Travelers Property Casualty Company of America v. Srm Group, Inc.

FIFTH DIVISION
MCFADDEN, P. J.,
RAY and RICKMAN, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
October 24, 2018
In the Court of Appeals of Georgia
A18A1418. TRAVELERS PROPERTY CASUALTY COMPANY
OF AMERICA v. SRM GROUP, INC.
RAY, Judge.
Travelers Property Casualty Company of America (“Travelers”) filed suit
against SRM Group, Inc. (“SRM”) seeking to recover unpaid premiums due under a
workers compensation insurance policy. In response, SRM asserted counterclaims
against Travelers for breach of contract, breach of duty of good faith and fair dealing,
and attorney fees based on Travelers’ audit of SRM’s employee risk classifications
and subsequent refusal to reclassify those employees, which resulted in a substantial
retroactive increase in the premium. Following a four-day trial, the jury awarded
$174,858.00 in damages to Travelers based on SRM’s failure to pay some of the
alleged increased premium due under the policy. However, the jury found that
Travelers had also breached the contract and acted in bad faith in conducting the audit
and in subsequently refusing to reclassify certain SRM employees. Accordingly, the
jury awarded damages to SRM in the aggregate sum of $174,858.00, which consisted
of $57,858.00 for the breach and $117,000.00 in bad faith attorney fees. Travelers
filed a motion for judgment notwithstanding the verdict or, in the alternative, motion
for new trial. Following a hearing, the trial court denied the motions.
Travelers appeals, contending that the trial court erred in denying the motion
for judgment notwithstanding the verdict on SRM’s counterclaims for breach of
contract and bad faith attorney fees, or in denying the motion for new trial, based on
(i) the inconsistency of the verdict; (ii) the trial court’s denial of certain motions in
limine; and (iii) the trial court’s refusal to give a requested jury instruction on open
account interest pursuant to OCGA § 7-4-16. For the following reasons, we affirm in
part and reverse in part.
The record shows that Travelers filed a lawsuit against SRM seeking to recover
damages in the amount of $479,017.541 arising out of SRM’s failure to pay the
increased premium due under a workers compensation policy between the parties.
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This sum included $279,157.00 for the policy period of 05/12/12 to 05/12/13
and $199,860.54 for the renewed policy period of 05/12/13 to 01/01/14. Travelers
cancelled the policy for nonpayment of the premium on January 1, 2014.
2
According to SRM, the premium was twenty times the price that Travelers had
estimated it would be and the increase was the result of an improper classification of
certain SRM employees. Consequently, SRM asserted counterclaims against
Travelers for breach of contract and breach of the covenant of good faith and fair
dealing based on the manner in which Travelers conducted an audit of SRM’s
employee classifications and Travelers’ subsequent refusal to reclassify those
employees. SRM also sought bad faith attorney fees pursuant to OCGA § 13-6-11 as
a result of the breach. Specifically, SRM’s counterclaims for breach allege that
Travelers wrongfully assigned certain job classifications to some of SRM’s
employees and then refused to reclassify these employees, resulting in an unwarranted
increase in the premium owed by SRM.
The terms of the insurance policy provided that the initial amount of the
premium set forth in the policy was only an estimate and that Travelers reserved the
right to retroactively adjust the premium amount during the policy period after an
audit of SRM’s records. Accordingly, in 2013, Travelers conducted such an audit, and
it issued a premium adjustment notice to SRM indicating an additional premium due
for the policy period from 05/12/12 to 05/12/13 in the amount of $279,157.00. SRM
disputed the retroactive increase in the premium, and the parties were unable to
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resolve the dispute. On January 1, 2014, Travelers cancelled the policy for SRM’s
nonpayment of the increased premium. Travelers then issued a billing statement to
SRM for the $279,157.00, as well as for the additional amount of $199,860.54 in
unpaid premium for the portion of the renewed policy period from 05/12/13 to
01/01/14.
During the policy period but before the 2013 audit, SRM was awarded a
contract by the U.S. Department of Homeland Security for the operation and
maintenance of dormitory facilities at the Federal Law Enforcement Training Facility
(“FLETC”) in Brunswick, Georgia. As a result of its 2013 audit, Travelers classified
SRM’s employees that worked at FLETC as “Code 9101-School” employees because
FLETC was a school or training facility for state and federal law enforcement
personnel. However, Suresh Prabhu, who was SRM’s chief executive officer and sole
owner, and John Oxendine, a former insurance commissioner for the State of Georgia
who was qualified as an expert in employee classification for insurance purposes,
both testified at trial that the FLETC workers should have been classified as “9052-
Hotel” employees, which carried a significantly lower premium cost than the “9101-
School” employee classification.
4
Travelers’ premium increase was also predicated in part on Travelers’ risk
classification of certain logistic specialists employed by SRM who kept track of
inventory and military equipment at various National Guard facilities. As a result of
its 2013 audit, Travelers classified these logistic specialists as “8292-
Warehouse/Storage” employees. However, both Prabhu and Oxendine testified at trial
that the logistic specialists should have been classified as “8810-Clerical” employees,
which carried a lower premium cost to SRM than the “8292-Warehouse/Storage”
employee risk classification.
Other than the issue of whether SRM had breached the contract by failing to
pay any portion of the retroactive premium increase, the primary focus of the trial was
Travelers’ handling of the 2013 audit and Travelers’ subsequent refusal to reclassify
the above-referenced employees. To that end, Travelers’ auditor, Larry Grasso,
testified that he initiated the employee classification process by reviewing the job
descriptions as they appeared in SRM’s payroll documents that were generated by an
outside payroll company and by referring to insurance trade publications. He testified
that he finalized the employee classification process after having one short
conversation and several follow-up emails with an administrative assistant who
worked in SRM’s head office. Although Grasso testified that an employee’s risk
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classification depended on his or her particular job requirements and work
environment, he acknowledged that he never visited SRM’s work sites or spoke with
anyone at SRM regarding its employees’ job requirements or work environment.
Rather, Grasso claimed that work site visits and employee interviews were not
necessary because, under the normal auditing process, he would get the required
information from the owner of the business. Notably, however, Grasso testified that
he decided not to contact Prabhu in this case. Furthermore, Grasso’s testimony
seemed to indicate that he harbored a certain level of indignation toward Prabhu
because Prabhu did not meet with him personally during the auditing process.
At trial, Prabhu testified in great detail as to nature of the work and the tasks
that were performed by its FLETC workers and logistic specialists, which was
consistent with the “hotel” and clerical” employee classifications, respectively.
Prabhu further testified that he provided this information to Travelers, that Travelers
apparently would not consider this information, and that Travelers simply ignored
him both during and after the audit resulting in the retroactive premium increase.
Although SRM acknowledged at trial that it owed at least some of the
additional amount of the premium, SRM admitted that it continued to pay only the
amounts that were established before the retroactive premium increase.
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As a result of SRM’s nonpayment of the increased portion of the premium,
Travelers cancelled the policy. At trial, Prabhu testified that the cancellation of the
policy caused a hardship on SRM’s efforts to find subsequent insurance, which he
needed to continue to maintain his business. Prabhu also testified that the inability to
resolve the employee classification dispute with Travelers and the resulting litigation
forced him to devote all of his time to the litigation instead of attending to SRM’s
business concerns, which has had a negative impact on SRM’s business.
After considering all of the evidence, the jury returned verdicts for both
Travelers and SRM on their respective claims, awarding damages to each party
which, in effect, resulted in no monetary recovery for either party.
1. Travelers contends that the trial court erred in denying Travelers’ motion for
judgment notwithstanding the verdict entered in favor of SRM on its counterclaim for
breach in the amount of $57,858.00, arguing that SRM failed to adduce any evidence
of its damages and that the amount of nominal damages awarded was excessive. We
discern no basis for reversal.
On appeal from the denial of a motion for judgment notwithstanding the
verdict, “we construe the evidence in the light most favorable to the party opposing
the motion, and the standard of review is whether there is any evidence to support the
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jury’s verdict.” (Citation omitted.) Park v. Nichols, 307 Ga. App. 841, 845 (2) (706
SE2d 698) (2011). Furthermore, a motion for judgment notwithstanding the verdict
should not be granted “unless there is no conflict in the evidence as to any material
issue and the evidence introduced, with all reasonable deductions therefrom, demands
a certain verdict.” (Citation omitted.) Prime Home Properties v. Rockdale County Bd.
of Health, 290 Ga. App. 698, 702 (3) (660 SE2d 44) (2008). “[A] verdict will not be
set aside where the evidence construed in favor of the verdict supports it, however
slightly.” (Citation omitted.) Page v. Will McKnight Const., Inc., 282 Ga. App. 571,
572 (1) (639 SE2d 381) (2006).
(a) Travelers first argues that it was entitled to judgment notwithstanding the
verdict on SRM’s counterclaim for breach of contract because SRM failed to
establish the amount of its nominal damages. Travelers’ argument lacks merit.
A plaintiff’s right to recover nominal damages depends only upon
whether the defendant’s liability has been established. Under the Civil
Practice Act it is not necessary to pray specifically for general or
nominal damages in order to present a question for the jury as to
nominal damages. All that is now necessary is that the plaintiff raise the
issue during the trial so that it may be presented to the jury.
8
(Citations and punctuation omitted; emphasis in original.) Bishop v. Int’l Paper Co.,
174 Ga. App. 863, 864 (1) (332 SE2d 12) (1985). Furthermore, in order to recover
nominal damages, “[a] showing of actual damages [is] simply not required.”
McEntyre v. Edwards, 261 Ga. App. 843, 845-846 (2) (583 SE2d 889) (2003). Lastly,
OCGA § 13-6-6 provides that “[i]n every case of breach of contract the injured party
has a right to damages, but if there has been no actual damage, the injured party may
recover nominal damages sufficient to cover the costs of bringing the action.”
Here, although SRM did not introduce any evidence of its damages in terms of
a specific monetary amount, it did provide some evidence that SRM suffered harm
as a result Travelers’ actions. SRM faced difficulties in obtaining subsequent workers
compensation insurance after the cancellation of the Travelers policy, and SRM’s
business was negatively impacted as a result of the time and resources that Prabhu
had to expend as a result of this litigation. Based on the foregoing authority, SRM had
the right to recover nominal damages for successfully bringing its counterclaim for
breach of contract, and it was not required to introduce evidence of its actual
damages.
(b) Travelers also argues that the jury’s award of $57,858.00 in damages is not
“nominal” because it is such a large amount. However, the law is clear that “nominal”
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damages may, in fact, be quite large, and an award cannot be set aside simply because
the amount is large, absent evidence of prejudice, bias, or mistake on the part of the
jury. Hilb, Rogal & Hamilton Co. of Atlanta, Inc. v. Holley, 295 Ga. App. 54, 60 (3)
(670 SE2d 874) (2008). Furthermore. “[i]nstead of being restricted to a very small
amount, the sum awarded as nominal damages may, according to circumstances, vary
almost indefinitely.” (Citation omitted.) Wright v. Wilcox, 262 Ga. App. 659, 662 (2)
(586 SE2d 364) (2003).
Here, the jury had the opportunity to weigh the evidence and determine the
credibility of the witnesses. In so doing, the jury determined that the amount it
awarded to SRM on its counterclaim for breach of contract was appropriate under the
circumstances of this case. There was no evidence to show that the award was the
result of prejudice, bias, or mistake on the part of the jury. Accordingly, the trial court
did not err in denying Travelers’ motion for judgment notwithstanding the verdict on
SRM’s counterclaim for breach of contract on this basis.
2. Travelers also contends that the trial court erred in denying its motion for
judgment notwithstanding the verdict on SRM’s counterclaim for attorney fees
pursuant to OCGA § 13-6-11 because the request for attorney fees was based on a
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compulsory counterclaim for breach of contract that was not independent of
Travelers’ claim for breach of contract. We agree.
“The award of expenses of litigation under OCGA § 13-6-11 can only be
recovered by the plaintiff in an action under the language of the statute; therefore, the
defendant and plaintiff-in-counterclaim cannot recover such damages where there is
a compulsory counterclaim.” (Citations omitted.) Sanders v. Brown, 257 Ga. App.
566, 570 (c) (571 SE2d 1) (2002). However, “if the counterclaim is an independent
claim that either arose separately from the plaintiff’s claim or arose after plaintiff’s
claim, then a plaintiff-in-counterclaim may recover expenses of litigation.” (Citation
omitted.) Id. Accord Byers v. McGuire Props., Inc., 285 Ga. 530, 540 (6) (679 SE2d
1) (2009); Singh v. Sterling United, Inc., 326 Ga. App. 504, 512-513 (4) (756 SE2d
728) (2014).
Under the Civil Practice Act, “[a] pleading shall state as a counterclaim any
claim which at the time of serving the pleading the pleader has against any opposing
party, if it arises out of the transaction or occurrence that is the subject matter of the
opposing party’s claim[.]” OCGA § 9-11-13 (a). Under this Code section, and
applying Byers, Singh, and Sanders, we conclude that SRM’s counterclaim for breach
of contract upon which it based its attorney fees claim is clearly a compulsory
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counterclaim, and not an independent claim, because it alleges that Travelers acted
in bad faith with respect to the underlying transactions that form the basis for
Travelers’ breach of contract claim, i.e. – the audit of SRM’s records, the subsequent
billing for the increased premium amount, the cancellation of the policy for
nonpayment of the increased premium, and the resulting claim for breach of contract
based on nonpayment of the increased premium. Accordingly, the trial court erred in
denying Travelers’ motion for judgment notwithstanding the verdict on SRM’s
counterclaim for attorney fees, and the jury’s attorney fee award must be reversed.
3. Based on our holding in Division 2, we need not address Travelers’ other
enumerations of error pertaining to the award of attorney fees to SRM.
4. Travelers contends that the trial court erred in denying its motion for new
trial based on the grounds that the verdicts were fatally flawed by virtue of an
intrinsic inconsistency which rendered the verdicts void ab initio. We disagree.
OCGA § 9-12-4 provides that “[v]erdicts shall have a reasonable intendment
and shall receive a reasonable construction. They shall not be avoided unless from
necessity.” In construing this statute, our Supreme Court has acknowledged that “the
presumptions are in favor of the validity of verdicts, and if possible a construction
will be given which will uphold them. Even if the verdict is . . . susceptible of two
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constructions, one of which would uphold it and one of which would defeat it, that
which would uphold it is to be applied.” (Citation and punctuation omitted.) Anthony
v. Gator Cochran Construction, Inc., 288 Ga. 79, 80-81 (702 SE2d 139) (2010).
Here, the jury was called upon to resolve the parties’ interrelated claims arising
out of the same contract. One issue was whether SRM had breached the contract for
failing to pay any amount of the retroactive increase of the premium. The jury found
that SRM had breached the contract in this regard, and the jury awarded damages to
Travelers in amount that the jury apparently determined was the proper amount of the
premium increase for which it was entitled. The other issues for the jury were whether
Travelers had breached the contract by failing to act in good faith in conducting the
audit and in reclassifying SRM’s employees resulting in an exorbitant overcharge for
the increased premium, and, if so, whether SRM was entitled to nominal damages as
a result of Travelers’ failure to act in good faith in resolving the dispute. The jury
found that Travelers had breached the contract in this regard, and it awarded nominal
damages to SRM in an amount that it deemed appropriate. Construing the verdicts in
the light most favorable to uphold their validity, we conclude that the verdicts were
neither inconsistent nor contradictory. Accordingly, the trial court did not err in
denying Travelers’ motion for new trial on this basis.
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5. Travelers contends that the trial court erred in denying its motions in limine
which sought to bar SRM’s admission of its subsequent insurer’s endorsements for
workers compensation insurance coverage. Travelers’ argument is without merit.
One of Travelers’ motions in limine sought the exclusion of any evidence of
risk classifications assigned to SRM employees after the cancellation of the Travelers
policy, arguing that such evidence was not relevant to Travelers’ claim for breach of
contract for nonpayment of the premium. However, SRM sought to admit the
documents as demonstrative exhibits in support of its own claim for breach of
contract to point out the discrepancies between Travelers’ risk classifications of
SRM’s employees with the risk classifications assigned by SRM’s new insurance
company. We conclude that the documents were clearly relevant to the issue of
whether Travelers had breached its duty of good faith and fair dealing in initially
assigning its risk classifications of the SRM employees and in later refusing to
reclassify those employees, because the differing risk classifications would have an
effect on the proper amount of the increase in premium. Thus, the probative value of
such evidence outweighed any potential prejudicial effect.
Travelers’ other motion in limine sought the exclusion of the same evidence
on hearsay grounds. Immediately prior to trial, and outside the presence of the jury,
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the trial court held a hearing on the motions in limine. The trial court denied the first
motion in limine that was based on relevancy grounds, and it conditionally denied the
motion in limine that was based on hearsay grounds, provided that SRM could later
authenticate the documents as business records prior to seeking admission of the
documents into evidence.
During the trial, SRM sought to authenticate and admit the documents at issue
through the testimony of Prabhu, SRM’s chief executive officer and sole owner.
Prabhu testified that he received the insurance documents from its new insurer at or
around the time they were drafted and that he maintained the documents in the
ordinary course of his business because he had to show such documents to
prospective clients to prove that SRM had insurance coverage as a prerequisite to
bidding on contracts, as well as to prove that SRM had insurance coverage to its
existing clients in order to remain in compliance with their contracts. SRM then
moved to admit the documents as being authenticated. When the trial court asked
Travelers’ counsel if there was any objection, Travelers’ counsel replied “No
objection, your Honor.”
“To preserve an objection upon a specific ground for appeal, the objection on
that specific ground must be made at trial, or else it is waived.” (Citation and
15
punctuation omitted.) Saye v. Provident Life and Acc. Ins. Co., 311 Ga. App. 74, 78
(4) (714 SE2d 614) (2011). Here, as Travelers affirmatively acquiesced in the
admission of the documents at issue, the issue of admissibility has been waived for
the purposes of appellate review.2
6. In its last enumeration of error, Travelers contends that the trial court erred
in denying its Request for Charge No. 48 seeking open account interest pursuant to
OCGA § 7-4-16. We disagree.
Travelers argued below that SRM was liable for prejudgment interest, and it
requested a jury instruction on prejudgment interest applicable to open accounts.
Concluding that Travelers was not entitled to prejudgment interest under the
circumstances of this case, the trial court did not give the requested charge to the jury.
OCGA § 7-4-16 provides, in pertinent part, that “[t]he owner of a commercial
account may charge interest on that portion of a commercial account which has been
2
Even if the documents were to be deemed inadmissable under the business
records exception to the hearsay rule, “the admission of hearsay is harmless when it
is cumulative of legally admissible evidence showing the same fact.” (Citation and
punctuation omitted.) Saye, supra at 79 (4). SRM’s expert, the former insurance
commissioner for the State of Georgia, presented testimony concerning the proper
classification of SRM’s employees which was consistent with the classification
contained in the documents at issue.
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due and payable for 30 days or more[.]” However, there are some circumstances in
which a plaintiff may not seek to recover under an open account theory.
A suit on open account is available as a simplified procedure to the
provider of goods and services where the price of such goods or services
has been agreed upon and where it appears that the plaintiff has fully
performed its part of the agreement and nothing remains to be done
except for the other party to make payment. However, when there is a
dispute that goes to either . . . [the] terms of the contract, what work was
performed, the quality of performance, or cost, then suit on account is
not the proper procedure for suit, because there is a factual issue other
than nonpayment on the account.
(Citation omitted.) Lager’s, LLC v. Palace Laundry, Inc., 247 Ga. App. 260, 264 (2)
(543 SE2d 773) (2000). Accord American Teleconferencing Svcs., Ltd. v. Network
Billing Systems, LLC, 293 Ga. App. 772, 777 (3) (a) (668 SE2d 259) (2008); Watson
v. Sierra Contracting Corp., 226 Ga. App. 21, 27 (b) (485 SE2d 563) (1997).
Here, SRM hotly contested such issues as Travelers’ good faith performance
under the contract and the amount of increased premium that SRM owed under the
policy based on Travelers’ improper risk classifications of SRM’s employees. As
there were factual issues to be resolved other than the mere nonpayment of the
increased premium, Travelers was not entitled to prejudgment interest under an open
17
account theory of recovery. Accordingly, the trial court did not err in failing to give
Travelers’ requested charge on open account interest.
For the above reasons, we reverse the trial court’s decision on Travelers’
motion for judgment notwithstanding the verdict only as it pertains to SRM’s
counterclaim for attorney fees pursuant to OCGA § 13-6-11. We affirm the verdict
and judgment below in all other respects.
Judgment affirmed in part and reversed in part. McFadden, P.J., and Rickman,
J., concur.
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