Auto-Owners Mut. Ins. Co. v. Bricks & Stones, LLC
| Decision Date | 09 June 2021 |
| Docket Number | Case No. 20-2365-JWB |
| Parties | AUTO-OWNERS MUTUAL INSURANCE COMPANY, Plaintiff, v. BRICKS & STONES, LLC, and DD&B CONSTRUCTION, INC., Defendants. |
| Court | U.S. District Court — District of Kansas |
This matter is before the court on Plaintiff's motions for summary judgment (Doc. 17) and to strike (Doc. 63), and Defendant DD&B Construction, Inc.'s ("DD&B") motions for leave to file surreply (Doc. 37) and for leave to file an amended answer (Doc. 42.) The motions are adequately briefed and are ripe for decision. (Docs. 18, 32, 35, 38, 43, 45, 46, 48, 50, 59, 64, 65.) For the reasons stated herein, Plaintiff's motion for summary judgment and motion to strike, as well as DD&B's motion for leave to file surreply, are DENIED. DD&B's motion to file an amended answer is GRANTED.
Plaintiff filed this action seeking a declaration of the parties' rights under an insurance policy it issued to Defendant Bricks & Stones, LLC ("B&S"). In particular, Plaintiff seeks a declaration that it has no obligation to defend or indemnify B&S on an underlying suit brought by DD&B.
The underlying suit was filed by DD&B in Wyandotte County, Kansas, on November 28, 2018. It alleged that B&S performed defective work as a subcontractor on a project for which DD&B was the general contractor. Plaintiff contends it was not notified of the suit until January of 2020, and that, under a reservation of rights, it thereafter retained a lawyer to represent B&S. The lawsuit resulted in a default judgment against B&S after it failed to comply with discovery obligations. In its motion for summary judgment, Plaintiff argues it is relieved of any obligation under the policy because it received untimely notice of the underlying suit and was prejudiced because the delay resulted in the entry of the default judgment against B&S.
Plaintiff issued a policy of insurance to B&S, policy number 134605-75667669, for the period from November 25, 2016 to November 25, 2017. The policy was renewed for a one-year period from November 25, 2017, to November 25, 2018. It expired on November 25, 2018. (Doc. 18-17 at 1-2.) Cornerstone Kansas City, LLC ("Cornerstone"), an insurance broker, procured the policy for B&S.
The policy included commercial general liability ("CGL") coverage. It provided in part that if a claim was made or suit brought against any insured, the insured must immediately record the specifics of the claim or suit and notify Plaintiff as soon as practicable. (Id. at 2.)
On November 28, 2018, DD&B filed suit against B&S in the district court of Wyandotte County, alleging breach of contract, negligence, breach of warranties, and breach of implied warranties. DD&B alleged that B&S's contract required it to properly install flashing and drip edges around windows, but that B&S negligently failed to do so. DD&S further alleged B&S was notified of the defect but failed to cure it, forcing DD&B to hire someone else to do it and requiring DD&B to make repairs to stone veneers and stucco around windows. It alleged that the defectresulted in damage to windows, interior finishes, carpeting, and trim. (Doc. 18-17 at 6.) On January 8, 2019, B&S filed an answer and counterclaim. On April 3, 2019, counsel for B&S withdrew, leaving B&S unrepresented. On April 19, 2019, DD&B filed a motion to compel B&S to properly respond to interrogatories and requests for production of documents. On June 4, 2019, the district court granted the motion to compel in an order stating in part that if B&S failed to properly respond, its answer would be stricken and a judgment would be entered against it. (Id. at 2-3.) B&S failed to comply with the deadline in the June 4 order. On June 17, 2019, DD&B filed a motion to strike B&S's pleadings and for default judgment.
In a letter dated September 6, 2019, counsel for DD&B notified B&S of a recent discovery of windows leaking due to B&S's alleged failure to install drip edges above windows on the project. The letter stated in part that DD&B was placing B&S's insurance carriers on notice, via the letter, of the damages allegedly caused by B&S and of DD&B's intent to seek reimbursement. Jolene Robbins of Cornerstone was copied on the letter and a copy of an ACORD Certificate of Insurance was attached to the letter.1 The certificate stated that DD&B is an additional insured under the policy and it listed Robbins as the contact person on the policy. (Doc. 32-1.) The ACORD Certificate contained various disclaimers, including that it conferred no right on the certificate holder (DD&B) and did not amend, extend, or alter the coverage afforded by the policies. (Id.) In an accompanying email, DD&B's attorney asked Robbins to place Plaintiff and another insurance carrier on notice of the claim as soon as possible. The email also said DD&Bwould offer Plaintiff the opportunity to inspect the premises before repairs were performed but indicated this would have to occur as soon as possible. (Doc. 32-2.)
On September 13, 2019, DD&B withdrew its motion for default judgment in order to file an amended complaint. (Doc. 18-17 at 3.) On October 24, 2019, DD&B filed its amended pleading seeking additional damages caused by the leaking windows.
On October 25, 2019, counsel for DD&B emailed Cornerstone employee Patrick Martin. Martin in turn emailed Jean Minardi, Vice President of Risk for Cornerstone, pointing out the September 6 message from DD&B and asking, "[H]ave we put the carriers on notice?" (Doc. 32-11.) Minardi emailed counsel for DD&B on October 28, 2019. Her email reflected that she and DD&B's counsel had spoken that morning and that "to properly advise and move forward" Minardi would need a date of loss and date of occurrence. (Id.) DD&B's counsel emailed back with that information on November 11. (Doc. 32-13 at 2-3.)
On December 2, 2019, Minardi sent Plaintiff an ACORD "Liability Notice of Occurrence/Claim" describing the claim by DD&B against B&S.2 The form stated in part that B&S:
On January 7, 2020, counsel for DD&B emailed Minardi stating, "Last we spoke you informed me that a claim had been made to [B&S's] insurance on behalf of DD&B as an additional insured under the policy." (Doc. 32 at 10.) On January 8, Minardi emailed back stating she had made two submissions to Plaintiff regarding DD&B's loss. (Doc. 32-13.) She stated that the first submission, which reported a loss date of May 20, 2019 (when the damage was first discovered), was rejected because there was no active policy at that time. Minardi said Plaintiff had established a claim number and would look into the second submission, on which she had reported a loss date of July 19, 2017, the date B&S began performing its work. (Id.) Minardi stated that counsel would "hear from someone at Auto Owners in the next 24 hours." (Doc. 32-4 at 1.) On January 8, Minardi also emailed Sara Slaybaugh, an adjuster employed by Plaintiff, asking whether a claim had been established for the notice of claim she "reported on 12/2/19?" (Doc. 32-14 at 2.) Minardi later notified counsel for DD&B that Slaybaugh was the adjuster on the claim. (Doc. 32 at 10.)
On January 16, counsel for DD&B sent a letter to Plaintiff summarizing the underlying litigation, noting that DD&B had heard nothing from Plaintiff, and stating that "DD&B, both as a claimant against B&S and as an additional insured under B&S's insurance policy, has submitted claim no. 300-00009715-2020" [the claim number previously provided by Minardi on January 8]. (Doc. 32-5.) The letter asked for a formal response to the claim and stated that if DD&B did not hear from Plaintiff by January 24, it would proceed to take a default judgment against B&S and would seek to collect from B&S and Plaintiff. (Id.) On January 24, 2020, Plaintiff emailed back that it was "attempting to reach the named insured" and that a coverage review of the lawsuit would need to be performed, which "takes several weeks." (Doc. 35-1 at 1.)
On January 30, Plaintiff engaged attorneys Derek MacKay and Brian Bartlett to represent B&S in the underlying action. Bartlett emailed counsel for DD&B and the parties agreed thatB&S could have an extension of time until February 14 to answer. (Doc. 32 at 11.) Bartlett also asked for a copy of the outstanding discovery requests and for an extension of time to February 28 to respond. (Id. at 12.) Counsel for DD&B later agreed to the extension and forwarded the discovery requests.
On February 6, Plaintiff advised B&S it would provide a defense under a reservation of rights. (Id. at 11.) The reservation of rights letter mentioned policy exclusions relating to B&S's own work and asserted that B&S's failure to timely report the underlying action created a coverage issue. (Doc. 18-2.) On February 19, B&S's counsel filed an answer to the amended petition.
Counsel for B&S failed to respond to the discovery requests by February 28. A declaration from attorney Bartlett states that he first attempted to contact B&S by email on February 1 but received no reply. He thereafter attempted to reach Ali Bagher or other B&S representatives at various email addresses and phone numbers but was unsuccessful. He states that as of the discovery deadline of February 28, he had obtained no response and was unable to provide the discovery. He "considered requesting another informal extension of time" but concluded that would be futile because he "could not reasonably determine whether or when" he would be able to provide responses. (Doc. 35-2 at 3-4.)
On March 18, counsel...
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