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McDonnel Group, LLC v. Starr Surplus Lines Insurance Co.

United States District Court, E.D. Louisiana

May 31, 2019

MCDONNEL GROUP, LLC
v.
STARR SURPLUS LINES INSURANCE COMPANY, ET AL.

         SECTION: “H” (2) (Applies to 19-2227; 19-2230)

          ORDER AND REASONS

          JANE TRICHE MILAZZO UNITED STATES DISTRICT JUDGE.

         Before the Court are Defendants' Motion to Dismiss Consolidated Plaintiff Mechanical Construction Company, L.L.C. n/k/a Bernhard MCC, L.L.C. (Doc. 161) and Motion to Dismiss Consolidated Plaintiff All Star Electric, Inc. (Doc. 162). For the following reasons, Defendants' Motions to Dismiss are DENIED.

         BACKGROUND

         This lawsuit arises out of the renovation of the Jung Hotel and Residences in New Orleans. In late 2014, The Jung, L.L.C. (“Jung”) hired McDonnel Group, L.L.C. (“McDonnel”) to be the general contractor on the renovation. In early 2015, McDonnel purchased builder's risk insurance policies (the “Policies”) from Defendants Starr Surplus Lines Insurance Company (“Starr”) and Lexington Insurance Company (“Lexington”).[1] Under the Policies, each Defendant insured 50% of the renovation project.[2]

         The trouble began when water damaged the hotel on several occasions in 2017. The “water intrusion” events, as the parties refer to them, delayed the renovation. As the delays piled up, so did delay-related costs, which prompted McDonnel to file insurance claims for damages that it alleges were covered under the Policies. When Defendants allegedly failed to timely and properly adjust McDonnel's claims, McDonnel filed suit. McDonnel seeks declaratory relief and damages for Defendants' alleged breach of contract and bad faith claim adjustment.

         On March 8, 2019, Mechanical Construction Company, L.L.C. n/k/a Bernhard MCC, L.L.C. (“BMCC”), an HVAC and plumbing subcontractor of McDonnel's on the Jung Hotel project, filed its own suit against Defendants. An electrical subcontractor, All Star Electric, Inc. (“ASE”), followed shortly thereafter with a separate suit. Both suits generally seek the same type of relief McDonnel seeks: damages based on Defendants' alleged breach of the Policies and bad faith insurance practice. On March 18, 2019, this Court consolidated all three cases.[3]

         On April 9, 2019, Defendants filed Motions to Dismiss Consolidated Plaintiffs BMCC and ASE (collectively “Subcontractors”). The Subcontractors oppose Defendants' Motions. The Court heard Oral Argument on the Motion to Dismiss BMCC on May 30, 2019.

         The crux of Defendants' argument is that the Subcontractors' claims must fail because the Subcontractors are not insured under the Policies on which their claims depend. It is undisputed that McDonnel is the only named insured on the Policies. What the parties disagree about is whether the Subcontractors qualify as additional insureds under the Policies.

         Defendants argue that the Policies unambiguously define who qualifies as an additional insured and that the Subcontractors clearly do not fit within that definition. The Subcontractors, meanwhile, generally argue that the Policies are unambiguously clear for the opposite proposition: that the Subcontractors are indeed additional insureds. Because Defendants argue for dismissal of both BMCC and ASE for the same reasons, and because the issues presented by both Motions are similar, the Court will address both Motions simultaneously.

         LEGAL STANDARD

         To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead enough facts to “state a claim for relief that is plausible on its face.”[4] A claim is “plausible on its face” when the pleaded facts allow the court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.”[5]A court must accept the complaint's factual allegations as true and must “draw all reasonable inferences in the plaintiff's favor.”[6] The Court need not, however, accept as true legal conclusions couched as factual allegations.[7] To be legally sufficient, a complaint must establish more than a “sheer possibility” that the plaintiff's claims are true.[8] If it is apparent from the face of the complaint that an insurmountable bar to relief exists and the plaintiff is not entitled to relief, the court must dismiss the claim.[9]

         LAW AND ANALYSIS

         Because this is a diversity action, Louisiana law applies.[10] “Under Louisiana law, an insurance policy ‘is a contract between the parties and should be construed by using the general rules of interpretation of contracts set forth in the Louisiana Civil Code.'”[11] The Civil Code provides that “[w]hen the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent.”[12] Alternatively, “[i]f a contract is ambiguous, a court must consider any proffered course of conduct evidence” to interpret the meaning of the ambiguous contract.[13] “[A] contract is ambiguous when, inter alia, its ‘written terms are susceptible to more than one interpretation,' when ‘there is uncertainty as to its provisions,' or when ‘the parties' intent cannot be ascertained from the language used.'”[14]

         The Policies define “Additional Insured(s)” as follows:

To the extent required by any contract or subcontract for an Insured Project*, and then only as their respective interest may appear, all owners, all contractors and subcontractors of every tier, tenants of the Insured Project* and any other individual or entity specified, in such contract or subcontract are recognized as Additional Insured's hereunder.[15]

         The Court need not proceed further to find the first level of ambiguity in the Policies. The only definite takeaway from the Policies' definition of additional insureds is that whether the Subcontractors are additional insureds depends on language in other contracts. It is not clear, however, what ...


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