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Rhino Shield Gulf South LLC v. RSUI Group Inc.

United States District Court, E.D. Louisiana

February 5, 2019

RHINO SHIELD GULF SOUTH, LLC and JAMES M. REDMOND
v.
RSUI GROUP, INC. and LANDMARK AMERICAN INSURANCE COMPANY

         SECTION “F”

          ORDER AND REASONS

          MARTIN L. C. FELDMAN UNITED STATES DISTRICT JUDGE.

         Before the Court is RSUI Group, Inc. and Landmark American Insurance Company's motion to dismiss pursuant to Rule 12(b)(6), or in the alternative, motion for more definite statement pursuant to Rule 12(e). For the reasons that follow, the motion to dismiss is GRANTED, the plaintiffs' claims are DISMISSED WITHOUT PREJUDICE, and the plaintiffs are granted leave to file an amended complaint within thirty (30) days to remedy the pleading deficiencies identified in this Order and Reasons.

         Background

          This bad faith claims adjustment and legal malpractice suit concerns a claim that an LLC's insurers and counsel extracted significant settlement contributions from the LLC's members by misrepresenting protections afforded under liability insurance policies.

         Rhino Shield of Louisiana, LLC (“Rhino Shield LA”) is a defunct limited liability company that dissolved in 2015. Prior to its dissolution, Rhino Shield LA allegedly obtained liability insurance policies from RSUI Group, Inc. (“RSUI”) and Landmark American Insurance Company (“Landmark”). Issued to Rhino Shield LA, these policies allegedly defined “insured” as follows:

A limited liability company, you are an insured. Your members are also insureds, but only with respect to the conduct of your business. Your managers are insureds, but only with respect to their duties as your managers.

         Between 2013 and 2017, former Rhino Shield LA customers filed approximately nine lawsuits in Louisiana state court against the company, as well as two of its members - Rhino Shield Gulf South, LLC (“Rhino Shield GS”) and James M. Redmond. According to Rhino Shield GS and Redmond, the former customers asserted claims under Louisiana law, “alleging liability covered by policies issued in Louisiana by RSUI/Landmark to Rhino Shield LA.”

         The members further allege that their insurers - RSUI and Landmark - and liability counsel - Brian T. Carr, APLC - would respond to the lawsuits by negotiating settlements. More specifically, they allege that RSUI, Landmark, and Carr

would misrepresent to Mr. Redmond that Rhino Shield GS (a solvent Florida entity owned by Mr. Redmond) and/or Mr. Redmond personally could be responsible for any judgment, verdict, and/or settlement of the lawsuits or claims referenced herein, essentially raising coverage defenses with Mr. Redmond personally and/or mispresenting and/or failing to inform Mr. Redmond of the liability protections afforded him under corporate or bankruptcy laws.

         Rhino Shield GS and Redmond further claim that RSUI/Landmark used appointed liability counsel or adjusters to extract settlement contributions from Redmond and/or Rhino Shield GS by misrepresenting that Redmond might face personal liability.

         On October 9, 2018, Rhino Shield Gulf South, LLC and James M. Redmond filed suit in the Civil District Court for the Parish of Orleans, asserting a claim of bad faith claims adjusting practices, or in the alternative, fraud against RSUI Group, Inc. and Landmark American Insurance Company, and a legal malpractice claim against Brian T. Carr, APLC. In their petition, the plaintiffs allege that RSUI and Landmark violated their duties of good faith and fair dealing under Louisiana law by misrepresenting the terms of the policy to plaintiffs, failing to fully pay claims with third parties until plaintiffs made contributions, and failing to appoint counsel to adequately defend them. In the alternative, the plaintiffs allege that RSUI and Landmark committed fraud by misrepresenting to plaintiffs that they had a duty to contribute to any settlement. Finally, the plaintiffs seek to recover damages - including an estimated $115, 062.11 allegedly extracted from them - as well as costs, attorney's fees, interest, and punitive damages.

         RSUI and Landmark timely removed the lawsuit to this Court on November 20, 2018, invoking the Court's diversity jurisdiction. Thereafter, the plaintiffs moved to remand on the ground that Brian T. Carr, APLC is a forum defendant, and defendant Carr moved to dismiss the claims asserted against it pursuant to Rule 12(b)(6), or in the alternative, for a more definite statement. In its Order and Reasons dated January 9, 2019, the Court denied the plaintiffs' motion to remand and granted Carr's motion to dismiss. RSUI and Landmark now move to dismiss the plaintiffs' claims asserted against them pursuant to Rule 12(b)(6), or in the alternative, for a more definite statement pursuant to Rule 12(e).

         I.

...


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