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Connor Group v. Certain Underwriters at Lloyds

United States District Court, S.D. Ohio, Western Division

June 12, 2018

The Connor Group, A Real Estate Investment Firm, LLC, Plaintiff,
Certain Underwriters at Lloyds, London Subscribing to Policy No. B128413102W16, et al., Defendants.



         Before this Court is a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure (F.R.C.P.) 12(b)(6). Plaintiff The Connor Group (“Connor Group”) seeks a declaratory judgment regarding Defendants' liability under the insurance policies agreed to by the parties. Defendants Certain Underwriters at Lloyd's, London (“Lloyd's”) and Aspen Specialty Insurance Company (“Aspen”) have filed a motion to dismiss the action for failure to state a claim in accordance with F.R.C.P. 12(b)(6). Doc. 11.

         I. Background

         Plaintiff Connor Group is a real estate investment firm headquartered in Miamisburg, Ohio. Doc. 1, ¶ 2. Connor Group, through its corporate affiliates and investor members, owns Villages of Addison Apartments in Dallas, Texas as tenants in common. Doc. 1, ¶ 14. Lloyd's is an insurance underwriting organization located in London, England, however they stipulated in their insurance policy agreement with Connor Group that service of process may be served upon them in the state of New York. Doc. 1, ¶ 3. Aspen is an insurance company incorporated in the state of North Dakota with its principle place of business in the state of Connecticut. Doc. 1, ¶ 4.

         As owners of Villages of Addison Apartments, Connor Group purchased commercial property insurance policies from Lloyd's (Policy No. B128413102W16) and Aspen (Policy No. PRAG48V16), both of which were in effect from February 26, 2016 to February 27, 2017. Doc. 1, ¶¶ 7-8. Connor Group's policy with Lloyd's provides coverage for damage to their real and personal property while the Aspen policy provides coverage for buildings and business property. Doc. 1, ¶¶ 9-10. The policies each contained a $5, 000, 000 limit per occurrence and make their respective insurers responsible for 50% of the overall risk. Doc. 1, ¶¶ 11-12. Furthermore, the policies stipulated the presence of a $500, 000 deductible for each occurrence for which a claim is based upon. Doc 1-1 PageID 17. On December 28, 2016, Connor Group submitted an insurance claim for property damage that allegedly had occurred as a result of a hail storm on March 23, 2016. Doc. 1, ¶¶ 16, 18. On November 21, 2016, Connor Group sold the property in question to Advenir at Addison LLC (“Advenir”) and subsequently assigned the insurance claim to them on February 9, 2017. Doc. 1, ¶¶ 17, 21. The claim was eventually assigned back to Connor Group by Advenir on July 20, 2017 (Doc. 1, ¶ 22) in consideration for Connor Group's release of $500, 000 in escrow funds to Advenir. Doc. 1, ¶ 23; Doc. 1-4 PageID 215.

         Following the initial filing of the insurance claim, Lloyd's and Advenir appointed York Risk Services Group (“York”) as a claims adjuster, who then contracted United Building Sciences (“UBS”) to inspect the property. Doc. 1, ¶ 19. The property was inspected January 3 and 4, 2017 and was re-inspected on January 25, 2017 at the request of Connor Group. Doc. 1-5 PageID 218. A representative of Needham Roofing (“Needham”) was present on behalf of Advenir at the re-inspection. Doc. 1-8 PageID 261. Connor Group and Advenir both dispute many of the findings that York and UBS made during their investigations of the property. See Doc. 1-9.

         Following UBS' finding that the roof damage was “likely caused by multiple storms” (Doc. 1-8 PageID 265), York cited multiple incidences of hail from the time when Connor Group acquired the property in 2014, noting that such incidents would count as separate occurrences pursuant to the policies and each be subject to the $500, 000 deductible under said policies. Doc. 1-5 PageID 224. Additionally, York reported the possibility that the roof had “inherent defects” that contributed to the ultimate damage that occurred. Id. York subsequently pointed out that the insurance policies did not cover latent or pre-existing defects in the property. Id. Furthermore, York told Connor Group that hail damage was found only on the south and west portions of the roof of the property, and that the policies did not cover replacement of the north and east portions following a finding of no damage therein. Id. During re-inspection of the property, Needham identified possible incidences of hail damage on the north and east slopes of the roof. Doc. 1-9 PageID 268. In its report, UBS noted this and argued that these incidences were “anomalies” appearing to be “scrapes, scuffs, blisters, and mechanical impact” separate from hail damage. Doc. 1-8 PageID 264. UBS estimated the replacement cost value of the damage to be $618, 880.22 with an actual cash value of $421, 311.47. Doc. 1-6 PageID 228; Doc. 1-8 PageID 265. In regards to this, Advenir informed York that Needham had estimated the cost to replace the shingles of the entire property at $1.567 Million, and that UBS' price estimate was insufficient to cover the repairs sought by Advenir as the future owners of the property. Doc. 1-9 PageID 269. In spite of these discrepancies, Lloyd's and Aspen notified Connor Group of the aforementioned coverage and adjustment issues related to the claim (Doc. 11 at p. 2; Doc. 1, ¶ 26), which precipitated Connor Group's present action.

         Following the estimated coverage allocation provided by Defendants, Plaintiff Connor Group seeks a declaratory judgment that Lloyd's and Aspen are obligated to provide insurance coverage for the full replacement of the roof and that only one deductible may be applied to such coverage. Doc. 1 PageID 7-8. Plaintiff further claims that Defendants' refusal to cover the roof's replacement cost constitutes a breach of contract for which they have suffered damages in the form of loss of insurance proceeds, attorneys' fees, and loss of escrow funds. Id. at PageID 9. Plaintiff further alleges that Defendants acted in bad faith by failing to properly investigate its insurance claim and ultimately withholding payment under the insurance policies. Id. at ¶¶ 48-49. Accordingly, Plaintiff asks the Court to order the aforementioned declaratory judgment, along with enjoining Defendants from delaying or denying payment under the policies, awarding pre and post-judgment interest, as well as Plaintiff's costs and attorney fees related to the present action Id. at PageID 11. Additionally, Plaintiff seeks punitive damages in regards to the claim of bad faith on the part of Defendants. Id.

         In response to Plaintiff's complaint, Defendants Lloyd's and Aspen filed a motion to dismiss for failure to state a claim under F.R.C.P. 12(b)(6), which is currently before the Court. At issue in the present motion to dismiss for failure to state a claim is the enforceability of the forum selection clause within the insurance policies given the presence of an additional service of suit clause within the aforementioned policies. The forum selection clause in question states that “The parties irrevocably submit to the jurisdiction of the Courts of the State of New York” (Doc. 1-1 PageID 49), while the service of suit clause states that in the event of a refusal to pay a claim, the insurer “will submit to the jurisdiction of a Court of competent jurisdiction within the United States.” Id. at PageID 32). These endorsements are expressly provided within Connor Group's insurance policy with Lloyd's and is additionally incorporated into their insurance policy with Aspen. See Doc. 1-2 PageID 206. Plaintiff argues that the provisions of the service of suit clause supersede those of the forum selection clause and thus make Defendants amenable to suit anywhere in the United States. Defendants argue that the provisions of the service of suit clause do not serve to preclude the enforceability of the forum selection clause within the insurance policies and thus the instant action must be dismissed as against the express requirements of the forum selection clause.

         II. Motion to Dismiss

         A. Legal Standard

         A motion to dismiss based upon a forum selection clause is to be assessed under Rule 12(b)(6) if that forum selection clause is valid and enforceable. Langley v. Prudential Mortg. Capital Co., LLC, 546 F.3d 365, 366 (6th Cir. 2008). Accordingly, the Sixth Circuit has allowed the use of Rule 12(b)(6) as a way to enforce motions to dismiss in cases where a forum selection clause limits jurisdiction to a state court. May v. Ticketmaster Entm't, LLC, No. 3:10-cv-00760, 2010 WL 4024257, at *4 (M.D. Tenn. 2010). In evaluating a motion to dismiss for failure to state a claim under Rule 12(b)(6), “the court only needs to determine whether the forum selection clause is enforceable and applicable; if it is, then the suit should be dismissed.” Id. Furthermore, the Court must “accept as true all of the well-pleaded allegations of the complaint, construing those allegations in the light most favorable to the plaintiff.” Rossborough Mfg. Co. v. Trimble, 301 F.3d 482, 489 (6th Cir. 2002). Additionally, there is no requirement that a complaint must include “detailed factual allegations, ” only that its statement of the grounds for entitlement to relief must rise above the level of a “formulaic recitation of the elements of the cause of action.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         B. Analysis

         At issue first in the Lloyd's and Aspen insurance policies is whether the forum selection clause is enforceable given the presence of the service of suit clause. Before this Court can analyze whether the forum selection clause on its face is enforceable, it must first determine whether it is enforceable together with the ...

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