Team Indus. Servs. v. Zurich Am. Ins. Co.

• Decision Date: 10 February 2021
• Docket Number: Case No. 19-2710-HLT-KGG
• Parties: TEAM INDUSTRIAL SERVICES, INC., Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY, et al., Defendant.
• Court: U.S. District Court — District of Kansas

TEAM INDUSTRIAL SERVICES, INC., Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY, et al., Defendant.

Case No. 19-2710-HLT-KGG

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

February 10, 2021

MEMORANDUM & ORDER ON MOTION FOR LEAVE TO AMEND COMPLAINT

NOW BEFORE THE COURT is the "Motion for Leave to File Second Amended Complaint" filed by Plaintiff Team Industrial Services, Inc (hereinafter "Plaintiff"). (Doc. 114.) The motion requests leave to add claims, and to add one party. Only Defendant Westar Energy, Inc. has filed a response opposing the motion. After review of the parties' submissions, the Court GRANTS in part and DENIES in part Plaintiff's motion.

BACKGROUND

Non-party Furmanite was a contractor which provided services to Westar at a coal-fired power plant. Under its contract with Westar, insurance was provided to Furmanite by Westar under an OCIP through Zurich which provided coverage to all enrolled contractors performing work for Westar during the policy's effective dates. Plaintiff alleges that it assumed the contract from Furmanite, but that as a result of "errors, oversights, or inadvertence that [it] contends is attributable to Westar, Zurich, and/or their agents or representatives, [Plaintiff] purportedly was not enrolled in the OCIP."

Two Westar employees were killed in an accident at the site and brought legal actions against Plaintiff. Zurich denied coverage because Furmanite, rather than Plaintiff, was listed as the insured, even though Plaintiff claims Westar and Zurich knew plaintiff was performing the work at the site.

Plaintiff brought this declaratory judgment action on November 19, 2019, against Westar and Zurich claiming it was entitled to coverage for the accidents. The motion to intervene (Doc. 92) filed by Westchester Fire Insurance Company was granted on 10/20/2020 (Doc. 117).

With the proposed Second Amended Complaint (Doc. 114-1), Plaintiff seeks to "supplement its averments against certain of these Current Defendants or assert additional causes of action against certain Current Defendants, based on facts and circumstances in common with the bases for the claims currently before the Court." (Doc. 114, at 2.) The motion also seeks to add another insurer as a defendant. The averments and claims relating to Defendant Westar are the subjectof this Order as no other parties responded or objected to Plaintiff's requested amendments.¹

In this regard, Plaintiff alleges that it has a right to defense and potential indemnity as to claims asserted against it in the Texas litigation under the OCIP maintained by Westar. (Doc. 114, at 3.) Plaintiff continues that the primary layer of OCIP coverage was provided through a policy of insurance issued by Defendant Zurich while excess OCIP coverage was to be provided by policies respectively issued by Defendant Westchester and Defendant Endurance. (Id.)

Westar argues that Plaintiff should not be allowed to file the proposed Second Amended Complaint

over a year after this case was filed, without explanation, adding, for the first time, seven affirmative claims for relief against [Westar], when the Rule 15 factors (undue delay, bad faith and dilatory motive, undue prejudice, and most importantly futility) weigh heavily against allowing the amendment.

(Doc. 134, at 24.)

ANALYSIS

I. Standards for Motions to Amend.

Motions to amend pleadings are governed by Fed.R.Civ.P. 15(a), which provides that a pleading may be amended "once as a matter of course within ... 21 days after service of a responsive pleading." Fed.R.Civ.P. 15 (a)(1)(B). Because more than 21 days have elapsed since Defendants filed their Answers, Plaintiff may amend "only with the opposing party's written consent," which has not been provided, "or the court's leave." Fed.R.Civ.P 15(a)(2).

Courts are to "freely give leave when justice so requires." Id. "The liberal granting of motions for leave to amend reflects the basic policy that pleadings should enable a claim to be heard on its merits." Calderon v. Kan. Dept. Soc. & Rehab. Servs., 181 F.3d 1180, 1186 (10th Cir. 1999)).

"Refusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment." Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993) (citation omitted). "The proposed pleading is then analyzed using the same standard as a motion to dismiss under Fed. R. Civ. P. 12(b)(6)." Causer v. Somers, No. 18-1221-JWB-GEB, 2020 WL 6742790, at *8 (D. Kan. Nov. 17, 2020). "[T]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on itsface.'" Williamson v. United Parcel Service, Inc., 2020 WL 1638063, at *2 (D. Kan. April 2, 2020) (citation omitted).

To withstand dismissal, a complaint or amendment need only make a statement of the claim and provide some factual support. Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007)). "It does not matter how likely or unlikely the party is to actually receive such relief, because for the purposes of dismissal all allegations are considered to be true." Williamson, 2020 WL 1638063, at *2 (citing Twombly, 550 U.S. at 556). In other words, applying this standard, "the court must accept as true all well-pleaded factual allegations and view them in the light most favorable to the pleading party." Carefusion 213, LLC v. Professional Disposables, Inc., No. 09-2626-KHV-DJW, 2010 WL 4004874, at *5 (D. Kan. Oct. 12, 2010).

The proposed amendment should be found futile only if the court finds "the proposed claims do not contain enough facts to state a claim for relief that are plausible on their face or the claims otherwise fail as a matter of law." Id. (citing Raytheon Aircraft Co. v. U.S., 501 F. Supp. 2d 1323, 1327 (D. Kan. 2007).) The party opposing the amendment has the burden of showing the proposed amendment is futile. Williamson, 2020 WL 1638063, at *2 (citing Layne Christensen Co. v. Bro-Tech Corp., No. 09-CV-2381-JWL-GLR, 2011 WL 3847076, at *5 (D. Kan. Aug. 29, 2011)).

II. Rule 15 Factors.

In opposition to Plaintiff's motion, Defendant Westar argues that the factors to be considered under Fed.R.Civ.P. 15 - undue delay, bad faith and dilatory motive, undue prejudice, and futility - weigh "heavily" against allowing Plaintiff's proposed amendments. (Doc. 134, at 24.) The Court will address each of these factors in turn.

A. Undue Delay.

In determining whether a delay is undue, the Tenth Circuit focuses primarily on the reasons for the delay. Denial of leave to amend is appropriate "when the party filing the motion has no adequate explanation for the delay.'" Minter v. Prime Equip. Co., 451 F.2d 1196, 1206 (10th Cir. 2006) (citations omitted)). An unexplained delay by itself can be adequate justification for the denial of a motion to amend. Durham v. Xerox Corp., 18 F.3d 836, 840 (10th Cir. 1994). Also, courts "have denied leave to amend when the moving party knew about the facts on which the proposed amendment was based but omitted the necessary allegations from the original pleading." Charles A. Wright & Arthur R. Miller, FED. PRAC. & PROC. §1488 (2d. ed. 1990).

According to Westar, Plaintiff "only sought to bring these claims after losing its OCIP defense in state court, nearly a year into the course of this litigation, and two years after learning of Zurich's coverage denial on the basis that [Plaintiff]was not enrolled in the OCIP." (Doc. 134, at 26.) More specifically, Westar alleges that Plaintiff

has been aware of the underlying accident since early June, 2018 (Doc. 114-13); has known of Zurich's denial of coverage since October 18, 2018, and has known since no later than November 18, 2019 (prior to filing this lawsuit) of Westar's position that [Plaintiff] had never been selected for inclusion in, or enrolled in, the OCIP, nor had Westar ever intended that [Plaintiff] be enrolled. Nonetheless, up to now, [Plaintiff] continuously alleged its failure to be enrolled in the OCIP as a 'mutual mistake,' resulting in Zurich's mistaken failure to include [Plaintiff] as a named insured under the Westar OCIP, as opposed to the result of some kind of wrongful conduct on Westar's part.

(Id., at 25.)

Westar continues that some of Plaintiff's proposed claims against it "are the same as those it previously alleged against Zurich in the First Amended Complaint," such as breach of contract and promissory estoppel. (Id., at 25-26.) Westar contends that "nothing has changed" because Plaintiff has been aware, since this litigation commenced, of Westar's position that Plaintiff "was never intended to be enrolled in, and in fact had never enrolled in, the OCIP." (Id., at 26.)

According to Westar, Plaintiff was aware of this at the time it filed the Complaint in the Illinois litigation, the initial Complaint in this case (Doc. 1), and the First Amended Complaint (Doc. 64) "without any suggestion of wrongdoing orliability on [Westar's] part, but merely alleging once again that [Westar] was a party to the litigation because its interests may be affected." (Id.) Westar argues that Plaintiff cannot provide an adequate explanation for the delay.

Plaintiff replies that the delay in filing is not undue because the amendment was sought prior to the expiration of the deadline in the Scheduling Order and that the statute of limitations on these claims had not passed. (Doc. 141, at 6-7.) The Court acknowledges that both of these statements are true, albeit not determinative of whether there was undue delay and seeking the amendment.

Plaintiff also argues that the timing of the motion to amend is resulted from its discovery of facts during the course of this litigation upon which the proposed claims against Westar are based. (Id., at 7.) Plaintiff contends that it

developed sufficiently 'detailed' evidence to justify claims

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