Landis Construction Co., LLC v. Torus Specialty Ins. Co. et al

Filing 30

ORDER & REASONS denying 16 , 17 & 19 Motions for Judgment on the Pleadings. Signed by Judge Martin L.C. Feldman on 7/13/2016. (caa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
LANDIS CONSTRUCTION, LLC

CIVIL ACTION

V.

NO. 16-1619

TORUS SPECIALTY INS. COMPANY,
ALTERRA EXCESS & SURPLUS LINES
INS. COMPANY, AND STARR SURPLUS
LINES INS. COMPANY

SECTION "F"

ORDER AND REASONS
Before the Court are three motions, all of which seek the
same relief. The defendants, StarStone Specialty Insurance Company
(f/k/a Torus Specialty Insurance Company), Starr Surplus Lines
Insurance Company, and Evanston Insurance Company (f/k/a Alterra
Excess & Surplus Insurance Company) move for judgment on the
pleadings to dismiss the plaintiff, Landis Construction’s, socalled “Delay Claim” and associated claim for statutory penalties.
For the reasons that follow, the motions are DENIED.
Background
This

is

an

insurance

dispute

between

a

builder,

Landis

Construction, and the insurers of the building project’s owner.
1501 Canal Apartments, LLC is the owner of its namesake
building on Canal Street in New Orleans. 1501 Canal hired Landis
Construction as a general contractor to perform renovations on the
building. The contract required the owner, 1501 Canal, to purchase
and maintain property insurance to protect the interests of the

1

builder, Landis Construction. 1501 Canal was also required to name
Landis as an “Additional Insured” on the policy.
In

compliance

with

its

obligations

under

the

building

contract, 1501 Canal obtained builder’s risk insurance. Three
different

insurance

companies

issued

policies

that

covered

a

portion of the total coverage amount (the policy limit). StarStone
issued a policy covering 37.5% of the policy limit; Starr issued
a policy covering 37.5% of the policy limit; and Evanston issued
a policy covering the remaining 25% of the policy limit. The
insurers agreed that Starstone’s would be the lead policy.
The total limit under the three policies was $22,955,000.
That amount was divided into sublimits for certain categories of
risks. For “physical damage,” the sublimit was $17,549,514. The
sublimit

for

“physical

damage

to

Existing

Property”

was

$5,050,486. Finally, the sublimit for “Delay in Completion-Soft
Costs” was $355,000. Central to these motions is a disagreement
over the sublimit category in which Landis’ claims fall.
In January of 2014, during the final stages of the renovation
project, a pressure relief valve attached to a water boiler on the
roof of the building released. Water flowed from the roof and
flooded the elevator machine room and electrical rooms below.
Landis was required to repair the water damage, and it incurred
costs in doing so. After consulting with its subcontractor in
February of 2014, Landis learned that the cost of replacing the
2

bus ducts in the building would be $333,056. This did not include
the cost of demolition and removal of the damaged bus ducts or
Landis’ lost profits and overhead expenses. In June of 2014, the
defendant insurers issued a $308,014 payment to Landis to cover
repair

costs.

By

July

of

2014,

however,

Landis

had

incurred

expenses totaling $443,092.48. It asked the defendants for an
additional partial payment of $138,048.48 to cover the difference
between the amount paid and the actual cost of the repairs.
Landis completed performance under the building contract in
September of 2014. The owner, 1501 Canal, was obligated under the
contract to pay Landis the balance owed for the costs incurred to
repair the water damage. In lieu of payment, however, 1501 Canal
subrogated and assigned to Landis its insurance claims against the
defendants. 1 Landis contends that the net loss it sustained as a
result of the water damage is $875,144.21 plus $5,925 for “Claims
Preparation Costs.” After subtracting the $308,014 already paid,
Landis submits that the defendants owe $573,055.21 to satisfy the
claim. This amount includes charges for Landis’ profits, overhead,
and costs during the period in which repairs were made.
After months of back and forth with the insurance adjuster,
the defendants agreed to pay a portion of the outstanding balance.

1

Landis also maintains that it was subrogated to 1501 Canal’s
insurance claims by operation of law because it had completed
performance without receiving reimbursement.
3

On September 9, 2015, the defendants’ accountant recommended an
additional $22,000 payment for “physical damage” and a payment of
$193,037 for “Soft Costs” related to Landis’ “Delay Claim.” On
October 7, 2015, the defendants submitted proof of loss forms to
Landis showing an agreed payment of $193,037. Landis executed the
forms and returned them on October 12, 2015.
Over 30 days later, on November 13, 2015, Landis received
payment of $72,388.94 from Starr. On November 18, 2015, Landis
received payment of $48,259.30 from Evanston. Finally, on January
8, 2016, Landis received payment of $72,388.94 from StarStone. 2
The defendants have yet to tender the remaining $22,000 payment
for

“physical

damage”

because

Landis

refused

to

execute

a

“Policyholders Release” in exchange. Landis seeks reimbursement
for the balance of the costs it incurred to repair the water
damage. 3
The defendants move for dismissal of Landis’ claims for lost
profits and overhead costs, which make up a substantial portion of

2

In addition to the balance of its insurance claim, Landis seeks
penalties for the untimeliness of the defendants’ payments.

3

The exact amount that Landis seeks is unapparent to the Court.
In its amended complaint, Landis claims that it was owed
$573,055.21 before the defendants made the final payment of
$193,037. The difference between the two is 380,018.21. However,
later in its amended complaint, Landis claims that it is owed “at
least $199,773.42 not including penalties and attorneys’ fees.”
Compare paragraphs 31 and 53 of the amended complaint.
4

the unpaid balance. According to the defendants, that portion is
a “Delay Claim” governed by the “Delay in Completion” endorsement
attached

to

the

insurance

policy.

The

Delay

in

Completion

endorsement provides: “For the purpose of this endorsement only,
the Named Insured, if different from that shown on the policy
declarations,

shall

be

as

shown

on

the

declarations

of

this

endorsement. There shall be no Additional Insureds hereunder.”
Directly below, the “Named Insureds” are listed. 1501 Canal is
listed, but Landis is not. 4 Simply put, because Landis is not a
“Named Insured,” the defendants contend the Delay in Completion
endorsement explicitly precludes Landis from recovering its lost
profits and overhead costs.
Landis

responds

that

it

has

fallen

into

a

well-placed

semantics trap. According to Landis, sometime during the monthslong dealings with the insurance adjuster, the adjuster began
referring to Landis’ claim for lost profits and overhead as the
“Delay Claim.” Unwittingly, and perhaps ineptly, Landis acquiesced
to the technical designation. It too began calling its claim a
“Delay Claim.” Indeed, Landis repeatedly distinguished between its
“Delay Claim” and its “Physical Damage Claim” throughout its
original complaint.

4

Landis is listed in the policy as an “Additional Insured” – one
who is specifically excluded by the Delay in Completion
endorsement.
5

After the defendants filed their motions for judgment on the
pleadings,

however,

Landis

realized

the

technical

meaning

of

“Delay Claim” and sought leave to amend and correct its complaint.
Landis’ motion to amend was unopposed, and the Court granted it on
June 27, 2016. In its amended complaint, Landis submits that the
policy clearly includes its claim for lost profits and overhead in
the “physical damages” category, not in the Delay in Completion
endorsement. 5
As a result, Landis urges that the “Delay Claim” which the
defendants seek to dismiss is misidentified as such. It contends
that its claim for lost profits and overhead are included under
the coverage terms of the policy for physical damage, and are not
subject

to

the

Landis

contends

Delay
that

in

Completion

the

motions

endorsement.
to

dismiss

Accordingly,
are

moot.

Alternatively, Landis submits that it is subrogated to the rights
of 1501 Canal, who is a “Named Insured,” and thus, its claim for
lost profits and overhead is valid even if it constitutes a “Delay
Claim” under the Delay in Completion endorsement.
I.

5

For example, the policy includes coverage for the “Total Contract
Value,” which includes “all wages, expenses, materials, supplies,
equipment, change orders plus if declared, contractor’s profit and
overhead, existing structures (when coverage is included by
endorsement) and such other charges, all whether provided by the
owner, contractors or others, which will become a part of or will
be expended on the project. . . .” (emphasis added).
6

Federal Rule of Civil Procedure 12(c) permits a party to move
for judgment after both the complaint and answer have been filed.
See Fed. R. Civ. P. 12(c). “A motion brought pursuant to [Rule
12(c)] is designed to dispose of cases where the material facts
are not in dispute and a judgment on the merits can be rendered by
looking to the substance of the pleadings and any judicially
noticed facts.” Great Plains Trust Co. v. Morgan Stanley Dean
Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002)(quoting Hebert
Abstract Co. v. Touchstone Props. Ltd., 914 F.2d 74, 76 (5th Cir.
1990)).
In considering a Rule 12(c), motion, the Court “accepts ‘all
well-pleaded

facts

as

true,

viewing

favorable to the plaintiff.’”

them

in

the

light

most

See Martin K. Eby Constr. Co. v.

Dall. Area Rapid Transit, 369 F.3d 464 (5th Cir. 2004) (quoting
Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999)). Documents
attached

to

a

motion

to

dismiss

are

considered

part

of

the

pleadings if they are referred to in the plaintiff’s complaint and
are central to the claim.

Causey v. Sewell Cadillac-Chevrolet,

Inc., 394 F.3d 285, 288 (5th Cir. 2004) (citing Collins v. Morgan
Stanley

Dean

Witter,

224

F.3d

496,

498-99

(5th

Cir.

2000)).

Accordingly, the Court considers the insurance policy in resolving
these motions.
II.

7

The

defendants’

pleadings

is

that

sole

basis

Landis’

for

“Delay

partial

Claim”

judgment

and

its

on

the

associated

statutory penalty claim must be dismissed because Landis has no
rights under the Delay in Completion endorsement. Since Landis has
amended the complaint, however, there no longer exists a “Delay
Claim.” Thus, accepting the well-pleaded facts in Landis’ amended
complaint as true, the defendants’ motions are obviously moot.
Even

assuming

Completion

that

Landis

endorsement,

has

no

Landis

rights

now

under

asserts

the

rights

Delay
under

in
a

different provision of the policy that does not exclusively apply
to “Named Insureds.” To the contrary, Landis now relies on language
that explicitly includes coverage for the type of damages it seeks.
The

defendants

have

yet

to

address

or

contest

such

rights.

Accordingly, the defendants’ motions for partial judgment on the
pleadings are DENIED. 6
New Orleans, Louisiana, July 13, 2016

______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE

6

The defendants filed a last-minute joint reply brief asking the
Court to resolve the “Delay Claim” issue because, in its opposition
brief, Landis claims it has reserved an alternative theory of
recovery under the Delay in Completion endorsement based on its
subrogated rights to the Named Insured (1501 Canal). Yet the
defendants attempt to raise a new issue not presented in their
initial motions: the scope of Landis’ subrogation rights. That
issue is not currently before the Court, and the Court does not
address it here.
8