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Wetch v. Crum & Forster Commercial Ins.

United States District Court, D. South Dakota, Western Division

September 30, 2019

DAVID WETCH, Plaintiff,



         United States Magistrate Judge Veronica L. Duffy filed a report and recommendation (“R&R”). (Docket 82). Defendants filed objections to the R&R. (Dockets 83 & 83-1). Plaintiff filed a response to defendants' objections. (Docket 94). By a March 21, 2019, order the court granted the defendants' motion to dismiss “count VI of the amended complaint, exploitation of an adult with a disability.” (Docket 120 at p. 11). The court reserved ruling on “the remainder of the recommendations in the R&R (Docket 82) associated with defendants' Rule 12(b)(6) motions to dismiss and the remainder of defendants' objections (Docket 83)[.]” Id. For the reasons stated below, defendants' objections (Dockets 83 & 83-1) to the R&R are overruled. The court adopts the R&R consistent with this order.


         Plaintiff David Wetch filed a six-count amended complaint against all four defendants.[1] (Docket 44). The five claims remaining asserted the following: count I, bad faith; count II, intentional infliction of emotional distress; count III, Medicare Secondary Payer Act private cause of action; count IV, [2] conversion; and count V, exemplary and punitive damages. Id. at pp. 13-17.

         Defendants Crum & Forster Commercial Insurance (“C&F Commercial”), Crum & Forster Holdings Corporation (“C&F Holdings”) and North River Insurance Company (“North River”) filed motions to dismiss the amended complaint pursuant to Fed.R.Civ.P. 12(b)(2) and(b)(6). (Dockets 45 & 46). They assert the amended complaint fails to state a claim upon which relief may be granted. Id. Defendant United States Fire Insurance Company (“U.S. Fire”) filed a motion pursuant to Rule 12(b)(6) to dismiss plaintiff's count VI of the amended complaint (Docket 47) and subsequently filed an answer asserting the amended complaint “fails to state a claim for relief against defendant and should therefore be dismissed.” (Docket 50 at p. 26 ¶ 2).

         Pursuant to 28 U.S.C. § 636, the case was referred to Magistrate Judge Duffy “for the purposes of resolving pretrial motions and conducting any necessary hearings, including evidentiary hearings . . . .” (Docket 75). The magistrate judge issued a R&R addressing defendants' motions. (Docket 82). The report recommended, in relevant part, the following:

1. C&F Holdings' “arguments for dismissal on the basis of Rule 12(b)(6) (failure to state a claim) . . . be denied as moot.” Id. at p. 49 ¶ 1 (bold and capitalization omitted);
2. C&F Commercial's and North River's motion to dismiss the “remaining counts against these two defendants should be denied.” Id. (bold and capitalization omitted); and
3. U.S. Fire's motion to dismiss “should be . . . denied as to all . . . counts.” Id. ¶ 3 (bold and capitalization omitted).

C&F Commercial and North River timely filed objections to the R&R. (Docket 83).[3] Pursuant to Fed.R.Civ.P. 72(b)(2) plaintiff timely filed a response (Docket 94) to defendants' objections. See Docket 120 at p. 8.

         Defendants filed 39 specific objections to the R&R. (Docket 83-1). Several of defendants' objections relate to the R&R's consideration of the 1992 litigation captioned Wetch v. North River Insurance Co. and Crum & Forster Commercial Insurance Co., CIV. No. 92-5123 (D.S.D. 1992) (“1992 litigation”). Defendants claim the R&R “includes independent research relating to plaintiff's 1992 litigation, which was not submitted by either party, and for which defendants were not given any notice or an opportunity to be heard before the [R&R] was filed.” (Docket 83 at p. 2). Defendants contend “[p]laintiff did not produce [the] 1992 complaint, [d]efendants' 1992 motion and answer (which, while not discussed in the [R&R], included a motion to dismiss) or any evidence adduced by either party in the 1992 litigation.” Id. at p. 10. For these reasons, defendants argue their objections to the R&R “should be granted on the basis . . . the 1992 litigation was not part of the record.” Id.

         With each specific objection associated with the 1992 litigation, defendants' basis for the objection is “[j]udicial [n]otice of facts without notice and opportunity.” (Docket 83-1 at pp. 1-2, 5-6 & 10). Other variations of the same objection interposed by the defendants are the “[e]vidence not in record, ” “[n]ot in evidence, ” “[i]t is not part of the record in this case, ” “[e]vidence not before court” or “[a]nswer not in evidence.” Id. at pp. 1, 5-6 & 9-10. While making these objections, defendants also ask the court to specifically consider parts of the 1992 litigation. Id. at pp. 1-2, 6-10; see also Dockets 83 at pp. 3, 5-8 & 15 and 84-1 through 84-8.

         Defendants were on notice by plaintiff's complaint that the 1992 litigation would play some role in the present litigation. See Dockets 1 ¶¶ 16- 18 and 1-2.[4] Plaintiff's submissions in response to defendants' motion to dismiss specifically referenced the 1992 litigation. See Dockets 24; 28 at pp. 3-5; and 28-1 at pp. 2-4. In fact, defendants' reply brief specifically drew the magistrate judge's attention to the 1992 litigation. See Docket 30 at pp. 6 & 9. Plaintiff's supplemental response again referenced the 1992 litigation. See Dockets 52 at pp. 5-6 and 53-4 at pp. 2-3.

         As will be highlighted later in this order, the magistrate judge took judicial notice of facts which were part of the earlier litigation between the same parties. See Fed.R.Evid. 201(b) and (b)(2) (“The court may judicially notice a fact that is not subject to reasonable dispute because it . . . can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”). Rule 201 further provides that “[o]n timely request, a party is entitled to be heard on the propriety of taking judicial notice and the nature of the fact to be noticed. If the court takes judicial notice before notifying a party, the party, on request, is still entitled to be heard.” Fed.R.Evid. Rule 201(e). Finally, under Rule 201, the magistrate judge “must take judicial notice if a party requests it and the court is supplied with the necessary information.” Fed.R.Evid. 201(c)(2). Defendants were on notice the court would likely review the 1992 litigation since it was readily accessible through the CM/ECF court indexing system and had been referenced by both parties. At no time during briefing on defendants' motion to dismiss did they request leave to be heard regarding the propriety of considering the 1992 litigation. It is disingenuous for defendants to assert objections to the work of the magistrate judge when defendants themselves made reference to the 1992 litigation.

         The court finds defendants' judicial notice objections are without merit. The magistrate judge properly considered the 1992 litigation and incorporated facts which could not be challenged. Defendants' objections based on judicial notice are overruled.

         Turning to defendants' specific objections to statements in the R&R, the court will address each objection without reference to the page of the R&R where the statement was made. Defendants' objections are as follows:

         1. North River and C&F Commercial Ins. specifically admitted they provided the relevant workers compensation insurance and adjusting services in connection with Mr. Wetch's claim. (Referencing 1992 litigation, Docket 5 at p. 4).

         Defendants claim there is no evidence in the record to support this statement. (Docket 83-1 at p. 1). In plaintiff's complaint in the 1992 litigation, Mr. Wetch alleged:

4. At all times relevant herein, North River Insurance Company provided worker's compensation insurance to the Employer.
5. At all times relevant herein, the Defendant Crum & Forster Commercial Insurance provided adjusting and claims services to the Insurer, North River Insurance Company.

(1992 litigation, Docket 1 at p. 7 ¶¶ 4 & 5). In their joint answer, North River and C&F Commercial admitted paragraphs 4 and 5 of the complaint. Id., Docket 5 ¶ XI.

         Defendants' objection to the factual statement made in the R&R is without merit. It is first-year law school civil procedure that an answer which admits an allegation of a complaint is deemed to be true and no further proof is required of the fact stated. “In responding to a pleading, a party must . . . admit or deny the allegations alleged against it by an opposing party.” Fed.R.Civ.P. 8(b)(1)(B). An answer which admits an allegation in the complaint concedes the statement is true. See Commonwealth of Kentucky v. State of Indiana, 281 U.S. 163, 175 (1930) (“By admitting in its answer that the allegations of the complaint are true, the state of Indiana admits the making of the contract and the authority of its officers to make it under the applicable legislation. Not only are the allegations of fact in the complaint conceded to be true, but there is also no dispute as to the legal import of these facts.”).

         The statement in the R&R is an accurate summary of the allegations in the complaint and the defendants' answer in the 1992 litigation. Defendants' objection 1 is overruled.

         2. North River and C & F Commercial Ins. filed a very extensive joint answer in which a veritable litany of affirmative defenses were [sic] raised, but they never argued that the court lacked personal jurisdiction over them. (Referencing 1992 litigation, Docket 5).

         Defendants contend this statement is not based on any evidence in the record. (Docket 83-1 at p. 1). A cursory examination of the answer filed by North River and C&F Commercial in the 1992 litigation allows the court to conclude the answer was extensive and contained several affirmative defenses but the defendants never raised the absence of personal jurisdiction to claim the court should not proceed on plaintiff's complaint. See 1992 litigation, Docket 5.

         The statement in the R&R is an accurate summary of defendants' 1992 litigation answer. Defendants' objection 2 is overruled.

         3. Neither North River nor C & F Commercial Ins. ever moved to dismiss for lack of personal jurisdiction in this prior federal case involving these same parties, this same work injury, and this same obligation or lack thereof to pay workers compensation benefits.

         Defendants argue this observation in the R&R is not based on any evidence in the record. (Docket 83-1 at p. 1). Defendants fail to point to any filing in the 1992 litigation which supports their objection. A review of the 1992 litigation permits the court to find the statement in the R&R is a proper conclusion derived from the earlier case.

         The statement in the R&R is an appropriate observation and conclusion derived from a review of the 1992 litigation. Defendants' objection 3 is overruled.

         4. Apparently the distinction was being drawn for purposes of determining the appropriate defendant's net worth to submit to the jury in connection with Mr. Wetch's claim for punitive damages. (Referencing 1992 litigation, Dockets 57 & 58).

         Defendants submit this observation in the R&R is not based on any evidence in the record. (Docket 83-1 at p. 2). While the magistrate judge may not have the opportunity to specifically review the defendants' pleadings in the 1992 litigation, it is clear from the docket text in CM/ECF the documents were associated with the financial condition of North River and C&F Commercial. See 1992 litigation, Dockets 57 (“Motion in limine re: punitive damages/financial condition by defendant North River . . . [and] Crum and Forster Ins[.]”) and 58 (“Memorandum by defendant North River . . ., defendant Crum & Forster Ins[.] in support of motion in limine re: punitive dam[ages]/ financial condition[.]”).

         The magistrate judge's statement is a fair comment on at least one of the reasons the defendants may have wanted to separate themselves from Mr. Wetch's claims. Defendant's objection 4 is overruled.

         5. Mr. Donovan further asserted that C & F Commercial Ins. undertook actions on behalf of North River-i.e. that C & F Commercial Ins. was the agent of North River.

         Defendants assert this statement “is in error.” (Docket 83-1 at p. 2). They claim Mr. Donovan's affidavit did not state “that Crum & Forster Commercial Insurance was an agent of North River or that it had undertaken any actions on behalf of North River.” Id. Instead, defendants claim “Mr. Donovan actually attested all actions taken in the [1992 litigation was] undertaken by North River, which does business under the trade name Crum & Forster Commercial Insurance.” Id.

         Mr. Donovan's 1993 affidavit was filed in the current case as an exhibit in support of plaintiff's brief in resistance to defendants' motions. See Docket 28-1 at pp. 2-5. Mr. Donovan stated “[t]he proper trade name pursuant to which several insurers owned directly or indirectly by Crum and Forster, Inc., a New Jersey corporation did business [as] ‘Crum & Forster Commercial Insurance.' ” Id. ¶ III. The affidavit continued, “[t]he activities of The North River Insurance Company in this action [the 1992 litigation] were undertaken by that company. No contention is being made that The North River Insurance Company should not be held liable for any act done by it or its representative under the trade name ‘Crum and Forster Commercial Insurance.' ” Id. ¶ V (emphasis added).

         While Mr. Donovan's affidavit did not use the term “agent, ” it is a fair reading of the statement that its representative, its agent, was “Crum and Forster Commercial Insurance.” Id. The R&R is a fair interpretation of Mr. Donovan's affidavit. Defendants' objection 5 is overruled.

         6. Mr. Donovan assured the court it was not making any contention that North River should not be held liable for any acts undertaken by C & F Commercial Ins. on its behalf. (Emphasis in R&R).

         Defendants claim this statement “is in error . . . . [because] Mr. Donovan's affidavit plainly states that the actions taken in the underlying matter were taken by North River―not Crum & Forster Commercial Insurance, which is merely a trade name under which North River did business.” (Docket 83-1 at p. 2). Again, the affidavit specifically stated that “[n]o contention is being made that The North River Insurance Company should not be held liable for any act done by it or its representative under the trade name ‘Crum and Forster Commercial Insurance.' ” (Docket 28-1 ¶ V) (emphasis added).

         If defendants' argument was correct, the affidavit would not have referenced North River's “representative” and the declaration made by Mr. Donovan would have simply ended with the words “done by it.” Id. The statement by the magistrate judge is a proper interpretation of Mr. Donovan's 1993 affidavit. Defendants' objection 6 is overruled.

         7. If Mr. Donovan's affidavit was truthful and C & F Commercial Ins. has no employees, then Ms. Hoek appears to have been employed by both North River and U.S. Fire Ins. simultaneously as their claims adjustor. . . . Another possibility is that Mr. Donovan's affidavit was untruthful and Ms. Hoek was an employee of C & F Commercial Ins. (Emphasis in R&R; referencing Docket 53-5).

         Defendants argue “[i]t is uncommon for an employee to work for both the parent company and its subsidiary.” (Docket 83-1 at p. 2). Defendants submit that just because “Ms. Hoek was employed by both North River and U.S. Fire does not make Mr. Donovan's affidavit untruthful.” Id.

         Mr. Donovan claims C&F Commercial has no employees, yet it may have been a representative of North River. (Docket 28-1 ¶¶ IV and V). Ms. Hoek, on the other hand, acted as both a claims adjustor for U.S. Fire and North River. (Docket 52 at pp. 5-6). Notwithstanding defendants' assertions, C&F Commercial was the only named insurer in the case cited by plaintiff, Suhn v. Hyland Angus Ranch, Employer, and Crum & Forster Commercial Insurance, Insurer, S.D. Department of Labor, HF No. 278, 1990/91, 1992 WL 518728 (May 5, 1992).

         The court finds the magistrate judge's statement was a fair comment on the confusion created by C&F Commercial, North River and U.S. Fire. Since Ms. Hoek was the claims adjustor in Suhn and C&F Commercial was the only identified insurer in that workers' compensation case before the South Dakota Department of Labor, Division of Labor and Management (“SDDOL”), it is reasonable to conclude Ms. Hoek was an employee of C&F Commercial. If that conclusion is correct, then it is a “possibility” that Mr. Donovan's statement was untruthful. (Docket 82 at p. 5). Defendants' objection 7 is overruled.

         8. In proceedings before the SDDOL in late 2015, C & F Commercial Ins. appeared and defended its position that the medical expenses were not, or not wholly, its obligation to pay under the 1994 stipulation. (Referencing Docket 1-15).

         Defendants claim this statement in the R&R is not accurate because “C & F Commercial Ins. did not ‘appear and defend' [in the 2015 SDDOL proceeding].” (Docket 83-1 at p. 3). Like in Suhn, C&F Commercial is the only named insurer identified in Mr. Wetch's worker's compensation case before the SDDOL. See Docket 1-15. C&F Commercial did appear and defend against Mr. Wetch's claims in 2015. Id. The statement ...

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