Krohmer Marina, LLC v. Certain Underwriters At Lloyd's, London

• Decision Date: 09 February 2023
• Docket Number: 20-CV-402-JWB
• Parties: KROHMER MARINA, LLC, et al., Plaintiffs, v. CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, et al., Defendants.
• Court: U.S. District Court — Eastern District of Oklahoma

KROHMER MARINA, LLC, et al., Plaintiffs,
v.
CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, et al., Defendants.

No. 20-CV-402-JWB

United States District Court, E.D. Oklahoma

February 9, 2023

MEMORANDUM AND ORDER

JOHN W. BROOMES UNITED STATES DISTRICT JUDGE

Presently before the court are two motions. The Society of Lloyd's (“Lloyd's”) specially appears in place of the defendant named as “Certain Underwriters at Lloyd's, London” (“Underwriters”) and moves to dismiss the Underwriters under Rule 12. (Doc. 35.) And Defendant International Insurance Co. of Hannover SE (“Hannover”) moves to stay the proceedings pending the completion of arbitration.^[1] (Doc. 48.) Plaintiffs have filed their responses in opposition. (Docs. 38 & 49.) Defendants have filed their replies. (Docs. 41 & 52.) For the reasons stated herein, Lloyd's motion to dismiss is GRANTED and Hannover's motion to stay is DENIED.

I. BACKGROUND

This diversity action arises out of an insurance claim for flood and wind damage/loss of business income. Plaintiffs Dustin and Suzanne Krohmer are the owners of Krohmer Marina, LLC, d/b/a Evergreen Marina. Evergreen Marina is located on Lake Eufaula, Oklahoma and it

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offers boat rentals and sales, RV rentals, and merchandise sales. Plaintiffs also own and operate a restaurant, Dam Bar & Grill, and a full-service ship store on the property. (Doc. 32 at 1-2.)

Plaintiffs entered into an insurance agreement (the “Policy”) to secure commercial marine liability coverage and coverage for damage to the Evergreen Marina and business interruption. (Doc. 32-1.) The Policy provides coverage for loss and/or damages caused by flood and wind, among other things. (Id. at 3.) The Policy was in effect from April 4, 2019, until April 4, 2020. (Id. at 2.)

Plaintiffs allege that Hannover, a German insurance company, “subscribed to the subject Policy for a 100% share of the risk.” (Doc. 32 at 7.) However, Plaintiffs also allege that Hannover placed the Policy in the Lloyd's of London insurance market “using certain registered Lloyd's brokers to underwrite the subject Policy.” (Id.) According to Plaintiffs, “Lloyd's is comprised of multiple syndicates who price and underwrite the risk of insurance policies issued at Lloyd's Marketplace via more than two hundred (200) registered Lloyd's insurance brokers.” (Id. at 5.) Plaintiffs allege that a group of Lloyd's brokers, who have identified themselves only as “Certain Underwriters at Lloyd's, London,” issued and/or underwrote the subject Policy.^[2] (Id. at 5.)

On or about May 10, 2019, the water levels at Lake Eufaula had risen significantly, flooding the Evergreen Marina and causing damage to the boat houses and other property. Plaintiffs submitted their initial claim (number 4162684) for property damages. (Id. at 3.) Plaintiffs allege that Defendants confirmed that the May 10 property damages were due to the flood event, and Plaintiffs' loss was covered under the Policy. (Id.)

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On or about June 5, 2019, the area near Lake Eufaula experienced high winds causing additional damages to the boat houses and other property. (Id.) Plaintiffs allege that they timely and properly submitted their claim (number 4163007) for the June 5 windstorm event, and that the windstorm event is a covered peril pursuant to the Policy. (Id. at 4.) However, Plaintiffs allege that Defendants have failed to fully adjust the repair costs for the physical damage resulting from the windstorm event. (Id.) Plaintiffs further allege that the severe damage resulted in significant interruption and/or suspension of normal business operations, and that the loss of business income exceeds $755,000.00. (Id.) Plaintiffs allege that they timely submitted a claim, but that Defendants failed to timely and fully adjust the business interruption claim. (Id.) Overall, Plaintiffs claim approximately $2,000,000.00 in damages. (Id. at 5.)

Plaintiffs filed this action on November 9, 2020. (Doc. 1.) Plaintiffs filed an amended complaint on March 19, 2021. (Doc. 16.) And Plaintiffs filed their second amended complaint on October 26, 2021. (Doc. 32.) Plaintiffs bring breach of contract and bad faith claims against Hannover and the Underwriters. In Count 1, Plaintiffs allege that, “[b]y failing to fully and timely indemnify Plaintiffs for their losses covered by the Policy, Defendants have breached their contractual obligations under the terms and conditions of the Policy.” (Id. at 10-11.) Plaintiffs allege “unreasonable delays” and that their claims were “improperly adjusted” thereby breaching Defendants' obligations to promptly and fully investigate claims and pay the full amount of benefits owed under the Policy. (Id. at 11.) In Count 2, Plaintiffs allege that Defendants have caused unreasonable delays in processing Plaintiffs' claims number 4162684 and 4163007 by taking over a year and a half following the covered flood and windstorm events to process Plaintiffs' claims and failing to issue more than relatively insignificant advance payments on each claim after Plaintiffs initiated legal action against Defendants, and then the post-litigation

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payments were improperly adjusted to the benefit of the insurers and the detriment of Plaintiffs. As such, Plaintiffs allege that Defendants have breached their obligations under the insurance agreement to promptly and fully investigate claims and pay the full amount of benefits owed under the Policy. (Id. at 12.) Plaintiffs allege that Defendants' acts and omissions were unreasonable and constitute bad faith. (Id. at 13.)

On November 15, 2021, Lloyd's specially appeared in place of the Underwriters and filed a motion to dismiss. (Doc. 35.) On December 30, 2021, Hannover filed a motion to stay pending arbitration. (Doc. 48.) And on August 15, 2022, Hannover filed a motion for hearing on the pending motions. (Doc. 57.)

II. LEGAL STANDARDS

A. Motion to Dismiss

Upon a motion to dismiss, the court must determine whether a complaint states a legally cognizable claim by making allegations that, if true, would show that the plaintiff is entitled to relief. The pleading “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 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (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.” Id. at 678 (citing Twombly, 550 U.S. at 556).

B. Motion to Stay

Hannover moves to stay this action and asks the court to order arbitration pursuant to the Federal Arbitration Act (“FAA”). Specifically, Hannover moves under Chapter 1 of the FAA, 9 U.S.C. §§ 1-16. (Doc. 48 at 8.) Chapter 1, Section 2 provides that:

A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter

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arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2.

Chapter 1, Section 3 further provides that a stay is required if the case involves “any issue referable to arbitration under an agreement in writing”:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

Id. § 3.

“[A] court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute.” Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 297 (2010). The Supreme Court has recognized a presumption in favor of arbitrability, which requires courts to rule a dispute arbitrable “where a validly formed and enforceable arbitration agreement is ambiguous about whether it covers the dispute at hand; and . . . the presumption is not rebutted.” See id. at 300-301.

III. ANALYSIS

A. Lloyd's Motion to Dismiss

First, Lloyd's contends that Plaintiffs fail to state a claim against the Underwriters because the Policy conclusively demonstrates that Hannover exclusively insured and underwrote the entire Policy, and thus it is not possible that any other insurers underwrote or insured the Policy. And because no other underwriters associated with Lloyd's (besides Hannover) were a party to the

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contract, they cannot be held liable for breach of contract or bad faith. But Plaintiffs contend that the second amended complaint contains “sufficient facts to show that Lloyd's had entered into an insurance agreement with Plaintiffs” and that the Policy was “issued and underwritten by Lloyd's.” (Doc. 38 at 4.)

Ordinarily, a “motion to dismiss challenging the legal sufficiency of the complaint is properly considered under Rule 12(b)(6) if the court analyzes only the complaint itself.” Brokers' Choice of Am., Inc. v. NBC Universal, Inc., 861 F.3d 1081, 1103 (10th Cir. 2017). “A district court may, however, consider documents attached to or referenced in the complaint if they are central to the plaintiff's claim and the parties do not dispute the documents' authenticity.” Id. And “factual allegations that contradict . . . a properly considered document are not well-pleaded facts that the court must accept as true.” Peterson v. Martinez, 707 F.3d 1197, 1206 (10th Cir. 2013).

Here, Plaintiffs allege in the second amended...