Federal Insurance Company v. Indeck Power Equipment Company

Filing 107

ORDER denying 88 Motion to Dismiss. Signed by Honorable Timothy D. DeGiusti on 07/07/2016. (jb)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
FEDERAL INSURANCE COMPANY,
Plaintiff,
v.
INDECK POWER EQUIPMENT
COMPANY; GLENN BRIGGS &
ASSOCIATES, INC.; CITY OF
ALTUS, ALTUS MUNICIPAL
AUTHORITY,
Defendants.

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Case No. CIV-15-491-D

ORDER
Before the Court is Plaintiff Federal Insurance Company’s (Federal) Motion
to Dismiss Count III of Defendant Indeck Power Equipment Company’s (Indeck)
First Amended Counterclaim [Doc. No. 88]. Indeck has filed its response in
opposition [Doc. No. 96]. The matter is fully briefed and at issue.
Indeck entered into a contract with the Altus Municipal Authority to install
portions of a water treatment system to produce drinking water for the residents of
the City of Altus. A lawsuit was subsequently filed against Indeck and Glen Briggs
arising out of the water treatment system (the Altus litigation). Pursuant to
insurance policies issued by Federal to Indeck, Federal agreed to defend Indeck
subject to a reservation of rights. Federal now brings the present action, contending

it has no duty to defend or indemnify Indeck and seeks to withdraw from Indeck’s
defense in the Altus litigation upon a finding it has no duty to defend Indeck. In
sum, Federal contends it has no duty to defend Indeck because the Altus plaintiffs
do not seek any damages covered by the policies.
Indeck filed a counterclaim in which it seeks a declaration that Federal does
owe a duty to defend and indemnify it with respect the Altus litigation. Count
Three of Indeck’s counterclaim asserts a cause of action for tortious breach of the
duty of good faith and fair dealing, to wit:
Every insurer has an implied duty to deal fairly and act in good faith
with its insured. Violation of this implied duty is a tort under
Oklahoma common law, for which consequential and punitive
damages may be sought. Federal has unreasonably withheld payment
to Indeck for its costs of defense in breach of its implied duty of good
faith. Federal has withheld payment from Indeck and forced it to incur
additional expense in the defense of the present action in bad faith in
order to force Indeck to settle the underlying litigation with its own
funds through the pressure of litigating on two fronts. Indeck has been
damaged as a consequence of Federal’s bad faith acts or omissions by
incurring substantial unreimbursed fees and costs in the underling
[sic] action and in this action after Federal agreed to defend Indeck.
Federal has committed other acts in bad faith which shall be disclosed
by discovery herein.
See Indeck’s First Amended Counterclaim, ¶¶ 67-71 (emphasis in original) [Doc.
No. 80].

2

Federal contends Illinois law applies to Indeck’s counterclaim and it is
preempted by Section 155 of the Illinois Insurance Code.1 In response, Indeck
argues that, under choice of law principles, Oklahoma law applies to its tortious
breach claim and, consequently, such claim is neither governed or barred by
Illinois law, specifically, Section 155.
At this stage of the litigation, 2 it would be inappropriate to issue a ruling on
Federal’s motion because doing so would require what applicable precedent
prohibits, which is to weigh the choice of law evidence submitted by the parties.
The allegations in Indeck’s counterclaim are insufficient to evaluate adequately the
choice of law issues raised by Federal’s motion. Such an inquiry, at this juncture,
would therefore be improper on a motion brought under Rule 12(b), and the issue
would be better reserved for summary judgment, where the Court has the benefit of
a properly developed record. See Jones v. Lattimer, 29 F. Supp. 3d 5, 10 n. 3
(D.D.C. 2014) (finding choice of law analysis was premature on motion to dismiss
and “better suited” for resolution at summary judgment stage after record had been
1

Section 155 provides an extracontractual remedy for an action on an insurance
policy – namely, by allowing attorney’s fees and punitive damages to be awarded
on a showing of “vexatious and unreasonable” conduct by an insurance company.
Cramer v. Insurance Exch. Agency, 675 N.E.2d 897, 902 (Ill. 1996).
2

The parties agreed to bifurcate summary judgment briefing by submitting initial
briefs on the threshold issue of whether Federal had a duty to defend, and, if the
entire case was not resolved as a result of said submissions, filing a second round
of dispositive motions that address all remaining issues. See Scheduling Order, ¶¶
6-7 [Doc. No. 64].
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developed); Clark Material Handling, Inc. v. Toyota Material Handling, U.S.A.,
Inc., No. 3:12–CV–510, 2012 WL 6107682, at *1 (W.D.N.C. Dec. 10, 2012)
(declining to engage in choice of law analysis at motion to dismiss stage in order to
fully develop factual record); Speedmark Transp., Inc. v. Mui, 778 F. Supp. 2d 439,
444 (S.D.N.Y. 2011) (finding choice of law determination is “premature on …
motion to dismiss, since the record” lacked necessary development for the factspecific analysis) (collecting cases); Arlandson v. Hartz Mountain Corp., 792 F.
Supp. 2d 691, 699-700 (D.N.J. 2011) (“Due to the factual inquiry that may be
necessary to properly weigh the [choice of law] Restatement factors, it can be
inappropriate or impossible for a court to conduct that analysis at the motion to
dismiss stage[.]”) (internal quotation marks and citations omitted).
Accordingly, Federal’s Motion to Dismiss [Doc. No. 88] is DENIED as set
forth herein.
IT IS SO ORDERED this 7th day of July, 2016.

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