America Home Assurance Co. v. Weaver Aggregate Transp. Inc.

AMERICAN HOME ASSURANCE COMPANY, a New York corporation, Plaintiff,

v. WEAVER AGGREGATE TRANSPORT, INC., a Florida corporation; and BEACON INDUSTRIAL STAFFING, INC.,a Michigan corporation, Defendants.

Case No. 5:10-cv-329-Oc-10TBS

UNTED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA OCALA DIVISION

Dated: September 16, 2011

ORDER

The following matters are pending before the Court:

1. Plaintiff American Home Assurance Company's Motion to Strike Defendant Beacon's Amended Affirmative Defenses to First Amended Complaint (Doc. 59);

2. Response to American Home's Motion to Strike Affirmative Defenses (Doc. 63);

3. Defendant Weaver Aggregate Transport, Inc.'s Motion for Leave to File Cross Claim and Third-Party Complaint (Doc. 60);

4. Defendant Beacon's Response to Defendant Weaver's Motion for Leave to File Cross Claims and Third Party Claims (Doc. 64); and

5. Defendant Weaver Aggregate Transport, Inc.'s Reply in Support of Motion for Leave to File Cross Claims and Third Party Claims (Doc. 69).

After due consideration, for the reasons set forth below, American Home Assurance Company's ("American") motion to strike Beacon Industrial Staffing, Inc.'s("Beacon") affirmative defenses is due to be GRANTED in PART and DENIED in PART and Weaver Aggregate Transport, Inc.'s ("Weaver") motion for leave to file cross claims and third party claims is due to be GRANTED in PART and DENIED in PART.

I. Background.

In its First Amended Complaint (Doc. 47), American alleges that it is an insurer authorized to provide workers' compensation and employer liability insurance in Florida and Beacon is a professional employment organization providing various human resource services, including leasing employees to its clients. (Id., ¶¶ 19 and 21). Weaver is a Florida trucking corporation which entered into a Client Service Agreement ("CSA") with Beacon pursuant to which Beacon agreed to provide payroll services to persons working for Weaver, and agreed to "furnish and keep in full force and effect, at all times during the term of this Agreement, Workers' Compensation Insurance covering all [Beacon] employees leased to [Weaver] under the terms of this Agreement." (Id., ¶¶ 20-22). Beacon leased numerous employees to Weaver during the life of the CSA. American is not a party to the CSA and is not mentioned in the agreement.

In 2004, American received a request from an insurance broker, The Goff Group, Inc. ("Goff"), to provide a quote for workers' compensation and employee liability insurance for Weaver. American submitted a quote, which Weaver accepted. American then issued to Weaver a "Binder for Workers' Compensation and Employer Liability Insurance." The notification attached to the Binder expressly states that: "Binding is subject to the following: any changes in rates and/or experience modification by any entity having jurisdiction over this policy, final premium will be determined at the end of the policy period after payoffs have been audited and applicable rates andexperience modification have been applied; and, receipt of a completed signed Acord application and experience modification worksheet within 48 hours." (Id., ¶¶ 24, 26-27). American received Weaver's signed Acord application and a cover letter instructing American to issue the policy for Weaver effective December 28, 2004 (Id., ¶ 28). The Acord application stated that Weaver had fifteen trucking employees and fifteen clerical employees all located in Alabama (Id., ¶ 29).

American received a subsequent letter from Goff instructing it to provide endorsements to add Florida coverage onto the policy, effective January 17, 2005 (Id., ¶ 32). The letter included a signed Acord application and added five clerical and four trucking employees all located in Florida (Id., ¶ 35). Based upon its receipt of a signed application and Acord, American issued to Weaver a workers' compensation and employee liability insurance policy providing coverage from December 28, 2004 through December 28, 2005 (Id., ¶ 36). The policy had an estimated annual premium of $70,542, calculated based on the category of employment of each of Weaver's listed employees, the state of employment, the estimated total remuneration to each category of employment, and the rate of coverage per $100 of remuneration in each class of employment. (Id., ¶¶ 37-39). The policy provided that the final annual premium would be determined by an audit after the policy's end date (Id., ¶ 40).

Weaver made the required estimated payments under the policy and in September 2005, Goff's corporate affiliate contacted American and requested a renewal of the policy for the following year (Id., ¶ 42). American issued a renewal policy to Weaver for the period December 28, 2005 through December 28, 2006 (Id., ¶ 43). American used the same employment information from the previous year andcalculated the annual estimated premium payment for the renewal policy at $70,438 (Id., ¶¶ 45-47). The renewal policy contained the same provision concerning calculation of the final annual premium (Id., ¶ 55). American received some payments under the new policy but canceled it effective June 16, 2006 based on Weaver's failure to pay the premiums (Id., ¶¶ 48-49).

During the periods that the two policies were in force, American paid benefits on several workers' compensation claims. (Id.¶ 53). Both policies obligated Weaver to allow American to conduct an audit of Weaver's business and financial records in order to determine the final annual premium amount. American attempted to conduct an audit during the second year of coverage but Weaver failed to cooperate (Id., ¶¶ 55-59). During the course of the audit American discovered, for the first time, that Weaver did not conduct any business in Alabama and that Beacon was in possession of all of Weaver's payroll information (Id., ¶¶ 60-61).

Beacon also failed to respond to American's requests for information (Id., ¶ 62). Due to Weaver's and Beacon's lack of cooperation, American was not able to complete its audit until October 2006 (Id., ¶ 69). Based on the limited information American was able to gather, it discovered that during the December 28, 2004 through December 28, 2005 policy period, Weaver paid for more than 125 employees all of whom were located in Florida (Id., ¶¶ 64-65). American found similar discrepancies between the information on the Acord application and the actual number of Weaver's employees for the policy period from December 28, 2005 through June 16, 2006 (Id. ¶ 66). In total, American's audit revealed that Weaver owed American an additional $404,013 in premium payments (Id., ¶¶ 66-67). American alleges that the discrepancies betweenthe nature, scope, and geographical location of Weaver's business operations were deliberate and intentional and that both Weaver and Beacon specifically intended to induce American to provide workers' compensation and employer liability insurance coverage at a rate that was substantially lower than the rate would have been had American been furnished with the correct information. American has made demands on Weaver for full payment of the premiums but Weaver has refused to make any further payments (Id. ¶ 70).

In Count Five of its First Amended Complaint, American alleges that Beacon (and Weaver) fraudulently induced it to provide workers' compensation and employer liability insurance for Weaver. Count Six is an action against Beacon for unjust enrichment and Count Seven alleges breach by Beacon of a third party beneficiary contract. Beacon has answered the First Amended Complaint and asserted seven affirmative defenses (Doc. 63). Now, American is asking the Court to strike Beacon's defenses numbered one, two, four and seven.

II. Choice of Law.

The parties do not agree upon the state or states whose laws are applicable to their claims and defenses. Based on the record presented to the Court, the Court cannot properly conduct a conflict-of-law analysis (Docs. 40 and 59). Although the laws of Florida, New York, Michigan, Nevada and Illinois may be similar, they are not identical and may lead to different results depending, for example, upon which state's statute of limitations applies to a particular claim.IV. The Motion to Strike Beacon's Affirmative Defenses.

A. Legal Standard.

"An affirmative defense raises matters extraneous to the plaintiff's prima facie case; as such, they are derived from the common law plea of 'confession and avoidance.'" Flav-O-Rich, Inc. v. Rawson Food Serv., Inc., 846 F.2d 1343, 1349 (11th Cir. 1998) (quoting 5 C. Wright and A. Miller, Federal Practice and Procedure § 1270 at 289 (1969)). Affirmative defenses are subject to the general pleading requirements of Rule 8(a) and should be "stricken if they fail to recite more than bare-bones conclusory allegations." Home Mgmt. Solutions, Inc. v. Prescient, Inc., No. 07-20608-CIV, 2007 WL 24112834, at *2 (S.D. Fla. Aug. 21, 2007). Federal Rule of Civil Procedure 12(f) provides for the striking of insufficient affirmative defenses. "A defense is insufficient as a matter of law only if: (1) on the face of the pleadings, it is patently frivolous, or (2) it is clearly invalid as a matter of law." Pandora Jewelers 1995, Inc. v. Pandora Jewelry, LLC, No. 09-61490-Civ., 2010 WL 5393265, at *2 (S.D. Fla. Dec. 21, 2010) (quoting Microsoft Corp. v. Jessee's Computers & Repair, Inc., 211 F.R.D. 681, 683 (M.D. Fla. 2002)).

B. First Affirmative Defense.

For its First Affirmative Defense, Beacon says that with the exception of the third-party beneficiary claim it is not a proper party to this suit because it had no relationship or contact with American and was not a party to any contract with American. Said another way, Beacon has averred that American cannot prove all the requisite elements of its claims for fraud in the inducement and unjust enrichment because it did not have any dealings with Beacon (Doc. 63). This amounts to a denial that American can proveall the elements of these causes of action but it...