State of Wisconsin Local Government Property Insurance Fund v. Lexington Insurance Company et al

Filing 68

ORDER signed by Judge J.P. Stadtmueller on 3/13/2017 DENYING 55 Defendant The Cincinnati Insurance Company's Motion for Judgment on the Pleadings. (cc: all counsel) (jm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
STATE OF WISCONSIN LOCAL
GOVERNMENT PROPERTY
INSURANCE FUND,
Case No. 15-CV-142-JPS
Plaintiff,
v.
LEXINGTON INSURANCE COMPANY,
THE CINCINNATI INSURANCE
COMPANY, and MILWAUKEE
COUNTY,

ORDER

Defendants.

On February 7, 2017, Defendant The Cincinnati Insurance Company
(“Cincinnati”) filed a motion for judgment on the pleadings. (Docket #55).
Plaintiff State of Wisconsin Local Government Property Insurance Fund (the
“Fund”) submitted its opposition to the motion on February 28, 2017. (Docket
#65). Cincinnati replied on March 8, 2017. (Docket #66). For the reasons
explained below, the motion must be denied.
Federal Rule of Civil Procedure (“FRCP”) 12(c) permits a party to seek
judgment once each side has filed its pleadings. Fed. R. Civ. P. 12(c). The
Court reviews such motions
by employing the same standard that applies when reviewing
a motion to dismiss for failure to state a claim under [FRCP]
12(b)(6)…. Thus, we view the facts in the complaint in the light
most favorable to the nonmoving party and will grant the
motion only if it appears beyond doubt that the plaintiff cannot
prove any facts that would support his claim for relief.

Buchanan-Moore v. County of Milwaukee, 570 F.3d 824, 827 (7th Cir. 2009)
(citations and quotations omitted). The Court must “draw all reasonable
inferences and facts in favor of the nonmovant, but need not accept as true
any legal assertions.” Wagner v. Teva Pharm. USA, Inc., No. 15-2294, 2016 WL
6081381, at *1 (7th Cir. Oct. 18, 2016).
The following facts are gleaned from viewing the factual allegations
of the complaint in a light most favorable to the Fund. The Fund insured,
inter alia, the Milwaukee County (the “County”) courthouse located at 901
North 9th Street, Milwaukee. (Docket #1-2 at 2). The County also purchased
an insurance policy for the courthouse from Cincinnati. Id. at 7. The Fund’s
policy offered broad coverage, while Cincinnati’s was directed only at
“machinery and equipment” breakdowns and resulting damage. Id. at 8-11;
see (Docket #13-3).
On July 6, 2013, a fire in the courthouse caused an estimated $18
million of damage. (Docket #1-2 at 14-15). The Fund manager made a
determination of the loss and advanced payment to Milwaukee County. Id.
at 8. The Fund paid the County for all but $1.6 million of the damage. Id. at
15, 19.
Both the Fund and Cincinnati policies included a “joint loss
agreement” endorsement (“JLA”). Id. at 19. The JLA provides a dispute
resolution mechanism when there is a disagreement between the Fund and
Cincinnati regarding the availability or extent of coverage for a loss. (Docket
#13-1 at 24). The JLA states that upon demand by the insured, the County,
each company “shall . . . pay to the insured one-half of the amount of the loss
which is in disagreement[.]” Id. It further states that “[t]he payments by the
insurers hereunder and acceptance of the same by the insured signify the
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agreement of the insurers to submit to and proceed with arbitration[.]” Id.;
see (Docket #13-3 at 17-18) (Cincinnati’s version of the JLA with equivalent
language).
The County invoked the JLAs and asked each insurer for $800,000,
which they duly paid. (Docket #1-2 at 19). The Fund alleges that its other
payments beyond the $800,000 it paid pursuant to the JLA “were made
pursuant to a determination that the loss was covered under the Fund
policy,” and “were made with full and continued reservation of all rights to
seek a legal determination as to the ultimate responsibility for such payments
and to pursue reimbursement from Cincinnati[.]” Id. at 15. It further alleges
that the insurers anticipate arbitrating the $1.6 million at issue under the
JLAs. Id. at 19. Nevertheless, the Fund specifically reserved the right “to
pursue a recovery from Cincinnati for amounts advanced by the Fund,
regardless of whether such amounts are” subject to the JLAs. Id. at 19-20. In
its prayer for relief, the Fund requests declaratory judgment “that as a matter
of law the Cincinnati Policy requires Cincinnati to reimburse the Fund for
certain amounts the Fund has paid and will be obligated to pay to Milwaukee
County” for the July 6, 2013 loss. Id. at 20-21.
The parties’ arguments are relatively brief. Cincinnati contends that
the Complaint fails to state a claim for relief, or in the alternative that the
Court lacks subject matter jurisdiction, both for the same reason. (Docket #56
at 4-6). Namely, because the JLAs compel arbitration of the $1.6 million in
dispute, there remains nothing left for the Court to decide. Id. at 6.
The Fund counters that it has asserted a claim for relief beyond the
$1.6 million subject to arbitration. (Docket #65 at 2-3). It cites the passages of
the Complaint quoted above, which it believes allow for damages in excess
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of the JLA funds. Id. at 3-4. The Fund maintains that its allegations allow for
recovery more than $1.6 million of its loss payments to the County, which
now total over $19 million, from Cincinnati. Id. at 5. According to the Fund,
it and Cincinnati “did not agree to arbitrate the entire matter in controversy.
Rather, they contractually agreed to arbitrate only those specific amounts
pursuant to which Milwaukee County invoked the policies’ JLA.” Id. at 6.
Cincinnati replies in two ways. First, it states that the Fund’s position
is inconsistent with the JLAs. (Docket #66 at 1). The Seventh Circuit’s
November 14, 2016 opinion in this matter described the JLA procedure as “a
demand by the insured; a dispute between the insurers about liability;
payment by each insurer of half the disputed amount; and acceptance of
payment by the insured.” (Docket #43 at 11). The language of the Fund’s JLA
echoes this interpretation. (Docket #66 at 2). As quoted above, it provides
that each insurer will pay “one-half of the amount of the loss which is in
disagreement[.]” (Docket #13-1 at 24). Cincinnati argues that the Fund is thus
limited to pursuing the $1.6 million, because that is the “amount of the loss
which is in disagreement” per the County’s invocation of the JLA. Id. at 2-3.
Second, Cincinnati addresses the Fund’s position that it reserved the
right to pursue Cincinnati for amounts above and beyond the $1.6 million
subject to JLA arbitration. Id. at 3. Cincinnati claims that the Fund’s position
violates the election of remedies doctrine. Id. In short, Cincinnati contends
that as applied here, the doctrine precludes a party from litigating when it
has voluntarily consented to arbitrating the same issue. (Docket #66 at 3-4);
see Jarosch v. Am. Family Mut. Ins. Co., 837 F.Supp.2d 980, 1017 (E.D. Wis.
2011). Cincinnati states that it relied on the prospect of arbitrating its entire
dispute with the Fund in complying with its JLA. (Docket #66 at 4-5). “Had
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Cincinnati known that the Fund intended to arbitrate anything less than the
full amount ‘which is in disagreement between the insurers,’” Cincinnati
maintains that it “would never have agreed to engage in the procedures set
forth in the JLA or to go forward with arbitration.” Id. Cincinnati claims
prejudice by its payment of the $800,000 pursuant to the JLA procedures and
its agreement to arbitrate the $1.6 million. Id. at 5.
As shown above, the Fund’s allegations clearly seek amounts over and
above the $1.6 million at play in the JLA process. Viewing those allegations
in a light most favorable to the Fund, the Court cannot say that “it appears
beyond doubt that the plaintiff cannot prove any facts that would support his
claim for relief.” Buchanan-Moore, 570 F.3d at 82. The Court offers no opinion
on the ultimate merit of Cincinnati’s other arguments raised in its reply.
Suffice it to say here that they do not account for the focus of a FRCP 12(c)
motion—the pleadings—and its attendant standard of review.1
Accordingly,
IT IS ORDERED that the defendant The Cincinnati Insurance
Company’s motion for judgment on the pleadings (Docket #55) be and the
same is hereby DENIED.

1

The arguments also raise potential evidentiary issues addressed by neither
party. One critical omission is an indication as to how the County determined that
it would ask for $1.6 million from the Fund and Cincinnati. See (Docket #1-2 at 19)
(“By letter dated August 1, 2014, Milwaukee County notified the Fund that the
County was invoking the joint loss agreements . . . [and] requested that the Fund
and Cincinnati each advance $800,000 . . . as the purported balance owed on the
claim.”). Cincinnati claims that the $1.6 million is the maximum disputed balance
but this does not explain why the allegations 1) describe it as a “purported”
balance, and 2) are silent as to who decided to demand $1.6 million and why. The
Court leaves these and any other evidentiary questions for a later stage of these
proceedings.

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Dated at Milwaukee, Wisconsin, this 13th day of March, 2017.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

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