ compensation policy, which Defendants provided to Plaintiff on March 31, 2015. Defendant Corbett also met in person with Davis on March 31, 2015. The parties dispute what occurred at this meeting.

         The first dispute relates to the how Plaintiff’s premium would be calculated under Guarantee’s policy. Davis testified that Defendant Corbett repeatedly stated that Guarantee’s policy’s premium would be based on a “universal rate” of $5.32 per $100 of payroll, regardless of how employees were classified. (Docket Item 153-9 at 132:11-134:8.) Defendant Corbett testified that he did not make any such promise, but rather that there would be different rates based on how different employees were classified. (See Docket Item 138-7 at 87:14-90:20.) Defendant Corbett merely meant for the “universal rate” to be a reflection of the average rate of all of Plaintiff’s employees, based on previous years’ payrolls. (See id.) Plaintiff’s payroll for the policy period totaled $5, 292, 427.00, while the proposal had projected a payroll of $5, 700, 000. Had the “universal rate” applied, Plaintiff would have paid $281, 557.12 in premiums during the policy period. Instead, Plaintiff paid $343, 224.00 in premiums, or $61, 666.88 more than it would have had the “universal rate” applied.

         Another aspect of the policy that was discussed at the March 31, 2015 meeting was the Loss Fund. Unlike some policies, Guarantee’s policy required Plaintiff to have a deductible of $250, 000 per claim. To ensure the ability to do this, Guarantee required Plaintiff to establish a Loss Fund in the amount of $650, 000. Patriot would administer and use the Loss Fund to pay claims up to the deductible amount. At the meeting, Davis asked Defendant Corbett what fees would come out of the Loss Fund. The parties disagree over how that question was answered. Davis testified that Defendant Corbett called Douglas Cook, a Patriot employee, to help answer the question. (Docket Item 153-1 ¶ 67.) Both Defendant Corbett and Cook denied recalling such a call taking place. (Docket Item 153-3 at 101:6-11; Docket Item 147-8 at 94:24-95:9.) Davis alleges that Cook him, while Defendant Corbett was listening, that the Loss Fund would be used to pay only indemnity costs, medical expenses, and attorneys’ fees. (Docket Item 153-1 ¶ 68.) Cook told Davis that the premium, and not the Loss Fund, would cover “commissions and administrative fees and things, ” according to Davis. (Id.) In addition to denying that the phone call ever took place, Defendant Corbett alleges that he informed Davis that claim payments would come out of the Loss Fund. (Docket Item 147-9 at 117:8-11.) As it turned out, the Loss Fund was used to pay “Allocated Loss Adjustment Expense” (“ALAE”) under the policy, which included numerous administrative costs - such as the costs of bill review services[3] - beyond indemnity costs, medical expenses, and attorneys’ fees. During the Guarantee policy period, Patriot paid $123, 329.90 from the Loss Fund for costs beyond indemnity costs, medical expenses, and attorneys’ fees.

         Additionally, Plaintiff alleges that Defendant Corbett expressed to it that any unused portion of the Loss Fund would roll over to the next year if Plaintiff chose to renew its policy with Guarantee, which Plaintiff viewed as “a huge selling point.” (Docket Item 153-1 ¶¶ 77-78.) Defendant Corbett disputes this, stating that he was merely referring to how Guarantee typically did business and that Plaintiff was aware that Guarantee could roll over the Loss Fund at its sole discretion. (Id.)

         Plaintiff also claims that, in the above-mentioned phone call, Davis asked whether the Loss Fund would be kept in a self-secured (or segregated) fund and was assured that it would be. (Id. ¶¶ 80-81.) Defendants, in addition to denying that the phone call ever happened, characterize things differently. Defendant Corbett testified that Davis asked him whether he knew if the Loss Fund was held in a separate account, not if it was required to be so held. (Id. ¶ 81.) In reality, the fund was not segregated. On November 1, 2017, $45, 231.39 remained in the Loss Fund. On November 27, 2017, Guarantee entered into a receivership for purposes of liquidation. In January 2018, Patriot filed for bankruptcy. Plaintiff has not recovered the remaining funds, despite the policy stating that they would be incrementally repaid beginning 18 months after the policy became effective.

         Ultimately, Plaintiff agreed in writing to purchase the Guarantee policy at the March 31, 2015 meeting. The Policy became effective on April 3, 2015. Plaintiff claims that it was only after this time that it became aware of the various discrepancies outlined above. Defendant contends that Plaintiff was aware of all of the actual terms of the policy based on various documents, including a written proposal and three term sheets from Guarantee. (Docket Item 147-4 ¶¶ 28-66.) Plaintiff points out that, while it did have some of those documents before signing up for the policy, it only signed up after Defendants representations at the March 31, 2015 meeting. (See id. ¶ 28.)

         As has been outlined above, Plaintiff alleges that the policy wound up being different in certain key aspects than what Defendants had described. As a result, they filed this action, initially in state court. It was removed to federal court on October 13, 2016. Defendants were not initially included in the suit, but were added in Plaintiff’s Amended Complaint, which was filed in early May 2017. The Amended Complaint originally contained ten claims against Defendants. (Docket Item 38.) However, on June 8, 2018, the late Honorable Jerome B. Simandle dismissed nine of those counts - seven with prejudice and two (Counts IX and X) without prejudice. (Docket Item 85.) Defendants did not seek the dismissal of Count VII. (See id.) Plaintiff filed a Motion for Leave to File a Second Amended Complaint on July 11, 2018, to redress the deficiencies with Counts IX and X. (See Docket Item 88.) Magistrate Judge Joel Schneider denied that Motion on September 7, 2018. (Docket Item 107.) Plaintiff filed a Motion for Reconsideration (Docket Item 111) on September 21, 2018, which Judge Schneider denied on January 14, 2019, (Docket Item 134).

         Plaintiff filed an Appeal of the Magistrate Judge’s denial on January 28, 2019. (Docket Item 137.) This Court denied that Appeal on September 25, 2019. (Docket Item 157.) As a result of the above procedural history, the only remaining claim against Defendants Brown & Brown and Corbett in this action is Count VII, which alleges “Negligence/Broker Malpractice.” (See Docket Item 38.)

         Currently before the Court are Defendants’ Motion for Summary Judgment (Docket Item 138) and Plaintiff’s Cross-Motion for Summary Judgment (Docket Item 147). Defendant filed its Reply Brief on April 29, 2019. (Docket Item 153.) Plaintiff filed its Reply Brief on May 13, 2019. (Docket Item 154.) Having considered the parties’ filings and arguments, the Court will deny both Defendants’ Motion for Summary Judgment and Plaintiff’s Cross-Motion for Summary Judgment for the reasons expressed herein.

         DISCUSSION

         A. Subject Matter Jurisdiction

         The Court has jurisdiction over Plaintiff’s claims under 18 U.S.C. § 1332, as the ...


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