Great Am. Ins. Co. v. Lexington Ins. Co.
| Decision Date | 27 April 2023 |
| Docket Number | 2:22-CV-345-TLS-JEM |
| Parties | GREAT AMERICAN INSURANCE COMPANY, Plaintiff, v. LEXINGTON INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
This matter is before the Court on Lexington Insurance Company's Motion to Dismiss [ECF No. 10]. For the reasons set forth below, the Court grants in part and denies in part the motion.
“A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the viability of a complaint by arguing that it fails to state a claim upon which relief may be granted.” Camasta v. Jos. A. Bank Clothiers Inc., 761 F.3d 732, 736 (7th Cir. 2014) ). When reviewing a complaint challenged by a Rule 12(b)(6) motion, a court construes the complaint in the light most favorable to the non-moving party, accepts the factual allegations as true, and draws all inferences in the non-moving party's favor. Bell v. City of Chicago, 835 F.3d 736, 738 (7th Cir. 2016). “Factual allegations must be enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp v. Twombly, 550 U.S. 544, 555 (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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).
Figg Bridge Builders, LLC (Figg) entered into an Engineering, Procurement and Construction Agreement (EPC Agreement) with Cline Avenue Bridge, LLC (CAB) for the design and construction of the Cline Avenue Bridge in Lake County, Indiana. Compl. ¶ 6. Under the EPC Agreement, the Plaintiff Great American Insurance Company (Great American), as surety, issued performance and payment bonds for Figg in favor of CAB. Id. ¶¶ 7-8.
In consideration for the bonds, Great American relied on an Agreement of Indemnity (AOI) by Figg and other entities, and Figg authorized Great American to file a UCC Financing Statement. Id. ¶¶ 9-12. As a result, Great American was granted a security interest in Figg assets set forth in paragraphs (a)-(i) of the AOI section titled “Assignment,” including the proceeds from all causes of action, all amounts due from any contract, and all accounts receivable. Id. ¶¶ 10, 11; compare Compl. Ex. 2, pp. 1-12 (“Assignment” ¶¶ (a)-(i)), ECF No. 1-12, with Compl. Ex. 3, p. 3 (UCC Financing Statement “attached collateral description”), ECF No. 1-3.
Defendant Lexington Insurance Company (Lexington) issued to Figg two liability insurance policies (commercial general liability and professional liability) and an excess liability policy. Compl. ¶ 13.
From January through April 2020, Great American advanced $14,750,000 under the AOI related to Figg's performance of the EPC Agreement. Id. ¶ 17.
On April 7, 2020, CAB wrongfully terminated Figg from the bridge project prior to its completion. Id. ¶ 14. CAB then submitted to arbitration a claim against Figg for breach of the EPC Agreement, and Figg asserted counterclaims against CAB in the arbitration proceeding. Id. ¶ 22. Lexington represents that it spent millions of dollars on Figg's defense in the arbitration. See Compl. Exs. 6, 7, ECF Nos. 1-6, 1-7. Figg paid a far smaller amount out of its own pocket to pursue its counterclaim against CAB. See Def. Mot. 2, ECF No. 10.
Following the termination of the EPC Agreement, Great American received payment bond claims from subcontractors and suppliers resulting in the payment of an additional $4,121,604.44. Compl. ¶ 17.
On August 10, 2020, CAB sued Great American in Lake County, Indiana, Superior Court in connection with CAB's claims under the performance bond. Id. ¶¶ 19-20.[1]
On August 31, 2020, Great American filed the UCC Financing Statement covering the interests Figg assigned to Great American under the AOI, with an effective date retroactive to the date of the first bond issued by Great American. Id. ¶ 12. Great American alleges that the UCC Financing Statement encumbered the assets that are the subject matter of this litigation-the net arbitration award described below. Id.
On February 10, 2021, Great American filed a third-party complaint against Figg in the state court case, with an amended pleading filed on January 24, 2022, alleging that Figg breached the AOI and must indemnify Great American. Id. ¶¶ 18-20; see Def. Ex. A, ECF No. 10-1; Cline Ave. Bridge, LLC v. Great Am. Ins. Co., 45D01-2008-PL-000517 (Ind. Super. Ct. filed Aug. 10, 2020).
On July 15, 2022, the arbitration panel issued an award, holding that CAB owed Figg a total net amount of $4,404,809.32 (Net Award Amount). Compl. ¶¶ 24-25. This Net Award Amount in favor of Figg was based on an award to CAB of $3,706,795.00 on its claims against Figg for defective work and $1,560,300 in liquidated damages and on an award to Figg of $4,939,423.98 against CAB in wrongful termination damages and $4,732,480.34 in attorneys' fees. Compl. Ex 4, p. 77, ECF No. 1-4. The attorneys' fees award was based on the finding that CAB's conduct in terminating Figg from the project was a material breach of the EPC Agreement's terms and conditions. Compl. Ex. 4, p. 76. The arbitration panel held that “[Figg] is entitled to an award of reasonable attorneys' fees and costs directly arising out of CAB's wrongful termination of [Figg].” Id.
On August 1, 2022, Great American wrote to CAB, reminding CAB of Great American's security interest, providing a copy of the UCC Financing Statement, asserting the Net Award Amount is subject to Great American's security interest, and demanding CAB pay the Net Award Amount to Great American or pay the funds via joint check made payable to Great American and Figg. Compl. ¶ 27; see also Compl. Ex. 5, ECF No. 1-5.
Prompted by Great American's letter, Lexington in turn wrote to CAB on August 8, 2022, contending that Lexington had advanced $2,179,468.83 to Figg for payment of attorneys' fees and expenses and that “Lexington has an unambiguous contractual right to all of Figg's rights to recover such amounts from CAB.” Compl. ¶ 29 . Lexington “insisted” that CAB pay $2,179,468.83 of the Net Award Amount to Lexington, with the amount subsequently revised to $2,064,634.54. Id. ¶¶ 30, 33; see Compl. Exs. 6, 7.
In its Complaint, Great American alleges that Lexington has neither a contractual right to the Net Award Amount nor a judgment providing Lexington with any legal interest in the Net Award Amount. Compl. ¶ 31. In contrast, Great American, by its perfected security interest through the filed UCC Financing Statement, has a legal, contractual, perfected, first, best, and superior right to payment of the Net Award Amount to the exclusion of all others. Id. ¶ 32.
On August 12, 2022, Great American wrote to Lexington, attaching the UCC Financing Statement, informing Lexington of Great American's perfected, first, best, and superior interest in the Net Award Amount, and notifying Lexington that its demand for payment of any portion of the Net Award Amount constituted tortious interference with Great American's rights. Id. ¶ 34; see also Compl. Ex. 8, ECF No. 1-8. Great American demanded that Lexington withdraw its demand for payment. Compl. ¶ 34; Compl. Ex. 8. The same day, Lexington wrote to Great American, claiming its right of subrogation to all of Figg's claims and rights to recover from CAB the monies Lexington paid for Figg's defense and refusing to withdraw its demand for payment. Id. ¶¶ 35, 36. Great American alleges that Lexington has not obtained an order entitling it to recover any sums from its insured, Figg. Id. ¶ 37.
On August 12, 2022, CAB filed a motion to interplead the Net Award Amount in the state court lawsuit because it was exposed to conflicting claims for the award, and the state court granted the motion on September 15, 2022. Id. ¶ 38; Def. Ex. B, ECF No. 10-2. On August 23, 2022, Figg filed a petition in state court to confirm the arbitration award, Def. Ex. C, ECF No. 10-3, and on October 12, 2022, CAB moved to vacate the arbitration award. Def. Ex. D, ECF No. 10-4. On November 8, 2022, Lexington filed a motion to intervene in the state court proceedings to protect its asserted subrogation rights. Def. Ex. E, ECF No. 10-5.
On November 16, 2022, Great American filed the instant four-count Complaint [ECF No. 1] against Lexington, alleging claims of tortious interference with a contractual relationship (Count 1), declaratory judgment (Count 2), trespass to chattels (Count 3), and attorneys' fees under the Indiana general recovery rule (Count 4). Lexington filed the instant Motion to Dismiss [ECF No. 10] on December 22, 2022, which is now fully briefed.
In the Motion to Dismiss, Lexington argues that Great American fails to state a claim on each of the four counts of the Complaint. The Court considers each in turn.
In the claim for tortious interference with a contractual relationship, Great American alleges that Lexington knew of the existence of the AOI between Great American and Figg and the perfected UCC Financing Statement filed by Great American; that Lexington intentionally and wrongfully alleged a competing interest in the Net Award Amount; Lexington's actions interfered with satisfaction of Great American's right to payment of the Net Award Amount as provided in the AOI and UCC Financing Statement; Lexington's...
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