- Case Type:
- Case Status:
- 19-10056 (5th Circuit, Feb 11,2020) Published
- (1) The bankruptcy court did not err by awarding the creditor both unpaid invoices and future claims. (2) The creditor's unpaid-invoices claim is recognized under applicable state law, and thus satisfies the definition of a claim under 11 U.S.C. § 101. (3) The debtor failed to show that the bankruptcy court made a mistake of fact in its allowance of the creditor's future losses claim. (4) The bankruptcy court did not err in awarding the creditor's claim to 25% of write-downs on unpaid amounts charged by providers. The claim was allowable as a matter of contract and was not unconscionable.
- Procedural context:
- After a trial on the debtor's objection to the claims of the appellants, the bankruptcy court allowed 85% of the creditor/appellees claims, including $1,691,000 in unliquidated future losses. The debtor appealed to the district court on three issue: (1) the bankruptcy court’s allowance of both “unpaid invoices” and “projected future losses”; (2) its allowance of the creditor’s claim for 25% of medical bill review “savings”; and (3) its denial of the debtor’s unconscionability defense. The district court affirmed the bankruptcy court on all issues. The debtor appealed.
- From 2011–2015, Zurich American Insurance Company provided workers’ compensation insurance for Trend Personnel Services, Inc., and TSL Staff Leasing Inc. (together “Trend”). During the four-year period, Zurich insured Trend’s employees and paid out all workers’ compensation claims up-front; and Trend reimbursed Zurich up to Trend’s per-claim deductible. While the contracts were uniform, the contracted-for programs were not—two of the contracts provided for traditional “paid loss” plans and the other two created complex “incurred loss” plans. Under the incurred loss plans, Trend was required to pre-fund a loss reserve account from which Zurich would deduct qualifying expenses as incurred. Trend also engaged Zurich to review submitted medical bills by applying a series of analyses (“checks”) to each invoice processed on Trend’s behalf. If Zurich ended up paying below the billed rate, Zurich would invoice Trend for a 25% fee of these savings—the delta between what the parties would have paid the service provider without the fee schedule write-down and what the parties ultimately paid. In late 2015, Trend quit paying Zurich’s invoices and found a new workers’ compensation insurance provider. Zurich initiated arbitration to recover unpaid invoices and future losses that Zurich expected to incur due to Trend’s policies. Trend then filed for bankruptcy. In the bankruptcy proceeding, Zurich sought $8,911,513.73, including $2,999,496 in estimated future losses. In response, Trend asserted various defenses and presented an expert who limited Zurich’s future losses to $1,691,000. After an extensive trial, the court allowed Zurich a $7,603,017 claim.
- ELROD, WILLETT, and OLDHAM
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