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Owner's Management Co. v. Arthur J. Gallagher & Co.

United States District Court, N.D. Ohio, Eastern Division

November 20, 2017

OWNER'S MANAGEMENT COMPANY, Plaintiff,
v.
ARTHUR J. GALLAGHER & CO., et al., Defendants.

          OPINION AND ORDER

          CHRISTOPHER A. BOYKO UNITED STATES DISTRICT JUDGE.

         This matter comes before the Court upon the Motion (ECF DKT #9) of Defendant, HealthSmart Benefit Solutions, Inc. (“HBS”), to Dismiss Counts II, IV, VI, VIII and IX of the Complaint against it Without Prejudice. For the following reasons, the Motion is granted.

         I. FACTUAL BACKGROUND

         Plaintiff Owner's Management Company (“OMC”) filed the instant Complaint on April 25, 2017, against HBS and Arthur J. Gallagher & Co. (“Gallagher”) for breach of contract, breach of fiduciary duties, negligent misrepresentation and for an accounting.

         Plaintiff is an independent senior living and multi-family residences property management company. Gallagher is an insurance brokerage and risk management company. HBS is a healthcare management company.

         Plaintiff had a long-standing relationship with Gallagher and relied upon Gallagher's expertise and advice for its employee healthcare benefit needs. Gallagher recommended a self-funded employee healthcare benefit plan from November 1, 2014 through October 31, 2015 that minimized Plaintiff's cost and potential exposure. Gallagher also recommended that Plaintiff utilize HBS as Claims Administrator. On November 1, 2014, Plaintiff, as Plan Sponsor, Administrator and Fiduciary, entered into the HealthSmart Benefit Solutions, Inc. Administrative Services Agreement with HBS. (ECF DKT #1-2). Gallagher was not a party to the Agreement. According to the Complaint, however, Gallagher and HBS modified how the assets of the Plan would be managed and how the costs, including the amount of approved benefit claims, were to be paid, all without Plaintiff's knowledge or consent. As the result of the alleged failures, mismanagement and misconduct of Gallagher and HBS, the Plan was underfunded and was terminated.

         The HealthSmart Benefit Solutions, Inc. Administrative Services Agreement contains the following relevant provisions:

¶ 1.3: Scope of Undertaking. [OMC] has sole and final authority to control and manage operation of the Plan. HBS is and shall remain an independent contractor with respect to the services being performed hereunder and shall not for any purpose be deemed an employee of [OMC]. HBS and [OMC] shall not be deemed partners, engaged in a joint venture or governed by any legal relationship other than that of independent contractors. HBS does not assume any responsibility for the general design of the Plan, the adequacy of funding required by the Plan, or any act or omission or breach of duty by [OMC].

         Pursuant to ¶ 2.1, HBS's sole responsibilities to OMC were limited to those described in the Agreement and any Exhibits attached. HBS was to handle the claims process and care management services for the Plan. These services involved reviewing claims, substantiating benefits eligibility, corresponding with enrollees and providers regarding claim coverage, preparing plan documents, coordinating stop-loss coverage and providing medical case management. (See OMC Opposition Brief, ECF DKT #12 at 6-7).

         According to ¶ 2.4, HBS and OMC agreed that HBS's duties under the Agreement were non-discretionary.

         Under ¶ 3.1, OMC would make all final determinations as to entitlement to Plan benefits and would be responsible for the Plan's compliance with all applicable federal and state laws and regulations.

¶ 3.2: Final Authority. [OMC] shall have all discretionary authority and control over the management and disposition of Plan assets to the exclusion of HBS. HBS shall not exercise any authority or control with respect to the management or disposition of the assets of the Plan. HBS shall have no responsibility or liability with respect to (i) any funding of Plan Benefits ...
¶ 3.3: Banking Arrangements. [OMC] shall provide sufficient funds to cover all of its obligations under the Plan, and HBS has no duty or obligation, legal or otherwise, to make such payments should [OMC] fail to provide such funding. [OMC] specifically authorizes HBS to issue claims payment via check, electronic transfer, and/or any other valid form of payment on a bank account established and maintained in the name of [OMC].

         Pursuant to ¶ 10.3, the Agreement, including any Exhibits, constituted the entire agreement between the parties with respect ...


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