E-Alert Case Updates

Third Party Complaint Fails to State a Claim for Tortious Interference or Indemnification; Sufficiently Alleges Claim for Contribution

Certain Underwriters at Lloyd’s, London v. R.J. Wilson & Assoc.
No. CCB-11-1809 (Maryland District Court, June 25, 2013)
by Elisabeth R. Connell, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

On June 25, 2013, Judge Blake granted and denied in part a motion to dismiss the third-party complaint (’TPC’) in the above case, removing any possibility of an award of punitive damages against the third party, NiiS. The court found that the TPC failed to allege a cause of action for tortious interference or for indemnification, and granted the motion to dismiss as to those claims. The TPC sufficiently alleged a cause of action for contribution, however, and a determination of whether the third party is entitled to immunity, as an agent of the plaintiff in the case, requires further factual discovery. Consequently, the court denied the motion to dismiss as to the claim for contribution on these grounds.

This case arose from a contract between Certain Underwriters of Lloyd’s (‘Lloyd’s’) and two related businesses in the U.S.; R.J. Wilson & Associates (‘Wilson’) and Medical Benefits Administrators of MD, Inc. (‘MBA’). The contract formed between these parties established Lloyd’s as an insurer of employer self-funded benefit plans. Per the agreement, Wilson was authorized to act as an insurance agent for Lloyd’s and MBA was to act as the claims administrator. When claims against an insured reached a certain level, Lloyd’s was to provide an advancement of funds. Any excess funds advanced to the insured that were not needed to pay their claims were required to be returned to Lloyd’s. Wilson was responsible for overseeing this process, ensuring recoupment of those payments, and providing a monthly report to Lloyd’s tracking these efforts. In June 2008, Wilson’s monthly report revealed more than $1 million in advances that had never been repaid. At this time, Lloyd’s employed the third party to this suit, NiiS, to conduct a reconciliation review of Wilson’s efforts. NiiS was unable to complete this audit due to Wilson and MBA’s failure to maintain records of these transactions and Lloyd’s consequently filed this lawsuit.

The Court granted leave to Wilson to file a third-party complaint against NiiS, alleging claims of tortious interference with contractual obligations, indemnification, and contribution. NiiS subsequently filed a motion to dismiss the third party complaint for failure to state a claim.

NiiS first argued that all the claims against them should be dismissed because they acted exclusively as an agent of Lloyd’s, entitling them to immunity from liability. The court noted that the existence of an agency relationship is a question of fact that required further factual discovery to resolve, and declined to dismiss the third party complaint on those grounds.

The Court did agree with NiiS’s argument that the TPC failed to state a claim for tortious interference. To allege sufficient facts demonstrating that NiiS intentionally engaged in a pattern of conduct to ruin Wilson’s relationship with Lloyd’s, Wilson was required to allege facts that would plausibly rise to the requisite malicious or unlawful level. Wilson merely alleged that NiiS redirected payments, interrupted the claims handling process, directed money away from Wilson to its own accounts, and gathered information about Wilson’s records, clients, and bookkeeping. These allegations were insufficient to maintain an action for tortious interference. This was the only claim alleged in the TPC that would have allowed an award of punitive damages, so with this dismissal, the court removed any possibility of an award of punitive damages against NiiS.

The Court also agreed that the TPC failed to state a claim for indemnification because Maryland law allows parties who were passively negligent to seek indemnification from other parties who were actively negligent. Lloyd’s only alleged active wrongdoing by Wilson, so any judgment against Wilson necessarily would require a determination that they were actively negligent, disqualifying them from seeking indemnification from any other party.

Finally, the court agreed that the TPC sufficiently alleged a claim for contribution because it was feasible that Wilson would be able to prove that NiiS contributed to the losses suffered by Lloyd’s by abusing its position as auditor to improperly hinder Wilson’s claims processing. NiiS may be immune from all liability in this suit if they were acting exclusively as an agent of Lloyd’s, or they may be liable as a contributing tortfeasor to the harm suffered by Lloyd’s, but either determination requires further factual discovery and could not be resolved through a motion to dismiss.