Allstate Ins. Co. v. ADT, LLC

• Decision Date: 30 June 2016
• Docket Number: 1:15-cv-517-WSD
• Citation: 194 F.Supp.3d 1331
• Parties: ALLSTATE INSURANCE COMPANY, as subrogee of its insureds, Chris Kernion and Jill Kernion, Plaintiff, v. ADT, LLC, formerly known as Brinks Home Security, Inc. and/or Broadview Home Security, Inc., Defendant.
• Court: U.S. District Court — Northern District of Georgia

194 F.Supp.3d 1331

ALLSTATE INSURANCE COMPANY, as subrogee of its insureds, Chris Kernion and Jill Kernion, Plaintiff,

v.ADT, LLC, formerly known as Brinks Home Security, Inc. and/or Broadview Home Security, Inc., Defendant.

1:15-cv-517-WSD

United States District Court, N.D. Georgia, Atlanta Division.

Signed June 30, 2016

Filed July 1, 2016

Jeffrey F. Leasendale, Nathan T. Dillard, Law Office of Moore & Associates, Atlanta, GA, for Plaintiff.

John Gregory Godsey, The Godsey Firm, LLC, Norcross, GA, for Defendant.

OPINION AND ORDER

WILLIAM S. DUFFEY, JR., UNITED STATES DISTRICT JUDGE

This matter is before the Court on Defendant ADT, LLC's ("Defendant")¹ Motion to Dismiss Plaintiff's Amended Complaint for Failure to State a Claim [9] ("Second Motion to Dismiss").

I. BACKGROUND

A. Facts

Plaintiff Allstate Insurance Company ("Plaintiff") issued to Chris and Jill Kernion (the "Kernions") an insurance policy (the "Policy") covering their Cobb County home (the "Property"). (Am. Compl. ¶ 7). On March 18, 2009, Defendant and the Kernions entered into a Protective Service Agreement ("Contract") in which Defendant agreed to install and maintain, in the Property, certain protective equipment, including a water sensor known as a "water bug." (Id.¶ 9; id., Ex. A). Section 7(e) of the Contract provides:

YOU UNDERSTAND AND AGREE THAT [DEFENDANT'S] LIABILITY TO YOU AND ALL OTHER PERSONS IS LIMITED TO A TOTAL RECOVERY OF NOT MORE THAN THE TOTAL AMOUNT OF FEES ACTUALLY PAID TO [DEFENDANT] UNDER SECTION 2(B) OF THIS AGREEMENT DURING THE TWELVE-MONTH PERIOD PRECEDING THE EVENT OR OMISSION FOR WHICH YOU AND ALL OTHER PERSONS MAY MAKE A CLAIM AGAINST [DEFENDANT]. YOU ACCEPT RESPONSIBILITY FOR ANY LIABILITY BEYOND THESE LIMITS AND YOU WILL MAINTAIN YOUR OWN INSURANCE COVERAGE AS YOU DESIRE TO PROTECT YOU AND OTHERS FROM ANY LOSSES EXCEEDING THESE LIMITS. YOU WILL ENSURE THAT EACH SUCH POLICY CONTAINS A PROVISION OR ENDORSEMENT WAIVING ANY AND ALL SUBROGATION RIGHTS AGAINST [DEFENDANT]. YOU WILL LOOK SOLELY TO THE PROCEEDS OF SUCH INSURANCE FOR ANY LOSS, LIABILITY, DAMAGE OR CLAIM ABOVE THE LIMITS OF [DEFENDANT'S] LIABILITY TO WHICH YOU AGREE IN THIS SECTION 7.

(Id., Ex. A § 7(e)).

The Contract also contains a clause exempting Defendant from liability "FOR LOSS OR DAMAGE DUE DIRECTLY OR INDIRECTLY TO ANY OCCURRENCE OR CONSEQUENCES THEREFROM, WHICH THE SERVICE IS DESIGNED TO DETECT OR AVERT." (Id., Ex. A § 7(b)).

Plaintiff alleges that Defendant "fail[ed] to install the water bug with the correct wire connects." (Id.¶ 20). As a result, on January 8, 2014, while the Kernions were out of town, the Property's pipes burst, sending thousands of gallons of water throughout the Property. (Id.¶¶ 8, 10). Because the water bug was installed incorrectly, it did not send an alarm that a water breach had occurred. (Id.¶ 10). The Property suffered extensive damage. (Id.¶ 8).

The Kernions filed a claim under the Policy. After the Kernions paid a $3,000 deductible, Plaintiff paid them $110,190.27 for the water damage they suffered. (Id.¶¶ 11-12). Plaintiff asserts a subrogation claim against Defendant to recover the $113,190.27 in damages caused by the flooding. (Id.¶ 13).

B. Procedural History

On December 22, 2014, Plaintiff filed its Complaint [1.1] in the State Court of Cobb County, Georgia, seeking damages caused by Defendant's improper installation of the water bug device. On February 20, 2015, Defendant removed the action to this Court on the basis of diversity of jurisdiction. ( [1] ). On February 27, 2015, Defendant filed its Motion to Dismiss for Failure to State a Claim [2] ("First Motion to Dismiss"), arguing that Plaintiff failed to identify a cognizable cause of action. Defendant argued that Plaintiff's presumed breach of contract and negligence claims were not viable because the Contract waives Plaintiff's subrogation rights against Defendant, exempts Defendant from liability, and limits Plaintiff's recoverable damages (collectively, "Defense Clauses"). Defendant also argued that Plaintiff failed to state a claim for breach of contract because the Complaint did not identify the Contract provision that Defendant allegedly violated. Defendant argued further that its failure to properly install the water bug was an alleged breach of the Contract and a claim based on negligence could not be asserted.

On March 12, 2015, Plaintiff filed its Response in Opposition to ADT LLC's Motion to Dismiss for Failure to State a Claim [4] ("First Response"). In it, Plaintiff identified the Contract provision that Defendant allegedly violated, argued that Defendant was grossly negligent, and argued that the Defense Clauses are unenforceable because they are not displayed prominently in the Contract. On March 26, 2015, Defendant filed its Reply in Support of its Motion to Dismiss for Failure to State a Claim [5] ("First Reply"), arguing that the Defense Clauses are valid because they "contain the requisite indicia of prominence." (First Reply at 3, 6). Defendant argued that "Georgia courts enforce prominent exculpatory provisions" and, "[f]or this reason, the Court should enforce the limitation of liability and subrogation provisions that were meaningfully set off in the [Contract]." (Id. at 11). Defendant did not argue that the subrogation waiver's validity is determined differently than the validity of the exculpatory and limitation-of-liability clauses.

On September 30, 2015, the Court issued its Opinion and Order [7] ("2015 Order"), dismissing Plaintiff's breach of contract claim for failure to identify the provision violated, and finding that Plaintiff did not "intend [ ] to assert a negligence claim in its Complaint." (2015 Order at 17 n.9). The Court also determined that the Defense Clauses are unenforceable, under Georgia law, because they are not "prominent, explicit, clear, and unambiguous." (Id. at 14). The Court granted Plaintiff leave to file an amended complaint to identify the Contract provision that Defendant allegedly violated.

On October 19, 2015, Plaintiff filed its Amended Complaint for Damages [8] ("Amended Complaint"), asserting a claim for breach of contract and a new claim for gross negligence. On November 2, 2015, Defendant filed its Second Motion to Dismiss, arguing that the Contract's subrogation waiver is valid because it is not an exculpatory clause and was not required to be displayed prominently in the Contract. Defendant acknowledges that neither party raised this issue previously. ( [11] at 2). Defendant also argues that Plaintiff fails to state a claim for gross negligence because Defendant's alleged failure to install the water bug properly was based on an obligation that arose solely from the Contract.

On November 16, 2015, Plaintiff filed its Response in Opposition to ADT LLC's Motion to Dismiss Amended Complaint for Failure to State a Claim [10] ("Second Response"), arguing that the Contract's subrogation waiver is invalid because, as the Court found previously, it is not displayed prominently in the Contract. Plaintiff also argues that subrogation waivers do not bar claims for gross negligence. On November 30, 2015, Defendant filed its Reply in Support of its Motion to Dismiss Plaintiff's Amended Complaint [11] ("Second Reply").

II. DISCUSSION

A. Legal Standard

On a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must "assume that the factual allegations in the complaint are true and give the plaintiff[ ] the benefit of reasonable factual inferences." Wooten v. Quicken Loans, Inc., 626 F.3d 1187, 1196 (11th Cir.2010). Although reasonable inferences are made in the plaintiff's favor, " ‘unwarranted deductions of fact’ are not admitted as true." Aldana v. Del Monte Fresh Produce, N.A., 416 F.3d 1242, 1248 (11th Cir.2005) (quoting S. Fla. Water Mgmt. Dist. v. Montalvo, 84 F.3d 402, 408 n. 10 (11th Cir.1996) ). The Court is not required to accept as true conclusory allegations or legal conclusions. See Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir.2010) (construing Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); see Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1263 (11th Cir.2004) ("[C]onclusory allegations, unwarranted deductions of facts or legal conclusions masquerading as facts will not prevent dismissal." (quoting Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182, 1188 (11th Cir.2002) (internal quotation marks omitted))).

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Mere "labels and conclusions" are insufficient. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). This requires more than the "mere possibility of misconduct." Am. Dental, 605 F.3d at 1290 (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 ). The well-pled allegations must "nudge[ ] [plaintiff's] claims across the line from conceivable to plausible." Id. at 1289 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ).

B. Analysis

1. Plaintiff's Breach of Contract Claim

Section 1(c) of the Contract provides that Defendant "will install and make operational" certain protective equipment, including a water bug, at the Kernions' Property. (Am. Compl. ¶¶ 16-17; id. Ex. A § 1(c)). Plaintiff asserts a subrogation claim for breach of contract on the ground that Defendant failed to "install and make operational" the water...