3644 13th St N.W. LLC v. Atain Specialty Ins. Co., Civil Action 19-2912 (JDB)

• Court: United States District Courts. United States District Court (Columbia)
• Decision Date: 12 January 2022
• Docket Number: Civil Action 19-2912 (JDB)
• Parties: 3644 13TH ST N.W. LLC, et al. Plaintiffs, v. ATAIN SPECIALTY INSURANCE COMPANY, Defendant.

3644 13TH ST N.W. LLC, et al. Plaintiffs,
v.
ATAIN SPECIALTY INSURANCE COMPANY, Defendant.

Civil Action No. 19-2912 (JDB)

United States District Court, District of Columbia

January 12, 2022

MEMORANDUM OPINION

JOHN D. BATES, United States District Judge.

This case arises from a house-flipping gone wrong. Plaintiff Todd Ragimov and his wholly-owned entities Atel Development LLC and 3644 13th St N.W. LLC (collectively, “the Ragimov Plaintiffs”) renovate run-down properties and “flip” them for a profit. But the renovation of 3644 13th Street N.W. (“the 3644 Property”) did not go as planned: an accident while contractors were performing underpinning work caused significant damage not just to the 3644 Property but also to the adjoining houses at 3642 and 3646 13th Street, owned respectively by Mamie Preston and Cristobal and Ofelia Argueta. Preston and the Arguetas then both filed lawsuits against the Ragimov Plaintiffs and their contractor (“the Preston Suit” and “the Argueta Suit, ” respectively). But although Ragimov notified his liability insurer, defendant Atain Specialty Insurance Company (“Atain”), and demanded that it defend him in these suits, Atain refused on the ground that Ragimov's policy was void and/or inapplicable to the Preston and Argueta Suits. The Ragimov Plaintiffs then brought this action seeking a declaratory judgment that Atain is obligated to defend them in the Preston and Argueta Suits. Atain responded with a counterclaim against the Ragimov Plaintiffs as well as Preston and the Arguetas, seeking an inverse declaration that Atain has no duty to defend the Ragimov Plaintiffs in the suits.

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Before the Court are the parties' cross-motions for summary judgment, a motion for default judgment as to Mamie Preston, and a motion by Atain to strike plaintiffs' memorandum in support of their cross-motion. Briefing is complete, and all three motions are ripe for decision. Although the Court will deny Atain's motion to strike, the Court concludes that Atain has no duty to defend the Ragimov Plaintiffs in the Preston and Argueta Suits. Accordingly, the Court will grant Atain's motion for summary judgment, deny plaintiffs' cross-motion, and issue a corresponding declaratory judgment. The Court will also deny as moot Atain's motion for a default judgment as to Mamie Preston, on the understanding that the Court's declaratory judgment will bind her just as it does the other counterclaim-defendants.

Background

I. The Ragimov Plaintiffs and the Atain Policy

Plaintiff Todd Ragimov is in the business of flipping houses: purchasing run-down or abandoned properties, remodeling them, and flipping them for a profit. He conducts this business through plaintiff Atel Development LLC (“Atel”), of which he is the sole member and manager. Compl. [ECF No. 1-2] ¶ 3; Pls.' Ex. A [ECF No. 50], Decl. of Todd Ragimov (“Ragimov Decl.”) ¶ 2.^[1] Ragimov is also the managing member of a second LLC, 3644 13th St N.W. LLC (“3644 LLC”), which owns the 3644 Property. Def.'s Ex. N, Resp. of Pls. to Atain's First Reqs. for Adm'n [ECF No. 45-14] (“Pls.' RFA Resps.”) ¶¶ 2, 4.^[2]

On May 25, 2016, 3644 LLC purchased the 3644 Property with the intention of flipping it. Ragimov Decl. ¶ 5. A few months later, Mr. Ragimov approached Chenault Insurance Services

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LLC (“Chenault”) “about extending or replacing [the] existing insurance coverage” on his properties, including the 3644 Property, Ragimov Decl. ¶ 7, and Chenault recommended a “House Flipper” liability insurance policy offered by Burns & Wilcox Ltd. and underwritten by Atain, id. ¶ 8; Compl. ¶ 13. Ragimov and Chenault then prepared an application for this policy: Ragimov filled out a form entitled “Burns & Wilcox ‘House Flipper' Insurance Application, ” see Def.'s Ex. I [ECF No. 45-9]; Pls.' Ex. B (same document), and Chenault completed and submitted a supplemental application entitled “General Contractors/Developers General Liability Application, ” see Def.'s Ex. J [ECF No. 45-10]; Pls.' Ex. C (same document).^[3] Burns & Wilcox issued a proposed binder for the policy on August 25, 2016, Pls.' Ex. D, and Atain issued a liability insurance policy to “Todd Ragimov, etal” [sic] effective September 14, 2016 (“the Atain Policy”), see Def.'s Ex. H [ECF No. 45-8].^[4]

The Atain Policy is long, but the gist is simple: Atain agreed to “pay those sums that the insured becomes legally obligated to pay as damages because of . . . ‘property damage' to which this insurance applies.” Def.'s Ex. H at 45. Under the policy, Atain also has “the right and duty to defend the insured against any ‘suit' seeking those damages” but has “no duty to defend the insured against any ‘suit' seeking damages for . . . ‘property damage' to which this insurance does not apply.” Id. Naturally, the policy also includes dozens of pages of definitions, endorsements, exclusions, and warranties fleshing out the scope of Atain's obligations and the kinds of damage the policy covers. The Court will address those provisions as they become relevant.

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II. The Underlying Suits

With the Atain Policy in place, the Ragimov Plaintiffs set to work flipping the 3644 Property, in part by hiring Abel Romero d/b/a Romero Contracting as general contractor. Compl. ¶ 24; see also Def.'s Ex. C [ECF No. 45-3] (contract between 3644 LLC and Abel Romero dated Dec. 2, 2016). Suffice it to say, the work did not go smoothly. On July 30, 2017, vandals broke into the property and stole a significant amount of copper plumbing, causing water to flood the basements of the 3644 Property and of Mamie Preston's adjoining home at 3642 13th Street (“the Preston Property”). See Ragimov Decl. ¶ 40. Then, on August 10, 2017, “there was an unanticipated problem with the portion of the work [Romero] w[as] performing involving the Property foundation and walls, ” Compl. ¶ 29, causing the building's foundation to shift and damaging the two adjacent homes, the Preston Property and the Arguetas' home at 3646 13th Street (the “Argueta Property”). The August 10 incident was so serious that emergency personnel responded to the scene, Compl. ¶ 29, and, per Preston's eventual lawsuit, the “Fire Marshal, dressed in full gear, ordered [Preston and her family] to evacuate immediately” due to “an imminent threat of gas explosion and collapse of her property, ” Def.'s Ex. F ¶ 78 [ECF No. 45-6] (Preston's complaint).

On March 8, 2018, the Arguetas filed a lawsuit in D.C. Superior Court against Mr. Ragimov, 3644 LLC, Abel Romero, and Romero Contracting for negligence, seeking $350, 000 in damages.^[5] See generally Def.'s Ex. G [ECF No. 45-7] (the Arguetas' amended complaint, dated September 24, 2018); Def.'s Statement of Undisputed Material Facts [ECF No. 44] (“Def.'s

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SUMF”) ¶¶ 24-31.^[6] They allege that the damage to their house was so serious that the District of Columbia declared it unfit for habitation, forcing the Arguetas to move out. Id. at ¶ 7, 16-19. On March 7, 2019, Mamie Preston also filed suit against Ragimov, Romero, and their associated entities, seeking $1.8 million in damages for a variety of contractual, tort, property, and statutory claims relating to the defendants' conduct at the 3644 Property. See Def.'s Ex. F; Def.'s SUMF ¶¶ 10-23.

The Ragimov Plaintiffs repeatedly notified Atain about the Preston and Argueta Suits, demanding that Atain defend them. See Compl. ¶¶ 34, 36; Def.'s Answer, Affirmative Defenses, and Countercl. to Pls.' Compl. [ECF No. 13] ¶¶ 34, 36 (admitting plaintiff's allegations);^[7] Pls.' Ex. L (letter from plaintiffs' attorney notifying Atain of the Preston Suit and requesting that Atain defend and indemnify Ragimov). Each time, Atain denied coverage, refusing to defend the Ragimov Plaintiffs in the Preston and Argueta Suits for the same reasons it has presented in this litigation. See Pls.' Ex. M at 1 (letter from Atain dated July 31, 2019, denying coverage for Preston Suit and referencing four previous letters relating to coverage).

III. The Instant Suit

On September 11, 2019, the Ragimov Plaintiffs filed the present action in D.C. Superior Court against Atain, alleging that Atain is in breach of the policy by refusing to defend plaintiffs in the Preston and Argueta Suits. See Compl. ¶¶ 38-44. Plaintiffs also sued Chenault and Burns & Wilcox for negligence in their preparation of the application for the Atain Policy. Compl. ¶¶ 45-

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60. Plaintiffs seek a declaration that Atain has a duty to defend plaintiffs in the Preston and Argueta Suits or, if Atain does not have such a duty, a declaration that Chenault and/or Burns & Wilcox were negligent (along with concomitant monetary damages). See id. at 11-13. Two weeks later, Atain removed the suit to this Court pursuant to 28 U.S.C. § 1441(a).^[8]

On October 25, 2019, Atain answered plaintiffs' complaint and asserted several counterclaims against the Ragimov Plaintiffs, seeking its own declaration that it has no duty to defend plaintiffs in the Preston and Argueta Suits. See generally Def.'s Countercl. ¶¶ 79-182. In addition, Atain joined Preston and the Arguetas as counterclaim defendants so that they would be bound by this Court's determination of Atain's obligations. See id. ¶ 13. Over the next several months, every party filed its answer with the exception of Mamie Preston, who never filed an appearance in this lawsuit or answered Atain's counterclaim. Accordingly, the clerk entered a default as to Preston on July 17, 2020. See Default [ECF No. 32].

In a Scheduling Order dated July 20, 2020, the Court bifurcated discovery and summary judgment proceedings into two phases. See Scheduling Order [ECF No. 33]. Because plaintiffs' negligence claims against Chenault and Burns & Wilcox are contingent on the inapplicability of the Atain Policy, the Court decided to determine Atain's obligations with respect to the Preston and Argueta Suits first (Phase One). Then, only if the Court concluded that the Atain Policy does...