Baumann v Sedgwick Claims Mgt. Servs. Inc.
Annotate this CaseDecided on May 9, 2005
Supreme Court, Suffolk County
Ronald A. Baumann, RICHARD M. BAUMANN, JR., and CONSTANCE A. GILMAN, as Trustees for and on behalf of the BAUMANN SELF-INSURANCE TRUST, Plaintiffs,
against
Sedgwick Claims Management Services Inc., SEDGWICK OF CONNECTICUT, INC., and J&H MARSH & McLENNAN, INC., f/k/a SEDGWICK OF NEW YORK, INC., Defendants.
26110-01
HAMBURGER, MAXSON, YAFFE, WISHOD & KNAUER, LLP
Attorneys for Plaintiffs
225 Broadhollow Road, Suite 301E
Melville, New York 11747
ANDERSON & OCHS, LLP
Attorneys for Defendants
369 Lexington Avenue, 16th Floor
New York, New York 10017
Elizabeth Hazlitt Emerson, J.
The plaintiff Ronald Baumann is an owner of Baumann & Sons Buses, Inc., and affiliated bus companies. In the early 1990's, the Baumann Self-Insurance Trust (hereinafter "the Trust") was established to provide workers' compensation benefits for Baumann employees. Beginning in 1993, the defendant Sedgwick Claims Management Services, Inc. (hereinafter "Sedgwick"), provided claims administration services to the Trust for a flat fee of $15,000 annually, which was eventually raised to $30,000 annually. In 1997, the plaintiff Ronald Baumann approached Sedgwick about the filing of loss-transfer claims. Loss-transfer claims are claims for reimbursement asserted against third-parties who are determined to be liable for causing or contributing to accidents or injuries that result in workers' compensation benefits being paid by the Trust. It is undisputed that Sedgwick undertook the filing of loss transfer claims on behalf of the Trust for claims that arose after July 15, 1994. However, according to the defendants, Sedgwick
Index No.: 26110-01
Page 2
only did so in anticipation of reaching a final, written agreement with the plaintiffs on the loss-transfer claims, among other things. Sedgwick submitted several proposals to the plaintiffs, all of which were rejected. Ronald Baumann refused to sign a contract with Sedgwick because he was dissatisfied with Sedgwick's performance. On February 1, 2000, not having obtained a signed contract from the plaintiffs, Sedgwick advised them that it would be unable to process any new claims after December 30, 1999.
The plaintiffs subsequently commenced this action against the defendants alleging, inter alia, that the defendants breached their agreement with the Trust by failing to properly and timely file the vast majority of the Trust's open loss-transfer claims. As a result, the three-year statute of limitations expired on numerous claims, resulting in losses to the Trust in excess of $1 million. The defendants counterclaimed alleging that the plaintiffs failed to pay for services rendered in 1998 and 1999. Both sides now move for summary judgment. The defendants contend that there was no enforceable agreement between the parties. The plaintiffs contend that there was an oral agreement that the defendants breached.
It is undisputed that the parties never had a written agreement. The plaintiffs signed written agreements in 1992 and 1993 with Patrick Carter Associates, Inc., a separate entitity that subcontracted with Sedgwick until 1993, when Patrick Carter died and Sedgwick took over the account. However, the plaintiffs never signed a written agreement with Sedgwick. It is also undisputed that the parties' oral agreement did not include loss-transfer services. In fact, neither party was even aware that the Trust was eligible to recover loss-transfer monies until 1997. Since the parties' original oral agreement did not include the processing of loss-transfer [*2]claims, the court finds that, in 1997, the parties modified that agreement to include the filing of loss transfer claims for claims that arose after July 15, 1994. Moreover, it is undisputed that such modification was not reduced to writing.
General Obligations Law § 5-1103 provides, in pertinent part, that an agreement, promise, or undertaking to change, modify, or discharge any contract or obligation shall not be invalid because of the absence of consideration, provided that the agreement, promise, or undertaking changing, modifying, or discharging such contract or obligation shall be in writing and signed by the party against whom it is sought to enforce the change, modification, or discharge or by his agent.
The court finds that the aforementioned modification to the parties' oral agreement was not supported by consideration. The parties agree that, in 1996 or 1997, the flat fee paid by the Trust to Sedgwick was raised, pursuant to an oral agreement, from $24,000 annually to $30,000 annually. The parties also agree that the increase was "to make the account more profitable." There is no evidence in the record that the increase was tied to the additional work that Sedgwick undertook in connection with the loss-transfer claims. In fact, the plaintiffs state in their reply memorandum, "The evidence uniformly demonstrates that [Sedgwick] agreed to perform and began performing loss transfer services as part of the...services already being provided to the Trust, already being billed to the Trust, and already being paid for by the Trust." The court, therefore, finds that Sedgwick received no new or addition consideration for its processing of the
Index No.: 26110-01
Page 3
plaintiffs' loss-transfer claims. Under these circumstances, the oral modification is unenforceable (see, State Bank of Albany v Arbit Furniture Co., 41 AD2d 866, affd 34 NY2d 875).
The plaintiffs contend that, although consideration may be necessary to compel the defendants to perform their promise in the future or to seek damages for a breach in refusing to perform, consideration is not necessary to hold the defendants liable for their incompetent performance of a contract already performed, i.e., breach of an executed contract. Preliminarily, the court notes that the plaintiffs' argument sounds in negligence rather than breach of contract. In any event, the court finds that it does not compel a contrary result. Part performance of an unenforceable oral agreement provides relief for the party that performed the oral agreement, not the party that merely benefitted from the other party's performance (cf., Messner Vetere Berger McNamee Scmetterer Euro RSCG v Aegis Group, 974 F Supp 270; question certified 150 F3d 194; certified question accepted 92 NY2d 916; certified question answered 93 NY2d 229; answer to certified question conformed to 186 F3d 135). Here, it is the defendants who performed pursuant to the terms of the oral modification, not the plaintiffs. [*3]
Regarding the counterclaim, the court finds that there is a question of fact as to whether the plaintiffs still owe Sedgwick $17,000 for services rendered in 1998 and 1999.
In view of the foregoing, the court grants the defendants' motion for summary judgment, but only to the extent of dismissing the plaintiffs' first cause of action, which is the only cause of action that the parties' motion papers address. The defendants' motion is otherwise denied. The plaintiffs' cross motion is also denied, and the parties are directed to proceed to trial on the remaining causes of action and the counterclaim.
DATED: May 9, 2005
J. S.C.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
