MatconUSA LP v. Houston Casualty Company

Opinion

1 2

3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE

9 10 MATCONUSA LP, CASE NO. C19-1952JLR 11 Plaintiff, ORDER DENYING MOTION v. FOR RECONSIDERATION 12 HOUSTON CASUALTY 13 COMPANY, et al., 14 Defendants. 15 I. INTRODUCTION 16 Before the court is Plaintiff MatconUSA LP’s (“Matcon”) motion for 17 reconsideration of the court’s August 16, 2022 order granting Defendant Marsh USA 18 Inc.’s (“Marsh”) Motion in Limine (“MIL”) 1 or, in the alternative, for dismissal of its 19 negligence claim against Marsh and entry of final judgment pursuant to Federal Rule of 20 Civil Procedure 54(b). (MFR (Dkt. # 158); Reply (Dkt. # 169); see 8/16/22 Order (Dkt. 21 # 157) at 3.) Marsh opposes Matcon’s motion for reconsideration and agrees with 22 1 Matcon that dismissal and entry of final judgment on Matcon’s negligence claim are 2 appropriate. (Resp. (Dkt. # 165); see 8/17/22 Order (Dkt. # 159) (directing Marsh to file

3 a response pursuant to Local Rules W.D. Wash. LCR 7(h)(3)).) Having reviewed the 4 motion, the parties’ briefing, the remainder of the record, and the applicable law, and 5 being fully advised, the court GRANTED in part and DENIED in part Matcon’s motion 6 for reconsideration in an oral ruling during a teleconference with the parties on August 7 23, 2022. (See 8/23/22 Min. Entry (Dkt. # 177); 8/23/22 Min. Order (Dkt. # 178).) The 8 court issues this written order to explain its reasoning for its ruling.

9 II. BACKGROUND 10 The court set forth the factual and procedural background of this case in detail in 11 its July 14, 2022 order on the parties’ motions for summary judgment. (See 7/14/22 12 Order (Dkt. # 129) at 2-13, 17-20.) Accordingly, the court focuses here only on 13 background relevant to Matcon’s motion.

14 This case arises from a dispute regarding damage allegedly caused by Matcon at a 15 construction project located at 1200 Stewart Street in Seattle, Washington (“the Project”). 16 (See 7/14/22 Order at 2-13.) Matcon filed this action for insurance benefits, including 17 defense and indemnity coverage, against Defendant Houston Casualty Company 18 (“Houston”) in November 2019. (See Compl. (Dkt. # 1).) It amended its complaint in

19 February 2020. (See Am. Compl. (Dkt. # 19).) The court set the parties’ original trial 20 date on April 26, 2021. (3/21/20 Sched. Order (Dkt. # 22).) 21 After receiving documents from Marsh pursuant to a third-party subpoena issued 22 by Houston, Matcon amended its complaint again in July 2020 to add Marsh and former 1 Defendant Crum & Forster Specialty Insurance Company (“CFSIC”) as defendants. (2d 2 Am. Compl. (Dkt. # 30); see Mot. to Amend (Dkt. # 27) at 4-5.) On November 17, 2020,

3 the court granted the parties’ stipulated motion to continue the trial date due to the 4 addition of Marsh and CFSIC as defendants and set the discovery completion date on 5 May 28, 2021; the dispositive motions deadline on June 29, 2021; and the trial on 6 November 8, 2021. (11/17/20 Order (Dkt. # 53); see 11/17/20 Sched. Order (Dkt. # 54).) 7 Because the court’s November 17, 2020 scheduling order reset only the deadlines that 8 had not yet expired when the parties moved for the continuance (compare 11/17/20

9 Sched. Order; with 3/21/20 Sched. Order), Matcon, Houston, and CFSIC jointly moved to 10 reset the deadlines for disclosure of expert testimony and motions related to discovery, 11 arguing that “the parties require additional time to identify and prepare their respective 12 experts, conduct discovery, and to resolve an[y] discovery-related disputes.” (See 13 12/16/20 Mot. (Dkt. # 60).) Magistrate Judge Theresa L. Fricke granted the parties’

14 motion and set the expert disclosure deadline on April 2, 2021 and the discovery motions 15 deadline on May 28, 2021. (12/16/20 Order (Dkt. # 61).) Despite representing that it 16 needed time to identify and prepare its expert witnesses, Matcon never disclosed any 17 experts. (See Matcon MIL Resp. (Dkt. # 146) at 2 (acknowledging that it did not intend 18 to present expert testimony).)

19 On March 22, 2021, the court dismissed Matcon’s tortious interference with 20 economic relations claim against Marsh. (3/22/21 Order (Dkt. # 70) at 3-4 (citing R&R 21 (Dkt. # 59) at 17-18).) As a result, Matcon’s sole remaining claim against Marsh was for 22 negligence arising from Marsh’s failure to notify Houston of requests for insurance 1 benefits Matcon submitted by email and through the Project’s Owner-Controlled 2 Insurance Program (“OCIP”) Portal. (See 2d Am. Compl. ¶¶ 55-57.)

3 On September 16, 2021, after the court denied a motion to continue filed by Marsh 4 (see 8/30/21 Order (Dkt. # 82)), Matcon and Marsh jointly moved the court for a 5 six-month continuance of the trial date and pretrial deadlines (9/16/21 Mot. (Dkt. # 83)). 6 They argued that they had good cause for an extension because an underlying lawsuit (the 7 “Underlying Lawsuit”) between Matcon, Marsh, the Project’s general contractor Graham 8 Construction & Management, Inc. (“Graham”), and the Project’s owner Project Stewart

9 LLC (“Project Stewart”) had not yet resolved and, as a result, “Matcon’s claim for 10 indemnity coverage [was] not yet ripe for trial.” (Id. at 3.) Matcon represented that it 11 had “reached an agreement in principle” in the Underlying Lawsuit in March 2020 “that 12 would resolve all claims made by and against Matcon,” but that no final agreement had 13 been signed because Project Stewart and Graham had not resolved the claims between

14 them. (Id. at 3 (citing 9/6/21 Sleight Decl. (Dkt. # 84) ¶¶ 4-7).) Matcon expected, 15 however, that the Underlying Lawsuit would be “finally resolved in the near future.” (Id. 16 (citing 9/6/21 Sleight Decl. ¶ 8).1) The court denied the joint motion but offered to move 17 trial to the end of the court’s calendar in summer 2023 if the parties stipulated to the 18 same. (9/16/21 Order (Dkt. # 86).)

19 On September 23, 2021, after a telephonic conference with counsel for all parties, 20 the court vacated the November 8, 2021 trial date; reset trial on August 29, 2022; and 21

1 The parties finally resolved the Underlying Lawsuit on August 23, 2022. (See 8/25/22 22 Sleight Decl. (Dkt. # 180) ¶¶ 8-11.) 1 granted in part Marsh’s request to reopen discovery. (9/23/21 Min. Entry (Dkt. # 88); 2 9/23/21 Min. Order (Dkt. # 89).) The court granted Marsh leave to take the depositions

3 of three witnesses; granted the parties leave to “examine the disclosed expert witnesses 4 on issues of damages after the underlying state-court lawsuit is resolved”; and set a May 5 2, 2022, deadline for completing this additional discovery. (9/23/21 Min. Order at 2.) 6 The court directed the Clerk to issue an updated scheduling order that reset the 7 “remaining unexpired case deadlines” based on the new trial date. (Id.; see 9/24/21 8 Sched. Order (Dkt. # 91).) Because the expert disclosures deadline had expired on April

9 2, 2021, the new scheduling order did not reset that deadline. (See 9/24/21 Sched. 10 Order.) 11 Marsh and Matcon filed cross-motions for summary judgment in May 2022. (See 12 Marsh MSJ (Dkt. # 92); Matcon MSJ (Dkt. # 105).2) The court granted Matcon’s motion 13 in part, concluding that Marsh owed Matcon, as an enrollee in the OCIP, “duties of

14 reasonable skill, ordinary care, diligence, and good faith in carrying out the instructions 15 of Project Stewart and [Westbank Holdings US Ltd. (“Westbank”)]3.” (See 7/14/22 16 Order at 25.) It denied the parties’ motions for summary judgment in all other respects. 17 (See generally id. at 17-28.) 18

19 20 2 Houston and CFSIC also filed motions for summary judgment in May 2022. (Houston MSJ (Dkt. # 99); CFSIC MSJ (Dkt. # 93).) Because those motions are not relevant to Matcon’s 21 motion for reconsideration, the court does not discuss them further in this order.

22 3 Westbank is Project Stewart’s owner. (See 7/14/22 Order at 2-13, 17-20.) 1 The parties filed motions in limine on July 18, 2022. (See Marsh MIL (Dkt. 2 # 136); Matcon MIL (Dkt. # 134); see also Houston MIL (Dkt. # 130); CFSIC MIL (Dkt.

3 # 132).) In relevant part, Marsh’s MIL 1 asked the court to preclude Matcon from 4 “offering any evidence, testimony, or argument regarding the standard of care allegedly 5 breached by Marsh because Matcon has failed to identify any expert witness to testify 6 about this uniquely specialized form of insurance” offered through the OCIP. (Marsh 7 MIL at 3-13.) Marsh argued that expert testimony was necessary for the jury to 8 understand Marsh’s professional duty of care because the standard of care owed by an

9 OCIP Project Manager is “beyond the expertise of a lay person.” (Id. at 6 (quoting 10 Harris v. Groth, 663 P.2d 113, 118 (Wash. 1983)); see also id. at 8-12 (discussing issues 11 that, according to Marsh, cannot be answered without expert testimony).) Matcon 12 countered that expert testimony was not required because the duty of care defined by the 13 court left “the jury with the relatively straight-forward task of determining whether

14 Project Stewart or Westbank instructed Marsh to report Matcon’s insurance claims.” 15 (Matcon MIL Resp. at 2.) It argued that expert testimony was unnecessary because the 16 court had already established the applicable standard of care (id. at 2-3 (quoting Douglas 17 v. Freeman, 814 P.2d 1160, 1165 (Wash. 1991)); that “expert testimony is unnecessary 18 where the acts in question are within the common knowledge or experience of lay

19 persons” (id. at 3 (quoting Sudre v. The Port of Seattle, No. C15-0928-JLR, 2016 WL 20 7035062, at *20 (W.D. Wash. Dec. 2, 2016)); and that “an average person can determine 21 whether an instruction has been issued without expert testimony” (id. at 6). 22 1 On July 22, 2022, Matcon moved the court for reconsideration of the tort duty 2 owed by Marsh to OCIP enrollees, which the court had previously defined in its summary

3 judgment order. (1st MFR (Dkt. # 137); 7/14/22 Order at 26.) It urged the court to 4 conclude instead that Marsh owed Matcon (1) a “duty to exercise reasonable skill and 5 ordinary care and diligence;” (2) a “duty to exercise good faith and carry out 6 instructions;” and (3) a “duty to notify insurers of claims, provided that Marsh is 7 informed in writing by Project Stewart or Westbank of the claim.” (1st MFR at 5.) 8 On August 12, 2022, the court granted Matcon’s motion for reconsideration of

9 Marsh’s tort duty in part, concluding that Marsh owed Matcon “a duty to exercise 10 reasonable care in performing the promises it made in the Engagement Letter [between 11 Marsh and the Project’s owner, Westbank], including the promise to prepare loss notices 12 and notify insurers of claims provided Marsh was informed in writing by Westbank or 13 Project Stewart of the claim.” (8/12/22 Order (Dkt. # 154); see 10/19/20 Williams Decl.

14 (Dkt. # 48) ¶ 9, Ex. G (“Engagement Letter”), at 2.) 15 During the pretrial conference in this matter on August 15, 2022, the court heard 16 argument on the motions in limine and issued an oral ruling granting Marsh’s MIL 1. 17 (See 8/15/22 Min. Entry (Dkt. # 156).) In a written order summarizing its oral rulings, 18 the court explained:

19 “In general, expert testimony is required when an essential element in the case is best established by an opinion which is beyond the expertise of a 20 layperson.” Harris v. Groth, 663 P.2d 113, 118 (Wash. 1983); see also AAS-DMP Mgmt., LP Liquidating Tr. v. Acordia Nw., Inc., 63 P.3d 860, 865 21 (Wash. Ct. App. 2003) (“Generally, if the act in question is within the ordinary knowledge and experience of laypersons, we have not required 22 expert testimony.”). The court is persuaded that what a reasonable [OCIP] 1 Administrator / Broker would do under the circumstances presented in this case is not within the ordinary knowledge and experience of laypersons. 2 Therefore, expert testimony is necessary to establish the standard of care.

3 (8/16/22 Order at 3.) The court also explained that Matcon’s reliance on Douglas was 4 misplaced because, contrary to Matcon’s assertion, that court did not hold that expert 5 testimony was unnecessary after a court decides the applicable duty of care. (Id. at 3 n.1 6 (citing Douglas, 814 P.3d at 1164-65).) Matcon filed the instant motion for 7 reconsideration later that same day. (See MFR.) 8 III. ANALYSIS 9 A. Motion for Reconsideration 10 “Motions for reconsideration are disfavored,” and the “court will ordinarily deny 11 such motions in the absence of a showing of manifest error in the prior ruling or a 12 showing of new facts or legal authority which could not have been brought to its attention 13 earlier with reasonable diligence.” Local Rules W.D. Wash. LCR 7(h)(1). As the court

14 explained in its oral ruling on August 23, 2022, Matcon has met neither standard. 15 Matcon argues that the court committed manifest error when it granted Marsh’s 16 MIL 1 because “(1) the [c]ourt has already defined Marsh’s duty; and (2) under the 17 circumstances presented in this case—i.e., considering the evidence currently in the 18 record—the common knowledge or experience of laypersons is sufficient for a jury to

19 determine whether Marsh breached its duty or the applicable standard of care.” (Mot. at 20 2.) It contends that based on the court’s formulation of Marsh’s duty of care, determining 21 whether Marsh breached its duty to notify the OCIP insurers of Matcon’s claims “is a 22 simple, binary issue—either Marsh ‘was informed in writing by Westbank or Project 1 Stewart of the claim,’ or it wasn’t.” (Id. at 3; see also Reply at 2 (arguing that “Marsh’s 2 duty has only two parts: (1) the trigger . . . and (2) the duty itself”).)

3 As Marsh points out, however, this case involves the administration of a unique 4 type of insurance that is outside of the ordinary knowledge and experience of laypersons, 5 and Matcon has overly simplified the issues the jury will need to consider. (See Resp. at 6 3; see also 8/16/22 Order at 3.) The task for the jury is to determine whether Marsh acted 7 with reasonable care in performing its duties under the Engagement Letter. See Wash. 8 Pattern Jury Instr. Civ. WPI 10.01 (defining “negligence” as “the failure to exercise

9 ordinary care”); id. WPI 10.02 (defining “ordinary care” as “the care a reasonably careful 10 person would exercise under the same or similar circumstances”). Without expert 11 testimony to explain to the jury what a “reasonably careful” OCIP Administrator / Broker 12 would have done under the circumstances presented in this case, the jury will have no 13 standard against which to measure Marsh’s conduct.

14 Indeed, the court agrees with Marsh that expert testimony is required to aid the 15 jury in considering a number of questions relevant to whether Marsh’s conduct was 16 consistent with that of a reasonably careful OCIP Administrator / Broker. These 17 questions may include whether a reasonably careful OCIP Administrator / Broker would 18 have (1) interpreted a November 9, 2018 email from the Project’s Claims Executive as

19 having “informed” Marsh of Matcon’s claims, thus triggering Marsh’s duty to report 20 them to Houston; (2) considered Matcon’s OCIP Portal submissions, which involved a 21 dispute between two insureds enrolled in the OCIP, to be “claims” within the meaning of 22 the OCIP; (3) evaluated whether Matcon’s claims exceeded the OCIP’s $25,000 1 deductible before reporting the claims to Houston; and (4) forwarded Matcon’s entire 2 OCIP Portal submissions, including its requests for defense and indemnity and its

3 correspondence with Graham, to Houston. (See Resp. at 6; see also Marsh MIL at 8-9.) 4 The court agrees that the jury would need testimony from an expert experienced in the 5 administration of OCIPs in order to answer these questions. 6 Finally, although Matcon is correct that “negligence claims against insurance 7 brokers do not automatically require expert testimony” (Reply at 3 (citing Acordia Nw., 8 Inc., 63 P.3d at 865); see also Matcon MIL Resp. at 4-6), it ignores that Marsh acted not

9 only as Project Stewart’s broker, but also as the administrator for the OCIP. Although 10 laypersons may commonly understand an insurance broker’s responsibility to, for 11 example, procure requested coverage or ensure that coverage does not lapse for failure to 12 pay premiums (see id. at 4 (quoting Humiston Grain Co. v. Rowley Interstate Transp. 13 Co., 512 N.W. 2d 573, 575 (Iowa 1993)), the court finds it extremely unlikely that the

14 role of an OCIP Administrator / Broker in a complex construction project would be 15 within the common knowledge of a layperson. For these reasons, the court concludes 16 that Matcon has not met its burden to show that the court committed manifest error when 17 it granted Marsh’s MIL 1 and DENIES Matcon’s motion for reconsideration. 18 B. Request for Entry of Final Judgment

19 Having denied the motion for reconsideration, the court now takes up Matcon’s 20 request for the alternative relief of dismissal and entry of final judgment under Federal 21 Rule of Civil Procedure 54(b). (See MFR at 5.) Matcon concedes that it cannot prove its 22 negligence claim against Marsh if the court requires expert testimony to establish what a 1 reasonable OCIP Administrator / Broker would do under the circumstances presented in 2 this case. (Id.) Therefore, according to Matcon, the court should not delay in dismissing

3 its negligence claim and entering final judgment. (Id.) Marsh joins in Matcon’s request 4 to dismiss Matcon’s negligence claim and enter final judgment. (Resp. at 7.) The court 5 grants in part and denies in part Matcon’s request. 6 First, the court agrees with Matcon and Marsh that, absent expert testimony to 7 establish the standard of care in this case, Matcon will be unable to prove its negligence 8 claim at trial as a matter of law. Therefore, the court DISMISSES Matcon’s negligence

9 claim against Marsh with prejudice. 10 Second, the court declines to enter final judgment on Matcon’s negligence claim at 11 this time. Rule 54(b) provides, in relevant part: 12 When an action presents more than one claim for relief . . . or when multiple parties are involved, the court may direct entry of a final judgment as to one 13 or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay. 14 Fed. R. Civ. P 54(b). Here, a four-day trial on the remaining claims between Matcon and 15 Houston is set to begin on September 12, 2022. (See 8/23/22 Min. Entry.) As a result, 16 under the current case schedule, all of the claims in this matter should be resolved within 17 a matter of weeks. The court concludes that it is in the interest of sound judicial 18 administration to enter a single final judgment after the claims between Matcon and 19 Houston have been resolved in order to prevent the risk of piecemeal appeals in this case. 20 See Curtiss-Wright Corp. v. General Elec. Co., 446 U.S. 1, 10 (1980) (committing the 21 22 1 decision regarding whether to grant a request under Rule 54(b) to the district court’s 2 discretion). Matcon’s request is, therefore, DENIED.

3 IV. CONCLUSION 4 For the foregoing reasons, the court orders as follows: 5 1. Matcon’s motion for reconsideration of the court’s decision to grant 6 Marsh’s MIL 1 (Dkt. # 158) is DENIED; 7 2. Matcon and Marsh’s joint request to dismiss Matcon’s negligence claim 8 against Marsh is GRANTED; and

9 3. Matcon and Marsh’s joint request for entry of final judgment as to 10 Matcon’s negligence claim against Marsh is DENIED. 11 Dated this 26th day of August, 2022. 12 A 13 14 JAMES L. ROBART United States District Judge 15 16 17 18 19 20 21 22