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Parties Involved:
Georgia Operators Self-Insurers Fund
Appellee-Cross Appellant
PMA Management Corp.
Appellant-Cross Appellee

Document Text:

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 15-10865

________________________

D.C. Docket No. 1:12-cv-02578-JSA

GEORGIA OPERATORS SELF-INSURERS FUND,

Plaintiff-Appellee

Cross-Appellant,

versus

PMA MANAGEMENT CORPORATION, 

Defendant-Appellant

 Cross-Appellee.

________________________

Appeals from the United States District Court

for the Northern District of Georgia

________________________

(November 10, 2015)

Before HULL, WILSON, and ANDERSON, Circuit Judges.

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PER CURIAM: 

In this appeal and cross-appeal from a bench trial,1

appellant PMA 

Management Corporation questions the calculation of damages, as well as the 

finding of fault. It also argues that the court abused its discretion when it allowed 

the Cross-Appellant’s expert to testify. Cross-Appellant Georgia Operators SelfInsurers Fund (“Georgia Operators”) argues that the court erred when it reduced 

the damages award, dismissed the negligence and breach of fiduciary duty claims, 

and declined to award attorneys’ fees. After thorough exploration at oral argument 

and careful review of the briefs and relevant parts of the record, we conclude that 

the opinion of the magistrate judge reflects a comprehensive understanding of, and 

a fair and accurate resolution of, the several issues. Accordingly, the judgment of 

the court below is affirmed in all respects. We discuss the several issues in turn.

I. PMA’S CHALLENGE TO THE DAMAGE AWARD

In the main appeal, PMA argues: (1) that the magistrate judge erred with 

respect to its damages award. PMA argues that the magistrate judge failed to 

apply the proper Georgia standard. It also argues that the evidence adduced by 

Georgia Operators: (a) fails to establish that PMA’s mishandling of its contractual 

 1 The bench trial was conducted by the magistrate judge with the consent of the parties.

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obligations caused Georgia Operators damages; and (b) fails to establish the 

amount of damages awarded.

We reject summarily PMA’s arguments with respect to causation. 

Independent auditor Hosman found, and PMA representatives admitted as much in 

internal memoranda, that PMA mishandled their contractual obligations, and that 

this mishandling resulted in increased claims costs. The magistrate judge based his 

finding of causation on the report and testimony of Hosman, the admissions of 

PMA representatives in internal memoranda, the testimony of expert witness 

McCoy, and simple common sense. The magistrate judge’s finding in this regard 

is supported by ample record evidence. There is nothing speculative about the 

finding or the evidence on which it is based.

We also summarily reject PMA’s argument that the magistrate judge failed 

to apply the proper standard under Georgia law with respect to the determination of 

the amount of damages. The magistrate judge properly applied Georgia’s standard 

that damages be estimated to a reasonable degree of certainty. Shepherd v. Aaron 

Rents, Inc., 430 S.E.2d 67, 70 (Ga.App. 1993) (“The ability to estimate damages to 

a reasonable degree of certainty is all that is required . . . and mere difficulty in 

fixing the exact amount will not be an obstacle to an award.”).

We also agree with the magistrate judge that the evidence adduced by 

Georgia Operators and the magistrate judge’s findings, with respect to the amount 

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of damages, satisfies Georgia’s reasonable certainty standard. There was ample 

evidence of serious breaches of PMA’s contractual obligations with respect to 

processing and settling the workmen’s compensation claims. Hosman’s report 

concluded that: “The overall performance of PMA . . . fell significantly below 

industry standards.” PMA representatives contemporaneously acknowledged the 

accuracy of Hosman’s report, and expert witness McCoy found widespread 

patterns of mishandling. McCoy examined in detail the 88 largest claims, which 

represented more than 90 percent of the total dollars paid out in settlement of 

claims, and identified such mishandling in 84 of those claims. Moreover, the 

patterns of mishandling thus identified were of a nature that made it very probable 

as a matter of common sense that similar mishandling was occurring in a similarly 

large percentage of the balance of the claims which McCoy did not examine. 

On the basis of such evidence, the magistrate judge inferred that the proven 

patterns of mishandling impacted not only the lost time claims particularly 

scrutinized by McCoy, but also impacted PMA’s overall handling of the claims in 

the account. We conclude that his inference is amply supported by Hosman’s 

findings, by admissions of PMA representatives in internal memoranda, by 

McCoy’s findings, and by common sense.2

 2 Thus, we reject PMA’s argument that Georgia Operators was required to prove the 

precise damage resulting from each of the more than 3,500 claims involved. We agree with the 

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Because Georgia Operators had proved systemic deficiencies in PMA’s 

overall performance with respect to the claims in this account, the magistrate judge 

accepted as the starting point for considering damages the extraordinary spike 

during the years 2007 through 2010 in the cost of claims per $100 of payroll. The 

spike with respect to the cost of claims during 2007 through 2010 was stark as 

compared to the historical cost of claims (reasonably calculated based on the most 

recent years, 2000 through 2006), and as compared to the cost of claims 

immediately thereafter in 2011 through 2013 (when measures had been put in 

place to remedy the deficiencies in PMA’s performance). The increase in the cost 

of claims for 2007 through 2010 – over and above what would have been expected 

had the historical rate of claim cost persisted through those years – was 

approximately $3 million. 

The magistrate judge found that the spike in the cost of the 2007 through 

2010 claims was caused in major part by PMA’s deficient performance. The 

magistrate judge carefully examined other possible causes that might have driven 

up the cost of claims, but found, after careful analysis, that such other causes did 

not play a substantial role in increasing claims costs during the spike period. 

 

magistrate judge that such a requirement would be wasteful of judicial resources, and would be 

virtually impossible (as was admitted by PMA representatives in internal memoranda). Neither 

Georgia law nor any ruling of Judge Evans required the method of proof urged by PMA.

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Nevertheless, the magistrate judge made an adjustment from the approximately $3 

million spike figure by excluding all 2007 claims from the analysis, thus reducing 

the spike figure to approximately $2.3 million. The magistrate judge found that 

this adjustment “would likely understate plaintiff’s damages” and would likely 

“more than account[] for” the impact of such other causes. However, the 

magistrate judge found that this adjustment resulted in a “more conservative and

more reliable” estimate of Georgia Operators’ damages. 

After careful review, we cannot conclude that the magistrate judge’s 

findings are clearly erroneous. We also conclude that the magistrate judge’s 

estimate of Georgia Operators’ damages satisfies the Georgia standard of 

reasonable certainty. The magistrate judge’s findings are supported by substantial 

evidence. Ample evidence supports the findings that PMA’s deficient practices 

were widespread and infected its overall performance. The magistrate judge’s use 

of the extraordinary spike in claims costs as a starting point is supported by the fact 

that the spike occurred in precisely the same time frame during which Hosman and 

McCoy identified patterns of PMA’s mishandling problems. Moreover, as soon as 

PMA’s performance problems were remedied, the claims costs dropped back to 

approximately the historical rate which preceded the spike. Ample record 

evidence, as well as common sense, supports the magistrate judge’s finding that 

PMA’s performance deficiencies were a major cause of the sudden and 

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extraordinary spike in claims costs. Ample evidence and common sense also 

support the magistrate judge’s finding that other possible causes did not play a 

substantial role in increasing claims costs during the spike period, and were 

appropriately accounted for by the adjustment made by the magistrate judge to the 

spike figure. 3

 For the foregoing reasons, we are satisfied that the damage award 

found by the magistrate judge falls well within Georgia’s standard of reasonable 

certainty.

II. PMA’s CHALLENGE TO COSTNER’S TESTIMONY

PMA’s second argument relates to the testimony of Georgia Operators longtime actuary, Costner. There was no objection in the court below, and no 

challenge on appeal, to the admissibility of the annual actuarial reports prepared by 

Costner for Georgia Operators, nor to the admissibility of Costner’s testimony at 

trial explaining the meaning of those actuarial reports. PMA objected in the court 

below, and challenges on appeal, only the calculations to which Costner testified at 

 3 In its first argument on cross-appeal, Georgia Operators argues that the magistrate judge 

erred in reducing its damages by excluding consideration of the claims originating in 2007. We 

reject Georgia Operators’ argument as being wholly without merit. Many of the 2007 claims 

were handled and closed out prior to the end of the calendar year 2007, and before PMA took 

over as successor third party administrator. With respect to those claims, of course, there could 

have been no impact at all as a result of any mishandling by PMA. With respect to the balance 

of the 2007 claims, as to which PMA’s mishandling might possibly have impacted, we cannot 

conclude that the magistrate judge’s rationale was unreasonable. The relative role with respect 

to these claims of PMA as opposed to the role of the predecessor third-party administrator, is 

unclear. Moreover, it was not unreasonable for the magistrate judge to take into account the 

impact that the other potential causes (urged by PMA and addressed by the magistrate judge) 

may have had on costs during the spike time period. 

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trial, which were based on the data already included in the actuarial reports. We 

dispose of this argument summarily because we agree with the magistrate judge 

that the testimony to which PMA objects constitutes simple mathematical 

computations based upon the data that already existed in the annual actuarial 

reports. As the magistrate judge noted, the court itself could do that basic 

arithmetic on the basis of the data already extant in the actuarial reports. 

III. GEORGIA OPERATORS’ CROSS-APPEAL

A. Georgia Operators’ challenge to the district court’s holding that Georgia 

Operators’ negligence and breach of fiduciary duty claims were barred by 

Georgia’s Economic Loss Doctrine

Judge Evans granted partial summary judgment on this issue, holding that 

these claims were barred by the Economic Loss Doctrine. We cannot disagree 

with Judge Evans’ conclusion that Georgia Operators’ claims fall squarely under 

what PMA was obligated to do under express contractual provisions. The 

damages Georgia Operators seeks are fully encompassed in its breach of contract 

claim. We cannot disagree with Judge Evans’ interpretation of Georgia law with 

respect to the Economic Loss Doctrine generally, or with respect to the exception 

for negligent professional services. Accordingly, we agree with Judge Evans that 

Georgia Operators’ negligence and breach of fiduciary duty claims were barred by 

the Economic Loss Doctrine.

B. Georgia Operators’ challenge to the magistrate judge’s denial of 

attorneys’ fees.

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Finally, we cannot conclude that the magistrate judge erred in declining to 

award attorneys’ fees to Georgia Operators. We agree with the magistrate judge 

that the parties intended the indemnity clause to indemnify the indemnitee against 

liability (including attorneys’ fees) to third parties – not to protect the parties to the 

contract from legal actions between the contracting parties. This interpretation is 

supported by the fact that the indemnity clause itself is expressly limited to losses 

caused by PMA’s negligence or willful misconduct, and the fact that the 

sophisticated parties here would have been familiar with the economic loss rule 

and would have known that purely economic losses resulting from a breach of 

contract would not be deemed a negligence claim that could trigger the indemnity 

clause.

Nor can we conclude that the magistrate judge abused his discretion in 

declining to award attorneys’ fees on the basis of the alleged bad faith on the part 

of PMA. Georgia’s statute, O.C.G.A. §13-6-11, permits, but does not mandate, an 

award of attorneys’ fees where a defendant has acted in bad faith, in effect leaving 

the award of fees to the discretion of the fact finder. Even assuming some bad 

faith with respect to the August 2011 audit, we cannot conclude that the magistrate 

judge abused his discretion in finding that PMA’s conduct in that discrete instance 

did not taint PMA’s overall performance with bad faith such as to warrant any 

award of attorneys’ fees.

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For the foregoing reasons, the judgment of the court below is affirmed both 

with respect to the main appeal and the cross-appeal.

AFFIRMED.

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