Modern Automotive Network, LLC v. Eastern Alliance Insurance Co.

• Court: Court of Appeals for the Fourth Circuit
• Decided: January 19, 2021
• Docket: 19-2143
• Status: Unpublished

Opinion

UNPUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 19-2143

MODERN AUTOMOTIVE NETWORK, LLC,

Plaintiff - Appellant,

v.

EASTERN ALLIANCE INSURANCE COMPANY, d/b/a Eastern Alliance Insurance Group; EASTERN ADVANTAGE ASSURANCE COMPANY, d/b/a Eastern Alliance Insurance Group; ALLIED EASTERN INDEMNITY COMPANY, d/b/a Eastern Alliance Insurance Group,

Defendants - Appellees.

Appeal from the United States District Court for the Middle District of North Carolina, at Greensboro. Loretta C. Biggs, District Judge. (1:17-cv-00152-LCB-JEP)

Submitted: December 11, 2020 Decided: January 19, 2021

Before KING and QUATTLEBAUM, Circuit Judges, and TRAXLER, Senior Circuit Judge.

Affirmed by unpublished opinion. Judge Quattlebaum wrote the opinion, in which Judge King and Senior Judge Traxler joined.

Andrew L. Fitzgerald, FITZGERALD LITIGATION, Winston-Salem, North Carolina, for Appellant. Reid C. Adams, Jr., Jonathan R. Reich, Brian F. Castro, WOMBLE BOND DICKINSON (US) LLP, Winston-Salem, North Carolina, for Appellees. Unpublished opinions are not binding precedent in this circuit.

2 QUATTLEBAUM, Circuit Judge:

Modern Automotive Network, LLC (“Modern”) filed a complaint against Eastern

Alliance Insurance Co., Eastern Advantage Assurance Co. and Allied Eastern Indemnity

Co. (collectively “Eastern”) alleging claims of breach of contract, negligence and

violations of the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”) ∗

arising out of an insurance coverage dispute. Modern appeals the district court’s order

denying its motion to strike a witness’ declaration, striking Modern’s expert witness’

testimony and granting summary judgment to Eastern on all claims. Finding no error, we

affirm.

I.

Modern first contends that the district court should have struck Jack Holmes’

declaration, which purportedly contained expert testimony based on Holmes’ thirty years

as an attorney dealing with unrepresented claimants before the North Carolina Industrial

Commission, because Eastern only disclosed Holmes as a fact witness. We review a district

court’s discovery rulings for abuse of discretion. Bresler v. Wilmington Tr. Co., 855 F.3d

178, 189 (4th Cir. 2017). Federal Rule of Civil Procedure 26(a)(2) provides that a party

must disclose the identity of any expert witness it intends to call at trial and any written

reports prepared by those witnesses or summaries of the witnesses’ opinions. A party who

fails to provide information or identify a witness as required by Rule 26(a) may not use

∗ N.C. Gen. Stat. § 75-1.1 (2019).

3 that information or that witness at trial unless the failure was substantially justified or

harmless. Fed. R. Civ. P. 37(c)(1). However, “Federal Rule of Evidence 701 permits a lay

witness—with no need for expert qualification—to give opinion testimony that is rationally

based on the witness’s perception and helpful to determining a fact in issue, so long as it is

not based on the same scientific, technical, or other specialized knowledge covered by

[Federal Rule of Evidence] 702.” Lord & Taylor, LLC v. White Flint, L.P., 849 F.3d 567,

575 (4th Cir. 2017) (internal quotation marks omitted).

The district court determined that Holmes’ testimony was governed by Rule 701

because it was based on his personal knowledge and perception. Accordingly, the court

determined Eastern was not required to disclose him as an expert witness and denied

Modern’s motion to strike. After reviewing the record, we agree. Holmes was an attorney

who handled a claim filed by one of Modern’s employees. He reviewed the claimant’s file

and prepared a declaration based on his experience with the claimant’s case. Thus, Holmes’

opinions flowed directly from his personal knowledge and perception of his experience

handling the claimant’s case before the North Carolina Industrial Commission.

Accordingly, we conclude that the district court did not abuse its discretion in denying

Modern’s motion to strike.

II.

Modern next contends that the district court erred in striking its proposed expert’s

testimony. “We review a district court’s decision to admit or exclude expert evidence for

abuse of discretion.” In re Lipitor (Atorvastatin Calcium) Mktg., Sales Practices & Prods.

4 Liab. Litig. (No II) MDL 2502, 892 F.3d 624, 632 (4th Cir. 2018). Rule 702 “assign[s] to

the trial judge the task of ensuring that an expert’s testimony both rests on a reliable

foundation and is relevant to the task at hand.” Daubert v. Merrell Dow Pharm., Inc., 509

U.S. 579, 597 (1993). “To be reliable, the testimony ‘must be based on scientific, technical,

or other specialized knowledge and not on belief or speculation, and inferences must be

derived using scientific or other valid methods.’” Belville v. Ford Motor Co., 919 F.3d 224,

232 (4th Cir. 2019) (quoting Oglesby v. Gen. Motors Corp., 190 F.3d 244, 250 (4th Cir.

1999)). Here, the district court excluded the testimony because the expert conceded that he

had no experience with pro se claimants before the North Carolina Industrial Commission

and had no experience with insurance claims handling, which were matters relevant to this

insurance coverage dispute. Further, the court noted that the expert’s deposition testimony

contradicted the opinions contained in his report. We, of course, afford the district court

discretion in making these types of evidentiary decisions. Our review of the record does

not reveal any abuse of that discretion by the district court.

III.

Finally, Modern contends that the district court erred in granting summary judgment

for Eastern on Modern’s breach of contract, negligence and UDTPA claims. We “review[]

de novo the district court’s order granting summary judgment.” Jacobs v. N.C. Admin.

Office of the Courts, 780 F.3d 562, 565 n.1 (4th Cir. 2015). “A district court ‘shall grant

summary judgment if the movant shows that there is no genuine dispute as to any material

fact and the movant is entitled to judgment as a matter of law.’” Id. at 568 (quoting Fed. R.

5 Civ. P. 56(a)). “‘A dispute is genuine if a reasonable jury could return a verdict for the

nonmoving party.’” Id. (quoting Libertarian Party of Va. v. Judd, 718 F.3d 308, 313 (4th

Cir. 2013) (internal quotation marks omitted)). In determining whether a genuine dispute

of material fact exists, “we ‘view the facts and all justifiable inferences arising therefrom

in the light most favorable to’ . . . the nonmoving party.” Id. at 565 n.1 (quoting Judd, 718

F.3d at 312. However, “the nonmoving party must rely on more than conclusory

allegations, mere speculation, the building of one inference upon another, or the mere

existence of a scintilla of evidence.” Humphreys & Partners Architects, L.P. v. Lessard

Design, Inc., 790 F.3d 532, 540 (4th Cir. 2015) (quoting Dash v. Mayweather, 731 F.3d

303, 311 (4th Cir. 2013)).

A.

Modern first contends that Eastern breached the insurance contract because it had a

duty to negotiate a “release and resignation” in a settlement agreement. While Modern

concedes that the insurance policy is silent as to this issue, it contends that the policy’s

“duty to defend” provision is ambiguous and, thus, the district court should have considered

Modern’s parol evidence that it wanted such a provision.

The phrase “duty to defend,” while not defined in the contract, is a legal term of art.

“[A]n insurer’s duty to defend an action brought against its insured is determined by the

language in the policy[.]” Lambe Realty Inv., Inc. v. Allstate Ins. Co., 527 S.E.2d 328, 331

(N.C. Ct. App. 2000). Thus, Modern cannot shoehorn a duty to negotiate a release and

resignation into a duty to defend clause when the clause is silent on that issue. Modern does

not cite any case in which a court has adopted such an interpretation of a duty to defend

6 clause in a workers’ compensation insurance policy. Rather than have us interpret an

ambiguous contract, Modern asks us to rewrite the policy. See Hodgin v. Brighton, 674

S.E.2d 444, 446 (N.C. Ct. App. 2009) (“If the language [in a contract] is clear and only one

reasonable interpretation exists, the courts must enforce the contract as written; they may

not, under the guise of construing an ambiguous term, rewrite the contract or impose

liabilities on the parties not bargained for and found therein.” (internal quotation marks

omitted)). This we cannot do. Accordingly, we affirm the district court’s order granting

Eastern summary judgment on Modern’s breach of contract claim.

B.

Next, Modern argues that Eastern breached its duty of good faith and fair dealing.

Again, it is mistaken. “In every contract there is an implied covenant of good faith and fair

dealing that neither party will do anything which injures the right of the other to receive

the benefits of the agreement.” Heron Bay Acquisition, LLC v. United Metal Finishing,

Inc., 781 S.E.2d 889, 894 (N.C. Ct. App. 2016) (internal quotation marks omitted).

However, the North Carolina Court of Appeals has held:

[A] cause of action alleging breach of good faith will not lie when the insurer settles a claim within the monetary limits of the insured’s policy; however, in doing so, . . . the insurer has the duty to consider the insured’s interest. . . . [A]n insurer may act in its own interest in settlement of the claim, and has the statutory authority to settle claims without the consent of the insured.

Cash v. State Farm Mut. Auto. Ins. Co., 528 S.E.2d 372, 380 (N.C. Ct. App. 2000) (citations

omitted). Because Eastern had the sole authority to settle the claims and it settled the claims

within the policy limits, Cash controls. While Modern’s evidence may indicate that Eastern

considered its own interests in settling the claims, the record also shows that Eastern

7 considered Modern’s interests. Thus, under Cash, the district court correctly rejected this

claim.

C.

Modern further claims Eastern negligently failed to provide copies of the relevant

case files kept by the law firm hired to draft the settlement agreements. The district court

granted Eastern summary judgment holding the negligence claim was barred as a matter of

law by the economic loss rule.

Under the economic loss rule, “no negligence claim exists where all rights and

remedies have been set forth in a contractual relationship.” Beaufort Builders, Inc v. White

Plains Church Ministries, Inc., 783 S.E.2d 35, 39 (N.C. Ct. App. 2016) (brackets and

internal quotation marks omitted). There are four exceptions to this rule. See id. at 40. The

parties agree that only the fourth exception is potentially applicable—“[t]he injury so

caused was a willful injury to or a conversion of the property of the promisee, which was

the subject of the contract, by the promisor.” Id.

For the reasons cited by the district court, Modern is unable to identify evidence that

creates a genuine issue of material fact as to whether Eastern converted the case file.

Accordingly, we affirm this district court’s order granting summary judgment on this

D.

Finally, Modern claims that the district court erred in rejecting its claims under the

UDTPA.

8 The UDTPA is meant to prevent unfair or deceptive acts or practices in or affecting commerce. In order to state a claim under the UDTPA, a plaintiff must show (1) [the] defendant committed an unfair or deceptive act or practice; (2) the action in question was in or affecting commerce; and (3) the act proximately caused injury to the plaintiff. Whether conduct is unfair or deceptive is a legal issue for the court to decide.

Ellis v. La.-Pac. Corp., 699 F.3d 778, 787 (4th Cir. 2012) (citations and internal quotation

marks omitted). Modern first contends Eastern is liable under the UDTPA by violating

Section 58-63-15(11) of the North Carolina Code. Under that sub-section, failing to

communicate “with such frequency as to indicate a general business practice” can

constitute an unfair method of competition and an unfair or deceptive act or practice

relating to the business of insurance. N.C. Gen. Stat. § 58-63-15(11)(b) (2019). And the

North Carolina courts have held that violations of § 58-63-15 also constitute violations of

the UDTPA. See Elliott v. Am. States Ins. Co., 883 F.3d 384, 396 (4th Cir. 2018). However,

as the district court noted, the record reveals no genuine issue of material fact as to whether

Eastern routinely failed to communicate. Rather, the record shows Eastern was generally

prompt in returning Modern’s inquiries. We find no error in the district court’s grant of

summary judgment on this claim.

Next, Modern attempts to establish a UDTPA violation predicated on Eastern’s

prioritization of its own interests in settling claims, which is the same basis of its breach of

good faith claim. “North Carolina courts have repeatedly held that a mere breach of

contract, even if intentional, is not sufficiently unfair or deceptive to sustain an action under

the UDTPA.” PCS Phosphate Co. v. Norfolk S. Corp., 559 F.3d 212, 224 (4th Cir. 2009)

(brackets and internal quotation marks omitted); see Wells Fargo Bank, N.A. v. Corneal,

9 767 S.E.2d 374, 377 (N.C. Ct. App. 2014) (“A UDTPA action is distinct from a breach of

contract action; a plaintiff must allege and prove egregious or aggravating circumstances

to prevail on a UDTPA claim.”).

We see no indication that North Carolina courts would hold that an insurer may

consider its own interest in settling a claim under insurance law yet find such conduct to

amount to a violation of the UDTPA. Further, the evidence does not show a genuine issue

of material fact of any egregious or aggravating circumstances in this case. At bottom,

Modern’s case boils down to its mere dissatisfaction with its choice of a high-deductible

insurance policy which, even considering the evidence in the light most favorable to

Modern, does not defeat Eastern’s motion for summary judgment.

IV.

Accordingly, we affirm the district court’s order. We dispense with oral argument

because the facts and legal contentions are adequately presented in the materials before this

court and argument would not aid the decisional process.

AFFIRMED