Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-01326/USCOURTS-ca8-06-01326-0/pdf.json

Parties Involved:
ATG Assurance Company
Appellant
BJC Health System
Appellant
Columbia Casualty Company
Appellee

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-1326

___________

BJC Health System, *

*

Appellant, *

*

v. *

*

Columbia Casualty Company, *

*

Appellee. * Appeal from the United States

_____________________ * District Court for the

* Eastern District of Missouri.

ATG Assurance Company Limited, *

*

Appellant, *

*

v. *

*

Columbia Casualty Company, doing *

business as CNA HealthPro, *

*

Appellee. *

___________

Submitted: September 28, 2006

Filed: February 23, 2007

___________

Before WOLLMAN, BOWMAN, and BENTON, Circuit Judges.

___________

Appellate Case: 06-1326 Page: 1 Date Filed: 02/23/2007 Entry ID: 3281345
1

We will refer to the plaintiffs collectively as “BJC” except when we refer to

ATG specifically. 

-2-

WOLLMAN, Circuit Judge.

This case is once again before us. See BJC Health Sys. v. Columbia Cas. Co.,

348 F.3d 685 (8th Cir. 2003) (reversing dismissal for failure to state a claim). The

plaintiffs, BJC Health System (BJC) and ATG Assurance Company Limited (ATG),1

appeal from the district court’s grant of a judgment as a matter of law, a motion for

partial summary judgment, and a motion to strike ATG’s prayer for punitive damages.

They also contend that the district court erred in excluding certain evidence. We

affirm in part, reverse in part, and remand for further proceedings. 

I. 

BJC, a network of hospitals, is the sole shareholder of ATG, a captive insurance

company that provides insurance for BJC. In September 1998, BJC and defendantappellee Columbia Casualty Company, doing business as CNA Health Pro

(Columbia), entered into a three-year contract, pursuant to which Columbia agreed to

provide reinsurance to ATG for a fixed yearly premium. 

Under the contract, Columbia agreed to reinsure ATG for individual claims that

exceeded $1 million or $3 million, depending on the hospital, and aggregate claims

over $22 million. One clause (“the incurred loss condition”) provided that continued

coverage would be conditioned upon an incurred loss ratio of less than 75%.

Although the parties contest how incurred loss should be defined, they apparently

agree that incurred loss refers to the costs associated with claims made against the

insured party. The incurred loss ratio, in turn, is determined by dividing BJC’s

incurred losses by the premium paid by BJC. The incurred loss condition is triggered

if an incurred loss ratio exceeding 75% occurs with respect to either aggregate claims

or with regard to any individual claim. 

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2

A reserve is an estimate of what a claim will cost.

3

If, for example, there were aggregate losses of $23 million, BJC would be

required to pay $22 million under the Columbia policy and it would be required to pay

the full $23 million under the Zurich policy. BJC continues to face potential liability

because there are, according to BJC, pending claims from the 2000-2001 policy year

that have not yet been resolved. 

-3-

Columbia provided reinsurance for the first two years of the program. On

September 22, 2000, only days before the end of the current policy year, Columbia

informed BJC that it had determined that BJC had exceeded the aggregate incurred

loss ratio. Columbia also stated that the incurred loss ratio had been exceeded on an

individual claim, the “Baby C” claim, as well. BJC had set a claim reserve2

 of below

$3 million on the Baby C claim, but Columbia assessed a reserve of $5 million, a sum

which would lead to an incurred loss ratio well in excess of the 75% set forth in the

contract. Columbia informed BJC that it would not continue with the third year of the

program unless the premium was increased to $3.1 million and the aggregate retention

level was increased to $31.1 million. 

Columbia extended the policy so that BJC could obtain replacement insurance,

which BJC acquired from Zurich. There were differences, however, between the

policy offered by Zurich and the policy that BJC had with Columbia. As noted earlier,

Columbia’s coverage commenced at an aggregate loss of $22 million. Zurich,

however, only offered coverage starting at an aggregate loss of $25 million. This $3

million gap in coverage means that BJC faces an additional $3 million in potential

liability that it would not be facing had Columbia continued with the third year of the

program.3

 Although Zurich declined to provide reinsurance starting at $22 million, it

stated that if it did offer coverage commencing at that level, the premium for the

additional $3 million in coverage would be $1.2 million. 

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BJC wanted losses from some of its facilities removed from the calculations.

-4-

BJC filed suit, alleging breach of contract, and sought compensatory damages

for the cost of the Zurich replacement policy as well as compensation for the

additional risk exposure BJC had to assume with the Zurich replacement policy. BJC

claimed that this latter amount was $1.2 million – the price Zurich would have

charged for meeting the $3 million coverage gap. BJC also sought punitive damages,

which were based on Columbia’s allegedly fraudulent conduct.

Much of this case revolves around the actuarial work Columbia presented to

BJC to justify Columbia’s determination that the incurred loss ratio had exceeded

75%. On October 10, 2000, the parties met in Chicago to discuss their differences.

At this meeting, Columbia distributed an actuarial analysis that concluded that the

incurred loss ratio had been exceeded. That report was time-stamped at 10:23 that

morning. This analysis contained errors that were not present in an earlier version of

the report that had been printed at 8:33 that morning, but which had not been

distributed. The errors in the distributed version contributed to a higher incurred loss

ratio. On October 19, in response to unrelated concerns voiced by BJC,4

 Columbia

distributed a third version of the report that addressed BJC’s concerns but also

corrected the incorrect figures from the second version. This third version, however,

contained a new error: one of the figures was about $2.4 million too high, an error

which, as described below, may have resulted in the calculation of an incurred loss

ratio in excess of 75%. 

John Pierce, a witness for BJC, reviewed all three versions of the actuarial

report and testified that Columbia did not provide any explanation regarding the

manner in which Columbia converted accident year data to report year data. An

accident year to report year conversion was necessary because, while BJC’s loss data

was compiled on an accident year basis, the reinsurance policy was priced on a report

year basis. In his report, Pierce remarked that this conversion was “the critical final

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-5-

step” in the analysis and that it was “unreasonable” to make this conversion without

an explanation as to how it was performed. Pierce also noted that without knowing

how Columbia had made the transition from accident year to report year figures, it

was difficult to estimate the impact that the new error in the third version of the

actuarial report might have had. He did, however, attempt to calculate the effect and

estimated that if this error was corrected the incurred loss ratio would fall below 75%.

Pierce also testified that Columbia unreasonably selected the same average experience

ratio – an important figure – in all three versions of the actuarial analysis, despite the

fact that the underlying data in these versions was different. He stated that the average

experience ratio had a significant effect on the accident year figures, but could not

state with exactitude how it might affect the report year data because Columbia did

not explain the accident year to report year conversion. 

Columbia’s actuaries either did not know or could not remember how the

accident year to report year conversion was done, and Columbia was unable to

produce the computer models it used to conduct its 1999 and 2000 actuarial analyses

of the BJC account. There was also evidence that Columbia’s actuaries recommended

a premium of nearly $13.5 million for the third policy year, a substantial increase that

could only be justified by a dramatic change in BJC’s losses or a by significant change

in the assumptions Columbia used in assessing the BJC account. Columbia’s actuaries

did not know whether BJC had experienced a serious change in losses between 1998

and 2000 and did not know whether there was a significant change in Columbia’s

methodologies. BJC presented testimony that there were no significant changes in

BJC losses. 

 BJC also presented testimony pertaining to the Baby C claim. Angela

Standish, BJC’s director of claims and litigation, testified that there was “absolutely”

no reason why a reserve above BJC’s $3 million self-insured retention had to be set

and that Columbia’s reserve of $5 million was neither proper nor reasonable. She also

outlined various considerations that she said would tend to lessen BJC’s potential

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-6-

losses on the claim. She also stated that Columbia had never expressed concerns

about her reserving practices. BJC also presented testimony that after a claims audit

in August 2000, the “general consensus” was that “things were fine.” 

The district court granted Columbia’s pre-trial motion for partial summary

judgment on the issue of compensatory damages (as it pertained to the $1.2 million

price quoted by Zurich), as well as Columbia’s motion to strike BJC’s prayer for

punitive damages. The district court also granted Columbia’s motion to exclude

evidence pertaining to Columbia’s financial and human resources practices and goals.

This evidence included testimony suggesting that Columbia sought to shed or increase

premiums for medical malpractice insurance clients. Following the presentation of

BJC’s case, the district court granted Columbia’s motion for judgment as a matter of

law.

 II.

In granting a judgment as a matter of law against BJC, the district court

concluded that, under the contract, Columbia had the right to determine incurred loss

and that BJC had offered no evidence that Columbia’s incurred loss determination was

made in bad faith. 

We turn first to BJC’s claim that judgment as a matter of law against BJC was

improper because the incurred loss condition is a condition subsequent. BJC contends

that because the incurred loss condition is a condition subsequent, it was Columbia –

not BJC – that bore the burden of presenting evidence pertaining to incurred loss. In

other words, BJC argues that incurred loss was not an element of its case and thus any

infirmities in BJC’s evidence could not serve as a proper basis for a judgment as a

matter of law against it. 

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For example, the Terms and Conditions state that “[t]his is a three year

program with premiums/aggregate guaranteed subject to” conditions such as the

incurred loss ratio. (Exhibit 2). This “subject to” language indicates a condition

subsequent. See NLRB v. Int’l Bhd. of Electrical Workers, Local Union No. 22, 748

F.2d 348, 351 (8th Cir. 1984) (concluding that the words “subject to” in a contract

indicated a condition subsequent). 

-7-

“Courts should not construe contract provisions to be conditions precedent

unless required to do so by plain, unambiguous language or by necessary implication.”

James E. Brady & Co., Inc. v. Eno, 992 F.2d 864, 869 (8th Cir. 1993) (quoting Kansas

City S. Ry. Co. v. St. Louis-San Francisco Ry. Co., 509 S.W.2d 457, 460 (Mo. 1974)

(internal quotation marks omitted)). Here, the contract’s language does not plainly

indicate a condition precedent. In fact, the language suggests that the incurred loss

condition is a condition subsequent.5

 Accordingly, we agree with BJC that the

incurred loss condition is a condition subsequent. We also agree that defendants

typically have the burden of proving the occurrence of conditions subsequent.

Peabody Holding Co., Inc. v. Costain Group PLC, 813 F. Supp. 1402, 1416 (E.D. Mo.

1993); see also Truck Ins. Exch. v. Hunt, 590 S.W.2d 425, 427 (Mo. Ct. App. 1979)

(noting that if an insurer seeks to avoid coverage because of the occurrence of a

condition subsequent, the insurer has the burden of proof). When the contractual

provision in question reposes discretion in the defendant, however, the plaintiff must

show that this discretion was exercised in bad faith. See Brozo v. Oracle Corp., 324

F.3d 661, 667-68 (8th Cir. 2003) (judgment as a matter of law was warranted where

contract accorded discretion to the defendant and there was no allegation that the

discretion was exercised in bad faith). 

In this case, the contract allocated to Columbia the right to determine incurred

loss. The contract specifies that Columbia would utilize a subdivision of Columbia,

CNA HealthPro Claim Consultants (CNA), “[f]or the purposes of determining

incurred losses.” (Exhibit 113). This amounts to a grant of discretion because, as the

evidence indicates, the determination of incurred loss is not an exact science and

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6

BJC argues that the contract envisions a collaborative process because it

provides that BJC and Columbia would review open case files together. This review

constitutes only one stage in the incurred loss determination, however, and does not

give rise to the inference that the final incurred loss calculation would be a mutual

endeavor requiring the concurrence of both parties. 

-8-

requires actuaries to exercise a certain measure of actuarial judgment. Although one

could debate the scope of Columbia’s discretion, we will assume that Columbia had

broad discretion in determining incurred loss.6

Any latitude Columbia might have had under the contract, however, was

constrained by the covenant of good faith and fair dealing that Missouri law finds

implicit in every contract. Cf. Farmers’ Elec. Coop., Inc. v. Missouri Dep’t of Corr.,

977 S.W.2d 266, 271 (Mo. 1998) (“Missouri law implies a covenant of good faith and

fair dealing in every contract.”). This good faith requirement extends to the manner

in which a party employs discretion conferred by a contract. Mo. Consol. Health Care

Plan v. Cmty. Health Plan, 81 S.W.3d 34, 45 (Mo. Ct. App. 2002). To establish a

violation of the covenant of good faith and fair dealing, it is not enough for a plaintiff

to show that a party invested with discretion made an erroneous decision. Id. at 48.

Instead, the plaintiff must show that the party exercised its discretion “in such a

manner as to evade the spirit of the transaction or so as to deny [the other party] the

expected benefit of the contract.” Id. at 46. The covenant of good faith and fair

dealing does not establish a “general reasonableness requirement.” Schell v. Lifemark

Hospitals of Missouri, 92 S.W.3d 222, 230 (Mo. Ct. App. 2002). Unreasonableness

can serve only as “evidence of subjective intent to undermine fulfillment of the

contract.” Id. at 231. 

To establish a submissible case of bad faith, then, BJC was required to do more

than offer evidence that Columbia’s incurred loss determination was flawed or

unreasonable. Instead, BJC had to present evidence that Columbia’s determination

of incurred loss was directed toward evading the spirit of the contract or denying BJC

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-9-

the benefit of its bargain. In this case, the benefit for which BJC bargained was three

years of reinsurance coverage guaranteed at a fixed premium. Accordingly, it would

have been bad faith, for example, for Columbia to have selected a particular method

for calculating incurred loss or to have made other judgments in the process of

determining incurred loss that were specifically designed to trigger a contractual

provision enabling Columbia to avoid its third-year obligation. This appears to be the

theory advanced by BJC.

Columbia contends that it is not bad faith for a party to act on the basis of

financial self-interest. Financial self-interest, however, will not excuse a party from

performing its contractual obligations in good faith and fair dealing. See Venture

Associates Corp. v. Zenith Data Sys. Corp., 96 F.3d 275, 279-80 (7th Cir. 1996)

(noting in a case where the parties contracted to negotiate a final agreement that

although it would not be bad faith for a party to act in its financial self-interest and

demand a higher price, it would constitute bad faith if the party’s purpose in

demanding a higher price is to “scuttle the deal”). We have observed that “the implied

duty of good faith and fair dealing does not extend so far as to undermine a party’s

general right to act on its own interests in a way that may incidentally lessen the other

party’s anticipated fruits from the contract.” Countrywide Services Corp. v. SIA Ins.

Co., 235 F.3d 390, 393 (8th Cir. 2000) (quoting M/A-Com Security Corp. v. Galesi,

904 F.2d 134, 136 (2d Cir. 1990)) (internal quotation marks omitted). The operative

word in that passage, for purposes of this case, is “incidentally.” It would not

necessarily constitute bad faith, for instance, for Columbia to employ a risk-averse

method of calculating incurred loss that might have the “incidental” consequence of

triggering the incurred loss condition. As John Pierce wrote in his report, the incurred

loss provision functions as a kind of “escape clause” in the “unusual event that the

results on the BJC Excess policy prove[] to be much worse than expected.” (Exhibit

61). A certain measure of caution, then, would be consistent with the bargain struck

by the parties and not constitute an act of bad faith, even if it incidentally resulted in

the calculation of a higher incurred loss ratio. It would not, however, be permissible

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-10-

for Columbia to exercise its discretion in a manner designed to “scuttle the deal,”

Venture Associates Corp., 96 F.3d at 279, however much in Columbia’s best financial

interest it might have been to reduce its profile in the area of medical malpractice

insurance and shed clients in that line. 

Because Columbia’s broader business motivations and goals bear on how and

for what purposes Columbia employed its discretion, evidence that Columbia was

seeking to shed medical malpractice clients like BJC was relevant to the question of

good faith. In excluding this evidence, the district court remarked that the relevant

issue was whether Columbia breached the contract and not the alleged reasons, good

or bad, it might have done so. The excluded evidence relates to the question of

Columbia’s good faith, however, and thus is relevant to the question whether the

contract was breached. The extent to which the excluded evidence should be admitted

is a matter to be evaluated pursuant to Fed. R. Civ. P. 402 and 403. 

Columbia claims that the incurred loss ratio was breached with respect to both

aggregate claims and a single claim (the Baby C claim). BJC’s evidence of bad faith

as it pertains to the aggregate claims centers primarily on the actuarial analysis

conducted by Columbia. Considered as a whole, the evidence permits an inference

that the purpose of the analysis was to reach a desired and predetermined conclusion,

i.e., that the incurred loss ratio had exceeded 75%. There was testimony that

Columbia unreasonably selected the same average experience ratio in all three

versions of the actuarial analysis despite the fact that the underlying numbers were

changing. This evidence, if credited, could indicate that the actual data were not as

important to Columbia as arriving at a particular conclusion. BJC also presented

evidence of errors in the various versions of the actuarial analysis, most of which

worked in Columbia’s favor. In addition, Columbia appeared largely incapable of

explaining how it made a crucial transition between accident year and report year data

and was unable to produce certain records. BJC also put on evidence from which a

jury could infer that the actuarial assumptions and models it had used to evaluate the

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7

Some of the evidence could also give rise to the inference that Columbia was

making it difficult for BJC to evaluate the reasonableness of Columbia’s incurred loss

determination. Columbia could not fully explain how it arrived at certain important

calculations and could not produce materials that might have shed light on its incurred

loss determinations in previous years. In addition, there was some evidence that

Columbia voiced its concerns about incurred loss only days before the conclusion of

the current policy year, despite some earlier assurances that Columbia intended to

continue with the policy. 

-11-

third policy year of the BJC account were more stringent than those it utilized in the

previous policy years. Finally, there was the excluded evidence that indicated that

Columbia was seeking to reduce its profile in the medical malpractice insurance

business. From this evidence, a jury could conclude that Columbia wanted to shed

BJC as a client (or exact from BJC a higher premium), that Columbia’s actuarial

analysis was driven by Columbia’s wish to arrive at an incurred loss figure that would

justify cancelling the third year of the contract rather than by the dictates of actuarial

judgment, and that Columbia’s determination of incurred loss as it pertained to

aggregate claims was therefore made in bad faith.7

 

BJC presented sufficient evidence of bad faith on the Baby C claim as well.

First, BJC presented testimony that Columbia’s $5 million reserve was unreasonable.

Although unreasonableness is not the same as bad faith, it may circumstantially

support the inference that a party sought to undermine the contract. Schell, 92 S.W.3d

at 231. There was also evidence suggesting that Columbia had not previously voiced

any concerns about BJC’s reserving practices. In addition, there was the

aforementioned evidence that Columbia sought to shed medical malpractice insurance

clients. Considering this evidence as a whole, we conclude that BJC presented

sufficient evidence for a jury to conclude that Columbia’s determinations regarding

the Baby C claim were made in bad faith. 

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-12-

Columbia contends that BJC cannot establish bad faith because BJC’s witnesses

expressed only a professional disagreement with Columbia’s incurred loss

determination and because none of the witnesses testified that the incurred loss figure

assessed by Columbia was unreasonable. This argument is unavailing. As set forth

above, there was testimony that the manner in which Columbia calculated incurred

loss was unreasonable and evidence that the calculation was made in a manner

designed to trigger the incurred loss provision, thus denying BJC the third year for

which it had bargained. There was evidence, then, that the incurred loss figure arrived

at by Columbia was, for lack of a better word, pretextual. Although the figure might

at first glance appear reasonable to a neutral observer if considered out of context

(without reference, for example, to the manner in which it was calculated), that will

not suffice to preclude a jury from determining that Columbia had acted in bad faith.

In sum, then, because BJC presented evidence from which a reasonable jury could

have concluded that Columbia acted in bad faith, the district court erred in entering

judgment as a matter of law. 

III.

 

The district court, pursuant to Federal Rule of Civil Procedure 12(f), struck

ATG’s prayer for punitive damages because it concluded that ATG’s complaint did

not allege fraud with the particularity required by Federal Rule of Civil Procedure

9(b). We agree. 

Courts may strike “from any pleading any insufficient defense or any

redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f).

Judges enjoy liberal discretion to strike pleadings under Rule 12(f). Nationwide Ins.

Co. v. Cent. Mo. Elec. Coop., Inc., 278 F.3d 742, 748 (8th Cir. 2001). We review the

allowance of a 12(f) motion for abuse of discretion. Id. Striking a party’s pleading,

however, is an extreme and disfavored measure. Stanbury Law Firm, P.A. v. IRS, 221

F.3d 1059, 1063 (8th Cir. 2000). 

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-13-

Although Missouri law generally does not permit the recovery of punitive

damages for a breach of contract, punitive damages may be permissible if the breach

also amounts to an independent tort. Peterson v. Continental Boiler Works, Inc., 783

S.W.2d 896, 902-03 (Mo. 1990). ATG bases its prayer for punitive damages on a

claim of fraudulent misrepresentation. ATG’s fraud claim must therefore comply with

the heightened pleading standards of Rule 9(b), which require plaintiffs to plead “the

circumstances constituting fraud . . . with particularity.” Fed. R. Civ. P. 9(b). Under

Rule 9(b), a plaintiff must plead “such matters as the time, place and contents of false

representations, as well as the identity of the person making the misrepresentation and

what was obtained or given up thereby.” Abels v. Farmers Commodity Corp., 259

F.3d 910, 920 (8th Cir. 2001) (quoting Bennett v. Berg, 685 F.2d 1053, 1062 (8th Cir.

1982), adhered to on reh’g, 710 F.2d 1361 (8th Cir. 1983) (en banc)). In other words,

the party must typically identify the “who, what, where, when, and how” of the

alleged fraud. United States ex rel. Costner v. URS Consultants, Inc., 317 F.3d 883,

888 (8th Cir. 2003). This requirement is designed to enable defendants to respond

“specifically, at an early stage of the case, to potentially damaging allegations of

immoral and criminal conduct.” Abels, 259 F.3d at 920. The level of particularity

required depends on, inter alia, the nature of the case and the relationship between the

parties. Payne v. U.S., 247 F.2d 481, 486 (8th Cir. 1957). “Conclusory allegations

that a defendant’s conduct was fraudulent and deceptive are not sufficient to satisfy

the rule.” Commercial Property Investments Inc. v. Quality Inns Int’l Inc., 61 F.3d

639, 644 (1995). Rule 9(b) should be read “in harmony with the principles of notice

pleading.” Schaller Telephone Co. v. Golden Sky Sys., Inc., 298 F.3d 736, 746 (8th

Cir. 2002) (quoting Abels, 259 F.3d at 920). 

The district court determined that ATG had not pled sufficient facts to show

that Columbia had acted fraudulently. In light of the record, we cannot conclude that

this determination was erroneous. The allegations of fraud are essentially recounted

in two paragraphs in the complaint. Neither of these paragraphs, however, alleges

fraud with the particularity required by 9(b). 

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-14-

According to paragraph 17, Columbia deleted a number in its second actuarial

analysis so that BJC and ATG would not discover that there were errors in Columbia’s

first analysis. It is difficult to see, however, how errors in the first actuarial analysis

– or Columbia’s attempt to conceal the fact that they were made – could support a

fraud claim. After all, as paragraph 18 alleges, Columbia intended for BJC to rely on

the second, rather than the first, actuarial analysis. 

Later, in paragraph 20, the complaint states that “[t]he second actuarial analysis

was false in its conclusion and Columbia Casualty knew that the second actuarial

analysis was false in this conclusion at the time it provided that analysis to BJC and

ATG.” In the circumstances of this case, we do not believe that this conclusory

assertion adequately alleges the “how” of the alleged fraud. As this case illustrates,

actuarial decisions are complex and often require some measure of judgment and

discretion on the part of the actuary conducting the analysis. ATG’s complaint

expresses disagreement with the conclusion of the second actuarial analysis, but it

does not specify where and how the analysis falls short. It does not state, for example,

whether the report relies on flawed data, makes incorrect assumptions, or employs

suspect methodology. Although such specificity may not be warranted in other cases,

we believe that more detail was called for here. 

In sum, ATG’s complaint lacks the particularity required by Rule 9(b). We

therefore affirm the district court’s order granting partial summary judgment.

 IV.

We turn now to the district court’s order precluding BJC from recovering

compensatory damages for the additional risk it bore as a result of Columbia’s

decision to terminate the contract. BJC is seeking $1.2 million – a sum that reflects

what Zurich claimed it would have charged BJC had Zurich offered coverage

commencing at $22 million. Although the district court agreed that BJC faces

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-15-

additional risk due to the $3 million coverage gap between the Columbia policy and

the Zurich replacement policy and acknowledged that “[t]here may well be

ascertainable costs associated with that risk,” the district court concluded that BJC had

failed to properly quantify these costs. We agree. 

There is no evidence that the Zurich quote adequately mirrors the costs

associated with BJC’s additional risk. Although the price quoted by Zurich is at least

partly based on Zurich’s estimate of BJC’s future losses, it is unclear whether this is

the only component of the Zurich quote. The Zurich quote, for example, may reflect

not only the costs associated with BJC’s additional risk, but other factors – such as a

profit margin for Zurich – as well. Moreover, there is little in the record regarding

how Zurich’s forecast of BJC’s future losses was conducted. Because BJC’s

calculation of damages is conclusory and insufficiently supported by the record, the

district court’s order precluding BJC from recovering compensatory damages relating

to the gap between the Columbia and Zurich policies was proper. 

The case is affirmed in part, reversed in part, and remanded for further

proceedings. 

______________________________

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