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Church Creek Construction, LLC v. MT Hawley Insurance Co.

United States District Court, D. South Carolina, Charleston Division

February 19, 2019

CHURCH CREEK CONSTRUCTION, LLC, KEVIN MOLONY, and LARRY ELSEY, as Assignor Plaintiffs,
v.
MT. HAWLEY INSURANCE COMPANY, ESSEX INSURANCE COMPANY, EVANSTON INSURANCE COMPANY, WOOD SPECIAL RISK BROKERS, LLC, and INSURANCE OFFICE OF AMERICA, INC., Defendants. and MEPKIN PLACE HOMEOWNERS ASSOCIATION, LLC, LAVONIA MITCHELL individually and on behalf of all other similarly Situation, ANDREW BLALOCK, KELLY BLALOCK, BEN YASCHIK, MARTIN YASCHIK, S. EMORY BULL HIOTT, NORMA F. CALLEN, FARZAN SOODAVAR AVINA ADAMIVAT, ROBERT P. LEDFORD, JR., CHRISTOPHER MIMS, PATRICK J. MALLARD, ERIC CROTTS, MARY GRAY, NICHOLAS HARGREAVES, JANE F. MITCHELL, JOSHUA SEARS, JULIUS MCMILLAN, LINDA MCMILLAN, STEPHANIE SLAN, and PATRICK J. MALLARD, as Assignee Plaintiffs, Plaintiffs,

          ORDER

          DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

         The following matter is before the court on defendant Mt. Hawley Insurance Company's (“Mt. Hawley”) motion for partial dismissal and/or a more definitive statement, ECF No. 67, and defendants Essex Insurance Company (“Essex”) and Evanston Insurance Company's (“Evanston”) (collectively, “Evanston”)[1] motion for partial dismissal and/or a more definitive statement, ECF No. 78. For the reasons set forth below, the court grants the motions, dismissing Counts II, IV, and V without prejudice and finding the issues of a more definitive statement as moot.

         I. BACKGROUND

         This case arises out of an insurance coverage dispute for an underlying state court judgment. Assignor plaintiff Church Creek Construction LLC is owned by assignor plaintiffs Kevin Molony and Larry Elsey (collective, “Church Creek”). Church Creek constructed Mepkin Place, a residential condominium complex. Assignee plaintiffs are Mepkin Place Homeowner's Association, LLC and individual condominium owners. Defendants have all provided insurance services to Church Creek.

         Assignee plaintiffs filed a lawsuit in state court alleging construction deficiencies at Mepkin Place against Church Creek, and judgment for $33, 802, 788.00 was entered against Church Creek on July 22, 2016 (“underlying judgment”). Assignee plaintiffs then filed a declaratory action suit in state court against Church Creek, Mt. Hawley, and defendant Wood Special Risk Brokers, LLC (“WSRB”) to determine whether Mt. Hawley was responsible for providing insurance coverage for the underlying judgment.[2]Mt. Hawley removed the declaratory action to this court.

         Mt. Hawley initially challenged assignee plaintiffs' standing to bring this action because they had submitted no proof that Church Creek, the insured, had assigned its rights to pursue such an action to assignee plaintiffs. As a result, the assignee plaintiffs sought leave to file an amended complaint to realign Church Creek as assignor plaintiffs (together with assignee plaintiffs, “plaintiffs”). The court held a hearing on the matter and allowed assignee plaintiffs to amend their complaint. However, the court limited discovery at that time to a statute of limitations issue raised by Mt. Hawley.[3] Then plaintiffs filed another motion to amend the complaint so they could add additional defendant insurance companies and eliminate their duty to defend claim, which plaintiffs argue would resolve the statute of limitations issue. The court held a hearing on this motion and allowed the amendment, which added Evanston as a defendant.

         The second amended complaint, now the operative complaint, levies the following claims: (1) a declaratory judgment declaring plaintiffs are entitled to coverage under Mt. Hawley's and Evanston's insurance policies for the full amount of coverage up to the amount of the underlying judgment; (2) another declaratory judgment declaring that Mt. Hawley and Evanston are responsible for the entire amount of the underlying judgment because they negligently failed to settle the underlying claim; (3) a bad faith claim against Mt. Hawley and Evanston for denying coverage; (4) a violation of the South Carolina Unfair Trade Practices Act (“SCUTPA”); (5) reformation of the insurance policies so that plaintiffs are provided coverage in the event the court finds no coverage; and (6) negligence against WSRB and defendant Insurance Office of America, Inc. Mt. Hawley filed a motion for partial dismissal and/or for a more definite statement on November 16, 2018. ECF No. 67. Plaintiffs filed their response, ECF No. 80, and Mt. Hawley filed a reply, ECF No. 81. Evanston also filed a motion for partial dismissal and/or for a more definite statement on December 19, 2018. ECF No. 78. Plaintiffs filed their response, ECF No. 82, and Evanston replied, ECF No. 83. The court held a hearing on the motions on February 12, 2019. The motions are ripe for review.

         II. STANDARD

         A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss under Rule 12(b)(6) . . . does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”). To be legally sufficient, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A Rule 12(b)(6) motion should not be granted unless it appears certain that the plaintiff can prove no set of facts that would support his claim and would entitle him to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When considering a Rule 12(b)(6) motion, the court should accept all well-pleaded allegations as true and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir.1999); Mylan Labs., Inc., 7 F.3d at 1134. “To 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 its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         III. DISCUSSION

         A. Motion for Dismissal of Counts II, IV, and V

         Evanston and Mt. Hawley (for the purposes of this order, “defendants”) argue that Counts II, IV, and V must be dismissed. The court agrees.

         1. Declaratory Judgment for Unreasonable Failure to Settle (Count II)

         In Count II, plaintiffs allege that defendants were given the opportunity to settle the claim for the underlying judgment but were “negligent, careless and reckless in their conduct and unreasonably failed and refused to provide coverage for, participate in and/or settle the claims for an amount within policy limits.” Second Am. Comp. ¶ 16. As a result, plaintiffs seek a ...


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