Lend Lease (US) Construction, Inc. v. Am Trust Insurance Company of Kansas, Inc. et al

Filing 59

MEMORANDUM Opinion Signed by the Honorable Samuel Der-Yeghiayan on 1/13/2016: Mailed notice (mw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LEND LEASE (US) CONSTRUCTION,
INC.
Plaintiff,
v.
TECHNOLOGY INSURANCE
COMPANY, INC. and
ADMINISTRATIVE EMPLOYER
SERVICES, INC.,
Defendants.

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No. 15 C 4318

MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendant Technology Insurance Company,
Inc.’s (TIC) and Defendant Administrative Employer Services, Inc.’s (AES) motions
to dismiss. For the reasons stated below, the motions to dismiss are granted.

BACKGROUND
Plaintiff Lend Lease (US) Construction, Inc. (Lend Lease) alleges that it
entered into a contract to act as a construction manager for a construction project
(Project) in Chicago, Illinois. According to Lend Lease, it subsequently entered into
a contract with Cives Corporation d/b/a Cives Steel Company (Cives) to act as a
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subcontractor and to perform work at the Project. Lend Lease claims that it also
supplied the Contractor Controlled Insurance Program (CCIP) for the Project, which
allegedly provided workers compensation insurance policies procured from CV Starr
(Starr Policies) to all enrolled parties.
Pursuant to the Lend Lease and Cives subcontract, Cives allegedly enrolled in
the CCIP and was issued a Starr Policy. Cives then purportedly entered into a subsubcontract with Midwest Steel, Inc. (Midwest). Pursuant to the Cives and Midwest
sub-subcontract (Cives-Midwest Sub-subcontract), Midwest also allegedly enrolled
in the CCIP and was issued a Starr Policy. Lend Lease claims that after Midwest
contracted with Cives, Midwest then entered into a sub-subcontract with AES
(Midwest-AES Sub-subcontract). However, AES allegedly was not enrolled in the
CCIP and thus was not issued a Starr Policy. According to Lend Lease, AES instead
procured a workers compensation insurance policy with TIC (TIC Policy).
In December 2014, four ironworkers were allegedly injured (Injured Workers)
in an accident while working at the Project. The Injured Workers allegedly sought
workers compensation benefits due to the injuries sustained. Lend Lease also alleges
that it is responsible for paying $500,000 of any covered claim under the Starr
Policies. According to Lend Lease, CV Starr has accepted coverage for the Injured
Workers, subject to a reservation of rights to recover any money paid by AES and/or
TIC. Lend Lease contends that TIC has failed to fulfill an obligation to provide
coverage for the Injured Workers’ claims and reimburse Lend Lease for any amount
paid, pursuant to the Midwest-AES Sub-subcontract and the terms of the TIC Policy.
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Lend Lease includes in its second amended complaint claims for indemnification or
contribution brought against TIC (Count I), a claim for declaratory relief brought
against TIC (Count II), and a claim for unjust enrichment brought against AES
(Count III). TIC now moves to dismiss the claims in Counts I and II, and AES
moves to dismiss the claim in Count III.

LEGAL STANDARD
In ruling on a motion to dismiss brought pursuant to Rule 12(b)(6), the court
must draw all reasonable inferences that favor the plaintiff, construe the allegations
of the complaint in the light most favorable to the plaintiff, and accept as true all
well-pleaded facts and allegations in the complaint. Appert v. Morgan Stanley Dean
Witter, Inc., 673 F.3d 609, 622 (7th Cir. 2012); Thompson v. Ill. Dep’t of Prof’l
Regulation, 300 F.3d 750, 753 (7th Cir. 2002). A plaintiff is required to include
allegations in the complaint that “plausibly suggest that the plaintiff has a right to
relief, raising that possibility above a ‘speculative level’” and “if they do not, the
plaintiff pleads itself out of court.” E.E.O.C. v. Concentra Health Services, Inc., 496
F.3d 773, 776 (7th Cir. 2007)(quoting in part Bell Atlantic Corp. v. Twombly, 127
S.Ct. 1955, 1965 (2007)); see also Morgan Stanley Dean Witter, Inc., 673 F.3d at
622 (stating that “[t]o survive a motion to dismiss, the complaint “must contain
sufficient factual matter, accepted as true, to state a claim to relief that is plausible on
its face,” and that “[a] claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is
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liable for the misconduct alleged”)(quoting Ashcroft v. Iqbal, 556 U.S. 662
(2009))(internal quotations omitted).

DISCUSSION

I. TIC’s Motion to Dismiss
TIC moves to dismiss both claims brought against it.

A. Contribution and/or Indemnification Claim (Count I)
TIC argues that Count I should be dismissed because Lend Lease failed to
plead a legal theory which would entitle it to recover its own deductible from TIC
under Illinois law. (TIC Mem. 1). The parties agree that contribution and indemnity
are mutually exclusive under Illinois law, in that a plaintiff cannot obtain relief on
both theories. (TIC Mem. 1); (Resp. TIC MTD 6); see Home Ins. Co. v. Cincinnati
Ins. Co., 821 N.E.2d 269, 276 (Ill. 2004)(stating that “[t]he remedies of contribution
and indemnity are mutually exclusive, and contribution is prohibited where a party
has a right to indemnity”).

1. Contribution
TIC argues that Lend Lease has not pled the elements necessary to establish an
equitable contribution claim under Illinois law. (TIC Mem. 8). The remedy of
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contribution is “an equitable principle arising among coinsurers which permits one
insurer who has paid the entire loss, or greater than its share of the loss, to be
reimbursed from other insurers who are also liable for the same loss.” Home Ins.
Co., 821 N.E.2d at 276; see Royal Globe Ins. Co. v. Aetna Ins. Co., 403 N.E.2d 680,
683 (Ill. App. Ct. 1980)(stating that “the right to contribution has its basis in equity
rather than in contract,” and that “the right arises when one insurer pays money for
the benefit of another insurer”). Since contribution “applies to multiple, concurrent
insurance situations,” it “is only available where the concurrent policies insure the
same entities, the same interests, and the same risks.” Home Ins. Co., 821 N.E.2d at
276 (emphasis added). Accordingly, such elements “must be met before the
insurance can be considered concurrent or double.” Id.; see Schal Bovis, Inc. v.
Casualty Ins. Co., 732 N.E.2d 1179, 1186 (Ill. App. Ct. 2000)(stating that “[i]n order
for an insurer to recover under a theory of equitable contribution, [it] must prove: (1)
all facts necessary to the claimant’s recovery against the insured; (2) the
reasonableness of the amount paid to the insured; and (3) an identity between the
policies as to parties and insurable interests and risks”). Moreover, if two insurers
“cover separate and distinct risks,” then “there can be no contribution among them.”
Home Ins. Co., 821 N.E.2d at 276.
TIC contends that Lend Lease failed to allege that the instant policies provided
concurrent coverage, that Lend Lease was the insurer for the loss, or that the parties
have a mutual insured. (TIC Mem. 8). TIC argues that Lend Lease merely alleges
that, as the construction manager of the Project, it had procured insurance policies
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through CV Starr for contractors enrolled in the CCIP, including the Injured
Workers’ employer, Midwest. (TIC Mem. 8). Lend Lease argues that its allegations
involve two policies which provide “concurrent workers compensation coverage to
Midwest,” in the Starr Policy issued to Midwest and the TIC Policy issued to AES,
which Lend Lease claims should also provide coverage to Midwest pursuant to the
Midwest-AES Sub-subcontract. (Resp. TIC MTD 8-9). Lend Lease also argues that
it “has paid or will pay the first $500,000 of the Injured Workers’ Claims,” and that
TIC should instead be responsible. (Resp. TIC MTD 9). Lend Lease further argues
that it is not obligated to use specific phrases such as “concurrent coverage” in its
second amended complaint, and that any discrepancies should not be resolved at the
motion to dismiss stage. (Resp. TIC MTD 9).
In the second amended complaint, Lend Lease specifically alleges that “[a]s
part of the CCIP, Lend Lease provided policies of workers compensation insurance
to all enrolled parties[,]” and that “[t]hese policies were procured from CV Starr.”
(SA Compl. Par. 10). As TIC notes in its motion, Lend Lease does not allege that
Lend Lease was the insurer of AES or Midwest but rather alleges that “CV Starr was
the insurer for the loss” and that Lend Lease had an “obligation to pay the policy
deductible” based on its own contractual obligation with CV Starr. (TIC Mem. 2).
Lend Lease also failed to allege the policy periods of the Starr Policy and TIC Policy
at issue. Accordingly, since Lend Lease cannot be seeking recovery against TIC for
amounts paid as a concurrent insurer for the Insured Workers’ claims, Lend Lease is
instead seeking reimbursement of its deductible obligation under the Starr Policies.
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(TIC Mem. 2, 8). Thus, Lend Lease has failed to plead the necessary elements of a
contribution claim, in that it failed to allege that it is an insurer itself (and not CV
Starr), and that the policies at issue covered the same entities, the same interests, and
the same risks. See Schal Bovis, Inc., 732 N.E.2d at 1186 (holding that policies at
issue insured different risks and insurers were not liable for same loss). Therefore,
Lend Lease has failed to state a claim for equitable contribution.

2. Indemnification
TIC argues that Lend Lease has failed to adequately plead a claim for
indemnification under Illinois law. (TIC Mem. 10). As opposed to contribution, the
remedy of indemnification is a means of “placing the entire burden for a loss on the
party ultimately liable or responsible for it and by whom it should have been
discharged.” Home Ins. Co., 821 N.E.2d at 276 (emphasis in original). The parties
agree that “the concept of implied indemnity is inapplicable to this matter.” (Resp.
TIC MTD 10); (TIC Mem. 6). Thus, the only issue is whether Lend Lease has pled a
viable express indemnity claim.
Illinois law recognizes express indemnity as “arising out of agreement of the
parties, implied by operation of law, or implied by the courts. . .” Stifle v. Marathon
Petroleum Co., 876 F.2d 552, 558 (7th Cir. 1989). TIC contends that Lend Lease
“does not plead the existence of a contract between itself and [TIC] or even an
express indemnity right against [TIC],” nor does Lend Lease allege that it is an
insured under the TIC Policy. (TIC Mem. 2, 9). TIC argues that Lend Lease’s
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indemnity claims are based on the Midwest-AES Sub-subcontract and the TIC
Policy, although Lend Lease “is not a party to either contract.” (TIC Mem. 9). In its
response, Lend Lease argues that its allegations that “it has paid and continues to pay
the Injured Workers’ Claims when TIC rightfully ought to do so” are sufficient to
state an indemnification claim that it is “entitled to shift the entire burden of a loss it
has paid onto another responsible party.” (Resp. TIC MTD 10). However, in the
absence of allegations including a contractual relationship or any agreement between
Lend Lease and either TIC or AES, Lend Lease has failed to allege any facts to
support an express indemnity claim. Lend Lease has thus failed to allege facts to
support either an express indemnity claim or an implied indemnity claim. Therefore,
Lend Lease has failed to state a claim for indemnification. Based on the above,
TIC’s motion to dismiss the alternative claims of contribution or indemnification
(Count I) is granted.

B. Claim for Declaratory Relief (Count II)
TIC argues that Lend Lease has not set forth a justiciable controversy and thus
has no standing to seek declaratory relief against TIC. (TIC Mem. 11). In its second
amended complaint, Lend Lease alleges that it is seeking two forms of declaratory
relief: (1) “[a] declaration that TIC is obligated to pay workers compensation benefits
to the Injured Workers,” and (2) “[a] declaration that TIC is obligated to pay workers

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compensation benefits to any potential future injured co-employees of Midwest and
AES pursuant to the Midwest-AES Sub-subcontract.” (SA Compl. 7).
As stated above, the court finds that Lend Lease has failed to sufficiently plead
claims for contribution or indemnification. Thus, since the court has already ruled
that the claims in Count I are defective, there is no basis upon which Lend Lease may
seek a declaration of TIC’s obligations under the TIC Policy in connection with the
Injured Workers’ claims. (See Royal Globe Ins. Co. v. Aetna Ins. Co., 403 N.E.2d
680, 682 (Ill. App. 1980)(stating that the two basic requirements for bringing an
action for declaratory relief are an actual controversy and standing). Based on the
above, TIC’s motion to dismiss Lend Lease’s claim for declaratory relief (Count II)
is granted.

II. AES’s Motion to Dismiss
AES moves to dismiss the unjust enrichment claim brought against it in Count
III. AES argues that Lend Lease does not a state a viable claim for unjust
enrichment, contending that Lend Lease failed to allege facts that suggest that AES
accepted or received any benefit from Lend Lease. (AES Mem. 3). AES contends
that Michigan law applies to the unjust enrichment claim, and Lend Lease contends
that Illinois law applies to the unjust enrichment claim. (AES Mem. 7, n. 4); (Resp.
AES MTD 6). However, both parties contend that under either Illinois law or
Michigan law, they are entitled to prevail in regard to AES’s motion. (AES Mem. 7,
n. 4); (Resp. AES MTD 6).
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Under Illinois law, for an unjust enrichment claim, a plaintiff must establish
“that the defendant has unjustly retained a benefit to the plaintiff’s detriment, and
that defendant’s retention of the benefit violates the fundamental principles of
justice, equity, and good conscience.” Siegel v. Shell Oil Co., 612 F.3d 932, 937 (7th
Cir. 2010)(citing HPI Health Care Serv., Inc. v. Mt. Vernon Hosp., Inc., 545 N.E.2d
672, 679 (Ill. 1989)); see also Browning v. Browning, 2014 WL 2781469, at *9 (Ill.
App. Ct. 2014)(indicating that relief under an unjust enrichment claim is equitable
relief and within the court’s discretion). Under Michigan law, for an unjust
enrichment claim, a plaintiff must establish: “(1) the receipt of a benefit by the
defendant from the plaintiff and (2) an inequity resulting to the plaintiff because of
the retention of the benefit by the defendant.” Hudson v. Mathers, 770 N.W.2d 883,
887 (Mich. Ct. App. 2009)(stating that “[i]f this is established, the law will imply a
contract in order to prevent unjust enrichment,” but that “a contract will be implied
only if there is no express contract covering the same subject matter”). Thus, under
both Illinois and Michigan law, Lend Lease needs to allege that AES received and
unjustly retained a benefit from Lend Lease.
AES contends that it was not involved in the negotiations and final agreement
between Lend Lease and CV Starr. According to AES, it had no involvement with or
relationship with Lend Lease. Lend Lease acknowledges in its second amended
complaint that it entered into an agreement with Cives, and did not directly enter into
any agreement with AES. (SA Compl. Par. 8, 12, 14). Lend Lease alleges that Cives
entered into a subcontract with Midwest, which then entered into a subcontract with
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AES. (SA Compl. Par. 8, 12, 14). Although there is no bar under an unjust
enrichment to recovery for a benefit that passed between intermediaries, it is relevant
to note that AES was two steps removed from Lend Lease on the Project.
Lend Lease alleges that “[a]s a result of AES’ failure to secure workers
compensation insurance extending to Midwest Steel and the Injured Workers, AES
has been unjustly enriched in that it has paid less premium for its workers
compensation insurance policy (i.e., the TIC Policy), it has not had to satisfy any
applicable deductible or self-insured retention on the TIC policy, and/or it has not
had the claims of the Injured Workers counted against its insurance loss runs.” (SA
Compl. Par. 38). However, such an allegation that AES was somehow benefitted in
a tangential manner based on certain events is not sufficient to state a valid unjust
enrichment claim. Estate of McCallum, 395 N.W.2d 258 (Mich Ct. App.
1986)(stating that “[a] person who has been unjustly enriched at the expense of
another is required to make restitution to the other” and that “[t]he process of
imposing a contract-in-law to prevent unjust enrichment is an activity which should
be approached with some caution”). Such facts fail to indicate that AES received
any benefit from Lend Lease or that AES unjustly retained any benefit at Lend
Lease’s expense. There are no allegations in the second amended complaint that
suggest that Lend Lease was even aware of AES or expected contribution from AES
until after the Accident. Nor does Lend Lease identify any tangible monies that
flowed to AES and that AES retained. Instead, Lend Lease references theoretical
premiums that would have possibly been paid by AES if events had gone differently.
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Lend Lease alleges in a conclusory fashion that “the unjust enrichment
enjoyed by AES was to Lend Lease’s detriment, and such unjust enrichment is
inequitable and violates the fundamental principles of justice, equity, and good
conscience,” but Lend Lease fails to allege facts to support such a statement. Lend
Lease cannot employ an unjust enrichment cause of action to troll far and wide for
unknown third-parties that may have indirectly benefitted from the situation in order
to recoup losses on a business deal that did not work out favorably. Saletech, LLC v.
E. Balt, Inc., 20 N.E.3d 796, 808 (Ill. App. Ct. 2014)(stating that “[t]he mere fact that
a person benefits another is not of itself sufficient to require the other to make
restitution therefor”)(internal quotations omitted)(quoting Hayes Mechanical, Inc. v.
First Industrial, L.P., 812 N.E.2d 419 (Ill. App. 2004)); NL Ventures VI Farmington,
LLC v. City of Livonia, 2015 WL 9392721, at *9 (Mich. Ct. App. 2015)(stating as in
Saletech that “[t]he mere fact that a person benefits another is not of itself sufficient
to require the other to make restitution therefor”)(internal quotations
omitted)(quoting Estate of McCallum, 395 N.W.2d 258 (Mich Ct. App. 1986)); see
also Rutledge v. Hous. Auth. of City of E. St. Louis, 411 N.E.2d 82, 86 (Ill. App. Ct.
1980)(stating that “[i]t follows from the requirement of an inequity that there is no
general responsibility to compensate one for work and labor done irrespective of the
circumstances in which it is carried out” and that “incidental” benefits are not
sufficient for an unjust enrichment claim). Based on the above, AES’s motion to
dismiss the unjust enrichment claim (Count III) is granted.

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CONCLUSION
Based upon the foregoing analysis, TIC’s motion to dismiss the claims in
Counts I and II is granted, and AES’s motion to dismiss the claim in Count III is
granted.

___________________________________
Samuel Der-Yeghiayan
United States District Court Judge
Dated: January 13, 2016

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