Liberty Mut. Fire Ins. Co. v. The Shaw Grp.

• Decision Date: 25 March 2022
• Docket Number: Civil Action 3:20-CV-871-JWD-RLB
• Court: U.S. District Court — Middle District of Louisiana
• Parties: LIBERTY MUTUAL FIRE INSURANCE COMPANY v. THE SHAW GROUP, INC. (n/k/a CB&I GROUP, INC.)

LIBERTY MUTUAL FIRE INSURANCE COMPANY
v.
THE SHAW GROUP, INC. (n/k/a CB&I GROUP, INC.)

Civil Action No. 3:20-CV-871-JWD-RLB

United States District Court, M.D. Louisiana

March 25, 2022

RULING AND ORDER

JOHN W. deGRAVELLES, JUDGE.

Before the Court is Liberty Mutual Fire Insurance Company's Motion to Dismiss for Failure to State a Claim (“Motion”) (Doc.18) brought by plaintiff, Liberty Mutual Fire Insurance Company (“Liberty”). It is opposed by defendant and counterclaimant, The Shaw Group Inc., n/k/a CB&I Group, Inc. (“Shaw”). (Doc. 23.) Liberty filed a reply brief. (Doc. 29.) The Court has carefully considered the Motion, the pleadings, the submissions of the parties and the arguments of counsel and is prepared to rule. For the following reasons, the Motion is granted in part and denied in part.

I. FACTUAL OVERVIEW

This dispute concerns two commercial general liability policies issued by Liberty to Shaw covering the policy periods of September 1, 2003, to September 1, 2004, (Doc. 18-2), and September 1, 2004, to September 1, 2005, (Doc. 18-3) (collectively, the “Policies”). (Doc. 18-1 at 5 (citing Doc. 10 at 19-20, ¶ 9).) Each policy had a $1.5 million aggregate limit, subject to deductibles of $500, 000 and $750, 000 respectively. (Docs. 18-2 at 1, 42; Doc. 18-3 at 1, 42.)

Endorsements to each policy required Shaw to reimburse Liberty for “both damages and defense costs, including amounts paid in settlement, ‘up to the deductible amount' for a covered claim.” (Doc. 18-1 at 5-7 (citing Doc. 10, at ¶ 11; Docs. 18-2 and 18-3 at 42).) Liberty claims the

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“deductible” included both settlement proceeds and defense costs. (Id. at 5-6.) Shaw agrees. (Doc. 52 at 1-3.) Thus, while Liberty might advance the entire $3 million limit, Shaw's deductible requirements had the effect of reducing the policies' limits, so that Shaw would owe $1.25 million when Liberty expended the full $3 million. (Doc. 18-1 at 7.) Liberty claims that “Shaw, and Shaw alone, is responsible [under the Policies] for reimbursing to Liberty the full $1.25 million deductible amount.” (Id. (citing Docs. 18-2 and 18-3 at 42-43).) Shaw disagrees.

Shaw purchased a second primary insurance policy from Chartis Specialty Insurance Company, n/k/a AIG Specialty Insurance Company (“AIG”) for the same time periods that Liberty's policies covered (“AIG Policy”).^[1] (Doc. 23 at 6.) The AIG Policy had a $1 million deductible. (Id.)

In 2012, Shaw and certain affiliates^[2] were named as defendants in litigation (“Abernathy Lawsuit”)^[3] involving the alleged exposure of certain workers at a plant owned and operated by Occidental Chemical Corporation (“Occidental” or “OxyChem”). (Doc. 18-1 at 8; Doc. 23 at 2.) On November 15, 2013, Shaw “demanded defense and indemnity from Liberty with respect to the Abernathy Lawsuit.” (Doc. 23 at 5.) Shaw claims that “Liberty repeatedly rejected [Shaw's] tender and wrongfully denied coverage[.]” (Id. at 5.) From Liberty's perspective, the initial rejection was because of “multiple coverage defenses[.]” (Doc. 18-1 at 8.) In any event, after some 17 months, on June 5, 2015, Liberty agreed to participate in Shaw's defense subject to a reservation of rights. (Doc. 23 at 5; Doc. 18-1 at 8.)

During the 17 months in which Liberty refused to defend Shaw, Shaw's other primary

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insurer, AIG, incurred the costs of the litigation according to Shaw. (See Doc. 23 at 6.) Shaw claims that the AIG Policy “paid at least $665, 591.56 in defense costs for which Liberty was responsible.” (Id. (citing Doc. 10 at 24-26, ¶¶ 33-34, 38).) In addition, Shaw claims that it “was forced to incur . . . at least $155, 894.82” directly for its defense. (Id. (citing Doc. 10 at 26, ¶ 40).) It claims that AIG's “$1 million deductible . . . was fully satisfied by payments made directly by [Shaw]. . . .” (Doc. 10 at 25, ¶ 35.)

According to Shaw, once Liberty began defending Shaw in July of 2016, Liberty began invoicing Shaw for defense costs, and, as a result of Shaw's “administrative error”, it paid $62, 242.65 to Liberty. (Id. at 27, ¶ 47.)

In or around December 2019, Shaw and its insurers settled the Abernathy Lawsuit, (id. at 27, ¶ 48), for a total of $26, 543, 092.50, (Doc. 18-4 at 1, 3, ¶ 1.) Of that amount, Liberty contributed $3 million, and AIG contributed $3.3 million. (Id. at 3, ¶ 1.) Other insurers paid the rest. (Id.)

In March, 2020, in connection with the settlement of the Abernathy Lawsuit, Shaw and its insurers entered into a Settlement and Mutual Release Agreement (“Insurance Settlement”) (Doc. 10 at 27, ¶ 49; Doc. 18-4). It “sets forth the various amounts that the respective parties would contribute to fund the settlement[.]” (Doc. 10 at 27, ¶ 49.) It also purports to settle certain claims as between Shaw and its insurers but reserves certain rights to Shaw and Liberty. (Doc. 18-4 at 3- 6, ¶¶ 1-2, 4, 7, 10; Doc. 10 at 27-28, ¶¶ 49-51.)

In May of 2020, Liberty “demand[ed] full payment of $1.25 million for deductibles and threaten[ed] to file suit should [Shaw] fail to pay (or commit to pay) the full amount within twenty-one days.” (Doc. 10 at 28, ¶ 55.) Shaw alleges that on October 9, 2020, Liberty stated it “would refrain drawing on [Shaw's] letter of credit” if Shaw “committed to paying . . . $439, 627 within thirty days[.]” (Id. at 30, ¶ 62.) Shaw paid that amount on October 29, 2020. (Id. at 30, ¶ 64.)

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On December 23, 2020, Liberty sued Shaw in this Court, (Doc. 1), demanding $749, 538.63 representing, Liberty alleges, the unpaid part of the $1.25 million deductible, (id. at 14, ¶ 54), plus late payment charges, (id. at 18, ¶ 76). Liberty also asks the Court to declare that it is entitled to “draw on Shaw's letter of credit . . . to secure payment of the $749, 538.63[, ]” plus the late charge (Id. at 19, ¶ 82).

On April 23, 2021, Shaw filed an answer and counterclaim (“Counterclaim”). (Doc. 10.) In it, Shaw denies responsibility and liability for the amounts claimed by Liberty, (see Id. at 35), and further claims that by virtue of Liberty's wrongful conduct, Liberty owes Shaw damages for unjust enrichment, breach of contract and bad faith under Louisiana Revised Statutes Section 22:1973, (id. at 31-35, ¶¶ 67-91.). Shaw claims that Liberty wrongfully failed to credit towards its deductible obligation the following amounts:

$665, 591.56 Defense costs paid by AIG on behalf of Shaw which was in fact owed by Liberty. (Id. at 26-27 ¶¶ 38, 43-45.)

$155, 894.92 Paid by Shaw directly to third parties for defense costs. (Id. at 26, ¶ 40.)

$62, 242.65 Paid by Shaw to Liberty as a result of an “administrative error.” (Id. at 27, ¶ 47.)

$439, 627.00 Paid by Shaw to Liberty only to avoid Liberty's drawing on Shaw's letter of credit. (Id. at 29-30, ¶¶ 60-61).

Total: $1, 323, 356.13

Shaw claims that it is entitled to have its deductible obligation credited with these amounts. (See Id. at 30-32, ¶¶ 65-66, 69.) The total of these payments exceeds the deductible by $73, 356.03 which represents, argues Shaw, an overpayment by Shaw which Liberty owes to Shaw. (Id. at 31-32, ¶ 69.)

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Shaw utilizes three theories of liability in support of its effort to negate any obligation it has to reimburse Liberty for amounts paid in connection with the deductible and to recover damages and its “overpayment” of monies paid directly by Shaw or indirectly by others in satisfaction of its deductible obligation, (id. at 30-31, ¶ 66; id. at 34, ¶ 87): unjust enrichment (Count I, id. at 31-32, ¶¶ 67-71); breach of contract (Count II, id. at 32-34, ¶¶ 72-87); and bad faith (Count III, id. at 34-35, ¶¶ 88-91).

In addition to demanding a credit against its deductible obligation and a return of the overpayment, Shaw asks for a return of monies it paid to Liberty on the deductible because of Liberty's failure to credit AIG's payments, (Doc. 10 at 34, ¶ 85); the amounts Shaw paid in “costs and fees in defending itself, ” (id); “all foreseeable and unforeseeable damages arising” from these alleged breaches, (id. at 34, ¶ 86); and penalties and attorney's fees as a result of Liberty's bad faith violation of its duties under La. R.S. 22:1973, (id. at 35, ¶ 90.)

In response, Liberty filed the present Motion. (Doc. 18.)

II. PARTIES' ARGUMENTS

A. Liberty's Motion (Doc. 18) and Original Memorandum (Doc. 18-1

Liberty argues that Shaw's counterclaim should be dismissed under Rule 12(b)(6) because (i) Shaw released its claims in the Insurance Settlement, (ii) Shaw does not allege any acts of bad faith recognized under Louisiana law, and (iii) the plain terms of Liberty's Policies foreclose Shaw's unjust enrichment theory. (Doc. 18 at 1-2; Doc. 18-1 at 3-4.) In support of its motion, Liberty attaches a copy of the Policies, (Docs. 18-2 and 18-3), and the Insurance Settlement, (Doc. 18-4). Though Rule 12(b)(6) motions are usually limited to the allegations in the complaint, Liberty seeks to “enlarge” the pleadings to allow the Court to consider the Insurance Settlement because it is “central to plaintiff's [counter]claims.” (Doc. 18-1 at 12-13 (citing, among others,

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Murchison Cap. Partners, L.P. v. Nuance Commc'ns Inc., 625 Fed.Appx. 617, n. 1 (5th Cir. 2015)).)

1. Shaw released any and all claims regarding the Abernathy lawsuit.

First, Liberty argues that Shaw's counterclaim is precluded by the Insurance Settlement. (Doc. 18-1 at 13.) Liberty maintains that the release applies broadly to “any and all claims . . . relating to or arising out of the Underlying Lawsuits and the claims against Shaw that are being settled by the Shaw settlement.” (Id. at 13-14 (quoting Doc. 18-4 at 3-4, ¶ 2).) Under Louisiana law, argues Liberty, “only one conclusion can be drawn: Shaw released the very actions asserted in the [C]ounterclaim[.]” (Id. at 14.) According to Liberty, every claim within Shaw's Counterclaim falls under the broad language of the release, which covered both present and...