ORDER
BEFORE THE COURT аre: (1) Defendant First Financial Employee Leasing, Inc.’s Motion for Partial Summary Judgment (Dkt. 64), to which Plaintiffs have responded (Dkt. 82); (2) Plaintiffs’ Motion for Partial Summary Judgment (Dkt. 67) and separate Memorandum of Law (Dkt. 69), 1 to which Defendant has responded (Dkt. 80); (3) Defendant’s Motion to Strike Plaintiffs’ Response Memorandum (Dkt. 84), to which Plaintiffs have responded (Dkt. 91); (4) Plaintiffs’ Cross-Motion to Strike Defendant’s Opposition and Defendant’s Motion for Summary Judgment (Dkt. 91), to which Defendant has responded (Dkt. 94); and (5) Defendant’s Motion to Strike Affidavit of Cynthia Goral and to Exclude Testimony at Trial (Dkt. 96), to which Plaintiffs have responded (Dkt. 107).
Plaintiffs brought this action to recover amounts owing under two policies of workers’ compensation and employers liability insurance issued to Defendant. Defendant counterclaimed and asserted (a) a claim for breach of contract (Count I) alleging that one or more Plaintiffs breached their claims management and settlement obligations under one of the policies; (b) a second claim for breach of contract (Count II) alleging that Plaintiffs overcharged Defendant by failing to apply a premium credit in accоrdance with the policies and as mandated by Florida law; and (c) a claim for equitable accounting (Count III).
As to Count II, Defendant contends that (1) in determining the amount of premium owed by Defendant, Plaintiff was required by Florida law and the insurance policies to apply a premium credit provided by the Florida Contracting Classification Premium Adjustment Program (“FCCPAP”), as promulgated by the National Council on Compensation Insurance, Inc. (“NCCI”) and (2) after being instructed to do so by NCCI, Plaintiff did initially apply the FCCPAP credit in its premium audit statements and thereby “endorsed” the policies to include the credit. In response, Plaintiffs argue that applying the FCCPAP to reduce Defendant’s premium was neither required by the policies nor consistent with Plaintiffs’ filed and approved rating plan. Additionally, Plaintiffs argue that, as Count II challenges a premium rate calculation and
Background
Plaintiffs American Casualty Co. of Reading, Pennsylvania (“American”) and Continental Casualty Co. (“Continental”) are insurance carriers. (Pretrial Statement, Dkt. 86 ¶ 9(c)). Plaintiff CNA ClaimPlus, Inc. is a claims administration company. 2 Although the nature of their affiliation is not entirely clear, Plaintiffs state that they all operate under the CNA Insurance Companies trademark and they refer to themselves collectively as CNA. Sather Aff. I, ¶ 2. Defendant First Financial Employee Leasing, Inc. (“FFEL”) is an employee leasing company. (Dkt. 86 ¶ 9(c)).
Plaintiff American issued to FFEL a policy of workers’ compensation and employers liability insurance for the effective dates of February 4, 2001 to February 4, 2002 (the “2001 Policy [Dkt. 64-1]”) and a renewal policy for the effective dates of February 4, 2002 to February 4, 2003, (the “2002 Policy [Dkt. 64-2]”). (Dkt. 86 ¶ 9(d)-(e)). At FFEL’s request, the 2002 Policy was terminated early, on December 31, 2002. Id. ¶ 9(e); Sather Aff. ¶ 3.
The Policies were issued as part of large deductible insurance programs (the “Programs”) whose terms and conditions were outlined in the Policies and in (1) a Deductible Reimbursement Agreemеnt between Plaintiff Continental and FFEL effective February 4, 2001; (2) a Claim Service Agreement between FFEL and RSKCo Claims Services, Inc., Plaintiff CNA ClaimPlus, Inc.’s predecessor in interest, effective February 4, 2001; and (3) confirmation letters sent by CNA to FFEL. See Sather Aff. I ¶ 5 and Exs. B, C, D & E (Dkt. 82-1 at 35-55 and Dkt. 82-2 at 1^14); see also Dkt. 86, ¶ 9(f)-(g).
Under Florida law, as to workers’ compensation and employers liability insurance, every insurer must file with the Department of Financial Services (f/k/a the Department of Insurance) “every manual of classifications, rules, and rates, every rating plan, and every modification of any of the foregoing which it proposes to use.” Fla. Stat. § 627.091(1). However, an insurer “may satisfy its obligation to make such filings by becoming a member of, or a subscriber to, a licensed rating organization which makes such filings and by authorizing the office to accept such filings in its behalf ...” Id. § 627.091(4). CNA states that NCCI has operated the only rating organization in the State of Florida for several decades. (Dkt. 82 at 21). NCCI has filed on behalf of its member carriers the Florida rates and rules contained in its Basic Manual for Workers Compensation and Employers Liability Insurance (the “NCCI Manual”). See Dkt. 110 at 4. Generally, an insurer may not issue a сontract of insurance except in accordance with its filings, see Fla. Stat. § 627.191, and must “adhere to the filings made on its behalf’ by NCCI, Fla. Stat. § 627.211; see also Dkt. 110 at 4.
The Programs were issued pursuant to a Workers’ Compensation Loss Reimbursement Rating Plan approved by the Department of Insurance in January, 1996.
See
Sather Aff. I ¶ 8 and Ex. F (Dkt. 82-3 at 2-65); Dkt. 64-1 at 19-22; Dkt. 64-2 at
The 2001 and 2002 Program’s premiums are based on formulas that contemplate FFEL’s deductible obligations (ie., risk retention) and loss experience. Sather Aff. I ¶ 13. The 2001 Policy and confirmation letters provide for a premium rate of $2.03 per $100 of payroll of covered employees. See id. ¶ 14; Dkt. 82-2 at 9, 13. Because the insured’s actual payroll over the course of the policy term cannot be determined in advance, the payroll (and hence the premium based thereon) is subjеct to an audit following expiration of the policy’s effective dates. Sather Aff. I ¶ 14.
The 2002 Policy and confirmation letters provide for a premium rate of 25.9% of “unmodified premium,” which is defined as the “the State rates per class times the payroll for that class” but excludes charges for increased employers liability limits and the effects of an experience modifier. See id. ¶ 17; Dkt. 82-2 at 31, 35; Dkt. 64-2 at 21. Again, because unmodified premium is based on payroll and actual payroll over the course of the policy term cannot be determined in advance, the payroll (and hence the premium) is subject to an audit following expiration of the policy’s effective dates. Sather Aff. I ¶ 18.
The Florida Contracting Classification Premium Adjustment Program was originally implemented in 1984 and was in effeet throughout the effective dates of the Policies. 4 Generally, FCCPAP provides a premium credit for construction industry employers who pay higher than average hourly wages, apparently to account for the fact that, although the higher wages result in a higher premium (because premium calculаtions are based on payroll), they may not result in correspondingly greater liability exposure. See Sather Dep. at 91-92, 155-56; Sather Aff. I ¶ 21 (“In essence, FCCPAP is a rate equalization tool.”). 5
The Florida pages of the NCCI Manual (effective Jan. 1, 2001) provide that, to obtain the credit, the insured must within three years after the policy period ends submit required information about payroll to NCCI, which then calculates the credit. Dkt. 64-3 at 2. Additionally, the Manual provides:
The carrier shall, upon audit, verify the information that was submitted by the insured and used in the calculation of the credit. If the carrier discovers an error in the [insured’s] original request for policy credit, the revised information must be submitted to [NCCI] for recalculation .... The credit, authorized by [NCCI] shall appear on Item 4. [sic] of the policy. If the credit is not available at the time of policy issuance, the carrier shall endorse the policy to provide this credit information.
Id.
Additionally, the Manual requires the carrier to use an approved form to notify insureds with contracting classifications on
A November 7, 2003 NCCI Circular (the “NCCI Circular” [Dkt. 64-9 at 2-7]) describes the administration of the FCCPAP program in greater detail. The NCCI Circular notes the extension of the program to 2004 and states that “[t]his program is mandatory and is applicable to all policies” with anniversary rating dates during 2004 that cover one or more of the eligible contracting classifications. (Dkt. 64-9 at 2). The NCCI Circular states that each carrier must issue a standard letter or notice (which is attached to the Circular) to every insured having a policy containing one or more of the eligible classifications. Id. The NCCI Circular further states that, upon the insured’s submission of the required payroll data, NCCI will compute “the applicable premium classification credit, and the overall policy credit factor,” which is expressed as a percentage to be applied to the employer’s entire Florida standard premium to arrive at the credit amount, and will notify the carrier accordingly. Id.; cf. Borba Rep. at 16. The NCCI Circular further provides:
The carrier will use this policy credit factor in the calculation of the insured’s estimated premium at policy issuance. In those cases in which the carrier receives the policy credit factor after the insured’s policy has been issued, the policy will be so endorsed. 6
At audit, the carrier will use the same policy credit factor in the calculation of the insured’s final earned premium....
Id. (emphasis added).
Finally, the NCCI Circular provides that the earned premium dollar adjustment amount resulting from application of the policy credit factor “must be reported on unit statistical reports under Classification Code 9046.” Id. at 3.
The required notice was attached to the 2002 Policy. See Sather Aff. I ¶ 24; Dkt. 64-2 at 3-4. Entitled “Florida Contracting Classification Premium Adjustment Program Workers’ Compensation Premium Credit Application 2001,” the notice (1) informs FFEL that the FCCPAP applies to policies with effective dates on or after January 1, 2001; (2) states that “[a] special premium calculation, which may result in a premium credit for you, will be based on average hourly pay rates for each classification of contracting operations”; (3) instructs FFEL to send NCCI a completed premium credit application, which is attached, “[i]n order that your premium may be correctly established”; (4) advises FFEL that NCCI “will advise us of any premium credit applicable”; and (5) wаrns that if NCCI does not receive the insured’s application within three years after the policy period ends, “your 2001 premium calculation will not reflect any possible premium credit.” Dkt. 64-2 at 3-4. The 2002 Policy’s endorsement schedule advises FFEL to read this “important” notice. (Dkt. 64-2 at 17).
As for the 2001 Policy, CNA admits that, pursuant to NCCI guidelines and based on the classification codes covered by the policy, CNA was obligated to provide FFEL with the same FCCPAP notice. See Sather Aff. I ¶ 23. Sather states that, because attachment of the notice to the policy documents was not an automated process in 2001, if the notice was provided with the 2001 policy (a point as to which Sather offers no information), “the underwriter or rater would have needed to manually attach the notice to the policy.” Id.
Evidently, FFEL did apply for the FCCPAP credit. A July 15, 2003 letter from NCCI to CNA states that FFEL had applied and qualified for a 2001 FCCPAP premium credit, notifiеs CNA of the appropriate policy credit factor, and instructs CNA to “[pjlease endorse the insured’s 2001/2002 policy.” (Dkt. 64—5). 7
FFEL submits a document (Dkt. 64-6) by which it contends CNA endorsed the policies. The endorsement has an effective date of February 4, 2001 and changes item 4 of policy no. WC194263450 (the number for both Policies) to add the “Florida Contracting Premium Adjustment,” code 9046, in an amount to be determined at audit. However, the endorsement states that it shall not be binding upon the carrier unless countersigned by an authorized representative of the company and no signature appears on the document. Terri Hill, who discovered the document in the audit file, did not know whether it was sent to the insured. 8 Surprisingly, CNA does not even mention the endorsement in its response.
Sather states that CNA complied with NCCI’s instructions and endorsed the policies “through the audit process” to reflect the FCCPAP credit. Sather Aff. If 28. Specifically, Sather avers that a July 28, 2003 audit adjustment for the 2001 Policy and an August 12, 2003 audit adjustment for the 2002 Policy “applied the designated credit percentages for the respective years pursuant to NCCI’s instructions.” Id. ¶ 29.
CNA’s July 28, 2003 рremium audit statement for the 2001 Policy voids a prior audit billed on August 21, 2002 and states that the reason for the correction is to “apply FL contracting credit of 7.00%.” (Dkt. 82-4 at 38). A line item for code 9046 records a $32,884 FCCPAP credit that (after application of a loss reimbursement plan factor, which is the factor that accounts for FFEL’s deductible reimbursement obligation, ie., its retained risk, see Borba Rep. at 9) results in a total earned premium of $846,254. (Dkt. 82^4 at 51; see also Borba Rep. at 14).
Similarly, CNA’s August 12, 2003 premium audit statement for the 2002 Policy voids a prior audit billed on June 25, 2003 and states that the reason for the correction is to “revise to add FL contracting credit .92” (Dkt. 82-4 at 53). 9 A line item for code 9046 records a $683,033 FCCPAP credit that (after application of a loss reimbursement plan factor) results in a total earned premium of $1,903, 174. (Dkt. 82-4 at 60; see also Borba Rep. at 16).
Sather opines that this application of the 7% policy credit factor in the July 28, 2003 and August 12, 2003 audit adjustments “serves as the endorsement to the policies to which NCCI refers” in its July 15, 2003 letter. Sather Aff. I ¶ 29;
see also
Sather Dep. at 108; Hill Dep. at 19. Sather avers that CNA endorsed the policies in this manner “to comply with NCCI’s instructions pertaining to statistical reporting re
Sather concedes that NCCI uses the reported information “to verify that the insured had the FCCPAP credit modified onto the policy....” Sather Aff. ¶1 39. However, Sather believes that NCCI is not interested in whether the required modification (ie., application of the policy credit factor) actually reduces the premium charged to the insured. See Sather Aff. I ¶ 40 (“NCCI does not concern itself with whether the FCCPAP alters the [insured’s] premium or not. NCCI simply tracks what insureds are entitled to the credit for statistical reporting purposes.”); Sather Dep. at 101.
Sather asserts that, although CNA applied the policy credit factor in the July 28, 2003 and August 12, 2003 audit statements, “CNA is reporting to NCCI that they applied the credit and the credit is inapplicable to the subject policy.” Sather Aff. I ¶ 41 (emphasis added). Sather does not identify which part of the July 28, 2003 or August 12, 2003 audit statements indicate that the FCCPAP credit is inapplicable, and a review of those statements, by themselves, provides no indication that the FCCPAP credit is inapplicable. Rather, those statements apply the FCCPAP credit to arrive at a reduced total earned premium.
Sather believes that “[i]ncluding the FCCPAP credit at the time of the audit does not mean that the credit [actually] applies to the ... policies.” Id. ¶ 30. At his deposition, Sather appeared to acknowledge the incongruity of “applying” in the audit process a premium credit that did not in fact apply to the Policies (ie., to which the insured is not entitled). Asked why CNA did not simply respond to NCCI’s letter by informing NCCI that the credit did not apply (and therefore CNA would not endorse the Policy as directed), Sather admitted that CNA could have so responded “when this credit was first put on—or actually when the large deductible policy was first put into place.” Sather Dep. at 169. Sather at first stated that he did not know why CNA had not done so. Id. However, Sather added that, as he understood it, CNA had handled the situation as it did to avoid criticism or other adverse action by NCCI for noncompliance with its directive to endorse the policy. Id. at 169-70.
At all events, the “application” of the contracting credit in the July 28, 2003 and August 12, 2003 audit statеments did not ultimately result in a reduction of the premium charged to the insured. This is because, after “application” of the credit in the first step of a two-step (and two-day) audit adjustment process, CNA changed the loss reimbursement plan factor (or deductible factor, as some witnesses called it) in the second step (and second day) of the process to offset the FCCPAP credit amount. 10
Thus, for the 2001 policy, although in the July 28, 2003 audit statement (or, as Borba calls it, audit report) “CNA included a 7% Florida CCPAP credit in the premium calculation” to arrive at a total earned
Similarly, for the 2002 policy, although in the August 12, 2003 audit statement CNA applied the FCCPAP credit to arrive at a total earned premium of $1,903,174, in the audit on the following day, August 13, 2003 (which lists as the reason for the audit to “revise deductible] credit”), “CNA included the 8% [sic] Florida CCPAP credit [but] decreased the loss reimbursement credit factor” to arrive back at a total earned premium of $2,068,665 (ie., an amount within $14 of the total earned premium reported in an audit performed before CNA received the NCCI letter). Id. at 15-16. 12
CNA’s witnesses agreed that the purpose of the alteration of the deductible factor was to ensure that, regardless of the contracting credit, the premium ultimately charged to the insured was the one that the parties contractually agreed to at the outset and that was stated in the Policies and the confirmation letters. See Hill Dep. at 27-28, 42-45, 53-54, 84, 89, 152; Sather Aff. I ¶ 31. 13 Additionally, Sather believes that reducing the charged premium based on the FCCPAP credit (ie., “applying” the credit in the ordinary sense of the word to the standard premium calculated in accordance with the Rating Plan) would have been inconsistent with CNA’s Rating Plan (which does not mention the credit) and therefore offsetting the credit was required to maintain compliance with the Rating Plan. 14 CNA’s expert, Dr. Philip Borba, agreed that “including consideration of the [FCCPAP] in the cаlculation of the premium ... would result in premiums not in conformance with [CNA’s] filed and approved program.” Borba Rep. at 7-8.
Sather believes that the FCCPAP credit is not mandatory where a carrier has its own rating plan approved by the Department of Insurance and the rating plan does not mention the credit. Sather Aff. I f 35. Bruce Smith, FFEL’s chief executive officer and Rule 30(b)(6) designee, appeared to agree. 15
Standard
Summary judgment is proper if, following discovery, the pleadings, depositions, answers to interrogatories, affidavits and admissions on file show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
Celotex Corp. v. Catrett,
Once a party properly makes a summary judgment motion by demonstrating the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings through the use of affidavits, depositions, answers to interrogatories and admissions on file, and designate specific facts showing that there is a genuine issue for trial.
Celotex,
The Court will not weigh the evidence or make findings of fact.
Anderson,
Discussion
Exhaustion
CNA contends that FFEL’s claims and defenses based on its alleged entitlement to the FCCPAP credit should be dismissed for failure to exhaust its administrative remedies under Section 627.371, Florida Statutes. 16 The Court agrees.
Section 627.371 provides an administrative procedure and remedy for an insured who is “aggrieved by any rate charged, rating plan, rating system, or underwriting rule” followed or adopted by an insurer or rating organization. Subsection (1) provides for a two-step review process. The first step is a written request to the insurer:
(1) Any person aggrieved by any rate charged, rating plan, rating system, or underwriting rule followed or adopted by an insurer, and any person aggrieved by any rating plan, rating system, or underwriting rule followed or adoptedby a rating organization, may ... make written request of the insurer or rating organization to review the manner in which the rate, plan, system, or rule has been applied with respect to insurance afforded her or him.
Fla. Stat. § 627.371(1). If the insurer or rating organization does not grant the request for review within thirty days, the insured may treat the request as having been denied. Id. The next step is an appeal to the Office of Insurance Regulation (“OIR”):
Any person aggrieved by the refusal of an insurer or rating organization to grant the review requested, or by the failure or refusal to grant all or part of the relief requested, may file a written complaint with the office, specifying the grounds relied upon. If the office has already disposed of the issue as raised by a similar complaint or believes that probable cause for the complaint does not exist or that the complaint is not made in good faith, it shall so notify the complainant. Otherwise, and if it also finds that the complaint charges a violation оf [chapter 627] and that the complainant would be aggrieved if the violation is proven, it shall proceed as provided in subsection (2).
Id. If the complaint states a violation of Chapter 627’s provisions governing rates and ratemaking, OIR may order corrective action (including a premium adjustment) pursuant to subsections 2 and 3. See Fla. Stat. § 627.371(2) & (3).
In
Florida Welding & Erection Serv., Inc. v. American Mut. Ins. Co. of Boston,
Here, the parties dispute the scope of this rule.
Florida Welding
required exhaustion of a challenge to a workers’ compensation insurance premium based on an allegedly inaccurate experience modifier. American
Home Assurance Co. v. Phineas Corp.,
Amount of insurance x Rate = Premium. Because the amount of insurance specified in a policy is a constant, a premium discount necessarily requires lowering the rate charged. Thus, to the extent an insured claims to have been wrongly deprived of a premium discount, the insured essentially is claiming to have been aggrieved by the rate charged.
Id. Accordingly, the court concluded generally that “a request for a ‘premium adjustment’ necessarily must arise from a challenge to the ‘rate charged’ ” within the meaning of Section 627.371. Id.
Significantly, the court in
Serchay
also disagreed with the reasoning of the federal district court in
Elite II v. American Cas. Co. of Reading, Pa.,
No. 8:05-CV-1623-T-17MAP,
Plaintiff is not challenging alleged improper classification, or the rates on which the premium is based. Plaintiff is seeking a declaration that the policy provisions require Defendant to apply the FCCPAP credit in calculating the correct premium for the policy periods. The Court recognizes the regulatory scheme and the discretion of the Florida Department of Insurance, but finds that the resolution of this case will turn on construction of the insurance policies.
Id.
In
Serchay,
the insured relied on
Elite II
to argue that a premium challenge based on a failure to apply a premium discount did not require exhaustion.
FFEL argues that (a) its claims, like those in Elite II, are based not on rates or rate calculations but on CNA’s breach of its obligation under the policies to apply the FCCPAP and (b) because its claims and defenses are based solely on construction of the insurance policies, “the result will turn on construction of the insurance policies” (Dkt. 80 at 4), as in Elite II Furthermore, FFEL characterizes Serchay’ s disagreement with Elite II as dicta.
Second, Serchay expressly held that Section 627.371 applies to a premium discount. To that extent, its disagreement with Elite II was necessary to the decision and not dicta. To the extent that FFEL contends that the FCCPAP credit is mandated by statute, Serchay’s holding applies because there is no relevant difference between a statutorily mandated premium discount and a statutorily mandated premium credit.
Third, even to the extеnt Serchay’s holding does not cover the facts of this case (e.g., because FFEL’s claim is based in part on contract), its extraordinarily broad rationale does. Serchay reasoned that because a premium adjustment necessarily changes the rate charged, a claim to a premium discount is essentially a challenge to the “rate charged” within the meaning of Section 627.371. 19
Fourth,
FCCI Ins. Co. v. NCM of Collier County, Inc.
appears to support requiring exhaustion here.
FCCI
involved a premium calculation challenge based on (a) allegedly inaccurate payroll amounts and loss reserves and (b) an allegation that the insurer had
“agreed
to reduce the premium amount” after being informed that losses were overstated.
Finally, FFEL’s contention that its claim for a premium refund is based solely on a construction of the Policies and the “endorsements” is disingenuous. FFEL has contended throughout this lawsuit and continues to contend that application of the FCCPAP credit is mandated not only by the Policies but also by Florida law, i.e., Florida statutory law and the NCCI Manual as “codified” by Florida law or regulation. 20
In sum, Florida appellate courts have not followed the narrower interpretation of
Florida Welding
suggested by
Elite II
and relied on by Defendant. Absent a persuasive indication that the Florida Supreme Court would disagree with
Serchay
or decide the issue differently, the Court concludes that FFEL was required to exhaust its administrative remedies under Section 627.371 before seeking relief in court.
See McMahan v. Toto,
Motion to Strike
Rule 30(b)(6) governs deposition notices directed to organizations. The deposition notice “must describe with reasonable particularity the matters for examination.” Fed.R.Civ.P. 30(b)(6). In response, the organization must designate one or more pеrsons to testify on its behalf as to those matters.
Id.
“The persons designated must testify about information known or reasonably available to the organization.”
Id.
As the persons designated represent the corporation just as an individual represents himself at a deposition,
see United States v. Taylor,
A corporate party does not satisfy its obligations under Rule 30(b)(6) by merely “producing a designee and [then] seeing what he has to say or what he can cover.”
Poole ex rel. Elliott v. Textron, Inc.,
If the designated deponent cannot answer questions regarding the subject matter as to which he is designated, then “the corporation has failed to comply with its Rule 30(b)(6) obligations and may be subject to sanctions.”
King v. Pratt & Whitney, a Div. of United Techs. Corp.,
Additionally, some courts have stated generally that when the Rule 30(b)(6) representative claims ignorance of a subject during the deposition, the organization is precluded from later introducing evidence on that subject unless the evidence was previously unavailable.
See Function Media, LLC. v. Google, Inc.,
No.2:07-CV-279-CE,
These decisions overstate the binding effect of Rule 30(b)(6) testimony. Although Rule 30(b)(6) testimony is that of the corporation, it does not constitute a judicial admission and the corporation “is no more bound than any witness is by his or her prior deposition testimony. A witness is free to testify differently from the way he or she testified in a deposition, albeit at the risk of having his or her credibility impeached by the introduction of the deposition.”
R & B Appliance Parts, Inc. v. Amana Co., L.P.,
FFEL served CNA with an Amended Notice of Taking Rule 30(b)(6) Deposition (Dkt. 107 at 11-18) in January, 2010. CNA states that it designated four persons to provide testimony regarding the subjects specified in the notice. (Dkt. 107 at 2). The subjects as to which CNA designated William Romashko included “[p]ayments made by Defendant to Plaintiffs in connection with the policies of insurance and rеlated agreements at issue in this Action, including, but not limited to, payments for losses, claim handling fees, expenses and taxes associated with claims submitted for coverage under the policies and related agreements”; “[cjredits applied by Plaintiffs in connection with the policies of insurance and related agreements at issue in this action”; and “[t]he amounts Plaintiffs claim are owed by Defendant pursuant to the [2001 and 2002] program documents.” Dkt. 107 at 8-9 (Nos. 4, 5, 11-12, & 14); see also Romashko Dep. II at 4.
Romashko was deposed on January 22, 2010. 24 A review of the transcript shows that Romashko was unable to adequately respond to certain questions concerning the amounts due and paid by FFEL. For instance, Romashko testified that
(1)although he was generally familiar with the amounts CNA claimed were owing, had confirmed their accuracy by reviewing CNA accounting records, and assumed (erroneously, as it turned out) that CNA had produced a spreadsheet summarizing the amounts, he could not recall how much was owed on each Policy, Romashko Dep. II at 15-19;
(2) although CNA had “collateral inventory” records showing the collateral posted by FFEL and any adjustments to the FFEL collaterаl account, Romashko did not know the amount initially posted, had not reviewed the pertinent collateral file, did not know exactly how much collateral was drawn down and applied to FFEL’s outstanding debts, had no information to give about a specific $2,806,000 withdrawal in 2004 (although he vaguely recalled discussions between the parties about drawing on the collateral to pay a debt no longer outstanding and not at issue in this lawsuit), and did not know what documentation still existed as to that transaction because he had not looked at the file and he confined his attention to amounts CNA claimed were currently owing, id. at 40-46;
(3) in connection with a balance of about $11,000 that allegedly remained in FFEL’s collateral trust account and had not been applied to its debts (notwithstanding an understanding between the parties that CNA would draw down the account for that purpose), Romashko had no knowledge as to whether the $11,000 had ever been so applied or, if not, why not, although Romashko could (and, implicitly, would upon request) research the application of the $11,000 and the drawdown of the collateral account and provide testimony on both points, id. at 58-59;
(4) as to three lump sum payments of $150,000 each made to CNA in 2007, although he stated that they were credited and remained available as offsets to the amounts FFEL owed but were not yet allocated to particular invoices or transactions because (as he believedbased on his review) CNA had no information as to what invoices or items they were meant to be applied, Romashko did not know whether CNA ever inquired from FFEL how they should be applied, id. at 47-53;
(5) although he explained that elaimshandling fees could change from year to year owing to changes in aggregate claim amounts (upon which they were based), and he explained several entries on that basis, Romashko was not able to state without further examination of the billing documents what caused a credit of $944 in an October 10, 2006 invoice (although he speculated that it might be the result of a subrogation payment that reduced the aggregate claim amount), id. at 67-68.
Additionally, FFEL complains that Romashko admitted to grave deficiencies in CNA’s acсounting system. Romashko testified that, although the somewhat archaic accounting system could produce a report showing all transactions and adjustments (essentially, an accounts receivable summary), some interpretation of the report (which would be “in code ... not in layman’s language”) would be required to understand the reason for particular entries. Id. at 29-32. Additionally, Romashko testified that, because each invoice or audit statement reflects current amounts owed using a “change method for accounting,” id. at 28, no single billing document would provide a history of all debits, payments, and credits together with the final result (the amount currently outstanding), although the billing statements or invoices contained the data from which such a summary could be created, id. at 28-29, 32-35.
In a January 27, 2010 letter (Dkt. 107 at 23), FFEL’s counsel stated that at depositions during the previous week, CNA’s witnesses referred to documents requested but not previously produced and requested an “Accounting History/Consolidated Report showing all amounts billed, paid and credited and related key/explanation.”
In response to the rеquest, Cynthia Goral, an account manager in CNA’s Legal Collections Department, prepared a spreadsheet summarizing FFEL’s account history, which was produced to FFEL on March 10, 2010, i.e., after the March 1, 2010 discovery deadline. 25 The spreadsheet details FFEL’s premium and loss obligations under both Programs, amounts paid by FFEL, the application of paid amounts, the dates FFEL made payments, the application of FFEL’s collateral to outstanding debts, credits to FFEL, and the source and amount of monies still owed. Goral Aff. ¶¶ 5-8.
FFEL moves to strike the Goral affidavit on the ground that it contains unspecified “material information that Plaintiffs refused to provide during [the Romashko deposition],” Dkt. 96 at 8, and that should have been provided through Romashko, id. at 10. FFEL did not request an extension of the discovery deadline so that FFEL may depose Goral or anyone else as to the information provided in the Goral affidavit.
In response, CNA contends that (a) the Goral affidavit does not contradict Romashko’s testimony but merely explains the information in the spreadsheet, which was provided in response to a specific discovery request that Rоmashko’s testimony evidently enabled FFEL to make, (b) given the general nature of the subjects specified in the notice, CNA did not anticipate that FFEL would want to explore in the Rule 30(b)(6) deposition the capabilities of CNA’s accounting system, and (c) to the extent FFEL has any legitimate concern, it should have moved to compel more com
Contrary to FFEL’s contention (Dkt. 96 at 8), Romashko did not “refuse” to provide any information at his deposition. Moreover, Romashko did not claim corporate ignorance as to the subjects in question, and the information in the Goral affidavit does not contradict (although it supplements) Romashko’s testimony.
See Goodyear Tire & Rubber Co. v. Great Sw. Express Co., Inc.,
No. Civ.A. 2:04-CV-69-WC,
Equitable Accounting
Under Florida law, a party seeking an equitable accounting must demonstrate that (1) the parties share a fiduciary relationship or the questionеd transactions are complex, and (2) the remedy at law is inadequate.
American United Life Ins. Co. v. Martinez,
FFEL asserted in Count III a claim for equitable accounting to determine (1) the amount of the premium refund to which FFEL is entitled based on the FCCPAP (an amount that FFEL now believes it has ascertained
28
) and (2) amounts owed to CNA for allocated loss adjustment expenses, claims handling fees, and reimbursement for reserves established after the 2001 and 2002 Policies
As noted above, a judgment for breach of contract is generally an adequate legal remedy. FFEL presents no substantial evidence showing the inadequacy of contract damages.
See Sussman v. Weintraub,
No. 06-20408-CIV,
Furthermore, FFEL’s attempt to show the inadequacy of its legal remedy ignores record evidence. FEEL asserts its inability to determine (a) how CNA calculated its loss expenses and taxes and interest charges, (b) how FFEL’s payments and collateral were applied, (c) whether amounts owed by CNA to FFEL were appropriately credited, and (d) whether the amounts claimed due exceed a “plan maximum,” ie., a cap on the total amount CNA could collect under the Policies for loss reimbursement expenses. (Dkt. 64 at 10-11).
As to the plan maximum, FFEL relies on Romashko’s inability to state the amount without further research. However, CNA submits a “Summary of Maximum Losses Chargeable” (Dkt. 90 at 41-42) that provides the information and that, as counsel avers (although without stating when), see Callahan Aff., Dkt. 90, ¶ 14, was produced to FFEL. As to interest charges, counsel avers that CNA shared the interest calculations with FFEL at the March 17, 2010 mediation. See Callahan Aff. ¶ 15 & Ex. H (Dkt. 90 at 44). Otherwise, FFEL relies on the deficiencies in Romashko’s testimony and especially his acknowledgment that no single billing document would provide the comprehensive account summary desired by FFEL. However, the spreadsheet prepared by Goral appears to provide that summary. FFEL’s recent receipt of the document (and the information as to interest charges and plan maximum) might well have justified an extension of the discovery deadline had the remedy been timely requested. However, FFEL did not request such an extension.
In sum, although the Court understands that FFEL encountered difficulties in ascertaining the accounting information it wanted (in part because of sanctionable conduct on the part of CNA, as noted above), FFEL appears to possess thе information now and, to the extent it does not, an equitable accounting is not a substitute for discovery available and permitted under the Federal Rules of Civil Procedure.
See Managed Care Solutions, Inc. v. Essent Healthcare, Inc.,
Conclusion
For the foregoing reasons, Defendant’s Motion to Strike Affidavit of Cynthia Goral and to Exclude Testimony at Trial (Dkt. 96) is GRANTED in part to the extent that, pursuant to Rule loss reimbursement expenses. (Dkt. 64 at 10-11).
In sum, although the Court understands that FFEL encountered difficulties in ascertaining the accounting information it wanted (in part because of sanctionable conduct on the part of CNA, as noted above), FFEL appears to possess the information now and, to the extent it does not, an equitable accounting is not a substitute for discovery available and permitted under the Federal Rules of Civil Procedure.
See Managed Care Solutions, Inc. v. Essent Healthcare, Inc.,
Conclusion
For the foregoing reasons, Defendant’s Motion to Strike Affidavit of Cynthia Goral and to Exclude Testimony at Trial (Dkt. 96) is GRANTED in part to the extent that, pursuant to Rule 37(d)(3), Defendant is awarded costs and attorney s fees incurred in the taking of William Romashko’s Rule 30(b)(6) deposition on January 22, 2010. Defendant shall file proof of costs and fees within fourteen days after entry of a final judgment.
Plaintiffs’ Motion for Partial Summary Judgment (Dkt. 67) is GRANTED.
Counts II аnd III of Defendant’s Counterclaim are DISMISSED, and Defendant’s Affirmative Defenses to the Complaint and Supplemental Complaint, to the extent that they are based on the FCCPAP allegations, are DISMISSED.
Defendant’s Motion for Partial Summary Judgment (Dkt. 64) is DENIED.
Defendant’s Motion to Strike Plaintiffs’ Response Memorandum (Dkt. 84), Plaintiffs’ Cross-Motion to Strike Defendant’s Opposition and Defendant’s Motion for Summary Judgment (Dkt. 91), and Plaintiffs’ requests for oral argument (Dkt. 69 at 2; Dkt. 82 at 2) are DENIED.
Notes
. Local Rule 3.01(a) provides that a motion must include "a concise statement of the precise relief requested, a statement of the basis for the request, and a memorandum of legal authority in support of the request, all of which the movant shall include in a single document of not more than twenty-five (25) pages.” (emphasis added).
. April 16, 2010, Affidavit of Matthew Sather ("Sather Aff. I” [Dkt. 82-1]), ¶ 2.
. See also January 20, 2010 deposition of Matthew Sather (“Sather Dep.” [Dkt. 66 at 4-50]) at 51.
. See Dkt. 64-9 at 2; Rebuttal Expert Report of Dr. Phillip Borba ("Borba Rep.” [Dkt. 72]) at 8.
.See also March 12, 2010 deposition of Philip Borba ("Borba Dep.” [Dkt. 81]) at 41-43; October 5, 2009 deposition of Howard Rosendale (“Rosendale Dep.” [Dkt. 68]) at 82-83.
. The NCCI Circular states that "the required endorsement must be attached to the policy." Dkt. 64-9 at 3.
. Sather states that he doеs not recall seeing any correspondence from NCCI instructing CNA to endorse the 2002 Policy. Sather Aff. I 27.
. See February 10, 2010 deposition of Terri Hill ("Hill Dep.” [Dkt. 66 at 52-91] at 78).
.Although the figure .92 was merely another way of expressing an 8% credit, it does not reflect the actual percentage applied in the audit, which was 7%. Said differently, the .92 figure on the cover sheet was a mistake that did not affect the results of the audit. See Borba Dep. at 160-6; Hill Dep. at 149-52.
. Although CNA appears to reject this characterization (Dkt. 82 at 13), Sather and Hill agreed that the purpose and effect of the second step was to offset the FCCPAP credit amount included in the step-one (or previous day's) audit report. See Sather Dep. at 132-34, 140; Hill Dep. at 89-90, 124; see also Borba Rep. at 13-15, 18-21; Borba Dep. at 144; cf. Pretrial Statement, Dkt. 86 at 3.
. The final premium audit for the 2001 program (Dkt. 64-7; Dkt. 82-4 at 2-15), dated March 28, 2007, similarly records an FCCPAP credit of $32,786 that (after application of the loss reimbursement plan factor) results in a total earned premium of $909,940.
. The final premium audit for the 2002 program (Dkt. 64-8; Dkt. 82-4 at 16-24), dated August 11, 2004, records an FCCPAP credit of $683,033 that (after application of the loss reimbursement plan factor) results in a total earned premium of $2,068,665, i.e., the same amount as reported in the August 13, 2003 audit.
. See also September 17, 2009 deposition of Bill Romashko ("Romashko Dep. I” [Dkt. 65 at 3-59]) at 175 184-85, 189-93.
. Sather Dep. at 93, 134, 166,169-70; Sather Aff. I V 37.
. See August 27, 2009 deposition of Bruce Thomas Smith ("Smith Dep.” [Dkt. 71 at 15-23]) at 47.
. FFEL argues that CNA waived its right to assert the exhaustion defense by failing to plead it.
See
Fed.R.Civ.P. 8(c)(1) (providing that a responsive pleading must include any affirmative defense);
Hassan v. U.S. Postal Serv.,
.
See also State Farm Mut. Auto. v. Gibbons,
.The NCCI Circular indicates the close connection between FCCPAP and rates by noting that, because the FCCPAP provides credits but no debits, "rate changes are necessary [in the Manual, presumably] for all the applicable classifications in order to offset the premium credits.” (Dkt. 64-9 at 2).
. The Court notes that plaintiff in
Serchay
has sought discretionary review in the Florida Supreme Court.
See
Plaintiff's Amended Brief in Support of Discretionary Review, SCI0-474,
. See, e.g., Dkt. 11 ¶¶ 22, 25; Dkt. 64 at 2, 3, 7, 9.
.
See also Taylor,
.
See also Black Horse Lane Assoc., L.P. v. Dow Chem. Corp.,
.
See also A.I. Credit Corp. v. Legion Ins. Co.,
. See January 22, 2010 deposition of Bill Romashko ("Romashko Dep. II” [Dkt. 65 at 61-91]).
. See April 16, 2010 Affidavit Cynthia Goral ("Goral Aff. [Dkt. 82-5]”) ¶ 4.
.
But see Black Horse Lane Assoc., L.P. v. Dow Chem. Corp.,
. See Romashko Dep. II at 14. But cf. Dkt. 107 at 12.
.See Dkt. 64 at 10 n. 6 ("If CNA had applied the FCCPAP credit without any offsets, First Financial would be entitled to a premium refund of $151,095 for the 2001 policy term and $165,492 for the 2002 policy term.”) (citing the November 16, 2009 expert report of Monty Gale [Dkt. 64-11]).