Pittsfield Dev., LLC v. Travelers Indem. Co.
| Decision Date | 08 June 2021 |
| Docket Number | Case No. 18-cv-6576 |
| Citation | 542 F.Supp.3d 791 |
| Parties | PITTSFIELD DEVELOPMENT, LLC, Pittsfield Residential II, LLC, and Pittsfield Hotel Holdings, LLC, Plaintiffs, v. The TRAVELERS INDEMNITY COMPANY, Defendant. The Travelers Indemnity Company, Counter-Plaintiff, v. Pittsfield Development, LLC, Pittsfield Residential II, LLC, and Pittsfield Hotel Holdings, LLC, Counter-Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Adrian M. Vuckovich, Paul Fourie Collins, Christopher Robert Bargione, Collins Bargione & Vuckovich, Chicago, IL, for Plaintiffs/Counter-Defendants.
Matthew S. Ponzi, Collin M. Kent, John Eggum, Foran Glennon Palandech Ponzi & Rudloff PC, Chicago, IL, for Defendant/Counter-Plaintiff.
Two pipes burst on the tenth floor of Chicago's historic Pittsfield Building on December 17, 2016. Water cascaded down the inside of the building, soaking the first ten floors and causing significant damage. The deluge led to this insurance coverage dispute between the Pittsfield entities (the owners of the wet floors of the building) and The Travelers Indemnity Company (their insurer).
The Pittsfield entities filed suit, alleging that Travelers had refused to pay the full extent of the covered loss. They seek more than $8 million. Travelers, in turn, filed two counterclaims for breach of contract and unjust enrichment.
The basis for the counterclaims was one of the line items in the $8 million damages estimate. The Pittsfield entities demanded more than $1 million for asbestos remediation. They purported to rely on a bid from a remediation firm, but according to Travelers, the bid did not exist. It was "phantom" and "phony." Demanding coverage based on a non-existent bid, Travelers argues, was an act of fraud that voids coverage.
The Pittsfield entities, in turn, moved to dismiss. For the reasons stated below, the motion is granted in part and denied in part.
In December 2016, two pipes burst on the tenth floor of the Pittsfield Building in downtown Chicago, creating a huge mess. See Second Am. Cplt., at ¶ 33 (Dckt. No. 79). Water "poured from the two pipes onto floor ten of the building," and it didn't stop there. Id. at ¶ 34. Water "traveled down the building through floors nine through one, causing extensive damage to the portions of the building owned by the Plaintiffs." Id. ; see also Counterclaims, at ¶ 15 (Dckt. No. 116).
Several Pittsfield entities submitted a claim for coverage under a property insurance policy issued by Travelers. The policy covered "direct physical loss or damage" to the Pittsfield Building. See Policy (Dckt. No. 116-1, at 3, 10, 97 of 101); see also Counterclaims, at ¶ 14 (Dckt. No. 116).
There is a wrinkle about who, exactly, is covered by the policy. Travelers issued the policy to "Pittsfield Building, LLC." See Policy (Dckt. No. 116-1, at 3 of 101). But according to the Pittsfield entities, no such entity exists. See Second Am. Cplt., at ¶¶ 18–19 (Dckt. No. 79). It was a "scrivener's error" (again, according to Plaintiffs). Id. at ¶ 19.
That issue is germane to the claims brought by the Pittsfield entities against Travelers, and is less germane to the counterclaims brought by the Travelers against the Pittsfield entities. So, for now, suffice it to say that several Pittsfield entities demanded coverage.1
The Pittsfield entities submitted a claim to Travelers under the policy for the damage. See Counterclaim, at ¶ 16 (Dckt. No. 116). Travelers, in turn, investigated the claim and determined that "certain amounts" were payable. Id. at ¶ 17.
The Pittsfield entities then hired a licensed public adjuster, Joseph Sabbagh, to assist them with their claim. Id. at ¶¶ 18–19. Based on communications with the adjuster, Travelers learned about damage to areas that it "had not previously been told were damaged in connection with the Loss." Id. at ¶ 20. So Travelers conducted a second investigation and determined it owed "certain amounts" for damage to these additional areas. Id. at ¶ 21.
In the months that followed, Travelers made a series of payments for the damage to the building. The payments totaled $301,537.95. Id. at ¶ 22.
The parties then hit an impasse. The Pittsfield entities and Travelers had much different views about the scope of coverage for the flooded floors. Id. at ¶ 24. The Pittsfield entities eventually filed suit for breach of contract, alleging a covered loss of $8,592,961.40. See Cplt., at ¶¶ 40–41 (Dckt. No. 1). After subtracting the amount paid by Travelers so far ($301,537.95), the Pittsfield entities demanded damages totaling $8,291,423.45. Id. at ¶ 41.
The Pittsfield entities later amended the Complaint, twice. See First Am. Cplt. (Dckt. No. 25); Second Am. Cplt. (Dckt. No. 79). The Second Amended Complaint included claims for breach of contract and reformation. See Second Am. Cplt. (Dckt. No. 79). But the amount of damages did not change. Once again, the Pittsfield entities demanded damages totaling $8,291,423.45. Id. at ¶ 55.
The Pittsfield entities supported their damages demand by attaching an estimate from their insurance adjuster (again, Sabbagh). Id. at ¶ 41; see also Estimate of Damages (Dckt. No. 79-3) (Exhibit 3 to the Second Amended Complaint). It's not entirely clear from the Second Amended Complaint whether the Pittsfield entities shared that estimate (as opposed to something else) with Travelers before filing suit. See Answer, at ¶ 41 (Dckt. No. 116) (). The estimate covers everything that you might think that you would need to do to repair a water-soaked building: removing carpet, replacing flooring, hanging drywall, painting walls, and so on.
The damage to the building was extensive, and so was the estimate. It spanned 100 pages, and covered more than 900 separate line items. See Estimate of Damages (Dckt. No. 79-3). In the end, after adding everything together, the estimate showed a loss totaling $8,592,961.40, the same number alleged by the Pittsfield entities in their Complaint. Id. (Dckt. No. 79-3, at 85 of 101).
Travelers brought counterclaims based on 1 of the 900+ line items. Line 929 appeared under the heading "HAZARDOUS REMOVAL." Id. (Dckt. No. 79-3, at 82 of 101). It contained an entry for "Lead Paint & Asbestos Removal (Bid Item from Bluestone Environmental)." Id. The line item included a bid amount of $950,000, with $190,000 in "Overhead and Profit," for a total of $1,140,000. Id. ; see also Counterclaims, at ¶ 32 (Dckt. No. 116). That single line item represented a significant portion of the total amount of the claim for damages ($1,140,000 of $8,592,961.40, roughly 13% of the total). See Counterclaims, at ¶¶ 32–33.
Travelers asked about the damages estimate during discovery. In particular, Travelers probed into the basis for the $1.14 million demand for the asbestos removal. According to the counterclaims, Travelers discovered that Bluestone Environmental never made a bid for asbestos removal at all. Id. at ¶ 41 () (emphasis in original).
Travelers ultimately filed two counterclaims about the "false," "phantom," "phony," and "fictitious" bid for asbestos removal. Id. at ¶¶ 1, 42, 44, 50. The first counterclaim is for breach of contract. Travelers claims that the Pittsfield entities breached a provision of the policy that prohibits insureds from committing fraud or intentionally misrepresenting facts. Id. at ¶¶ 51–62. Travelers seeks to void the policy based on the alleged misrepresentation about the asbestos removal.
The second counterclaim is for unjust enrichment. Travelers seeks to recover the $301,537.95 paid to the Pittsfield entities so far. Id. at ¶¶ 63–69.
The counterclaims take an unusual step, attaching evidence gathered during discovery about the "false" bid for asbestos removal. Travelers attached to its pleading a transcript of the Rule 30(b)(6) deposition of the Pittsfield entities. When asked about the line item showing a loss of $1,140,000, the Pittsfield witness testified that they "have a proposal from a contractor that says it." See Dep., at 201:24-25 (Dckt. No. 116-4, at 15 of 18).
Travelers also attached two declarations from Bluestone Environmental. The President of Bluestone Environmental declared that the company "never provided a written estimate, bid, or quote to do work at the Pittsfield Building." See O'Dea Decl., at ¶ 7 (Dckt. No. 116-5, at 3 of 6). The company "has no record of providing a verbal estimate, bid, or quote," either. Id. at ¶ 9. In fact, Bluestone has never visited or inspected the Pittsfield Building. Id. at ¶ 8. In the second declaration, an employee of Bluestone confirmed that she "did not provide a written or verbal estimate, bid, or quote, or any ballpark/rough estimate" about this building. See Williams Decl., at ¶ 8 (Dckt. No. 116-5, at 6 of 6).
The Pittsfield entities responded by moving to dismiss the counterclaims. See Mtn. to Dismiss (Dckt. No. 122).
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not the merits of the case. See Fed. R. Civ. P. 12(b)(6) ; Gibson v. City of Chicago , 910 F.2d 1510, 1520 (7th Cir. 1990). At this early stage, the Court assumes the truth of the well-pleaded facts in the counterclaim, including the exhibits. See Forrest v. Universal Savings Bank, F.A. , 507 F.3d 540, 542 (7th Cir. 2007). A court normally cannot consider evidence outside the pleadings on a motion to dismiss without converting it to a motion for summary judgment. See Hecker v. Deere & Co. , 556 F.3d 575, 582–83 (7th Cir. 2009). But an exhibit to the complaint is deemed to be part of the complaint itself, so it is fair game on a motion to dismiss. See Williamson v. Curran , 714 F.3d 432, 436 (7th Cir. 2013).
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