Mike Rose's Auto Body, Inc. v. Applied Underwriters Captive Risk Assurance Co.

389 F. Supp. 3d 687
CourtDistrict Court, N.D. California
DecidedJune 17, 2019
DocketCase No. 16-cv-01864-EMC
StatusPublished
Cited by4 cases

This text of 389 F. Supp. 3d 687 (Mike Rose's Auto Body, Inc. v. Applied Underwriters Captive Risk Assurance Co.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mike Rose's Auto Body, Inc. v. Applied Underwriters Captive Risk Assurance Co., 389 F. Supp. 3d 687 (N.D. Cal. 2019).

Opinion

EDWARD M. CHEN, United States District Judge

Plaintiff Mike Rose's Auto Body, Inc. ("MRAB") entered into two contracts with Defendant Applied Underwriters Captive Risk Assurance Company, Inc. ("AUCRA"), pursuant to which AUCRA provided workers' compensation insurance to MRAB. MRAB brought suit over fees AUCRA attempted to charge in relation to the two contracts. The parties engaged in arbitration that resulted in a final arbitration award ("Final Award") in March 2018. MRAB moved to confirm the Final Award. Because an outstanding issue remained regarding the second contract, this Court remanded the issue to the arbitrator to resolve in the first instance. In January 2019, the arbitrator issued a decision on *691remand ("Remand Order"). MRAB now moves to confirm the Final Award and Remand Order, whereas AUCRA moves to vacate the Remand Order. See Docket Nos. 62 ("Pl. Mot."), 64 ("Def. Mot.").

For the reasons discussed below, the Court GRANTS in part and DENIES in part both motions. The Final Award, as supplemented by the Remand Order, is confirmed in full with the exception of the Remand Order provision increasing the interest rate applied to sums owed under the first RPA.

I. BACKGROUND

A. Factual Background

MRAB entered into two Reinsurance Participation Agreements ("RPAs") for workers' compensation insurance with AUCRA. The first RPA was entered into on October 1, 2009, and the second on October 1, 2012. Docket No. 1 ("Compl.") ¶¶ 11, 19. Each RPA had a three-year term. See Docket No. 68-2, Exh. A (2009 RPA), Exh. B (2012 RPA). Under the RPAs, MRAB deposited money into a "cell" to pay employees' workers' compensation claims. Compl. ¶ 13.

In February 2013, following the expiration of the first RPA and the closing of all claims it covered, MRAB demanded that AUCRA reimburse the $79,167 remaining in the cell. Id. ¶ 17. AUCRA refused.

In 2015, following the expiration of the second RPA, AUCRA sent a statement informing MRAB that it owed $361,000 in additional collateral. Id. ¶ 23. The statement explained that the amount was "due based on [MRAB's] actual claims applying run-off Loss Development Factors (LDFs) and an additional capital deposit of $44,441." Id. "Loss Development Factors" are factors AUCRA uses to calculate the potential costs associated with workers' compensation claims that may continue to accrue after the end of the active period of the RPA. Id. ¶¶ 12, 23-24. Once an RPA expires, AUCRA applies LDFs to each open and closed claim to determine whether the employer needs to pay additional collateral to cover the potential future costs of claims. At this time, two claims under the second RPA remain active. See Remand Order at 3. MRAB refused to pay the $361,000 requested by AUCRA. Compl. ¶ 23.

B. Procedural Background

In April 2016, MRAB filed a complaint against AUCRA seeking a declaration that both RPAs are void and unenforceable, that MRAB is entitled to rescission, that MRAB owes AUCRA no money, and that AUCRA owes MRAB $79,167. See Compl. at 7-12. The complaint also sought disgorgement of the money MRAB paid to AUCRA under the RPAs and damages for fraud, breach of contract, and unfair business practices. See id. AUCRA moved to compel arbitration pursuant to the arbitration clause in the RPAs. Docket No. 12. This Court granted AUCRA's motion to compel arbitration. Docket No. 29.

1. Interim Order

In December 2017, the arbitrator issued an interim order in which he ruled, inter alia , that the RPAs were valid and enforceable. See Docket No. 62-1, Exh. A ("Interim Order") at 3.

2. Final Award

On March 19, 2018, the arbitrator issued the Final Award, which expressly incorporated by reference the Interim Order. Id. , Exh. B at 3. The Final Award ordered the following:

(1) AUCRA shall pay MRAB $79,167.00 and any return premium due on the first RPA.
*692(2) AUCRA's claim for $361,024.41 on the second RPA is denied.
(3) AUCRA is prohibited from using "Run-off Loss Development Factors" to calculate the amount owed by MRAB for claims under the second RPA. Instead, AUCRA must calculate the amount owed using "Weekly Open Claims and Closed Claims Loss Development Factors." Any return premium generated by the application of the revised LDF calculation will be paid to MRAB.
(4) The amounts specified were due January 10, 2018, and subject to a 5% simple interest rate accruing beginning at January 10, 2018.
(5) Each party will bear the cost of its own legal fees.
(6) The administrative fees and expenses of the arbitration proceeding, totaling $5,750.00, and the compensation and expenses of the arbitrator, totaling $21,250.00, shall be borne by both parties equally. Therefore, MRAB shall reimburse AUCRA the sum of $1,125.01, representing the portion of said fees and expenses in excess of the apportioned costs previously incurred by AUCRA.

Id. at 3-4.

AUCRA did not comply with the Final Award, and MRAB moved to confirm it. Docket No. 56. However, the parties continued to dispute how to perform the LDF calculations for the second RPA. The Court accordingly denied MRAB's motion to confirm the Final Award without prejudice and remanded the dispute to the arbitrator for the limited purpose of resolving the outstanding issue:

[T]he matter is remanded to the arbitrator to resolve in the first instance the Parties' dispute over specific calculations for claims under the second Reinsurance Participation Agreement (Plan Period 10/1/12 to 10/1/15) discussed on page 3 of the Interim Order and pages 3-4 of the Final Award. Accordingly, Plaintiff's petition to confirm the arbitration award ... is DENIED as premature, and without prejudice to a further petition once the arbitrator has addressed the instant dispute and concluded all matters before him.

Docket No. 60.

3. Remand Order

On remand, the arbitrator conducted an initial conference call in which he discussed with the parties "the scope of the remand and the general status of the case, along with claims status and billing related to the second plan." Docket No. 68-2 ¶ 2. Over the course of December 2018 and January 2019, the arbitrator sent several emails to the parties requesting information about the mechanics of the RPAs. See Docket No. 68-1, Exhs. 17, 25, 27. During this period, AUCRA thrice suggested that the arbitrator schedule a hearing to address the issues raised in his emails. Id. , Exhs. 29, 30, 39. The arbitrator declined to hold a hearing, indicating that he "believe[s] [he] has sufficient information to rule on this matter." Id. , Exh. 41 at 2.

On January 25, 2019, the arbitrator issued the Remand Order. Docket No. 62-1, Exh. D ("Disposition of Application and Remand"). The arbitrator stated that in the Final Award, he had "erred in assuming that only the Run-Off Loss Development Factors ...

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389 F. Supp. 3d 687, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mike-roses-auto-body-inc-v-applied-underwriters-captive-risk-assurance-cand-2019.