James River Insurance Company v. Ultratec Special Effects Inc et al
Filing
101
MEMORANDUM OPINION AND ORDER re 85 MOTION to Dismiss Third-Party Defendant Britton-Gallagher & Associates, Inc.s Motion to Dismiss, in Part, Ultratec Special Effects, Inc.s First Amended Third-Party Complaint filed by Britton-Gallagher & Associates, Inc.; for reasons stated within the motion to dismiss, 85 , is GRANTED as to the fraud claims against Britton Gallagher (Counts V and VI), and DENIED as to the breach of contract claim (Count I); Ultratec's fraud and suppressio n claims against Britton Gallagher are DISMISSED without prejudice; Ultratec is free to replead these claims by June 30, 2017, and Britton Gallagher, if warranted, is free to challenge these claims again; This time, however, in the event a motion to dismiss is filed, the court will assess attorneys fees against the losing party. Signed by Judge Abdul K Kallon on 06/20/2017. (KBB)
FILED
2017 Jun-20 AM 10:47
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
JAMES RIVER INSURANCE
COMPANY,
)
)
)
Plaintiff/Counterclaim Defendant,
)
)
vs.
)
)
ULTRATEC SPECIAL EFFECTS,
)
INC., et al.,
)
Defendants
)
)
)
ULTRATEC SPECIAL EFFECTS, )
INC.,
)
)
Third-Party Plaintiff
)
)
v.
)
)
BRITTON-GALLAGHER &
)
ASSOCIATES, INC. AND
)
FOUNTAIN PARKER,
)
HARBARGER AND ASSOCIATES, )
LLC.
)
)
Third-Party Defendants.
Civil Action Number
5:16-cv-00949-AKK
MEMORANDUM OPINION AND ORDER
James River Insurance Company, Inc. filed a declaratory judgment action
pursuant to 28 U.S.C. § 2201, seeking to establish that it has no coverage
obligation related to an explosion at Ultratec Special Effects, Inc.’s plant in Owens,
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Alabama, based on an Employer’s Liability Exclusion. Doc. 1 at 11–12. In
response to James River’s lawsuit, Ultratec filed a Third-Party Complaint against
Britton-Gallagher & Associates, Inc. and Fountain Parker Harbarger and
Associates, LLC, alleging various torts arising out of the procurement of the
insurance policies at issue. See generally doc. 76. Presently before this court is
Britton-Gallagher’s motion to dismiss some of Ultratec’s claims against it. See doc.
85. For the following reasons, Britton-Gallagher’s motion is due to be granted as to
the fraud and suppression claims and denied as to the breach of contract claim.
I.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 8(a) requires that a complaint contain a short
and plain statement of the claim showing that the plaintiff is entitled to relief. Fed.
R. Civ. P. 8(a). While notice pleading is not intended to require the plaintiff to
specifically plead every element of a cause of action, “it is still necessary that a
complaint contain either direct or inferential allegations respecting all the material
elements necessary to sustain recovery under some viable legal theory.” Roe v.
Aware Woman Center for Choice, Inc., 253 F.3d 678, 683 (11th Cir. 2001)
(internal citations omitted); Seagood Trading Corp. v. Jerrico, Inc., 924 F.2d 1555
(11th Cir. 1991). By contrast with Rule 8(a)’s fairly liberal pleading standard, Fed.
R. Civ. P. 9(b) requires a party to “state with particularity the circumstances
constituting fraud or mistake.” To comply with this heightened pleading standard,
2
a
plaintiff
must
allege:
“(1)
the
precise
statements,
documents,
or
misrepresentations made; (2) the time, place, and person responsible for the
statement; (3) the content and manner in which these statements mislead the
Plaintiff[]; and (4) what the defendants gained by the alleged fraud.” American
Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1291 (11th Cir. 2010).
A motion made pursuant to Federal Rule of Civil Procedure 12(b)(6) is
permitted when a plaintiff has failed to state a claim upon which relief can be
granted. Fed. R. Civ. P. 12(b)(6). In a motion to dismiss, the factual allegations in
the plaintiff’s complaint are taken as true and “the court limits its consideration to
the pleadings and exhibits attached thereto.” Grossman v. Nationsbank, N.A., 225
F.3d 1228, 1231 (11th Cir. 2000); South Florida Water Mgmt Dis. v. Montalvo, 84
F.3d 402, 406 (1996). To survive a motion to dismiss, “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic
Corp. v. Twombly, 550 U.S. 544 (2007)). A claim is plausible where it “pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. Dismissal for failure to state a
claim, then, is appropriate where the plaintiff fails to state a claim that is “plausible
on its face.” Id. This is a “context specific task that requires the reviewing court to
draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.
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II.
FACTUAL BACKGROUND 1
In 2011, Ultratec contracted with Britton-Gallagher and Fountain Parker to
procure insurance for Ultratec and its subsidiary Ultratec Special Effects (“Ultratec
HSV”) to protect Ultratec from all liability, including claims filed by employees of
Ultratec HSV and any of Ultratec’s other subsidiaries. Ultratec expected BrittonGallagher and Fountain Parker to shop the relevant insurance markets and to then
inform it of all available coverage and alternatives. Ultimately, Britton-Gallagher
and Fountain Parker procured commercial general liability insurance for Ultratec
through James River and procured worker’s compensation and employer’s liability
insurance through another company, with James River providing excess insurance
coverage.
On February 6, 2015, an explosion at the Ultratec HSV facility resulted in two
fatalities and one serious injury. This incident spawned three lawsuits against
Ultratec and others in the Circuit Court of Madison County, Alabama. Ultratec
submitted the defense of the lawsuits to James River under its commercial general
liability policy. James River assumed Ultratec’s defense under a reservation of
rights and subsequently filed this declaratory judgment action seeking to establish
that it owed no duty to defend or indemnify under the policy, and to recover all
costs expended for defending the state lawsuits. According to James River, the
1
For the purposes of Fed. R. Civ. P. 12(b)(6), the plaintiff’s allegations are presumed true. As such, the facts are
taken from Ultratec’s Amended Third-Party Complaint, doc. 76.
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Employer’s Liability—Exclusion Endorsement attached to the 2014-2015 Policy
excludes coverage for bodily injury sustained by employees of Ultratec.
III.
ANALYSIS
In its third-party complaint against Britton-Gallagher and Fountain Parker.
Ultratec contends primarily that James River’s position is “inconsistent with the
insurance that [Ultratec] requested and that Britton-Gallagher and Fountain Parker
promised to procure.” Doc. 76 at 6. As a result, Ultratec has filed breach of
contract and fraud claims against these entities. Britton-Gallagher has moved to
dismiss three of the six claims Ultratec asserts against it: breach of contract (Count
I), negligent misrepresentation (Count V), and fraudulent suppression (Count VI).
A. The Breach of Contract Claim (Count I)
To support its motion to dismiss the breach of contract claim, Britton-Gallagher
contends that “the plain language of the underlying contract between Ultratec and
Britton-Gallagher clearly stated that the insurance policy issued to Ultratec would
contain an employer’s liability exclusion endorsement.” Doc. 86 at 2. This
contention rests primarily on the insurance proposal, see doc. 69-1, which BrittonGallagher represents as being the full scope of the contractual relationship between
it and Ultratec. Based on the third-party complaint, however, Ultratec alleges that
Britton-Gallagher also made oral representations that form part of the contract.
Allegedly, Ultratec entered into an oral contract with Britton-Gallagher and
Fountain Parker that laid out the conditions of engagement prior to receiving the
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insurance proposal, including that the two brokers purportedly would obtain
appropriate comprehensive insurance coverage for the Ultratec entities and inform
Ultratec of all policy alternatives. See doc. 76 at 11. Britton Gallagher and
Fountain Parker purportedly breached this contract by failing to “exercise
reasonable skill, care and diligence in procuring insurance which would not create
a catastrophic gap in coverage under the relevant policies.” Id. at 11. Moreover,
allegedly, the failure by these two agents to identify the Employer’s Liability
Exclusion Endorsement as a potential uninsured exposure breached these agents’
contractual duty to act with reasonable skill in procuring insurance. Id. at 11–12.
Under Alabama law, “a contract may consist of several communications
between the parties, some in writing and some oral, each constituting a link in the
chain which comprises the entire contract.” Lawler Mobile Homes, Inc. v. Tarver,
492 So. 2d 297, 304 (Ala. 1986). As a result, in addition to the insurance proposal,
the court must also consider the parties’ oral communications. See id. Therefore,
because Ultratec’s allegations about the purported oral communications are
sufficient at this juncture to plead a breach of contract claim, see Southern Medical
Health Sys., Inc. v. Vaughn, 669 So. 2d 98, 99 (Ala. 1995), Britton Gallagher’s
motion to dismiss the contract claim is due to be denied.
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B. Misrepresentation and Suppression Claims (Counts V and VI)
Britton Gallagher challenges the fraud claims next, contending that Ultratec has
failed to plead them with the particularity required by Fed. R. Civ. P. 9(b). To
satisfy Rule 9(b)’s “particularity” standard, a complaint should identify (1) the
precise statements, documents or misrepresentations made; (2) the time and place
of and persons responsible for the statement; (3) the content and manner in which
the statements mislead the plaintiff; and (4) what the Defendants gain by the
alleged fraud. American Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1291 (11th
Cir. 2010). Here, Ultratec alleges that on three separate occasions representatives
from Britton-Gallagher and Fountain Parker visited Ultratec and represented that
they had procured coverage sufficient to cover Ultratec against bodily injury
claims. Doc. 76 at 15, 18. However, the only conversation that Ultratec specifically
references to support this contention involved David Harbarger, the representative
of Fountain Parker. Doc. 76 at 15. With respect to Britton-Gallagher, Ultratec
relies instead on generalized allegations that Britton-Gallagher falsely represented
that the Employers Liability Exclusion Endorsement did not present a potential
uninsured exposure and that it relied on these general statements or omissions by
failing to procure additional insurance to cover the gap left by the Endorsement.
Doc. 76 at 16–18. These general allegations lack the requisite specificity required
by Fed. R. Civ. P. 9(b). See American Dental Ass’n, 605 F.3d at 1291 (A plaintiff
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pleading
fraud
must
identify
the
precise
statements,
documents
or
misrepresentations made). Accordingly, Britton-Gallagher’s motion is due to be
granted on these claims.
CONCLUSION
For the foregoing reasons the motion to dismiss, doc. 85, is GRANTED as to
the fraud claims against Britton Gallagher (Counts V and VI), and DENIED as to
the breach of contract claim (Count I). Ultratec’s fraud and suppression claims
against Britton Gallagher are DISMISSED without prejudice. Ultratec is free to
replead these claims by June 30, 2017, and Britton Gallagher, if warranted, is free
to challenge these claims again. This time, however, in the event a motion to
dismiss is filed, the court will assess attorneys fees against the losing party.
DONE the 20th day of June, 2017.
_________________________________
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE
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