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E.L. Hollingsworth & Co. v. Zurich American Insurance Co.

United States District Court, E.D. Michigan, Southern Division

April 16, 2018

E. L. HOLLINGSWORTH & COMPANY, Plaintiff and counter-defendant,
ZURICH AMERICAN INSURANCE COMPANY, Defendant and counter-plaintiff.


          DAVID M. LAWSON United States District Judge.

         Plaintiff E. L. Hollingsworth & Company filed a complaint against its insurance carrier, defendant Zurich American Insurance Company, alleging that Zurich overcharged it for premiums on its truck fleet insurance. The premiums, although set in advance, were subject to an “Incurred Loss Retrospective Rating Agreement” that allowed Zurich to charge additional amounts (or refund them, as the case may be) based on an agreed formula. Zurich issued invoices to Hollingsworth in 2015, 2016, and 2017 under the retrospective rating agreement. Hollingsworth refused to pay them and filed this lawsuit challenging their validity. Zurich filed a counterclaim for the amounts due, and, after the discovery period closed, moved for summary judgment. Hollingsworth has been given the opportunity to produce evidence showing that the retrospective rating formula was misapplied, and to identify those cases it believes Zurich settled in violation of their agreement. But its response to the summary judgment motion falls short on that score, and plaintiff's counsel candidly acknowledged at oral argument that such evidence likely would not be forthcoming. The record does not yield any material fact issue, and it demonstrates that Zurich is entitled to judgment as a matter of law in its favor on the complaint and its counterclaim.


         Hollingsworth is a logistics firm that operates a fleet of over 400 “trucking units.” In 2007, Hollingsworth sought to insure its fleet, and began negotiating a policy with Zurich. Jeff Berlin, Hollingsworth's chief financial officer and executive vice president, attests that “it was made clear” during the ensuing negotiations that Hollingsworth sought to “handle” all claims within its deductible, maintain “significant oversight” of all claims outside of the deductible, and retain final authority to settle all claims. According to Berlin, Zurich accepted those terms.

         Keith Klingenberg, a Wells Fargo employee who served as the insurance broker for Hollingsworth during these negotiations, testified in an affidavit that “during the negotiations . . . it was made clear to all parties that [Hollingsworth] would be allowed to handle all claims that were within their deductible.” Klingenberg also testified that “it was Zurich's position at the time that all claim settlements would be approved by Jeff Berlin, CFO of [Hollingsworth].”

         Zurich disputes that it agreed to those terms, citing the contract between Zurich and Hollingsworth, which states:

We [Zurich] will have the right and duty to defend any “insured” against a “suit” asking for such damages or a “covered pollution cost or expense.” However, we have no duty to defend any “insured” against a “suit” seeking damages for “bodily injury” or “property damage” or a “covered pollution cost or expense” to which this insurance does not apply. We may investigate and settle any claim or “suit” as we consider appropriate. Our duty to defend or settle ends when the Liability Coverage Limit of insurance has been exhausted by payment of judgments or settlements.

Def's. Mot. Ex. A-4, Common Policy Declarations § 2 ¶ A (Pg ID 249-250).

         According to Zurich, during the negotiations, Hollingsworth sought a way to reduce the up-front cost of their insurance policy. To that end, Hollingsworth agreed to several additional terms reflected in the final policy and in an “Incurred Loss Retrospective Rating Agreement” and a “Deductible Agreement.” Those agreements reduced up-front premium costs in two ways: Hollingsworth agreed to pay a higher deductible per claim; and Hollingsworth agreed to assume part of Zurich's risk through a “retrospectively rated” insurance policy. By the 2012/2013 policy year, the deductible for trucker's liability was $100, 000 per claim. Under such a policy, Zurich would pay claims that exceed Hollingsworth's deductible as under a conventional policy, but Hollingsworth's premiums would be adjusted retrospectively each year “based on agreed-upon factors such as standard premium, incurred losses, reserves for losses, and taxes.” Put simply, Zurich would issue a supplemental premium invoice each adjustment period; the more Zurich had paid to settle claims during the adjustment period, the higher Hollingsworth's adjusted premium would be.

         After the policy for 2007/2008 expired, Hollingsworth repurchased insurance each year. According to Zurich, each renewal policy included substantially the same terms as the 2007/2008 policy and the supplemental agreements signed in 2007 were still in effect. Zurich issued its first “retrospective premium adjustment” invoice in 2009, and continued to issue adjustment invoices semi-annually. Hollingsworth paid those premium adjustments without dispute until Zurich's April 8, 2015 invoice. The April 8 invoice reflected additional charges of $56, 110: $36, 302 for the 2012/2013 coverage period, and $19, 808 for the 2008/2009 period. On April 18, 2016, Zurich issued an invoice for $79, 594: $79, 534 for the 2012/2013 period, and $60 for the 2008/2009 period. On May 29, 2017, Zurich issued an invoice for $22, 378: $7, 371 for the 2012/2013 period, and $15, 007 for the 2008/2009 period. Each amount reflected a payment either to a claimant or as defense costs on the claim. At the time Zurich filed this motion, Hollingsworth had not paid any of these invoices. Zurich alleges that Hollingsworth owes $158, 082 in total retrospectively adjusted premiums.

         According to Hollingsworth, Zurich settled claims at higher costs than Hollingsworth was able to negotiate individually. Hollingsworth cites one instance in which Jeff Berlin contends that he was able to negotiate a smaller settlement with a claimant than what Zurich was initially willing to offer. But Hollingsworth does not provide evidence that Zurich actually overpaid when settling claims. Hollingsworth also believes that Zurich made payments on claims within Hollingsworth's deductible and upon which Hollingsworth had already paid, thereby increasing Hollingsworth's retrospective premiums. Again, however, Hollingsworth offers no specific examples, other than Berlin's own suspicions.

         When Zurich submitted its April 8, 2015 invoice to Hollingsworth, Berlin requested that Zurich provide information on the payments it had made on claims Zurich paid within Hollingsworth's deductible. Berlin also asked Zurich to provide information on several larger claims on which Berlin felt Zurich had overpaid. Berlin was unsatisfied with the response. He says that although Zurich provided a spreadsheet with information on claims Zurich had paid, it was incomplete or unclear, and did not assuage his concerns that Zurich was overpaying on claims or paying claims within Hollingsworth's deductible that Hollingsworth had already dealt with. Zurich included a copy of that spreadsheet in its motion papers, which identifies the policy number, claim number, date of loss, and the net paid indemnity and expenses. With its response, Hollingsworth has provided miscellaneous paperwork regarding several claims Berlin feels were paid by both Zurich and Hollingsworth. Pl.'s Resp., Ex. 1, Berlin Decl. ¶ 7 (Pg ID 473); Pl's. Resp. Ex. A-3 (Pg ID 477) (“Some of the claims that I believe were paid by both Zurich and Hollingsworth are attached to this Declaration as Exhibit A-3.”). But those documents are incomplete and disorganized, and it is impossible to compare them to the information Zurich has furnished to determine if, as Hollingsworth alleges, Zurich has been making payments on cases Hollingsworth has already settled. And Hollingsworth has not offered any explanatory testimony. Nancy Dow, a Legal Collections Specialist employed by Zurich, testified that she reviewed the Zurich files relevant to those claims and did not find any instance in which Zurich duplicated a payment made by Hollingsworth.

         Hollingsworth has been withholding its adjusted premiums since 2015. It believes Zurich is overpaying on large claims and paying small (under Hollingsworth's deductible) claims that Hollingsworth has already settled on its own. Hollingsworth believes that, by overpaying and paying already settled claims, Zurich is causing Hollingsworth's retrospectively adjusted premiums to rise unfairly. But it has not been able to point to any specific claim that might support its belief.

         During the discovery process in this case, Zurich gave Hollingsworth full and direct access to its claims database, allowing Hollingsworth to “see every payment that was made by Zurich, how much was paid on each and every claim, as well as all other parts of the claims files.” Dow Aff. at ¶ 2 (Pg ID 524-525). Berlin testified that technical issues and incompatibilities prevented him from accessing the database and reviewing the claims in question. Dow testified that Zurich provided technical support and training to Berlin and to Hollingsworth's ...

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