Westfield Insurance Company v. B.H. Green & Son, Inc. et al
MEMORANDUM OPINION & ORDER granting in part and denying in part 11 Motion to Dismiss. Scheduling Conference set for 7/28/2011 09:00 AM in Teleconference before Chief Judge Thomas B. Russell.. Signed by Chief Judge Thomas B. Russell on 06/13/2011. cc:counsel (CSD)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
CIVIL ACTION NO: 5:11-CV-00010
WESTFIELD INSURANCE COMPANY
B.H. GREEN & SON, INC., et al.,
MEMORANDUM OPINION AND ORDER
Plaintiff Westfield Insurance Company has moved to dismiss counts II and III of
Defendant B. H. Green & Son, Inc.’s, counterclaim (DN 11). Defendant has responded (DN 17).
Plaintiff has replied (DN 19). The motion is GRANTED IN PART and DENIED IN PART.
This action is based on an underlying state court action. Defendant B. H. Green & Son,
Inc., was a contractor for Lyon County Board of Education. Defendant was contracted to
construct a middle school. After construction, cracks started to develop in the concrete of the
middle school. Lyon County Board of Education filed suit against multiple parties, including
B. H. Green.
Plaintiff Westfield is B. H. Green’s insurance company. Westfield has been defending
B. H. Green under a reservation of rights in the state court litigation. Westfield now sues in
federal court for a declaratory judgment on whether B. H. Green’s insurance policy covers the
Multiple issues have been raised in the underlying action. Originally, the damage was
alleged to be the result of a chemical reaction in the concrete known as an alkali carbonate
reaction (“ACR”). This reaction is allegedly the result of certain impurities present in the
concrete supplied to B. H. Green. Recently, the concrete supplier has filed a counter-claim,
alleging that the problem was not in the concrete, but was a design defect from the architect.
“When considering a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure, the district court must accept all of the allegations in the complaint as true, and
construe the complaint liberally in favor of the plaintiff.” Lawrence v. Chancery Court of Tenn.,
188 F.3d 687, 691 (6th Cir. 1999) (citing Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995)).
To survive a Rule 12(b)(6) motion to dismiss, the complaint must include “only enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007); see also Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009). The “[f]actual
allegations in the complaint must be enough to raise a right to relief above the speculative level
on the assumption that all the allegations in the complaint are true.” Twombly, 550 U.S. at 555
(internal citation and quotation marks omitted). A plaintiff must allege sufficient factual
allegations to give the defendant fair notice concerning the nature of the claim and the grounds
upon which it rests. Id.
Furthermore, “a plaintiff’s obligation to provide the grounds of his entitlement to relief
requires more than labels and conclusions, and a formulaic recitation of the elements of a cause
of action will not do.” Id. A court is not bound to accept “[t]hreadbare recitals of the elements
of a cause of action, supported by mere conclusory statements.” Iqbal, 129 S. Ct. at 1949.
Plaintiff has moved to dismiss Counts II and III from the counterclaim.
Defendant argues that coverage of the current case should be included in the insurance
contract due to promissory estoppel. Kentucky courts have held that estoppel cannot be used to
create or enlarge the coverage of an insurance policy. Old Republic Ins. Co. v. Begley, 314
S.W.2d 552, 557 (Ky. 1958); accord CJS Insurance § 1146; but cf. Am. Cas. Co. of Reading, Pa.
v. Shely, 314 Ky. 80 (1950) (estoppel can be used to create coverage if a defense is undertaken
without a reservation of rights letter). However, the general explanation for such a policy, “that
an insurer should not have to cover a loss for which the insured paid no premium,” is
inapplicable to the instant facts as alleged. Counterclaim, DN 8, pg. 6 (“14. In issuing the
policy and through its terms, Westfield represented to Green that coverage would be in place for
the type of claim asserted in the underlying lawsuit. 15. Green relied on the promise of such
coverage in paying premiums to Westfield for such coverage and in deciding not to purchase
such coverage via another insurance product and/or from another insurer.”). In addition, Old
Republic Ins. is factually distinguishable because it dealt specifically with declining to enlarge
coverage that was not in compliance with certain Kentucky statutes.1 Accordingly, the motion to
dismiss Count II is DENIED.
Count 3 seeks a recession of the contract and a refund of premiums for frustration of
purpose, failure of consideration, mutual mistake, and unjust enrichment. Plaintiff has failed to
The Court stated: “We perceive nothing in the record which would authorize the court to
extend the coverage of the contract by reason of any knowledge or act on the part of the
company even if it be assumed that the workman, Begley, believed that he was protected by the
insurance.” In the instant case, it is alleged that the parties discussed and bargained for the
disputed coverage. Accordingly, the facts may develop in such a way that would “authorize the
court to extend the coverage of the contract by reason of . . . knowledge or act on the part of the
company.” Id. at 557.
demonstrate that Defendant can succeed on no set of facts on the claim of frustration of purpose,
failure of consideration, and unjust enrichment. Accordingly the motion to dismiss those claims
Under Kentucky law, however, the mutual mistake claim must fail as a matter of law.
While a mutual mistake of fact can void a contract in Kentucky, a mutual mistake of law has no
effect. Clayville v. Huff, No. 2005-CA-001497-MR, 2007 WL 3406911, *2 (Ky.App. 2007)
(citing Sadler v. Carpenter, 241 S.W.2d 840, 842 (Ky. 1952)); Murphy v. Torstrick, 309 S.W.2d
767, 770 (Ky. 1958); Raisor v. Burkett, 214 S.W.3d 895, 906 (Ky.App. 2006). Accordingly,
Defendant is not entitled to recession on the grounds of mutual mistake. The motion to dismiss
mutual mistake from Count III is GRANTED.
For the above reasons, the motion to dismiss is GRANTED IN PART and DENIED IN
PART as consistent with this opinion.
In addition, a TELEPHONIC SCHEDULING CONFERENCE shall be held on July 28 at
9:00 am Central Time. The Court will place the call to the parties.
IT IS SO ORDERED.
June 13, 2011
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