Colliers Int'l - Atlanta, LLC v. Maxum Indem. Co.

640 F.Supp.3d 1343

COLLIERS INTERNATIONAL - ATLANTA, LLC, Plaintiff, v. MAXUM INDEMNITY COMPANY, Defendant.

CIVIL ACTION NO. 1:19-CV-05016-SEG

United States District Court, N.D. Georgia, Atlanta Division

Signed November 7, 2022

Michael Coleman Gretchen, Shattuck Ely, Fellows LaBriola LLP, Atlanta, GA, for Plaintiff.

Michael John Duffy, Pro Hac Vice, Michael J. O'Malley, Pro Hac Vice, Wilson Elser Moskowitz Edelman & Dicker LLP, Chicago, IL, Monica R. Dean, Waldon Adelman Castilla Hiestand & Prout, Atlanta, GA, Parks Kalervo Stone, Wilson Elser Moskowitz Edelman & Dicker, Atlanta, GA, for Defendant.

ORDER

SARAH E. GERAGHTY, United States District Judge

This case is before the Court on Defendant Maxum Indemnity Company's Motion for Leave to Amend its Answer and Affirmative Defenses (Doc. 67), Plaintiff Colliers International - Atlanta, LLC's Motion for Partial Summary Judgment (Doc. 69), and Defendant Maxum Indemnity Company's Motion for Summary Judgment (Doc. 74). Having carefully considered the parties' positions and the applicable law, the Court enters the following order.

I. Background

Plaintiff, Colliers International - Atlanta, LLC ("Colliers"), is a company that provides commercial real estate services. (Doc. 86 ¶ 1.) Defendant, Maxum Indemnity Company ("Maxum"), issued a professional liability policy to Colliers (the "Policy"), wherein Maxum agreed to provide insurance coverage for Colliers' errors and omissions in the performance of its professional services. (Id. ¶ 2.) This is a contract case in which Colliers—which paid significant sums of money to defend itself against allegations of fraud in a Texas state court case—alleges that Maxum shirked, in part, its contractual duty to pay those expenses. The instant case might be thought of as "part two" of the parties' dispute regarding whether Maxum should have paid a larger share of Colliers' defense costs under the Policy. "Part one" was an earlier declaratory judgment action, Maxum Indemnity Company v. Colliers International - Atlanta, LLC, et al., No. 18-cv-1236 (N.D. Ga.), in which Maxum sought a declaration from this Court that it was not obligated to cover the claim asserted against Colliers. In that prior action, this Court sided with Maxum, finding that because Colliers failed to timely report the claim, it would not be covered under the Policy. In this case, Colliers posits that notwithstanding this Court's prior ruling, Maxum had a duty to defend Colliers up until the time of the Court's declaratory judgment and that Maxum breached that duty in bad faith. The following undisputed events are relevant to the present dispute:

• On March 30, 2016, attorneys for Mattress Firm, Inc. ("Mattress Firm")—one of Colliers' customers—notified Colliers of a potential claim Mattress Firm had against it for alleged fraudulent conduct (the "Mattress Firm Claim"). (Doc. 78-1 ¶¶ 6-7; Doc. 86 ¶ 5.) Mattress Firm alleged that Colliers executive, Alexander Deitch, conducted a scheme involving bribery, kickbacks, and self-dealing relating to Colliers' real estate brokerage services. (Doc. 34-10 at 3.)

• On June 29, 2017, Colliers first reported the Mattress Firm Claim to Maxum. (Doc. 78-1 ¶ 10.)

• On July 28, 2017, Colliers' insurance broker informed Maxum that Colliers intended to retain Lewis Brisbois as defense counsel and provided Maxum the hourly rates Lewis Brisbois would charge. (Doc. 86 ¶ 11.)

• On July 31, 2017, a Maxum representative emailed Colliers' broker, explaining that Maxum was reviewing the Mattress Firm Claim to determine whether there would be coverage. (Id. ¶ 12; Doc. 69-6 at 1.) The email also stated, "[t]o the extent that coverage is in place, the Policy is a duty to defend policy which means that Maxum would seek to assign counsel to defend Colliers." (Doc. 69-6.)

• Between August 2017 and October 2017, Colliers' broker sent multiple inquiries to Maxum's representative seeking further information as to whether Maxum would be covering the Mattress Firm Claim. (Doc. 86 ¶¶ 13-18.) In response to each email, Maxum's representative stated that Maxum was still reviewing the claim and that a coverage decision would be issued shortly. (Id.)

• On October 30, 2017, Mattress Firm filed a lawsuit against Colliers in Harris County, Texas (the "Underlying Lawsuit"), alleging fraud, bribery, and a kickback scheme related to real estate brokerage services. (Doc. 34-10 at 3.)

• On January 5, 2018, Maxum sent Colliers a reservation of rights letter, in which it stated that it "will honor its defense obligations to Colliers [in the Underlying Lawsuit] under Policy No. PFP-6023915-02 under a reservation of rights." (Doc. 34-7 at 2.) Maxum also reserved "the right to withdraw from defending Colliers . . . at any time during the Lawsuit and reserve[d] the right to refuse to indemnify . . . once additional facts or evidence are discovered that would merit a subsequent formal denial or disclaimer of coverage."¹ (Id. at 22-23.)

• On January 9, 2018, after Maxum assumed Colliers' defense in the Underlying Lawsuit, Colliers' broker asked Maxum how it planned to handle Lewis Brisbois' defense costs in the Underlying Lawsuit. (Doc. 86 ¶ 26.) Having not received a response, on February 8, 2018, Colliers' broker again asked Maxum to advise on its defense costs. (Id. ¶ 27.)

• On March 23, 2018, Maxum filed a declaratory judgment action against Colliers in this Court seeking a declaration as to whether the Mattress Firm Claim fell within the coverage of Colliers' Policy (the "Declaratory Judgment Action").² (Id. ¶ 27.)

• As of June 5, 2019, Maxum had not paid any of the defense costs Colliers accrued in the Underlying Action.³ (Id. ¶ 30.) On this date, Colliers sent Maxum a formal notice of bad faith, giving Maxum 60 days to pay Colliers' outstanding defense costs from the Underlying Lawsuit. (Id.)

• On September 9, 2019, Maxum paid Colliers a one-time sum of $286,010.43, representing what Maxum believed to be the reasonable attorneys' fees associated with defending Colliers in the Underlying Action. (Id. ¶ 32.) Maxum made no further payment for Colliers' defense costs.

• On November 5, 2019, Colliers filed the instant suit bringing two claims against Maxum: (1) a breach of contract claim premised on Maxum's alleged refusal to defend Colliers in the Underlying Lawsuit, and (2) a bad-faith refusal claim under O.C.G.A. § 33-4-6. (Doc. 1.)

• On April 24, 2020, in Maxum's prior Declaratory Judgment Action, the Court found that Colliers failed to timely report the Mattress Firm Claim to Maxum and, as a result, the claim was not covered under the Policy (the "Declaration of Non-Coverage"). (Doc. 34-10.)

In addition to the Policy with Maxum, Colliers had two other professional liability insurance policies—one with Liberty International Underwriters ("Liberty"), and one with Travelers Casualty and Surety Company of America ("Travelers"). (Doc. 78-1 at 4-5.) Colliers tendered the Mattress Firm Claim to both Liberty and Travelers. (Id.) All three of Colliers' professional liability insurance policies contained an "Other Insurance" provision, stating that each policy shall only be in "excess" of any other insurance available to Colliers. (Id. at 13-15.)

In this lawsuit, Colliers contends that Maxum owed a duty to defend it in the Underlying Lawsuit and that Maxum breached that duty by paying only a fraction of the defense costs Colliers accrued prior to the Court's Declaration of Non-Coverage. According to Colliers, the relevant period during which Maxum owed this duty to defend was from June 29, 2017 (the date on which Colliers first reported the Mattress Firm Claim to Maxum) until April 24, 2020 (the date of the Declaration of Non-Coverage). Colliers claims that during this period, it actually incurred $1,658,937.35 in defense fees and expenses (Doc. 52-1), such that Maxum's payment of $286,010.43 was a drop in the bucket when compared to what Colliers was owed. Colliers seeks unpaid defense costs in the amount of $1,372,926.92. It further seeks $686,463.46 under O.C.G.A. § 33-4-6 for Maxum's alleged bad faith in this case.

Maxum denies the existence of a duty to defend, arguing that the Declaration of Non-Coverage terminated any alleged obligation it had to provide Colliers a defense. Maxum asserts that Colliers' claims are barred by the doctrines of res judicata and collateral estoppel, and that Colliers should have raised them as compulsory counterclaims in the earlier-filed litigation. Maxum also argues that its reservation of rights did not create a contractual duty to defend and that the "Other Insurance" provisions in Colliers' policies operate to limit any recovery Colliers might obtain against Maxum. Finally, Maxum seeks summary judgment in its favor on the bad faith claim.

II. Relevant Procedural History

On December 22, 2020, Maxum filed a motion for summary judgment. (Doc. 34.) After that motion was fully briefed, the Court granted the parties a discovery extension and extended the time to file dispositive motions. (Docs. 55, 61.) On July 7, 2021, the Court denied Maxum's motion for summary judgment without prejudice, allowing it to renew the motion upon the close of extended discovery. (Doc. 62.)⁴

On October 6, 2021, Maxum filed a motion for leave to amend its answer and affirmative defenses, seeking to add two affirmative defenses that were not originally included in its answer. (Doc. 67.) And on October 8, 2021, the parties filed cross motions for summary judgment. (Docs. 69, 74.) Those motions are fully briefed (Docs. 77, 78, 82, 84, 85, 87) and ripe for review.

III. Maxum's Motion for Leave to Amend Answer and Affirmative Defenses

Maxum seeks leave to amend its answer and affirmative defenses to: (1) add res judicata and collateral estoppel as affirmative defenses, and (2) add an affirmative defense stating that "Colliers' recovery is barred, in whole or part, by the existence of additional insurance policies, the 'Other Insurance' provisions of which are irreconcilable and...