Filed: Jun. 27, 2017
Latest Update: Mar. 03, 2020
Summary: Case: 16-20472 Document: 00514051164 Page: 1 Date Filed: 06/27/2017 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit No. 16-20472 FILED June 27, 2017 LIBERTY MUTUAL INSURANCE COMPANY Lyle W. Cayce Clerk Plaintiff - Appellee v. SERVISAIR, L.L.C., now known as Swissport SA, L.L.C.; SERVISAIR USA, INCORPORATED; SERVISAIR FUEL SERVICES, L.L.C., now known as Swissport SA Fuel Services, L.L.C.; TRI-STAR ACQUISITION CORPORATION, Defendants - Appel
Summary: Case: 16-20472 Document: 00514051164 Page: 1 Date Filed: 06/27/2017 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit No. 16-20472 FILED June 27, 2017 LIBERTY MUTUAL INSURANCE COMPANY Lyle W. Cayce Clerk Plaintiff - Appellee v. SERVISAIR, L.L.C., now known as Swissport SA, L.L.C.; SERVISAIR USA, INCORPORATED; SERVISAIR FUEL SERVICES, L.L.C., now known as Swissport SA Fuel Services, L.L.C.; TRI-STAR ACQUISITION CORPORATION, Defendants - Appell..
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Case: 16-20472 Document: 00514051164 Page: 1 Date Filed: 06/27/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 16-20472 FILED
June 27, 2017
LIBERTY MUTUAL INSURANCE COMPANY Lyle W. Cayce
Clerk
Plaintiff - Appellee
v.
SERVISAIR, L.L.C., now known as Swissport SA, L.L.C.; SERVISAIR USA,
INCORPORATED; SERVISAIR FUEL SERVICES, L.L.C., now known as
Swissport SA Fuel Services, L.L.C.; TRI-STAR ACQUISITION
CORPORATION,
Defendants - Appellants
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:14-CV-3667
Before REAVLEY, HAYNES, and COSTA, Circuit Judges.
PER CURIAM:*
Servisair, L.L.C., now known as Swissport SA, L.L.C.; Servisair USA,
Inc.; Servisair Fuel Service, L.L.C., now known as Swissport SA Fuel Services,
L.L.C.; and Tri-Star Acquisition Corp. (collectively, “Servisair”) appeal from a
grant of summary judgment to Liberty Mutual Insurance Company (“Liberty
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 16-20472 Document: 00514051164 Page: 2 Date Filed: 06/27/2017
No. 16-20472
Mutual”) on its breach of contract claim for a workers’ compensation insurance
policy. We AFFIRM. 1
Liberty Mutual and Servisair entered into a valid “guaranteed cost”
insurance policy in which the final premium would be determined based on an
audit of Servisair’s payroll classifications at the end of the policy period. An
estimated premium was generated at the policy’s inception based on payroll
numbers and classifications provided by Servisair’s payroll department. There
is no dispute that Servisair significantly over-allocated payroll to clerical
employees, which is a considerably less expensive classification. After the
policy period ended, the payroll audit revealed that Servisair’s actual payroll
had a much greater exposure to the more expensive classifications and less
exposure to the less expensive clerical classification. Based on the more
expensive actual payroll numbers and the agreed-upon rates used for the
estimated premium, Liberty Mutual billed Servisair for an additional
$3,641,962. Servisair refused to pay the additional premium and this lawsuit
ensued.
On appeal, Servisair makes two primary arguments: (1) the policy is the
product of a mutual mistake about the premium calculations, and (2) the
policy’s premium calculation provisions are ambiguous.
Mutual Mistake. The mutual mistake argument is easily dispatched.
The mistake, if any, was Servisair’s alone. Servisair argues that “the
underlying factual basis on which [Servisair and Liberty Mutual] relied in
negotiating and agreeing to the policy was inaccurate, in that the allocations
of payroll to individual insurance class codes was substantially inaccurate[.]”
1 The appeal is from a final judgment issued by a United States magistrate judge who
presided over the matter by consent under 28 U.S.C. § 636(c). The district court had diversity
jurisdiction over the case under 28 U.S.C. § 1332, and we have appellate jurisdiction under
28 U.S.C. § 1291. The standard of review is de novo. Cooley v. Hous. Auth. of City of Slidell,
747 F.3d 295, 297 (5th Cir. 2014).
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No. 16-20472
Specifically, Servisair over-allocated payroll to less expensive clerical
employees. This error resulted in a premium estimate significantly less
expensive than the final premium, which was calculated using the true payroll
classification numbers revealed by the audit. The magistrate judge concluded
that the mistake was not material to the agreement because the policy clearly
contemplated that the payroll classification numbers might be inaccurate and
shifted that risk to Servisair.
Part Five section E of the policy explains which parties bear the risk of
an inaccurate premium estimate:
If the final premium is more than the premium
[Servisair] paid to [Liberty Mutual], [Servisair] must
pay [Liberty Mutual] the balance. If it is less, [Liberty
Mutual] will refund the balance to [Servisair]. The
final premium will not be less than the highest
minimum premium for the classifications covered by
this policy.
By its plain terms, the policy provides that Servisair is responsible for paying
more than the estimated premium if the final premium exceeds the estimated
premium. This is an open-ended obligation with no limit on the amount of
additional premium Servisair might ultimately owe.
There is no dispute that Texas law applies to this insurance dispute.
“The elements of mutual mistake are: (1) a mistake of fact; (2) held mutually
by the parties; (3) which materially affects the agreed-on exchange.” N.Y.
Party Shuttle, LLC v. Bilello,
414 S.W.3d 206, 212 (Tex. App.—Houston [1st
Dist.] 2013, pet. denied). Importantly, “mutual mistake should not be available
to avoid the results of an unhappy bargain” because the “[p]arties should be
able to rely on the finality of freely bargained agreements.”
Id. (citing Williams
v. Glash,
789 S.W.2d 261, 265 (Tex. 1990)). Accordingly, “a party bears the
risk of mistake when the risk is allocated to him by agreement.” Cherry v.
McCall,
138 S.W.3d 35, 40 (Tex. App.—San Antonio 2004, pet. denied) (citing
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RESTATEMENT (SECOND) OF CONTRACTS § 154 (AM. LAW INST. 1981) and de
Monet v. PERA,
877 S.W.2d 352, 359 (Tex. App.—Dallas 1994, no writ)); accord
Smith v. Lagerstam, No. 03-05-00275-CV,
2007 WL 2066298, at *8 (Tex. App.—
Austin 2007, no pet.) (quoting RESTATEMENT (SECOND) OF CONTRACTS § 154(a)
(AM. LAW INST. 1981)). When the risk of mistake is allocated to the defendant
by agreement, the defendant’s mutual mistake defense “fails as a matter of
law.”
Cherry, 138 S.W.3d at 40; accord Transworld Leasing Corp. v. Wells
Fargo Auto Fin., LLC, No. 04-12-00036-CV,
2012 WL 4578591, at *6 (Tex.
App.—San Antonio 2012, pet. denied). That is the result here. As the
magistrate judge correctly concluded, the risk of an underestimated premium
was “placed squarely on the shoulders of Servisair.”
Ambiguity. Turning to the issue of ambiguity, Servisair challenges the
terms “guaranteed cost,” “rules,” and “rating plans” as ambiguous, particularly
regarding their effect on the “schedule ratings” used to calculate the final
premium after the audit. But when Servisair’s arguments are analyzed, the
real argument it is making is that Liberty Mutual had a particular profit goal
in mind in light of Servisair’s loss history and pursued that goal in setting the
schedule ratings. In other words, Servisair contends that Liberty Mutual did
not care about the payroll inaccuracies when setting the policy; it cared about
achieving a particular profit and achieved that profit by adjusting the schedule
ratings according to loss history. Given this conclusion, Servisair maintains
that Liberty Mutual should have readjusted the schedule ratings when
calculating the final premium to achieve the exact same profit goal pursued in
the estimated premium.
“If a written contract is amenable to a definite legal meaning, then it is
unambiguous and will be enforced as written.” Nautilus Ins. Co. v. Country
Oaks Apartments Ltd.,
566 F.3d 452, 455 (5th Cir. 2009). Extrinsic evidence
is admissible to determine the parties’ intent only after the contract is
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determined to be ambiguous. Nat’l Union Fire Ins. Co. of Pittsburgh v. CBI
Indus., Inc.,
907 S.W.2d 517, 520 (Tex. 1995). Accordingly, evidence of the
parties’ intentions cannot be used to create an ambiguity.
Id. at 521 n.5. Thus,
Servisair’s repeated efforts to create an ambiguity by relying on the profit
motives expressed by Liberty Mutual employees at deposition do not work if
the language itself is clear.
The term “guaranteed cost” refers to the type of insurance policy to which
the parties agreed and is defined by the terms of the policy. The policy itself
explains how premiums are initially calculated and then subject to
modification as described above. No ambiguity is presented there. As far as
“rules” and “rating plans,” the policy states that the applicable rules and rating
plans used to calculate the final premium are the rules and rating plans in
Liberty Mutual’s manuals, which are not in the record. At oral argument,
however, Servisair disclaimed any argument that the manuals are either
unclear or necessary to the court’s understanding of the rate calculation. The
policy itself clearly refers to these manuals as the source of the rules and rating
plans and is thus unambiguous.
We agree with the magistrate judge that Servisair’s arguments about
the “schedule ratings” do not create an ambiguity. Servisair relies on extrinsic
evidence to show how the schedule ratings were calculated, but extrinsic
evidence is not needed to understand the schedule ratings provided in the
policy. However those “schedule ratings” were calculated, they were clearly
stated and agreed upon at the policy’s inception and were not changed at the
time of final calculation.
Servisair made a deal that, in retrospect, it did not like. That does not
allow it to rewrite or avoid its obligations. We AFFIRM.
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