United States District Court for the Northern District of Ohio, Eastern Division

September 16, 2022, Decided; September 16, 2022, Filed

CASE NO. 1:21-cv-00441

Reporter

2022 U.S. Dist. LEXIS 168194 *; 2022 WL 4290684

Great West Casualty Company, Plaintiff, -vs- Maric Transportation, Inc., et al., Defendants.

Core Terms

Trucks, coverage, Transportation, insured, Endorsement, leased, independent contractor, reimbursement, motor carrier, deductions, trailer, rented, time of an accident, Declaratory, contractual, parties, damages, summary judgment, loaned, insuring agreement, liability coverage, provide coverage, contractual obligation, covered automobile, insurance policy, owner operator, accurate copy, bodily injury, Non-Trucking, ambiguous

Counsel:  [*1] For Great West Casualty Company, Plaintiff: Brian Douglas Sullivan, LEAD ATTORNEY, Reminger Co. – Cleveland, Cleveland, OH; Brianna M. Prislipsky, Reminger, Ste. 1400, Cleveland, OH.

Maric Transportation, Inc., Defendant, Pro se, Franklin, WI.

Predrag Maric, also known asPeter Maric, Defendant, Pro se, Franklin, WI.

For Susan Quinones, as Legal Guardian of David N. Scheehle, Joyce McKenzie, Defendants: Christopher J. Van Blargan, Kisling, Nestico & Redick – Akron, Akron, OH; Michael J. Maillis, Kisling, Nestico & Redick – Youngstown, Ste. A, Poland, OH.

Olanyanju Ladejo, Defendant, Pro se, Snellville, GA.

For Joyce McKenzie, Susan Quinones, as Legal Guardian of David N. Scheehle, Counter-Claimants: Christopher J. Van Blargan, Kisling, Nestico & Redick – Akron, Akron, OH; Michael J. Maillis, Kisling, Nestico & Redick – Youngstown, Ste. A, Poland, OH.

For Great West Casualty Company, Counter-Defendant: Brian Douglas Sullivan, LEAD ATTORNEY, Reminger Co. – Cleveland, Cleveland, OH; Brianna M. Prislipsky, Reminger, Ste. 1400, Cleveland, OH.

Judges: PAMELA A. BARKER, UNITED STATES DISTRICT JUDGE.

Opinion by: PAMELA A. BARKER

Opinion

MEMORANDUM OPINION AND ORDER

Currently pending are (1) Plaintiff and Counter-Defendant Great [*2]  West Casualty Company’s (“Great West”) Motion for Summary Judgment filed on March 15, 2022 (“Great West’s Motion”) (Doc. No. 39); and (2) Defendants and Counter-Claimants Susan Quinones’s and Joyce McKenzie’s (together “Defendants”) Cross-Motion for Partial Summary Judgment filed on April 12, 2022 (“Defendants’ Motion”) (Doc. No. 41). Great West filed a combined Brief in Opposition to Defendants’ Motion and Reply in Support of its Motion on May 12, 2022 (“Great West’s Opposition”) (Doc. No. 44), and Defendants filed a Reply in Support of their Motion on May 24, 2022 (“Defendants’ Reply”) (Doc. No. 45).

For the following reasons, Great West’s Motion is GRANTED, and Defendants’ Motion is DENIED.

I. Background

A. Stipulated Facts

Great West and Defendants (together, the “parties”) have stipulated to the following facts. (Doc. Nos. 38, 43, 46.)

i. The Accident

On April 7, 2018, Olanyanju Ladejo (“Ladejo”) was operating a 2007 Freightliner tractor with VIN 1FUJA6CVX6PU98227 owned by Wisconsin Trucks, Inc. (“Wisconsin Trucks”), Jovo Mihic, and White Eagles. (Doc. No. 38, ¶ 2.) At the same time, Ladejo was hauling a 2012 Great Dane Trailer VIN 1GRAP0620CT564202 owned by M&M Express, Inc. (together, [*3]  with the Freightliner, the “Vehicle”). (Id.) While doing so, Ladejo negligently rear-ended a van operated by David Scheehle (“Scheehle”). (Id.) A true and accurate copy of a portion of the Ohio Highway Patrol Crash report is attached as Exhibit B to the Stipulations of Facts and the parties stipulate to the facts contained therein. (Id. & Ex. B.)

At the time of the accident, Ladejo was transporting cargo under a contract between Wisconsin Trucks and ProServ Logistics, Inc. (“ProServ Logistics”), a third-party freight broker. (Id. at ¶ 5.) The contract between ProServ Logistics and Wisconsin Trucks is presumed to be valid and was in effect at the time of the accident. (Id. at ¶ 7.) A true and accurate copy of the agreement between Wisconsin Trucks and ProServ Logistics is attached as Exhibit G to the Amended Supplemental Joint Stipulations of Facts. (Doc. No. 46, ¶ 2 & Ex. G.)

Ladejo was engaged in the interstate transportation of goods on behalf of Wisconsin Trucks at the time of the accident. (Doc. No. 38, ¶ 6.) Ladejo was driving a vehicle used in the business of the person or entity to whom the vehicle was rented, leased, or loaned at the time of the accident. (Id. at ¶ 9.)

ii. The [*4]  Insurance Policies

Effective February 1, 2018 through February 1, 2019, Great West issued a “Non-Trucking Use” (“NTU”) Commercial Lines Policy numbered ICP00366M to the Independent Contractors of Wisconsin Truck Owner Operators Association (the “NTU Policy”). (Doc. No. 38, ¶ 1.) The NTU Policy was issued to the insured in New Berlin, Wisconsin. (Id.) A true and accurate copy of the NTU Policy is attached as Exhibit A to the Stipulations of Facts. (Id. & Ex. A.)

Maric Transportation, Inc. (“Maric Transportation”) is a member of the Independent Contractors of Wisconsin Truck Owner Operators Association and is an insured under the Great West NTU Policy. (Id. at ¶ 4.) A certificate of insurance for the Great West NTU Policy, a true and accurate copy of which is attached as Exhibit D to rhe Stipulations of Facts, identifies Wisconsin Trucks as the motor carrier. (Id. at ¶ 4 & Ex. D.) The contract or agreement between Maric and Wisconsin Trucks, a true and accurate copy of which is attached as Exhibit F to the Amended Supplemental Joint Stipulations of Facts (“the Independent Contractor and Policy Agreement”), is presumed to be valid and was in effect at the time of the accident. (Id. at ¶ [*5]  7; Doc. No. 46, ¶ 1; Doc. No. 46-1.)

The Independent Contractor and Policy Agreement contains the following relevant provisions:

Predrag Maric UNDERSTAND AND AGREE TO THE TERMS IN THIS CONTRACT DATED Jan[.] 13, 2018

1. I understand that I am an Independent Contractor/ Owner Operator. This agreement shall remain in full force and effective for a 1 year period beginning on the date first written above and continuing thereafter on a year to year basis. Either Party may terminate this Agreement at any time, with or without cause.

***

13. I understand that taking the tractor and trailer anywhere other than agreed upon trip origin route and destination or my personal use or place of residence requires verbal notification/disclosure to Wisconsin Trucks, Inc.

***

15. It iss [sic] my responsibility to make and keep copies of the Vehicle Trip Report, Vehicle Expense Report, Bill of Lading and all receipts of each trip until Wiscosnin [sic] Trucks, Inc. has been paid by the broker or shipper and I have been paid by Wisconsin Trucks Inc. If the original copies are lost in the mail or due to my negligence and I cannot provide copies, I will be responsible for all expenses and lost earnings to Wisconsin [*6]  Trucks, Inc. as well as my loss of pay for said load.

16. I understand, acknowledge and give Wisconsin Trucks, Inc. permission to withdraw and/or deduct monies from my net revenue/pay for the following conditions:

a. Cash Advances.

b. Shortages in trip funds by my failure to provide receipts for fuel, supplies or other items and services that I have been advanced monies to purchase on behalf of Wisconsin Trucks, Inc[.]

c. My failure to provide copies of BOL, Trip Sheet, Expense Report and all receipts for load.

d. Any charges or penalties to pick up or deliver load on time scheduled.

e. Any physical damage on the tractor and trailer assigned to me if any accidents occur.

f. Any towing charges for vehicles that I own or assigned to me if I am found at fault in an accident.

g. Fees and penalties assessed by the US DOT due to driver qualification violations.

h. I understand that this is not a complete list of items that may arise that could effect [sic] deductions from my revenue and that I have the right to submit a written rebuttal to Wisconsin Trucks Inc[.] for consideration of reversal of deductions from wages for items listed and not listed.

17. I understand that Wisconsin Trucks will provide [*7]  Cargo and Liability coverage for me, the truck and trailer that I will be using while working for Wisconsin Trucks, Inc[.]

18. I understand that I will be provided with the Certificate of Insurance and will have to be responsible to keep with me at all times proving that the truck, trailer and driver are covered under Cargo and Liability Insurance that is offered by carrier Wisconsin Trucks Inc.

19. Wisconsin Trucks Inc[.] will provide coverage for Cargo up to $100,000 as stated on the certificate of insurance given to me.

20. Wisconsin Trucks Inc[.] will provide coverage for Liability up to $1,000,000 as stated on the certificate that was given to me.

21. I understand that in case of an accident that Wisconsin Trucks will cover cargo damages and losses and liability demages [sic] of bodily injury or property demage [sic] caused by and [sic] accident up to their limits.

22. I understand that if there is any other excess of the policy limit I as contractor/owner operator will be liable for any such amount above that limit. . . .

(Doc. No. 46-1, PageID # 520-22.)

The signature line above “Contrac[t]or/Owner Operator, Maric Transportation Inc., Predrag Maric on the last page of the Independent [*8]  Contractor and Policy Agreement contains a handwritten signature of Predrag Maric. (Id. at PageID # 522.)

Neither the 2007 Freightliner identified as VIN 1FUJA6CVX6PU98227 nor the 2012 Great Dane Trailer identified as VIN 1GRAP0620CT564202 that Ladejo was driving at the time of the accident were listed under the NTU Policy on file with Great West. (Doc. No. 38, ¶ 13.)

Wisconsin Trucks was insured for trucking liability under a policy of insurance issued by Spirit Commercial Auto Risk Retention Group (“Spirit”) at the time of the crash. (Id. at ¶ 10.) The policy issued by Spirit provided coverage for any negligence alleged on the part of Ladejo or Wisconsin Trucks giving rise to Defendants’ claims. (Id. at ¶ 11.) Spirit was placed in receivership by the Nevada Department of Insurance, is insolvent, and is in the process of liquidation. (Id. at ¶ 12.)

iii. The Underlying Lawsuit

On July 30, 2020, Defendants Quinones (as Scheele’s legal guardian) and McKenzie (Scheehle’s mother) filed a complaint, a true and accurate copy of which is attached as Exhibit C to the Stipulations of Facts, against numerous individuals and entities, including Ladejo, Maric Transportation and Predrag Maric (“Maric”), [*9]  for injuries and damages arising out of the April 7, 2018 accident in the Trumbull County Court of Common Pleas bearing case number 20CV00883 (“Trumbull County Action”). (Doc. No. 38, ¶¶ 3-4 & Ex. C.)

Great West is currently providing Maric Transportation, Maric, and Ladejo with a defense to the claims asserted against them in the Trumbull County Action pursuant to a reservation of rights. (Id. at ¶ 14.)

B. NTU Policy Language

Section I, titled “Covered Autos,” of the “Commercial Auto Cover Part Wisconsin Non-Trucking Use Coverage Form” of the NTU Policy reads in relevant part as follows:

59= INDEPENDENT CONTRACTOR COMMERCIAL AUTOS. Only those trucks, tractors and “trailers” on file with us that are leased by the “motor carrier” shown in the Declarations under this symbol and only while under a written lease agreement of thirty (30) days or more. This includes only those “autos” for which a premium has been paid for the coverages offered by the policy and only while the lease is in force. If the lease is cancelled or expires then no coverage shall apply.

(Doc. No. 38-1, PageID # 364.)

Section II, titled “Covered Autos Liability Coverage,” of the Wisconsin Non-Trucking Use Coverage Form of [*10]  the NTU Policy provides in relevant part as follows:

A. COVERAGE

We will pay all sums the “insured” legally must pay as damages because of “bodily injury” or “property damage” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of a covered “auto” only while:

1. A covered “auto” is not used to carry property in any business; and

2. A covered “auto” is not used in the business of anyone to whom the “auto” is rented, leased, or loaned.

***

We have the right and duty to defend any “insured” against a “suit” asking for such damages . . . . However, we have no duty to defend any “insured” against a “suit” seeking damages for “bodily injury” . . . to which this insurance does not apply. We may investigate and settle any claim or “suit” as we consider appropriate. Our duty to defend or settle ends when the Covered Autos Liability Coverage Limit of Insurance has been exhausted by payment of judgments or settlements.

(Id. at PageID # 366.) (Hereinafter, “the Insuring Agreement.”)

1. WHO IS AN INSURED

The following are “insureds”:

a. You for any covered “auto”.

b. Anyone else while using with your or any adult family member’s permission a covered [*11]  “auto” you own, hire or borrow except:

(1) The owner, or any “employee”, agent or driver of the owner, or anyone else from whom you hire or borrow a covered “auto”.

(2) Your “employee” or agent if the covered “auto” is owned by that “employee” or agent or a member of his or her household.

***

c. The owner or anyone else from whom you hire or borrow a covered “auto” that is a “trailer” while the “trailer” is being used exclusively by you and:

(1) Is not used to carry property in any business; and

(2) Is not used in the business of anyone to whom the “auto” is rented, leased or loaned.

(Id. at PageID # 366.)

B. EXCLUSIONS

This insurance does not apply to any of the following:

***

2. CONTRACTUAL

Liability assumed under any contract or agreement. But this exclusion does not apply to liability for damages:

a. Assumed in a contract or agreement that is an “insured contract” provided the “bodily injury” or “property damage” occurs subsequent to the execution of the contract or agreement; . . .

(Id. at PageID # 367-68) (Hereinafter, “the exception to the assumed contract exclusion.”)

***

15. MOTOR CARRIER OPERATIONS

This insurance does not apply to:

a. A covered “auto” while used to carry property in any business; [*12]  or

b. A covered “auto” while used in the business of anyone to whom the “auto” is rented, leased, or loaned.

(Id. at PageID # 370.) (Hereinafter, “the Motor Carrier Operations exclusion.”)

Under Section VI-Definitions, the term “insured contract” is defined in relevant part as follows:

L. “Insured contract” means:

***

5. That part of any other contract or agreement pertaining to your business . . . under which you assume the tort liability of another to pay for “bodily injury” or “property damage” to a third party or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement; . . .

(Id. at Page ID # 378.)

The NTU Policy also contains an endorsement titled “Motor Carrier Reimbursement” (the “Endorsement”). (Id. at PageID # 350-51.) The Endorsement modifies insurance provided under the Commercial Auto Coverage Part and provides that “the provisions of the Coverage Form apply unless modified by [it].” (Id. at PageID # 350.) It provides in relevant part as follows:

Description of Covered “Auto(s)”:

APPLIES TO ALL COVERED “AUTOS”.

A. COVERAGE

1. We will pay any contractual obligation you have to reimburse the Motor Carrier to whom you are [*13]  leased for any “loss” due to an “accident” and resulting from the ownership, maintenance or use of a covered “auto”. This coverage applies only if such “loss” is in a written agreement and is a type of “loss” listed in the SCHEDULE on this endorsement.

2. We have the right and duty to defend any “insured” against a “suit” asking for such damages. However, we have no duty to defend any “insured” against a “suit” seeking damages for “loss” to property of others to which this insurance does not apply. We may investigate and settle any claim or “suit” as we consider appropriate. Our duty to defend or settle ends when the Limit of Insurance for this coverage has been exhausted by payment of judgments or settlements.

(Id.)

II. Procedural History

On February 25, 2021, Great West filed a Complaint in this Court seeking Declaratory Judgment. (Doc. No. 1.) Specifically, Great West’s Complaint contains four counts: (1) Declaratory Judgment that claims against Maric Transportation in the Trumbull County Action are not covered under the NTU Policy because neither the tractor nor trailer are covered autos (Count I); (2) Declaratory Judgment that the alleged loss giving rise to the claims against Maric [*14]  Transportation in the Trumbull County Action are not within the coverage grant of the NTU Policy (Count II); (3) Declaratory Judgment that claims against Maric Transportation in the Trumbull County Action are excluded under the NTU Policy (Count III); and (4) Declaratory Judgement that Ladejo is not an insured under the NTU policy and/or coverage is otherwise excluded (Count IV). (Id. at 9-12.)

On June 21, 2021, Defendants Quinones and McKenzie filed an Answer and Counterclaim for Declaratory Judgment. (Doc. No. 13.) Defendants’ Counterclaim contains two counts: (1) Declaratory Judgment that Maric Transportation, Maric, and/or Ladejo are entitled to coverage under the policy’s assumed contractual liability exception (Count I); or alternatively (2) Declaratory Judgment that the policy’s unqualified limit and exclusion of coverage to non-trucking uses violates applicable financial responsibility laws and is unenforceable such that Maric Transportation, Maric, and/or Ladejo are entitled to coverage for Defendants’ claims (Count II). (Id.) On July 12, 2021, Great West answered Defendants’ Counterclaim. (Doc. No. 20.)

On March 15, 2022, Great West filed its Motion for Summary Judgment. (Doc. [*15]  No. 39.) On April 12, 2022, Defendants Quinones and McKenzie filed a Cross-Motion for Partial Summary Judgment and opposing Great West’s Motion. (Doc. No. 41.) On May 12, 2022, Great West filed a combined Opposition to Defendants’ Motion and a Reply in support of its Motion. (Doc. No. 44.) Then, on May 24, 2022, Defendants filed a Reply in support of their Motion. (Doc. No. 45.) The parties also submitted Stipulations of Facts on March 15, 2022 (Doc. No. 38), Supplemental Joint Stipulations of Facts on April 14, 2022 (Doc. No. 43), and an Amended Supplemental Joint Stipulation of Facts on September 8, 2022 (Doc. No. 46). The parties’ motions are now ripe for review.

III. Standard of Review

Summary judgment is proper “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.” Fed. R. Civ. P. 56(a). “A dispute is ‘genuine’ only if based on evidence upon which a reasonable jury could return a verdict in favor of the non-moving party.” Henderson v. Walled Lake Consol. Sch., 469 F.3d 479, 487 (6th Cir. 2006). “Thus, ‘[t]he mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.'” [*16]  Cox v. Ky. Dep’t of Transp., 53 F.3d 146, 150 (6th Cir. 1995) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)) (alteration in original). A fact is “material . . . only if its resolution might affect the outcome of the suit under the governing substantive law.” Henderson, 469 F.3d at 487.

At the summary judgment stage, “[a] court should view the facts and draw all reasonable inferences in favor of the non-moving party.” Pittman v. Experian Info. Sols., Inc., 901 F.3d 619, 628 (6th Cir. 2018). In addition, “the moving party bears the initial burden of showing that there is no genuine dispute of material fact.” Ask Chems., LP v. Comput. Packages, Inc., 593 F. App’x 506, 508 (6th Cir. 2014). The moving party may satisfy this initial burden by “identifying those parts of the record which demonstrate the absence of any genuine issue of material fact.” Lindsey v. Whirlpool Corp., 295 F. App’x 758, 764 (6th Cir. 2008). “[I]f the moving party seeks summary judgment on an issue for which it does not bear the burden of proof at trial, the moving party may [also] meet its initial burden by showing that ‘there is an absence of evidence to support the nonmoving party’s case.'” Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986)). Once the moving party satisfies its burden, “the burden shifts to the non-moving party who must then point to evidence that demonstrates that there is a genuine dispute of material fact for trial.” Ask Chems., 593 F. App’x at 508-09. “[T]he nonmoving party may not simply rely on its pleading, but must ‘produce evidence that results in a conflict of material fact to be solved [*17]  by a jury.'” MISC Berhad v. Advanced Polymer Coatings, Inc., 101 F. Supp. 3d 731, 736 (N.D. Ohio 2015) (quoting Cox, 53 F.3d at 150).

IV. Analysis

In its Motion, Great West seeks a declaration that (1) the allegations against Maric Transportation and Ladejo in the Trumbull County Action are not covered by the NTU Policy; (2) Great West is not obligated to provide coverage to either Maric Transportation or Ladejo under the NTU Policy; and (3) Defendants are bound by the Court’s coverage determination. (Doc. No. 39 at 12.) Great West argues that summary judgment should be granted in its favor for two overarching reasons: (1) the insurance coverage is not triggered here because the Vehicle is not a “covered auto” under the NTU Policy; and (2) even if the Vehicle was a covered auto, the Motor Carrier Operations exclusion applies to exclude coverage because at the time of the accident, Ladejo was using the Vehicle to transport property in the course of Wisconsin Trucks’ business, and the Vehicle was being used in the business of Wisconsin Trucks, who had rented, leased, or borrowed the Vehicle from Maric Transportation. And, according to Great West, there are no exceptions to these exclusions that would reinstate coverage. (Id. at 10-11.)

Defendants’ Motion seeks an Order from this Court (1) denying [*18]  Great West’s Motion; (2) granting Defendants’ Motion; (3) declaring that Maric Transportation, Maric, and Ladejo are entitled to a defense; and (4) dismissing the remainder of the case without prejudice as the issue of Great West’s duty to indemnify Maric Transportation, Maric, and Ladejo is premature. (Doc. No. 42 at 2.) In their Motion, Defendants argue in particular that Maric Transportation, Maric, and Ladejo contractually assumed liability for torts they committed while leased to Wisconsin Trucks, and such liability falls within the coverage afforded under the endorsement, as well as the exception to the assumed contract exclusion. (Id.)

A. Interpretation of Insurance Contracts Under Wisconsin Law

The parties do not dispute that Wisconsin law governs the interpretation of the NTU Policy and cite to Wisconsin law for the evaluation of the NTU Policy. (Doc. No. 39 at 9; Doc. No. 42 at 8.) The Court will briefly address the general principles governing the interpretation of insurance contracts under Wisconsin law. These principles will inform the Court’s subsequent analysis of the parties’ arguments. Under Wisconsin law, the Court must first “look to a policy’s initial grant of coverage.” [*19]  Casey v. Smith, 2014 WI 20, 353 Wis. 2d 354, 846 N.W.2d 791, 796 (Wis. 2014). If coverage is granted, the Court must next “examine whether any exclusions withdraw coverage from a claim.” Id. Then, “if an exclusion applies, the court will then consider whether there are any exceptions to the exclusion that reinstate coverage.” Id.

The Court interprets “policy language according to its plain and ordinary meaning as understood by a reasonable person in the position of the insured.” Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, 338 Wis. 2d 761, 809 N.W.2d 529, 535 (Wis. 2012). “Thus, the first task in construing an insurance policy is to determine whether there is ambiguity with respect to the disputed coverage.” State Farm Mut. Auto. Ins. Co. v. Langridge, 2004 WI 113, 275 Wis. 2d 35, 683 N.W.2d 75, 81 (Wis. 2004). Language is ambiguous “if it is susceptible to more than one reasonable interpretation.” Folkman v. Quamme, 2003 WI 116, 264 Wis. 2d 617, 665 N.W.2d 857, 864 (Wis. 2003) (quoting Danbeck v. Am. Family Mut. Ins. Co., 2001 WI 91, 245 Wis. 2d 186, 629 N.W.2d 150, 154 (Wis. 2001)). However, “the mere fact that a word has more than one dictionary definition, or that the parties disagree as to its meaning, does not render the word ambiguous if only one meaning comports with an insured’s objectively reasonable understanding.” Hirschhorn, 809 N.W.2d at 535.

“If there is no ambiguity in the language of an insurance policy, it is enforced as written, without resort to rules of construction or applicable principles of case law.” Folkman, 665 N.W.2d at 864. If, however, there is an ambiguous clause in the insurance policy, the clause will be construed in favor of the insured. See id. [*20]  Nevertheless, this rule has limitations. The Court does not “interpret insurance policies to provide coverage for risks that the insurer did not contemplate or underwrite and for which it has not received a premium.” Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, 268 Wis. 2d 16, 673 N.W.2d 65, 73 (Wis. 2004).

B. Commercial Auto Coverage

Great West argues that coverage under the NTU Policy is not triggered here because the Vehicle is not a “covered auto” as defined by the NTU Policy. (Doc. No. 39 at 7.) Further, Great West argues that even if coverage is triggered, because the Vehicle was “being used to carry property in the business of another and was being used in the business to one whom the truck was rented, leased, or loaned,” coverage is excluded under the NTU Policy. (Id.) Defendants do not seem to oppose Great West’s arguments regarding the interpretation and analysis of these provisions of the NTU Policy. Accordingly, and after an independent review of the NTU Policy, the Court agrees with Great West.

Under the NTU Policy’s Declarations, Covered Autos for Covered Autos Liability Coverage are described in Section I under the symbol “59.” (Doc. No. 38-1, PageID # 340.) According to symbol “59,” Covered Autos are only those that are “on file” with Great West that are leased [*21]  by the motor carrier under a written lease agreement of thirty (30) days or more. (Id. at PageID # 364.) The parties have stipulated that the Vehicle was not “listed under the NTU Policy on file with Great West.” (Doc. No. 38, ¶ 13.) Thus, the Vehicle is not a covered auto under the NTU Policy.

Further, even if the Vehicle qualified as a covered auto—and it does not—the Insuring Agreement and the Motor Carrier Operations exclusion, both of which provide that the insurance does not apply to covered autos being used to carry property in any business, or while being used in the business of anyone to whom the auto is rented, leased, or loaned, apply to preclude coverage to Maric, Maric Transportation and Ladejo. (Doc. No. 38-1, PageID # 366, 370.) The parties have stipulated that the Vehicle was being used in the business of the person or entity to whom the vehicle was rented, leased, or loaned at the time of the accident. (Doc. No. 38, ¶ 9.) Specifically, Ladejo was using the Vehicle to transport property in the course of Wisconsin Trucks’ business, and the Vehicle was being used in the business of Wisconsin Trucks, who had rented, leased, or borrowed the Vehicle from Maric Transportation. [*22]  Thus, the Covered Autos Liability Coverage does not apply here.

C. Motor Carrier Reimbursement Endorsement (the “Endorsement”)

While Defendants do not dispute Great West’s arguments regarding the interpretation of the NTU Policy’s Insuring Agreement and Motor Carrier Operations exclusion, Defendants argue that the Endorsement expands the NTU Policy’s coverage beyond that contained in the Insuring Agreement, entitling Maric Transportation, Maric, and Ladejo to a defense and indemnification under the policy. (Doc. No. 42 at 11-15.) Generally, Defendants assert, but do not cite to any evidence for their assertion, that Maric Transportation, Maric, and Ladejo, “foreseeing this possibility” that they “may be liable in tort and contractually for any damages in excess of Wisconsin Trucks’ available coverage,” purchased the endorsement to close this gap in coverage “and provide coverage where [] they assumed contractual liability under an insured contract with Wisconsin Trucks regardless of whether that liability arose from trucking or non-trucking operations.” (Id. at 8.)

Specifically, Defendants argue that the endorsement’s description of covered autos as “All Covered ‘Autos'” is “vague, confusing, [*23]  and indeterminable,” and “in light of the endorsement’s language and purpose, an objectively reasonable insured could conclude that any auto is covered so long as the insured is contractually obligated to reimburse a motor carrier to whom the insured is leased for loss arising out of the ownership, maintenance, or use of that auto.” (Id. at 14.) Defendants assert that this construction is “consistent with the purpose of the endorsement – to provide coverage for a lessor’s direct acts of negligence in leasing employees or equipment to a motor carrier by allowing the lessor to assume responsibility by contract without running afoul of the non-trucking restrictions of the Coverage Form’s Insuring Agreement” and “harmonizes the exception to the NTU Policy’s contractual liability exclusion.” (Id.)

In its Opposition, Great West argues that the Endorsement does not apply here for three overarching reasons: (1) no contractual obligation of reimbursement existed between Maric Transportation (as distinguished from Predrag Maric) and/or Ladejo with Wisconsin Trucks; (2) even if a contractual obligation existed, that contract does not require reimbursement; and (3) even if there was a contractual [*24]  obligation of reimbursement, the Vehicle was not a covered auto under the Endorsement. (Doc. No. 44 at 2-9.) The Court will address each reason in turn.

1. Contractual obligation

Defendants rely on the Independent Contractor and Policy Agreement between Maric and Wisconsin Trucks as the “contractual obligation . . . to reimburse the Motor Carrier to whom you are leased for any ‘loss’ due to an ‘accident‘ and resulting from the ownership, maintenance or use of a covered ‘auto,'” under the Endorsement, arguing that such a contract expands the NTU Policy’s coverage to cover the accident. (Doc. No. 42 at 14-15.) Great West responds that the Independent Contractor and Policy Agreement is not between either Maric Transportation and Wisconsin Trucks or Ladejo and Wisconsin Trucks, but rather, is solely between Predrag Maric in his individual capacity and Wisconsin Trucks. (Doc. No. 44 at 3-4.) In their Reply, Defendants counter that paragraph 15 of the Independent Contractor and Policy Agreement “contemplates that Maric Transportation is responsible for accurately handling paperwork and is accountable regardless of whether the paperwork is negligently lost by a driver or Maric Transportation’s [*25]  clerical employees” and that the “insurance clauses in paragraphs 19-21 and excess liability allocation in paragraph 22 are not limited to liability arising out of Maric’s personal operation of a truck, but are instead broadly worded to apply to any liability arising from an accident including claims of negligent hiring, supervision, and dispatch.” (Doc. No. 45 at 2-3.)

The Court agrees with Great West and holds that Defendants have failed to produce Rule 56 evidence of a contractual agreement between either Maric Transportation and Wisconsin Trucks or Ladejo and Wisconsin Trucks. The Independent Contractor and Policy Agreement states: “I, Predrag Maric[,] understand and agree to the terms in this contract, dated Jan. 13, 2018.” (Doc. No. 46-1.) Nowhere does it provide that it is between Maric Transportation and Wisconsin Trucks. In fact, the only place the contract mentions Maric Transportation is under Maric’s signature line. (Id.) Defendants argue that the inclusion of “Maric Transportation Inc” between “Contractor/Owner Operator” and “Predrag Maric” signifies that Maric was signing on behalf of Maric Transportation. However, Contractor/Owner Operator is how the position of the Independent [*26]  Contractor is described in the first paragraph of the contract: “I understand that I am an Independent Contractor/Owner Operator.” (Id. at ¶ 1.) Each of the paragraphs following refer to Maric as “I,” or as an individual, and no language in the contract can be read to infer that the contract is referring to Maric Transportation or any of its employees, including the language referenced by Defendants at paragraphs 15 and 19 through 22.

In fact, in describing the contract, Defendants state: “Maric was employed by Wisconsin Trucks as a dispatcher, and on January 13, 2018, signed an independent contractor agreement with Wisconsin Trucks allowing him to drive for that company.” (Doc. No. 42 at 6.) Defendants continue: “It is a fair inference that other employees of Maric Transportation including Ladejo had similar contracts with Wisconsin Trucks. (Id.) An inference is not enough. The contract at issue solely refers to Maric as the party to the contract, and the Court construes the contract to be between Maric, in his individual capacity, and Wisconsin Trucks. Neither Maric Transportation nor Ladejo are parties to the contract.

Because Defendants have offered no other evidence of a contractual [*27]  agreement between either Maric Transportation or Ladejo with Wisconsin Trucks, the Court holds that the Endorsement does not apply here and thus there is no coverage.

2. Reimbursement requirement

Even if the Court construed the Independent Contractor and Policy Agreement to be between Wisconsin Trucks and Maric Transportation or Ladejo, the Endorsement would still not apply as the contract does not impose an obligation on the insured to reimburse the motor carrier, as required by the Endorsement.

In their Motion, Defendants assert that under the contract, “the driver assumes all responsibility for liability arising from his negligence in excess of the policy limit, and Wisconsin Trucks retains the right to deduct those amounts from the driver’s pay.” (Doc. No. 42 at 15.) According to Defendants, this “equates to a contractual duty and right of reimbursement for tort liability that falls within the definition of an “insured contract” as well as the insuring agreement of the [Endorsement].” (Id.)

In its Opposition, Great West interprets Defendants’ arguments as referencing paragraphs 20 through 22 of the Independent Contractor and Policy Agreement which place responsibility for liability [*28]  in excess of the policy limit upon Maric, and to paragraph 16 of the contract affording Wisconsin Trucks’ the right to make certain deductions. (Doc. No. 44 at 4-6.) Great West argues that these provisions do not “provide a right or obligation on behalf of Predrag Maric to reimburse Wisconsin Trucks.” (Id.) In their Reply, Defendants counter that while paragraph 22 “does not specify to whom Maric Transportation/Maric would be liable, [] the fair interpretation is that it gives Wisconsin Trucks a contractual right of indemnification from Maric Transportation/Maric if it is forced to pay an injured party damages in excess of its insurance policy limits,” and thus, falls within the coverage of the Endorsement. (Doc. No. 45 at 4.)

The Court does not construe the Independent Contractor and Policy Agreement as providing a right to reimbursement. As to the issue of liability in excess of the policy limit, paragraph 22 does not specify to whom Maric would be liable, just that he would be liable for any amount above the $1 million policy limit of liability coverage provided by Wisconsin Trucks. This language does not require a reimbursement to Wisconsin Trucks, nor does it grant Wisconsin Trucks [*29]  the right to seek reimbursement for such damages.

As to the right of Wisconsin Trucks to make certain deductions, paragraph 16 of the contract lists a number of conditions, and leaves open the potential for Wisconsin Trucks to take deductions for conditions “not listed” in which Maric “acknowledge[s] and give[s] Wisconsin Trucks, Inc. permission to withdraw and/or deduct monies from [his] net revenue/pay. (Doc. No. 46-1, ¶ 16.) Again, this clause does not provide the right of Wisconsin Trucks to seek reimbursement for the listed or not listed conditions, but rather to deduct those amounts in the first instance from Maric’s pay. And, while the list does include deductions for physical damage to the trailer and towing charges resulting from an accident, it does not contain a listed condition for deductions based on liability for bodily injury or other potential liability arising from an accident. Regardless of the conditions listed or any not listed, that the contract gives Wisconsin Trucks “permission to withdraw and/or deduct monies” cannot be construed as a right to reimbursement. And, without a right to reimbursement, the Endorsement is not triggered or applicable.

Accordingly, based [*30]  on the reasons above, no coverage is afforded by the Endorsement.

3. Definition of Covered “Auto”

The Court rejects Defendants’ argument that the term covered “auto” as used in the Endorsement is ambiguous so as to trigger the Endorsement. The Endorsement “APPLIES TO ALL COVERED ‘AUTOS,'” and the parties stipulated that the truck and trailer being operated by Ladejo at the time of the accident was not on file with Great West; and the Vehicle was being used in the business of Wisconsin Trucks, to which it had been rented, leased, or owned at the time of the accident. Thus, the very language or terms of the Insuring Agreement of the policy are not triggered to provide liability coverage, and the Motor Carrier Operations Exclusion reinforces the conclusion that there is no coverage under these facts.

D. Insured Contract

Defendants also argue that the Independent Contractor and Policy Agreement can be considered a covered “insured contract” under the exception to the assumed contract exclusion. (Doc. No. 42 at 15.) Great West does not address this argument.

Defendants’ argument here is misplaced for at least two reasons. First, the Court has already determined that the Independent Contractor [*31]  and Policy Agreement is not a contract between Maric Transportation or Ladejo with Wisconsin Trucks, and thus, the contract does not give rise to coverage as to Maric Transportation or Ladejo. Second, even if Maric Transportation and/or Ladejo were parties to the contract, the Court has also already determined that coverage does not exist under the Covered Autos Liability Coverage. The Insuring Agreement provides that the insurance does not apply to covered autos being used to carry property in any business, or while being used in the business of anyone to whom the auto is rented, leased, or loaned, apply to preclude coverage to Maric Transportation and Ladejo. (Doc. No. 38-1, PageID # 366, 370.) The parties have stipulated that the Vehicle was being used in the business of the person or entity to whom the vehicle was rented, leased, or loaned at the time of the accident. (Doc. No. 38, ¶ 9.) Because there is no coverage in the first instance, the Court need not reach the exclusion to the coverage, let alone the exception to the exclusion. Accordingly, whether the Independent Contractor and Policy Agreement is, in fact, an “insured contract” as defined under the exception to the assumed [*32]  contract exclusion is irrelevant here.

E. Defendants’ “Additional Facts”

Defendants devote nearly four pages of their Motion to setting forth what they delineate or caption “ADDITIONAL FACTS.” (Doc. No. 42 at 2-5.) However, what Defendants describe as or delineate “ADDITIONAL FACTS” are only assertions or allegations, and not facts supported by any Rule 56 evidence. Initially, Defendants describe the interstate trucking industry, and cite to case law describing “chameleon carriers”¹ and the “serious and persistent hazard” that they pose. (Id. at 3-4.) Then, Defendants cite to portions of their Complaint in the Trumbull County Action for the remaining allegations set forth under “ADDITIONAL FACTS,” to include the allegations that Maric Transportation is owned by Maric, and that Ladejo “appears to have been employed by Maric Transportation and/or dispatched by Maric to work for Wisconsin Trucks the day prior to the crash.” (Id. at 4.) Further, Defendants’ arguments regarding the purpose of the Endorsement, and the insured’s motivations for purchasing the Endorsement, are speculation and are unsupported by any evidence in the record as well as by the language of the NTU Policy itself.

F. Defendants [*33]  are bound by the determinations made by this Court.

Lastly, Defendants do not seem to oppose Great West’s argument that Defendants are bound by this Court’s coverage determination. Under Ohio law, “a declaratory judgment action between an insured and insurer seeking a declaration on the applicability of coverage for injuries to a plaintiff caused by the insured is binding upon that plaintiff . . . if the declaratory judgment action is initiated by the insured or if the plaintiff is joined as a party in the declaratory judgment action.” Estate of Heintzelman v. Air Experts, Inc., 126 Ohio St. 3d 138, 2010- Ohio 3264, 931 N.E.2d 548, 554 (Ohio 2010). Thus, Defendants are bound by this Court’s determination that no coverage exists under the NTU Policy as to Maric Transportation and Ladejo.

V. Conclusion

For all the reasons set forth above, Great West’s Motion for Summary Judgment (Doc. No. 39) is hereby GRANTED, and Defendants’ Cross-Motion for Partial Summary Judgment (Doc. No. 41) is hereby DENIED. Accordingly, the allegations against Maric Transportation and Ladejo in the Trumbull County Action are not covered by the NTU Policy; Great West is not obligated to provide coverage to either Maric Transportation or Ladejo under the NTU Policy; and Defendants are bound by the Court’s coverage determinations. [*34] 

IT IS SO ORDERED.

/s/ Pamela A. Barker

PAMELA A. BARKER

U. S. DISTRICT JUDGE

Date: September 16, 2022

End of Document

---

¹ A “chameleon carrier” is described by Defendants as an “ephemeral motor carrier created by a central controlling company to escape the repercussions of repeated safety and regulatory violations.” (Doc. No. 42 at 3.)

United States District Court for the Northern District of Georgia, Gainesville Division

September 12, 2022, Decided; September 12, 2022, Filed

Civil Action No. 2:17-CV-120-RWS

Reporter

2022 U.S. Dist. LEXIS 169220 *

PATRICIA HOLLAND, Surviving Mother of KIP EUGENE HOLLAND, and WAYNE HOLLAND, as Administrator of the Estate of KIP EUGENE HOLLAND, Deceased, Plaintiffs, v. CYPRESS INSURANCE COMPANY, J.W. HARPER FARMS, and KERI BELL, as Administrator of the Estate of JAMES WENDELL HARPER, Deceased, Defendants.

Prior History: Holland v. Cypress Ins. Co., 2019 U.S. Dist. LEXIS 232427, 2019 WL 9465896 (N.D. Ga., Jan. 14, 2019)

Core Terms

attorney’s fees, contingency fee, cases, contingency fee agreement, bad faith, customary, settlement offer, trial court, expenses, Plaintiffs’, award of attorney’s fees, hourly rate, attorney’s fees award, value of professional service, contingency fee contract, calculation, value of a service, present case, jury award, Appeals, damages, costs, expert testimony, reasonable fee, trial judge, settlement, decisions, lodestar, driving, courts

Counsel:  [*1] For Patricia Holland, the surviving mother of Kip Eugene Holland, Wayne Holland, Administrator of the estate of Kip Eugene Holland, deceased, Plaintiffs: Robert S. Lazenby, LEAD ATTORNEY, Lazenby Law Group, Gainesville, GA USA; Stacey Allen Carroll, Carroll Law Firm LLC, Roswell, GA USA.

For Cypress Insurance Company, Defendant: Grant Butler Smith, LEAD ATTORNEY, Brent Michael Estes, Dennis Corry Smith & Dixon, LLP-ATL, Atlanta, GA USA; William B. Pate, LEAD ATTORNEY, Dennis, Corry, Smith & Dixon, LLP, Atlanta, GA USA; Elliot Kerzner, Kenan G. Loomis, Cozen O’Connor-Atl, Atlanta, GA USA.

For JW Harper Farms, an entity, Defendant: Grant Butler Smith, LEAD ATTORNEY, Brent Michael Estes, Dennis Corry Smith & Dixon, LLP-ATL, Atlanta, GA USA; William B. Pate, LEAD ATTORNEY, Dennis, Corry, Smith & Dixon, LLP, Atlanta, GA USA.

For Keri Bell, Administrator of the Estate of James Wendell Harper, Deceased, Defendant: Grant Butler Smith, LEAD ATTORNEY, Brent Michael Estes, Dennis Corry Smith & Dixon, LLP-ATL, Atlanta, GA USA; William B. Pate, LEAD ATTORNEY, Dennis, Corry, Smith & Dixon, LLP, Atlanta, GA USA; Laurie Webb Daniel, Webb Daniel Friedlander LLP, Atlanta, GA USA.

Judges: RICHARD W. STORY, United [*2]  States District Judge.

Opinion by: RICHARD W. STORY

Opinion

ORDER

This case comes before the Court on remand from the Eleventh Circuit Court of Appeals for this Court to reconsider the $6 million attorney fee award in light of recent state court decisions. For the reasons that follow, the Court finds the attorney fee award is reasonable and declines to vacate or reduce the award.

I. BACKGROUND

On December 8, 2016, James Harper (“Harper”) was driving a tractor-trailer in Gainesville, Georgia and lost control of the vehicle resulting in the trailer detaching from the tractor and crushing Kip Holland, a pedestrian walking beside the roadway. A witness who had driven behind Harper for the 1.5-2 miles before the incident, testified that Harper was driving “erratically, even to the point of one time crossing over into oncoming traffic” and running another truck “off the road into some gravel.” A business’s security camera recorded the wreck, and footage showed that Holland saw the trailer headed toward him before impact. A witness at the scene testified that she and two other witnesses heard Harper moaning when they went to him. Harper died as result of his injuries.

Prior to the accident, Harper completed a required [*3]  Federal Motor Carrier Safety Administration (“FMCSA”) Medical Examination to maintain his commercial driver’s license. At that time, he completed a Department of Transportation (“DOT”) Medical Examination Report form but he concealed parts of his medical history including a past brain aneurysm, lung disease, sleep apnea, chronic back pain, coughing fits, and blackouts. Based in part on this inaccurate DOT form, Harper was cleared to drive.

Harper also had a prescription for hydrocodone to be taken four times a day and refilled every 30 days. But on his DOT form, he said “No” in response to the question, “Are you currently taking medications?”

Holland’s mother and estate (“Plaintiffs”) sued Harper’s estate for wrongful death and Harper’s insurer, Cypress Insurance Company, pursuant to Georgia’s direct-action statute. Following a four-day trial, the jury returned a verdict in favor of Plaintiffs on all issues. Specifically, the jury awarded Plaintiffs $13 million for wrongful death, $2 million for pain and suffering, and $29,363 for medical and funeral expenses. [Doc. 209]. The jury found that Cypress’s insured engaged in bad faith in the transaction, pursuant to O.C.G.A. § 13-6-11, which provides for the [*4]  expenses of litigation to be awarded as damages. In a bifurcated proceeding following the liability phase and pursuant to § 13-6-11, the jury rendered a special verdict in the amount of $6 million for litigation expenses to be awarded to Plaintiffs. [Doc. 210]. Final Judgment was entered on both verdicts and against both Defendants in the amount of $21,029,263. [Doc. 211].

On March 5, 2020, Defendants filed a Motion for Judgment Notwithstanding the Verdict (“JNOV”) pursuant to Fed. R. Civ. P. 50 and alternatively for a new trial under Fed. R. Civ. P. 59(59)(a)(1)(A). [Doc. 223]. In its JNOV motion, Cypress raised several issues including challenges to its liability for bad faith damages as well as the amount of attorney fees awarded by the jury. Based on evidence that Harper gave incomplete information when participating in medical examinations for purposes of commercial licensure, evidence that Harper was driving erratically for one and a half to two miles prior to the incident and failed to get off the road and stop the truck, and evidence that Harper may have been taking hydrocodone while driving, the Court found there was sufficient evidence to support the jury’s finding of bad faith on the part of Harper and denied the JNOV motion as [*5]  to liability for bad faith damages. [Doc. 233].

As for the amount of the attorney fee award, the Court found that Plaintiffs introduced evidence of the contingency fee contract, an accounting of time spent on the case by counsel, and testimony from a local attorney who specializes in personal injury and wrongful death actions that the fee was reasonable. ([Doc. 233] at 17). No rebuttal evidence was offered by Defendants. The Court properly instructed the jury on the Georgia law governing the award of bad faith damages. (Id.). The Court found that the jury award of attorney fees equal to the fees under the contingency fee arrangement was supported by the evidence. (Id. at 18). The motion for JNOV was denied. (Id.).

On September 21, 2020, each Defendant filed a Notice of Appeal [Docs. 235 & 236]. Also, Cypress filed a Motion for Relief from Judgment seeking to have the judgment against it reduced to $1 million based on its policy limits. [Doc. 234]. The Court agreed with Cypress and granted Cypress’s motion, ordering that the judgment against Cypress be amended to reflect a judgment of $1 million. [Doc. 256].

On the appeals, the Court of Appeals affirmed all this Court’s rulings with the [*6]  exception of the $6 million attorney fee award. [Doc. 267]. As to that award, the Court of Appeals vacated the judgment and remanded to this court to review the award in light of recent Georgia state court authority.

II. DISCUSSION

A. Evidence of Attorney Fees

At trial, Plaintiffs entered into evidence the fee agreement between Plaintiffs and counsel that provides for contingent fees of 40% of the gross proceeds of recovery in the event the case went to trial. (Pl.’s Ex. 84 [Doc. 216-54]). In the event of an appeal, the agreement calls for contingent fees of at least 45% of the gross proceeds of recovery. (Id.) Plaintiffs also submitted a statement of expenses totaling $37,158.54. (Pl.’s Ex. 85 [Doc. 216-55]). Plaintiffs’ counsel submitted time sheets showing 1073.3 hours through January 27, 2020, which did not include final trial preparation, the trial, or post-trial motions. (Pl.’s Ex. 86 [Doc. 216-56]). The Court also notes that Plaintiffs’ counsel, Mr. Lazenby, tried the case without the assistance of other counsel. The participation by multiple attorneys would certainly have been reasonable as evidenced by Defendants having two attorneys at trial.

Plaintiffs also presented expert [*7]  testimony from Matt Cook, an attorney who specializes in personal injury cases. Mr. Cook described his experience handling trucking cases and explained in detail the work required to properly prosecute such cases. He testified that the 40 % contingency contract for cases going to trial is standard in Georgia. He further testified that $37,158.54 in expenses, while low, is reasonable and customary. He acknowledged that Plaintiffs’ counsel recorded 1073.3 hours in the case but noted the time sheets did not include trial preparation and actual trial time.

Mr. Cook testified as to each of the factors set out in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974), that courts regularly consider when calculating an award of attorney fees. He pointed out several exceptional factors in this case. First, the case involved several novel and difficult issues: one of the Defendants was an out-of-state insurance company; the defense of medical emergency was involved in the case; the Defendant driver died before trial and before he could be deposed. Each of these created issues outside the normal auto accident case. Second, because of the novel issues involved, special skill and knowledge were required. Because of his experience in this field, Plaintiffs’ [*8]  counsel possessed the skill and knowledge needed to address the novel issues involved. Third, the preclusion of other employment is a significant factor because Plaintiffs’ counsel is a solo practitioner. He does not manage a high volume of cases but is selective in accepting cases. Thus, it is important that he be adequately compensated for the cases he does accept. Fourth, Mr. Cook stressed that the fee requested by Plaintiffs is, almost without exception, the customary fee for this kind of work. This fee request is not an outlier, it is what is expected in cases of this kind. This fee was agreed to by counsel and his clients at the beginning of the case, and it represents the expectations of both should the litigation be successful. Based on these expectations, counsel not only invests his time, he also fronts all expenses associated with the litigation. Fifth, Mr. Cook testified that Plaintiffs’ counsel has been practicing law for 20 years and enjoys a good reputation in the county and state. Finally, the result obtained by counsel is exceptional. Taking all these factors into account, Mr. Cook offered his opinion that a 40% fee is a reasonable fee in this case.

On cross-examination, [*9]  Mr. Cook acknowledged that the jury had the authority to award the contingency fee that he testified about, a fee based on an hourly rate, or some other amount that they determined based on the evidence. He also acknowledged that a contingent fee can vary widely based on the amount of the recovery. No evidence on the attorney fee issue was offered by Defendants.

After the close of evidence and arguments by counsel, the Court instructed the jury on the law. Defendants submitted no written requests to charge in this phase of the trial. However, the Court conferred with counsel prior to charging the jury and gave an expert witness charge requested by Defendants. (Trial Tr. [Doc. 228-4] at 365). The jury was instructed that Plaintiffs must prove the actual cost of plaintiffs’ attorney fees and the reasonableness of costs. They were also instructed that they were not required to accept the opinion of the expert witness. Regarding the contingency fee agreement, the jury was instructed: “A contingency fee agreement is a guidepost to the reasonable value of the services the lawyer performed. However, you are not bound to that fee in your deliberations.” (Id. at 400). Defendants had no objections [*10]  to the instructions. (Id. at 401).

Because the fee agreement was in evidence, the jury was aware that, based on the verdict they had rendered, Plaintiffs would owe attorney fees of $6,011,745.20, representing 40% of the gross proceeds of recovery ($15,029,363), plus expenses of $37,158.54 for a total of attorney fees and expenses of $6,048,903.74. What the jury could not know at the time is that since Defendants subsequently filed an appeal, Plaintiffs now owe fees of at least, $6,763,213.35 representing 45% of the gross proceeds of recovery ($15,029,363) plus expenses of $37,158.54 for a total of attorney fees and expenses of $6,800,371.89.

B. Applicable Law

Georgia law provides “no specific formula to calculate attorney’s fees” for bad faith. In re Purvis, 512 B.R. 348, 384 (N.D. Ga. 2014). “The issue of attorney fees under OCGA § 13-6-11 is a question for the factfinder and an award will be upheld if any evidence is presented to support the award.” Burlington Air Express, Inc. v. Georgia-Pacific Corp., 217 Ga.App. 312, 312-13, 457 S.E.2d 219 (1995) (citations omitted). For an award of attorney fees, a claimant must “prove the actual costs of his attorneys and the reasonableness of those costs.” Hardnett v. Ogundele, 291 Ga. App. 241, 245, 661 S.E.2d 627 (2008) (citation omitted). “[B]oth the liability for and amount of attorney fees pursuant to OCGA § 13-6-11 are solely for the jury’s determination.” Covington square Assoc., LLC v. Ingles Markets, Inc., 287 Ga. 445, 447, 696 S.E.2d 649 (2010).

A court may consider [*11]  a contingent fee agreement and the amount it would have generated as evidence of usual and customary fees in determining both the reasonableness and the amount of an award of attorney fees. When a party seeks fees based on a contingent fee agreement, the party must show that the contingency fee percentage was a usual or customary fee for such case and that the contingency fee was a valid indicator of the value of the professional services rendered. In addition, the party seeking fees must also introduce evidence of hours, rates, or some other indication of the value of the professional services actually rendered.

Home Depot U.S.A. v. Tvrdeich, 268 Ga. App. 579, 584, 602 S.E.2d 297 (2004) (citations and quotations omitted).

In Ga. Dept. of Corrections v. Couch, 295 Ga. 469, 759 S.E.2d 804 (2014), the Georgia Supreme Court addressed the reasonable value of professional services in a § 9-11-68 case. Consistent with the above-quoted language, the court held “[W]hile certainly a guidepost to the reasonable value of the services the lawyer performed, the contingency fee agreement is not conclusive, and it cannot bind the court in determining the reasonable value.” Id. at 484. The court reversed the trial court’s award of attorney fees because the trial court had relied solely on the contingency fee agreement. The court went on to point out that such [*12]  a calculation was also erroneous because, under § 9-11-68, a party is not entitled to recover all of their attorney fees in the case. The court identified the uncertainty of when a contingent fee is earned as a complication to relying too heavily on the contingent fee in § 9-11-68 cases. Id. at 486.

“An award of attorney fees under OCGA § 13-6-11 will be affirmed if there is any evidence to support it.” Metropolitan Atlanta Rapid Transit Auth., 334 Ga. App. 665, 670 (citation omitted). “A request for attorney’s fees should not result in a second major litigation.” Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S. Ct. 1933, 76 L. Ed. 2d 40 (1983).

C. Analysis

This Court applied the foregoing applicable law in its August 21, 2020 Order (Doc. 233) denying Defendants’ motion challenging the reasonableness of the attorney fee award. The record is unchanged, and the Court finds for the same reasons previously stated that the award should not be set aside. The evidence introduced at trial that supports the decision of the jury has been reviewed in Section II.A. of this Order. That evidence satisfies the requirements of Georgia law for the award. The parties entered into a contingent fee contract requiring payment of 40% of any recovery if the case went to trial. The uncontradicted evidence showed that this contract reflected the usual and customary fee for this work. Beyond [*13]  that, an expert witness went through a full analysis of the fee as contemplated by Johnson v. Georgia Highway Express and opined that a 40% contingent fee was a reasonable fee based on those factors. Finally, plaintiffs introduced time records for time counsel spent on the case with the exception of pretrial preparation, trial, and post-trial motions. Thus, the unrefuted evidence at trial was that a 40% contingent fee was a usual and customary fee and was reasonable. As required under Georgia law, evidence of hours and rates was also provided. As all the evidence at trial supported the verdict of the jury, no further inquiry into the jury’s decision should be necessary.

However, this Court has been directed to consider its prior decision in light of two recent Georgia Court of Appeals decisions: Kennison v. Mayfield, 359 Ga. App. 52, 856 S.E.2d 738 (2021) (“Kennison”) and Cajun Contractors, Inc. v. Peachtree Prop. Sub, LLC, 360 Ga. App. 390, 861 S.E.2d 222 (2021) (“Cajun contractors”). Before addressing the cases separately, the Court will address two significant distinctions between Kennison and Cajun Contractors and the present case.

While the present case involves an award of attorney fees pursuant to OCGA § 13-6-11, both Kennison and Cajun Contractors involved claims for attorney fees pursuant to OCGA § 9-11-68, Georgia’s offer-of-settlement statute. Under that statute, a party may make an offer of settlement to an opposing party. If that [*14]  offer of settlement is rejected by plaintiff, the defendant may recover reasonable attorney fees and expenses from the date of the rejection of the offer of settlement if the final judgment against the defendant is less than 75% of the defendant’s offer. If the offer of settlement is rejected by defendant, the plaintiff may recover reasonable attorney fees and expenses from the date of the rejection of the offer of settlement if the final judgment against defendant is greater than 125% of the offer of settlement. Thus, if a party is entitled to an award of attorney fees and expenses pursuant to the statute, that award is for fees and expenses incurred from the date of the rejection of the offer of settlement through the entry of judgment. Bad faith is not a requirement for an award under the statute. Unlike OCGA § 13-6-11 which sanctions a party for bad conduct, “[t]he purpose of OCGA § 9-11-68 . . . is to encourage litigants in tort actions to make and accept good faith settlement proposals in order to avoid unnecessary litigation, which in turn supports the State’s policy of encouraging negotiations and settlements.” Shaha v. Gentry, 359 Ga. App. 613, 614, 859 S.E.2d 567 (2021).

The other distinction between Kennison and Cajun Contractors and the present case is that in both those cases, the [*15]  attorney fee decisions at issue were made by the trial judge, not a jury. The Court will now address the specific holdings of Kennison and Cajun Contractors, in turn.

In Kennison, plaintiffs made a $1 million offer-of-settlement before trial. The jury awarded plaintiffs damages of $33,438,267.82. Plaintiffs’ counsel was representing them with a contingent fee contract of 40%. Following trial, the trial judge conducted a hearing over two days and entered a 16-page order granting an attorney fee award of $12,751,258.60 and expenses of $91,018.36. Aside from the contingent fee agreement, plaintiffs also offered the following evidence in support of the fee request: estimated number of hours counsel worked on the entire case; estimated hours worked on the case after the offer of judgment was rejected; counsel’s hourly rate for handling hourly work; expert testimony as to the reasonableness of the hours worked and hourly rate of counsel; expert testimony that a 40% contingent fee is the usual and customary fee for such cases; a summary of the work performed by counsel; and the high degree of difficulty of the case. The trial judge also noted the limited evidence offered by defendants to rebut plaintiffs’ expert testimony [*16]  and the judge’s own observations regarding performance of counsel.

The decision in Kennison was splintered. The disagreement centered on two issues: (1) What was a reasonable fee? and (2) How should that fee be apportioned between pre-rejection and post-rejection work? Presiding Judge Doyle wrote the decision for the court. However, the division of the decision addressing these issues “is not binding precedent as a majority of the judges did not fully concur in the rationale in that division.” Cajun Contractors, 360 Ga. App at 406. The decision held that the evidence in the trial court failed to establish the reasonable value of the professional services rendered by counsel. The court rejected the value-added method the trial court had used to determine the value of the services. Essentially, this method involved reducing the final judgment by the $1 million offer of settlement to determine how much value was provided by the work done after the rejection of the offer of settlement. Kennison, 359 Ga. App. at 66-67. Instead, the Court of Appeals’ analysis was heavily weighted toward consideration of hours actually expended and a reasonable hourly rate, essentially a lodestar analysis. In this analysis, the court rejected the hourly rate approved by the trial [*17]  court because the trial court considered risk/reward in valuing the services. The court found that because the trial court considered the risk of nonpayment in accepting $1900 as counsel’s hourly rate, that rate was not “a valid indicator of the value of the professional services rendered,” as is required by Couch. Id. at 67-68. The Court also criticized plaintiffs’ counsel’s failure to better document his hours. Id. at 69. Little consideration was given to the contingent fee agreement by the court. As for the apportionment of the services between pre-rejection and post-rejection, the Court held that the trial court erred in its finding as to the value of services rendered after rejection of the offer because the trial judge improperly included work done on behalf of plaintiffs prior to the date of the rejection of the settlement offer. Id. at 65.

Judge McFadden wrote a dissent that was joined by four other judges, with one additional judge concurring in the judgment only. Id. at 753 (McFadden, C.J., dissenting). As an initial matter, the dissent found that the evidence presented in the trial court supported the court’s findings on the reasonable value of services. Id. at 755. In a thoughtful review and analysis of the trial court’s [*18]  decision, the dissent found that the trial court ruling was consistent with prior holdings, including Couch, which held that a contingent fee agreement could serve as the basis for a fee award if the party shows “that the contingency fee percentage was a usual or customary fee for such cases and that the contingency fee was a valid indicator of the value of the professional services rendered.” Id. at 759. The dissent found that the evidence presented to the trial court supported the trial court’s finding that the contingent fee was a usual and customary fee that indicated the value of the professional services rendered. The trial court had taken the additional step of receiving “evidence of hours, rates, or some other indication of the value of the professional services actually rendered” as required by Couch. Id. The dissent went on to disagree with the concerns raised by Presiding Judge Doyle as to the trial court’s determination of the amount of reasonable attorney fees incurred following rejection of the offer. Id. at 759-61. However, those issues are not relevant to the issues in the present case, and the Court will not address them, except to say that the ultimate need to apportion the fees between pre-rejection [*19]  and post-rejection of the offer of settlement appears to have a significant impact on the court’s calculation of the reasonable value of fees.

Turning to Cajun Contractors, the Georgia Court of Appeals upheld an attorney fee award pursuant to OCGA § 9-11-68. Plaintiff served defendant with an offer to settle the case for $75,000. Defendant rejected the offer and served on plaintiff two offers of settlement, one for $25,000 and the other for $50,000. At trial, plaintiff received a judgment of $5,250,000 and filed a motion for attorney fees pursuant to OCGA § 9-11-68. In support of the motion, plaintiff’s counsel submitted estimates of hours worked on the case between the rejection of the offer of settlement and judgment. An expert also offered an affidavit that the 40% contingent fee agreed upon was the ordinary, customary, and reasonable fee in the Atlanta area. The expert also opined that the 40% contingent fee was reasonable in the case. Based on the 40% contingent fee, plaintiff asserted he had incurred $2,100,000 in attorney fees. Plaintiff offered three alternative methods for calculating the pro rata fee under OCGA § 9-11-68: “Value Added Over Defense Offer” approach resulting in a proposed fee award of $2,080,000; “Value Added Over Plaintiff’s [*20]  9-11-68 Offer” approach resulting in a proposed fee award of $2,070,000; and “Percentage of Work Performed” approach resulting in a proposed fee award of $1,911,000.

The trial court conducted a hearing at which plaintiff did not introduce any additional evidence, but defendant presented expert testimony challenging the amount of fees requested by plaintiff. The trial court declined to use any of the approaches proposed by plaintiff. Instead, the trial court multiplied the number of hours expended by an hourly rate that it determined was reasonable obtaining a total of $350,000. Based on counsel having obtained a result worth 73 times more than the offer of judgment, the court added a multiplier of three times the $350,000 guide for a total fee of $1,050,000. The Court of Appeals held that the evidence submitted by plaintiff was sufficient to establish the value of the professional services actually rendered by trial counsel. Cajun Contractors, 360 Ga. App. at 406. The court specifically cited the 40% contingency fee as a proper factor to be included in the analysis. Id. The defendant challenged the use of a multiplier as an improper employment of the lodestar methodology used by federal courts. The court rejected the argument [*21]  finding that the court has the discretion to use the multiplier independent of any lodestar analysis that might be used by a federal court. Id. at 407-08.

The undersigned finds nothing in Kennison or Cajun Contractors that alters the conclusion that the attorney fee award in the present case is reasonable. The analysis in those cases is driven by the fact that the court must apportion the value of services between two different time periods. In that context, a court rightfully relies heavily on hours actually expended by the attorney. Apportioning a contingent fee in that context would not only be difficult but also would likely not serve the purposes of the offer-of-settlement statute. See Couch, 259 Ga. at 486. The object of the analysis in a § 9-11-68 case is to determine the value of additional work an attorney did after an offer of settlement was rejected. The inquiry is necessarily tied to time. The fact that the lawyer will receive a contingent fee, while relevant to this inquiry, is not conclusively probative of the value of the hours. Rather, it should be a factor to be considered in determining what that value is. Because § 9-11-68 is not a sanction for bad conduct but is an incentive to encourage settlement, having the fee calculation be tied to the [*22]  work resulting from the rejection of the offer is consistent with the goal of the statute. The idea is that the party is paying for the extra work required because of the rejection of the offer by that party. The award is not intended to be a windfall to the prevailing party. Rather, the payment should put the prevailing party in the same position it would have been in had the offer been accepted. In fairness to a party declining an offer, there should be an ability to calculate with some degree of certainty the risk of declining the offer. That certainty comes from the requirement that there be a reasonable fee for the lawyer’s time. Allowing a party to get a windfall based on an unexpected verdict would not serve the purpose of the statute.

On the flipside, § 13-6-11 fees are based on bad faith. A party has engaged in conduct that warrants imposition of a sanction. The idea here is not simply to hold the party responsible for additional work that it may have caused. Rather, the intent is to punish the wrongdoers by making them pay the attorney fees for the prevailing party. This is not about a mathematical apportionment of costs. The statute contemplates that all of a plaintiff’s fees and [*23]  costs will be paid by the defendant so long as they are customary and reasonable. A contingent fee is customary and reasonable in personal injury cases. Almost without exception, that is the cost the plaintiff will have in the case.

If intent of the statute is to be honored, then contingent fees should be awarded if they are customary and reasonable. The Georgia courts have approved the awarding of fees based on contingent fee agreements. See Brock Built, LLC v. Blake, 316 Ga. App. 710,715, 730 S.E.2d 180 (2012) (approving fees under a litigation employment clause based on contingent fee agreement but vacating for consideration of dismissed claim); City of Atlanta v. Hofrichter/Stiakakis, 291 Ga. App. 883, 889-90, 663 S.E.2d 379 (2008) (approving §13-6-11 bad faith fees based on contingent fee agreement with supporting evidence that this was customary fee and testimony attorney “took over 26 depositions and had spent hundreds of hours on the case”); Home Depot U.S.A.,268 Ga. App. at 884-85 (approving award of §13-6-11 bad faith fees based on contingency fee contract and testimony that counsel “probably got into five boxes and a full table of things. And it took a great deal of work”).

A review of cases cited by Defendants where a contingent fee was not awarded reveals that most of the cases are cases involving offers of judgment. These cases include Couch, Kennison, and Cajun Contractors that are discussed above. [*24]  Khalia v. Rosebud, 353 Ga. App. 350, 355-56, 836 S.E.2d 840 (2019) is a § 9-11-68 case that considered a contingent fee and awarded fees less than the contingent fee but more than the hourly rate. In those bad faith cases cited by Defendants where the court declined to follow a contingent fee agreement, the party has typically relied simply on the agreement and provided little or no additional supporting evidence. See Hagan v. Keyes, 329 Ga. App. 178, 764 S.E.2d 423 (2014) (reversing award of §13-6-11 bad faith fees when only evidence of fees was evidence plaintiff owed his attorney $12,000); Rivergate Corp. v. BCCP Enter., Inc., 198 Ga. App. 761, 761-63 (1991) (no evidence of amount or reasonableness of fees); Sims v. GT Architecture Contractors Corp., 292 Ga. App. 94, 663 S.E.2d 797, (§13-6-11 bad faith fees claim failed when only evidence of reasonableness of fees was testimony of plaintiff and her counsel as to the amount of the fees); Smith v. Travis Pruitt & Assoc., P.C., 265 Ga. 347, 348 (1995) (award of attorney fees in fraud action reversed when only evidence of amount of fees was counsel’s statement that fees “will exceed ten thousand dollars”); Southern Cellular Telecom v. Banks, 209 Ga. App. 401, 402, 433 S.E.2d 606 (1993) (holding that a court may consider but is not bound by a contingent fee agreement when awarding attorney fees); Hardy v. Cauthen, No. CV406-194, 2009 U.S. Dist. LEXIS 35162, 2009 WL 1154105, at *1) (denying attorney fees in Georgia RICO case when only evidence was contingent fee contract); Crosby v. DeMeyer, 229 Ga. App. 672, 674, 494 S.E.2d 568 z91997) (reversing jury’s award of §13-6-11 attorney fees when only evidence of fees was plaintiff’s testimony that she “had to borrow approximately $4,700 to pay fees”); Kwickie/Flash Foods, Inc., 256 Ga. App. 556, 558, 568 S.E.2d 816 (2002) (vacating trial [*25]  judge’s award of §13-6-11 attorney fees and remanding for an evidentiary hearing when only evidence in support of fees was evidence of the actual costs of the attorney); Patton v. Turnage, 260 Ga. App. 744, 746-49, 580 S.E.2d 604 (2003) (jury award of §13-6-11 attorney fees reversed when only evidence was that plaintiff had a 15% contingent fee contract with counsel).

Unlike the parties in the cases relied upon by Defendants, Plaintiffs submitted substantial evidence in support of the attorney fee claim. In fact, the Court fails to see that there is much more a party could offer to support a contingent fee agreement than was offered by Plaintiffs here. Thus, if Georgia state court decisions holding that bad faith fees may be based on a contingent fee contract remain viable, then this is a case where such an award should be upheld. If the law requires a party to justify its fees based on numbers of hours expended and a fair hourly rate, then use of the lodestar method should be acknowledged. Yet, Georgia courts have specifically denied that the lodestar method has been adopted by Georgia courts. See Cajun Contractors, 360 Ga. App. at 420 (Gobeil, J. dissenting).

A final distinction between the present case and Kennison and Cajun Contractors should be noted. “The issue of attorney fees under OCGA § 13-6-11 is a question for the (factfinder) [*26]  and an award will be upheld if any evidence is presented to support the award.” Burlington Air Express, Inc., 217 Ga. App. at 312-13 (citation omitted). Unlike a decision by a trial judge that includes findings of fact and conclusions of law that can be parsed over in search of error, the award of attorney fees in this case was made by a jury that had been properly instructed on the applicable law. “We not only can, but we must, presume that juries follow their instructions. The presumption that they do is rock solid law enshrined in a host of decisions of the Supreme Court and this Court.” In r Price, 964 F. 3d 1045, 1049 (11th Cir. 2020) (citations omitted). Therefore, the decision of the jury should be upheld.

To be clear, a jury is not required to base its award solely on the contingent fee. In his questioning, Defendants’ counsel made the point that a contingent fee can vary widely based on the amount of the recovery. (Trial Tr. [Doc. 228-4] at 396-97). If the amount a jury awarded as damages were of a magnitude that the jury concluded that the contingent fee resulting from that award was unreasonable, the jury would be authorized to award fees in an amount other than that called for by the fee agreement. Even though the plaintiff would owe her attorney fees greater than were [*27]  awarded by the jury, such an award would be consistent with Georgia law and consistent with the instructions given to the jury at trial in this case.

III. Conclusion

Having reviewed the award of attorney fees in light of recent state court decisions, the Court finds that the award complies with Georgia law and is reasonable. The Court therefore DENIES Defendants’ request that the Court reduce or vacate the attorney fee award.

SO ORDERED this 12th day of September, 2022.

/s/ Richard W. Story

RICHARD W. STORY

United States District Judge

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