Weitz Co. v. Lexington Ins. Co.

• Decision Date: 12 May 2015
• Docket Number: No. 13–3744.,13–3744.
• Citation: 786 F.3d 641
• Parties: The WEITZ COMPANY, LLC, Plaintiff–Appellant v. LEXINGTON INSURANCE COMPANY; Allied World Assurance Company (U.S.), Inc.; Westchester Surplus Lines Insurance, Company ; Essex Insurance Company; Lloyds London, also known as Underwriters at Lloyds; John Doe, Various unknown insurers hereby named John Doe Insurers, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

786 F.3d 641

The WEITZ COMPANY, LLC, Plaintiff–Appellant
v.
LEXINGTON INSURANCE COMPANY; Allied World Assurance Company (U.S.), Inc.; Westchester Surplus Lines Insurance, Company ; Essex Insurance Company; Lloyds London, also known as Underwriters at Lloyds; John Doe, Various unknown insurers hereby named John Doe Insurers, Defendants–Appellees.

No. 13–3744.

United States Court of Appeals, Eighth Circuit.

Submitted: Oct. 7, 2014.
Filed: May 12, 2015.
Rehearing Denied June 17, 2015.

786 F.3d 643

Jonathan Sternberg, argued, Kansas City, MO, for appellant.

Charles Glaston Cole, argued, Washington, DC (John F. Lorentzen, Joan M. Fletcher, Ryan Gene Koopmans, Des Moines, IA, Roger Warin, Mary Woodson Poag, Jessica Urban, Washington, DC, Don R. Sampen, James M. Hoey, James Robert Swinehart, Chicago, IL, David Lanier Luck, John A. Camp, Miami, FL, William R. Lewis, Carol M. Rooney, Tampa, FL, on the brief), for appellee.

Before LOKEN, BEAM, and COLLOTON, Circuit Judges.

Opinion

BEAM, Circuit Judge.

The Weitz Company appeals the district court's¹ adverse grant of summary judgment in favor of several insurance companies (collectively, the defendant insurers) on Weitz's claims for equitable subrogation and unjust enrichment. Unfortunately, this litigation, at best, has involved a confusing array of asserted and withdrawn causes of action and periodic infusions of new or changed facts and arguments. As best understood, Weitz, a party to a completed construction contract with a Hyatt Corporation affiliate (Hyatt), seeks to become subrogated through Hyatt, to insurance monies that were not, according to Weitz, properly paid to Hyatt by the defendant insurers for claims made to them by Hyatt, their insured. We find that Weitz's claims are both unsupported and unsupportable. Accordingly, we affirm.

I. BACKGROUND

In January 2001, Weitz contracted with Hyatt to build an assisted-living facility in Aventura, Florida. While the contract between Hyatt and Weitz required acquisition of mutually protective insurance coverages by both parties, this dispute involves both insurance coverages mandated by the construction agreement and, curiously, post-construction property damage policies issued only to Hyatt for Hyatt's benefit.

The project was completed in July 2003. In November 2003, Hyatt obtained the currently at issue post-construction insurance policies from defendants Allied and Lexington. They are part of a comprehensive series of policies between Hyatt, Lexington and Allied designed to cover numerous Hyatt properties in sundry locations throughout the country. As indicated, these policies did not come into being until after completion of the construction work performed by Weitz. As also indicated, Weitz was neither a party to these insurance contracts nor a third-party beneficiary. The policies exclude from coverage damages due to faulty workmanship and mold, except to the extent that another covered loss results from the faulty workmanship—for instance, business interruption losses. The policies between Hyatt and the defendant insurers also give the insurers subrogation rights after they have made payment to Hyatt on any covered loss.

It is undisputed that the completed construction was defective in numerous ways. The first problem occurred with the care center construction. Hyatt notified two of the current defendant insurers, Lexington and Allied, of an insured loss. Hyatt described the loss as involving excessive moisture and mold growth. In July 2005, Hyatt submitted a proof of loss totaling more than $11 million. Hyatt ultimately

786 F.3d 644

settled that claim for $750,000 with Allied and Lexington; the settlement amount was steeply discounted from the total loss because the policies between Hyatt and Lexington and Allied did not cover faulty workmanship or mold. With this settlement, Hyatt released Lexington and Allied from all claims under these policies relating to the care center.

Hyatt next discovered problems at the newly constructed residential towers—again, defective construction had resulted in moisture, mold growth, and cracked stucco. While Hyatt initially gave notice of this loss² to Lexington and Allied in July 2005, it ultimately decided to bypass the defendant insurers and their inevitable defenses based upon the policy exclusions, and sued Weitz and the architects directly in federal court for $102 million.

Weitz, in turn, sued its subcontractors and their insurers, as well as its own construction contract-related liability insurers. In 2010, prior to trial, Weitz settled with Hyatt for $53 million, a small part of which was paid by the project's architects. Weitz purports to have contributed $51,681,838.94. Weitz was then indemnified by its contract liability insurers (who were also Hyatt's contract liability insurers) and the subcontractors' insurers, in amounts totaling $55,799,684.69. Weitz contends that it obtained assignments for these amounts from its subcontractors and insurers but no such documents appear to be part of the record. Weitz contends that it somehow wishes to seek remuneration under these assignments but offers no apparently valid reason or theory for doing so in this action.³ Accordingly, we disregard this contention.

Via subrogation, Weitz essentially attempts to obtain coverage for itself under Hyatt's post-construction insurance policies issued by defendant insurers in 2003. Specifically, Weitz posits that at least some part of the coverage afforded by the defendant insurers' policies should now be paid to Weitz on its theory of equitable subrogation or, perhaps, unjust enrichment or both. Neither of these theories are supported by the undisputed facts or applicable law.

In this quest for subrogation, Weitz brought the instant suit against the defendant insurers, initially consisting of only Lexington and Allied. Weitz originally asserted causes of action based on contract, but subsequently amended its pleadings to assert the present subrogation and enrichment claims. In addition to Lexington and Allied, Weitz later added several excess insurers to the suit, limited to claims based upon damages to the residential towers. The defendant insurers moved for summary judgment, taking the position that their insurance contracts did not cover Hyatt's damages resulting from Weitz's faulty workmanship and also that other aspects of the claims were barred by contractual periods of limitations. Further, the defendant insurers also contend that Weitz's equitable claims are fatally undermined by the fact that Weitz has already recovered from its own liability insurers (also Hyatt's liability insurers) and its subcontractors

786 F.3d 645

and their liability insurers well more than it paid Hyatt in settlement of the Florida litigation.

The district court conducted a choice-of-law analysis and found that Illinois, as the principal place of business of Hyatt and its insurance brokers, the underwriters, and where the insurance contracts were executed, had the most significant contacts. The court recognized that the rights of Weitz, as subrogee of Hyatt, were subject to any defense Hyatt would have faced, and that Hyatt had discharged Lexington and Allied from any liability as to the care center claim. The court next found that the insurance contracts at issue required claims to be brought within two years, and Weitz's suit was filed more than five years after the damage to the care center occurred, and more than four years after the damage to the towers was discovered. Accordingly, Weitz's claims were barred by the contractual period of limitations. Similarly, the court held that Weitz was barred from suing for any alleged damage to the plaza deck because Hyatt did not give the insurers notice of damage to the plaza deck, which was required by the insurance contracts.

In addition to the difficulties with the contractual periods of limitations and notice, the court noted that, though proceeding in equity, Weitz had already collected $55.8 million from others, several million more than it paid to settle with Hyatt. Further, the court was “unconvinced” that Weitz paid a liability for which the defendant insurers were primarily liable, a requirement of equitable subrogation. Finally, the court rejected Weitz's unjust enrichment claim; because the subrogation claim failed, the unjust enrichment claim...