Century Sur. Co. v. Blevins

Century Surety Co v. Blevins, et al

Civil Action No. 6:14-00411

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAFAYETTE DIVISION

Dated: July 10, 2014

Judge Richard T. Haik, Sr.

Magistrate Judge C. Michael Hill

MEMORANDUM RULING

Before the Court is a Motion For Partial Dismissal Of Claims For Bad Faith And Unfair Commercial Practices filed by Century Surety Company ("Century") [Rec. Doc. 24], defendant Sohum, LLC d/b/a Regency Inn's ("Sohum") Opposition to the motion [Rec. Doc. 32] and Century's Reply thereto [Rec. Doc. 34]. For the reasons that follow, the Court will grant Century's motion for partial dismissal and will abstain from hearing this declaratory judgment action.

I. Background

Century issued a commercial general liability insurance policy, Policy No. CCP726979, to Sohum, covering the time period from August 28, 2011 to August 28, 2012 ("Policy"). In this lawsuit, Century seeks a declaration that it owes neither defense nor indemnity to its insured with regard to the claims asserted against them in an underlying state-court lawsuit, Cvlie Blevins, et al v. Sohum, LLC d/b/a/ Regency Inn, Docket No. 2013-0166L, in the 15th Judicial District Court, Lafayette Parish, Louisiana ("Underlying Lawsuit").

In the Underlying Lawsuit, plaintiffs allege that on or about May 20, 2012, Cylie Blevins and Jeffrey Dugas, along with their minor son, Jeffrey Dugas II, (Underlying Plaintiffs) were on the premises of the Regency Inn in Lafayette, Louisiana ("Premises") which was owned, maintained, and/or operated by Sohum. UnderlyingPlaintiffs allege that Jeffrey Dugas II found an "Icee cup" which had been left in the laundry facility of the Premises and consumed the substance contained in the cup before his parents could stop him. The Underlying Lawsuit contends that the substance in the "Icee cup" "constituted a hazard as it was a corrosive substance and was left where a child could unwittingly find it."

Underlying Plaintiffs assert that Sohum was negligent in (a) failing to provide a safe place for its patrons, including Jeffrey Dugas II; (b) allowing a dangerous and toxic substance to remain in the "Icee cup," "knowing that such would be an attraction to a minor child who might ingest the substance, with knowledge or constructive knowledge of the hazard created while failing to take reasonable steps to warn of and/or correct the hazard or otherwise prevent the injuries;" (c) failing to take adequate and proper steps, including but not limited to failing to warn of the hazard; and (d) other acts of negligence to be proven at the trial of this cause. Underlying Plaintiffs seek damages for physical pain and suffering and mental pain and suffering allegedly sustained by Jeffrey Dugas II as a result of Sohum's negligence as well as damages for economic loss, including medical bills and future loss of earning capacity. Underlying Plaintiffs also seek damages pursuant to La. C.C. art. 2315.6 and for loss of consortium. The lawsuit currently remains pending.

By letter dated February 6, 2013, Century agreed to defend Sohum in connection with the Underlying Lawsuit "subject to a complete reservation of rights under the policy and applicable law to deny coverage."¹ R. 15-3. The reservation of rights letterreferenced coverage A of the Policy's general liability coverage which states that "[Century] will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." The Policy is subject to a "Special Exclusions and Limitations Endorsement", form number CGL 1701 (0510), which modifies the Policy's commercial general liability coverage and states in relevant part:

A. In consideration of the premium charged this policy has been issued subject to the following exclusions being added to coverages A & B:

This insurance does not apply to:

* * *

6. Mold, Fungi, Virus, Bacteria, Air Quality, Contaminants, Minerals or Other Harmful Materials

* * *

d. "bodily injury", or "property damages", or "personal and advertising injury" arising out of, caused by, or alleging to be contributed to in any way by toxic or hazardous properties of minerals or other substances.

Under Section V, Definitions, of the Policy, the term "bodily injury" is defined as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." In its Declaratory Judgment Complaint, Centurycontends that because all of Underlying Plaintiffs' alleged bodily injuries arise out of or were caused by "toxic or hazardous properties of a substance," the Mold, Fungi, Virus, Bacteria, Air Quality, Contaminants, Minerals or Other Harmful Materials Exclusion bars coverage for all claims in the Underlying Lawsuit.

On April 17, 2014, Sohum filed a counterclaim for damages against Century alleging: (1) breach of contract; (2) bad faith denial of coverage and refusal to defend the underlying lawsuit; (3) estoppel; (4) vicarious liability; and unfair commercial practices. R. 13. Sohum claims that "[Century] breached its contract of insurance with [Sohum] in bad faith" and that "[Sohum] is entitled to penalties, interest, and attorney fees against [Century] for arbitrary, capricious, and bad faith refusal to provide coverage and a defense to [Sohum] and consequential damages...." Id. at ¶¶ 59-60. Sohum specifically alleges that "[i]n bad faith and for arbitrary and capricious reasons, [Century] sent [Sohum] a letter purporting to be a reservation of right for [Century] to deny coverage" and that "[Century] knew that [the] Reservation of Rights Letter did not state any legitimate reason in the Policy for [Century] to deny coverage" and that it was "unclear and unintelligible."Id. at ¶¶ 44, 46, 47. Sodium further states that "[i]n bad faith and for arbitrary and capricious reason, [Century] commingled files and information concerning coverage defenses of [Century] with files and information concerning defense of [Sohum]...." Id. at ¶ 50.

Century filed this motion to dismiss Sohum's counterclaims for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). R. 24. Century contends that Sohum's counterclaims for bad faith and unfair commercial practices are "conclusory allegations or legal conclusions masquerading as factual conclusions" andthe counterclaims must be dismissed under Rule 12(b)(6) for Sohum's failure to plead "enough facts to state a claim [for] relief that is plausible on its face." In particular, Century contends that under Louisiana law, in order to state a cause of action for bad faith penalties against an insurer, as in Sohum's counterclaim, a claimant must being the action under Louisiana's claims handling statutes, La. R.S. §§ 22:1892 or 22:1973. Because Sohum has not alleged that Century knowingly committed one of the exclusive acts specified in either of those statutes, its counterclaim for bad faith must be dismissed with prejudice. Century further contends that Sohum's claims for unfair trade practices are facially invalid as there is no private cause of action under La. R.S. § 22:1964.

II. Motion to Dismiss

A motion to dismiss for failure to state a claim, under Fed.R.Civ.R 12(b)(6), is appropriate when a defendant attacks the complaint because it fails to state a legally cognizable claim. Ramming v. United States, 281 F.3d 158, 161 (5th Cir.2001). When considering such a motion, a district court must limit itself to the contents of the pleadings, including any attachments thereto. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir.2000). The court must accept all well-pleaded facts as true, and it must view them in the light most favorable to the plaintiff. In re Katrina Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir.2007) (internal quotations omitted). However, conclusory allegations and unwarranted deductions of fact are not accepted as true, Kaiser Aluminum & Chemical Sales v. Avondale Shipyards, 677 F.2d 1045, 1050 (5th Cir.1982) and courts "are not bound to accept as true a legal conclusioncouched as a factual allegation." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

"'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). 'Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).' Twombly, 550 U.S. at 555." Central States, Southeast and Southwest Areas Health and Welfare Fund ex rel. Bunte v. Health Special Risk, Inc., --- F.3d ----, 2014 WL 2853587, 2 (5^th Cir. 2014). If the plaintiff fails to allege facts sufficient to "nudge[ ][his] claims across the line from conceivable to plausible, [his] complaint must be dismissed." Twombly, 550 U.S. at 570.

A claim meets the test for facial plausibility "when the plaintiff pleads the factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "[D]etermining whether a complaint states a plausible claim for relief ... [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense."Id. at 663-664. Therefore, "[t]he complaint (1) on its face (2) must contain enough factual matter (taken as true) (3) to raise a reasonable hope or expectation (4) that discovery will reveal relevant evidence of each element of a claim." Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 257(5th Cir.2009).

1. Good Faith & Fair Dealing

Sohum alleges Century breached its insurance contract in bad faith and violated its obligation of fair dealing when the insurer sent Sohum a reservation of rights letter which was "unclear and unintelligible" and failed to state any "legitimate reason in the Policy" for denial of coverage. Sohum further...