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Zurich American Insurance Co. v. Staffing Concepts National, Inc.

United States District Court, M.D. Florida, Tampa Division

November 20, 2017

ZURICH AMERICAN INSURANCE COMPANY, Plaintiff,
v.
STAFFING CONCEPTS NATIONAL, INC., et al., Defendants.

          ORDER

          STEVEN D. MERRYDAY UNITED STATES DISTRICT JUDGE

         In April 2014 Zurich sued seventeen defendants for breaching twenty-one insurance policies. Each policy covers workers' compensation claims between March 1, 2011, and March 1, 2012. Under a “large-deductible endorsement” to each policy, Zurich agrees to pay a claim, and the insured agrees to reimburse Zurich for the deductible up to $2 million. Because the policies unambiguously obligate the defendants to reimburse Zurich for a claim up to $2 million, three orders (Docs. 119, 122, and 124) grant summary judgment for Zurich on liability. A June 2017 jury trial on damages yielded a $9.1 million award for Zurich.

         Identifying half a dozen purported errors in the summary-judgment orders and the trial, the LRA defendants[1] and G&S Leasing move (Docs. 184 and 185) for judgment as a matter of law or alternatively for a new trial. Also, Zurich moves (Doc. 192) for costs and pre-judgment interest.

         I. Motions for judgment as a matter of law or for a new trial

         A. Subject-matter jurisdiction

         Ten days before the trial, the defendants moved (Doc. 155) to dismiss for lack of subject-matter jurisdiction and argued that the defendants' belated attempt to invoke a purported administrative remedy divested subject-matter jurisdiction. A June 12 order (Doc. 156) denies the motion. The LRA defendants and G&S Leasing repeat the arguments in the unsuccessful motion to dismiss. For the reasons explained in the June 12 order (Doc. 156), the defendants' argument fails.

         B. “Collateral” or “set-off”

         The defendants claim as error the exclusion of testimony about the “collateral” or the “collateral setoff.” Rather than pay Zurich directly, the defendants remitted money to a third party, PMSG, [2] which “managed the operations” for the defendants and for several companies not a party to this action. (Opferman, Tr. Vol. IV at 10-11 and 14-15) In addition to contracting with Zurich on the defendants' behalf, PMSG contracted with Zurich on behalf of the non-parties, [3] one of which owed Zurich at least several million dollars. (Opferman, Tr. Vol. IV at 41)

         The defendants proffered testimony from Daniel Opferman, the former vice-president of operations for PMSG, that PMSG deposited $22, 135, 675 in a trust. (Tr. Vol. IV at 25) Also, PMSG paid into escrow $200, 000 and posted (purportedly on the defendants' behalf) a $2, 500, 000 letter of credit. According to Opferman, PMSG posted as collateral a total of $24, 835, 675, but no collateral remains. (Tr. Vol. IV at 25 and 32) The defendants argue that the collateral posted by PMSG reduces or eliminates the defendants' debt for the 2011-2012 claims and that the jury could properly consider testimony about the collateral.

         As explained above, a non-party company owned by Hendry Hardin and managed by PMSG owed Zurich money under pre-2011 policies. (Tr. Vol. IV at 37-38) Opferman testified that the parties agreed that Zurich could apply the collateral in PMSG's trust to the non-party's pre-2011 debt. (Tr. Vol. IV at 33-38) In accord with the parties' agreement, [4] Zurich applied the collateral to the pre-2011 debt. (Opferman, Tr. Vol. IV at 37-38) Opferman, who could identify no error in Zurich's applying the collateral to the pre-2011 debt, stated that he knew about nothing that required Zurich's applying the collateral to the defendants' 2011-2012 debt. (Tr. Vol. IV at 36-39)

         The proffered testimony about the “collateral” or the “setoff” warranted exclusion. Testimony about money withdrawn from a third party's trust and applied - with the parties' agreement and without the defendants' timely objection - to another debt could not aid the jury's determination of damages caused by the defendants' failure to reimburse Zurich for the 2011-2012 debt. Even if relevant, the testimony risked confusing the jury with an erroneous belief that the defendants reimbursed through the third party's trust the same money over which Zurich sues in this action. Although the defendants undoubtedly prefer that the jury credit the defendants for the money in PMSG's trust, the defendants could identify at trial nothing that obligated Zurich to apply the collateral to the 2011-2012 debt. Absent evidence that connected the collateral to the 2011-2012 debt, testimony about the collateral remained both irrelevant and highly likely to unduly distract, mislead, and confuse the jury.

         Two points about the collateral warrant brief attention. First, the defendants cite the testimony of Opferman and Zurich underwriter March Bashore and argue that the parties “intended” that the collateral satisfy the 2011-2012 debt. But Bashore's proffered testimony (Tr. Vol. III at 185-238) neither mentions the pre-2011 debt nor contemplates the effect of the “standstill agreement” on the collateral. In any event, one underwriter's subjective characterization of the “intent, ” “purpose, ” or “intended function” of the collateral cannot absolve the defendants of the reimbursement obligation. Second, the defendants argue that Zurich failed to identify the account or debt to which Zurich applied the collateral. For example, the LRA defendants assert that the defendants “had every equitable right to tell the jury they paid substantial collateral to Zurich . . . and to insist to the jury that Zurich account for where that collateral went.” (Doc. 185 at 21) But the defendants' failure to counterclaim for an accounting prevents success on that argument (or on several “accounting” variants that appear throughout the record).

         C. Who is “you”?

         An endorsement representative of the twenty-one policies provides that “You agree to reimburse us” for up to $2 million per claim. (Doc. 165-1 at 93) The defendants argue (Doc. 185 at 5-15) for the first time that uncertainty ...


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