Gulf Coast Workforce, L.L.C. v. Zurich Amer Ins Co

Case: 17-30379 Document: 00514458474 Page: 1 Date Filed: 05/04/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 17-30379
Fifth Circuit
FILED
May 4, 2018
GULF COAST WORKFORCE, L.L.C., Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
ZURICH AMERICAN INSURANCE COMPANY OF ILLINOIS,
Defendant - Appellee
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:15-CV-5342
Before REAVLEY, JONES, and GRAVES, Circuit Judges.
PER CURIAM:*
Plaintiff-Appellant Gulf Coast Workforce, L.L.C. (“GCW”) appeals from
the $53,161 judgment entered against it below. Finding no error, we AFFIRM.
BACKGROUND
GCW provided contract labor in Alabama, Florida, Louisiana,
Mississippi, and Texas. GCW purchased workers’ compensation insurance
from Appellee, Zurich American Insurance Company of Illinois (“Zurich”).
Zurich cancelled GCW’s policy in 2015.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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GCW’s estimated premium at the beginning of the 2014-2015 policy
period was $134,534. GCW paid a deposit of $125,463 toward this estimated
premium. The final premium for the policy period was to be calculated after
the policy ended. The policy regarding calculation of a final premium states:
The final premium will be determined after this policy ends
by using the actual, not the estimated, premium basis and proper
classifications and rates that lawfully apply to the business and
work covered by this policy. If the final premium is more than the
premium you paid to us, you must pay us the balance.
The policy explains that the final premium “will be determined in the following
way . . . . If we cancel, final premium will be calculated pro rata based on the
final time this policy was in force.”
Zurich attempted to perform a premium audit to determine GCW’s final
premium after its policy was cancelled. A Zurich auditor, Kathleen Smith
(“Smith”), attempted this final premium audit with the help of GCW’s
insurance broker, Blaine Vedros (“Vedros”). A series of e-mails between Smith
and Vedros shows that Smith received some, but not all, of the information
required to complete her premium audit. Smith informed Vedros on May 22,
2015 that she would return the audit as “unable to complete” because she had
not received detailed payroll reports showing overtime. Smith used the
information she had received to estimate a final premium of $178,624. GCW
was billed $53,161 (the estimated final premium less GCW’s deposit).
GCW did not provide further documentation or dispute this final
premium. Instead, GCW filed a petition for damages in Louisiana state court
seeking compensation for direct and indirect losses stemming from Zurich’s
handling of a workers’ compensation claim and subsequent cancellation of
GCW’s insurance policy. Zurich removed the petition to federal court and then
filed a counterclaim for the unpaid premiums. Zurich moved for summary
judgment on GCW’s claims, which the district court granted.
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Zurich’s counterclaim proceeded to a bench trial. The district court
determined that GCW was liable for the outstanding premium balance and
entered judgment in the amount of $53,161 plus costs. GCW timely appealed.
STANDARD OF REVIEW
When reviewing a bench trial, this court reviews findings of fact for clear
error and legal issues de novo. Water Craft Mgmt. LLC v. Mercury Marine,
457 F.3d 484, 488 (5th Cir. 2006). Factual findings are clearly erroneous if
“(1) the findings are without substantial evidence to support them, (2) the
court misapprehended the effect of the evidence, and (3) although there is
evidence which if credible would be substantial, the force and effect of the
testimony, considered as a whole, convinces the court that the findings are so
against the preponderance of credible testimony that they do not reflect or
represent the truth and right of the case.” Id. To reverse for clear error, this
court must have “a definite and firm conviction that a mistake has been
committed.” Canal Barge Co. v. Torco Oil Co., 220 F.3d 370, 375 (5th Cir.
2000).
This court reviews “the district court’s interpretation of contracts and
conclusions of law de novo and under the same standards that guided the
district court.” Musser Davis Land Co. v Union Pac. Res., 201 F.3d 561, 563,
(5th Cir. 2000) (citing Exxon Corp. v. Crosby-Miss Res., Ltd., 154 F.3d 202, 205
(5th Cir. 1998)). A district court’s determination that a party has breached a
contract is a question of fact. See Concise Oil & Gas P’ship v. La. Intrastate
Gas Corp., 986 F.2d 1463, 1469 (5th Cir. 1993). This court reviews a district
court’s damages awards for clear error. See Fed. Sav. & Loan Ins. Corp. v. Tex.
Real Estate Counselors, Inc., 955 F.2d 261, 268 (5th Cir. 1992).
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DISCUSSION
GCW alleges that the district court erred by: (1) awarding amounts
allegedly due based on an “estimated audit” rather than a final audit; and
(2) by awarding an amount that no witness was able to explain or confirm.
a. Awarding Amounts Due Based on an “Estimated Audit”
GCW’s first argument focuses on the policy language stating that “[t]he
final premium will be determined after this policy ends by using the actual,
not the estimated, premium basis . . . .” GCW contends that Zurich had no
contractual right to recover any alleged outstanding premium because Zurich
did not complete an actual audit to determine the final premium, and instead
estimated the final premium based on the information available to Smith.
GCW argues that the district court erred by fashioning a remedy for Zurich
where Lousiana law and the contract provided none.
The district court disregarded this argument. The court stated that
“[t]he completion of the final audit might be considered a suspensive condition
to a valid bill for premium due” and that “when this condition is effectively
defeated by one party, it cannot benefit from such action or inaction.” The
district court based this conclusion on Louisiana Civil Code Article 1772 and
the Louisiana state court opinion in Grimsley v. Lenox, 643 So. 2d 203 (La. Ct.
App. 1994).
Upon review, this court agrees with the district court’s conclusion. The
policy, in addition to stating that a final premium will be determined based on
the actual premium basis, required GCW to “keep records of information
needed to complete premium [and] provide [Zurich] with copies of those records
when we ask for them.” The record reflects that GCW did not provide copies
of all records requested by Smith. Louisiana Civil Code Article 1772 provides
that “[a] condition [in a contract] is regarded as fulfilled when it is not fulfilled
because of the fault of a party with an interest contrary to the fulfillment.”
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Here, the district court held that the estimated final premium would be
considered final because GCW’s failure to comply with its obligation to furnish
records to Zurich prevented a true final audit. Article 1772 dictates this result.
Accordingly, this court affirms the district court’s holding that GCW owed
Zurich for unpaid premiums based on an estimated final premium audit.
b. Awarding Damages Unexplained by any Witness
GCW’s second point of error alleges that the district court awarded
damages that no witness could explain or confirm. Zurich’s sole witness was
Smith, who conducted the audit but did not work on billing matters. GCW
contends that, because Smith could not testify to the $53,161 premium, Zurich
did not prove its damages.
This argument ignores evidence admitted during the bench trial. Trial
Exhibit 2 is an invoice dated August 13, 2015 which shows an amount due of
$53,161 based on an audit. Trial Exhibit 3 shows Smith’s estimated audit and
the adjustments to GCW’s premium. Calculations on the first three pages of
this document reflect a total earned premium of $178,624, a deposit premium
of $125,463, and the additional premium due of $53,161 (the difference
between the earned premium and deposit premium). These documents and
the testimony from Smith and Vedros provided the district court with sufficient
evidence to award $53,161 in damages to Zurich. Therefore, the district court’s
damages determination was not clearly erroneous. Accordingly, this court
affirms the district court’s damages award.
CONCLUSION
For the reasons stated above, the district court’s judgment is
AFFIRMED.
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