Nat'l Mech. Servs., Inc. v. Kinsale Ins. Co.

620 F.Supp.3d 1096

NATIONAL MECHANICAL SERVICES, INC., a California corporation, Plaintiff, v. KINSALE INSURANCE COMPANY, an Arkansas corporation;Mercer Insurance Company, a Pennsylvania corporation; and Does 1-50, inclusive, Defendants.

Case No.: 22-cv-576-CAB-AGS

United States District Court, S.D. California

Signed August 8, 2022

C. Brant Noziska, Rockwood and Noziska LLP, San Diego, CA, Kimberlyn Brooke Pinkerton, The Law Offices of C. Brant Noziska, APC, San Diego, CA, Shanshan Yu, San Diego, CA, for Plaintiff.

Matthew Joseph Hafey, Nicolaides Fink Thorpe Michaelides Sulli, Nicolaides Fink Thorpe Michaelides Sullivan, LLP, Los Angeles, CA, for Defendant Kinsale Insurance Company.

David S. Blau, Ronald Laurence Nelson, Blau Keane Law Group P.C., El Segundo, CA, for Defendant Mercer Insurance Company.

ORDER GRANTING DEFENDANT KINSALE INSURANCE COMPANY'S MOTION TO DISMISS

Cathy Ann Bencivengo, United States District Judge

This matter is before the Court on Defendant Kinsale Insurance Company's ("Kinsale") motion to dismiss Plaintiff National Mechanical Services, Inc.'s ("NMS") complaint. [Doc. No. 9.] The motion has been fully briefed and the Court finds it suitable for determination on the papers submitted and without oral argument. See S.D. Cal. CivLR 7.1(d)(1). For the reasons set forth below, Kinsale's motion to dismiss is GRANTED.

I. BACKGROUND

Plaintiff NMS filed the operative complaint in San Diego Superior Court on March 24, 2022, against Defendants Kinsale and Mercer Insurance Company ("Mercer"). [Doc. No. 1-2.] Mercer removed the matter to federal court on April 25, 2022. [Doc. No. 1.] The following is a summary of the allegations taken from NMS's complaint.¹

NMS is in the business of maintaining, repairing, and servicing generators in power plants, refineries, and petrochemical plants across the United States. [Doc. No. 1-2 ¶ 1.] NMS holds a commercial general liability insurance policy with Kinsale, policy number 0100013169-7 (the "CGL Policy"), and a commercial excess liability insurance policy with Mercer, policy number 27306433 (the "Excess Policy"). [Id. ¶¶ 3, 5.] Both policies were in effect from July 21, 2020, to July 21, 2021. [Id.]

In May 2021, NMS was hired by Onward Energy ("Onward") to perform preventative maintenance on three of Onward's generators, labeled the #2, #4, and #6 generators. [Id. ¶ 13.] Onward agreed to pay NMS $273,021 for the maintenance work and prepaid a portion as a deposit. [Id.] On May 3, 2021, NMS began work on the #4 and #6 generators. [Id. ¶ 14.] NMS removed and shipped the #6 generator's bearings to JD's Babbitt Bearing, a third-party business, for refurbishment. [Id. ¶ 15.] JD's Babbitt Bearing installed a steel threaded metal plug into the non-driven end bearing's main lube supply hole, which NMS contends should not have been installed. [Id. ¶ 17.] NMS received the refurbished bearings on May 11, 2021, and after cleaning, inspecting, and measuring the bearings, reinstalled them into the #6 generator. [Id. ¶ 19.] When site operators started the #6 generator on May 13, 2021, the generator "tripped offline" and began to emit a burnt smell, causing damage to the generator. [Id. ¶¶ 20-22.] As a result, the #6 generator had to be repaired and did not operate until October 30, 2021. [Id. ¶ 29.] NMS completed its work on the #4 generator with no incident, but Onward declined service on the #2 generator following the damage to the #6 generator. [Id. ¶¶ 23, 30.]

NMS invoiced Onward for all work done on the #4 generator, all work done on the #6 generator up until the damage, and the projected costs for the #2 generator, totaling $118,026.75. [Id. ¶ 30.] While Onward paid NMS for setting up and taking down its rotor table during the reinstallation process, it did not pay NMS for its staff and equipment used in the repair of the #6 generator. [Id. ¶ 29.] Onward then invoiced NMS for all costs related to repairing the #6 generator from the date of damage up to August 26, 2021, totaling over $1.35 million. [Id. ¶¶ 29, 36.] Onward now refuses to pay NMS's $118,026.75 invoice until NMS pays Onward its $1.35 million repair costs, which Onward and NMS expect to be covered by NMS's insurance policies with Defendants. [Id. ¶ 30.]

On May 20, 2021, NMS's owner, Elizabeth da Silva, contacted NMS's insurance agent at Kinsale, Judy Schwartz, to inform her of the incident with the #6 generator. [Id. ¶ 33.] On May 21, 2021, Schwartz emailed Kinsale to file a claim on behalf of NMS. [Id.] On May 22, 2021, Lynne Wood responded on behalf of Kinsale that the claim was assigned to her for handling as claim number 00023488. [Id.] On May 24, 2021, Wood informed da Silva that NMS's claim would likely not be covered because the damage was caused by NMS's negligence, but the next day told da Silva that Kinsale would "take another look at the claim to see if it was coverable." [Id. ¶ 34.]

Between mid-2021 and the filing of NMS's complaint, very little communication took place between NMS and Kinsale. [Id. ¶ 35.] Wood "rarely" returned da Silva's phone calls and messages. [Id.] Schwartz inquired about the claim status with Kinsale several times but was told each time that Kinsale was still reviewing the matter. [Id.] On November 4, 2021, NMS sent Kinsale all final invoices from Onward and NMS. [Id. ¶ 36.] On December 3, 2021, NMS sent Wood the complete report, pictures, invoices, and loss time invoices relating to the generator incident, and confirmed with Wood on December 15, 2021, that they had been sent to her. [Id. ¶ 38.]

In January 2022, Wood informed da Silva over the phone that "a good chunk of [the claim] looks like it will be covered." [Id. ¶ 39.] Neither Wood nor any other Kinsale representative stated that they required anything further to process NMS's claim. [Id.] On January 31, 2022, Wood informed NMS that she had a reservation of rights letter in her possession that she would review and send by the end of the week, but NMS did not receive the letter. [Id. ¶ 40.] On February 14, 2022, NMS sent a letter to Wood demanding that Kinsale provide full coverage for the claim within fourteen days, which Wood acknowledged as received but did not otherwise respond to. [Id. ¶ 43.] NMS then filed the present complaint against Kinsale and Mercer on March 24, 2022. As of the date of its complaint, NMS had not received any resolution or other response from Kinsale. [Id.]

NMS's complaint asserts three causes of action for: (1) declaratory relief against both defendants, declaring that each defendant is obligated to cover NMS's insurance claim arising out of the #6 generator damage; (2) injunctive relief against both defendants, directing each defendant to pay NMS's insurance claim; and (3) breach of the implied covenant of good faith and fair dealing, brought against Kinsale only. [Id. ¶¶ 44-72.] On June 16, 2022, Kinsale moved to dismiss NMS's complaint for lack of subject-matter jurisdiction under Rule 12(b)(1) and for failure to state a claim under Rule 12(b)(6). [Doc. No. 9.] The motion is now fully briefed.

II. LEGAL STANDARD

Whether a claim is "ripe" for adjudication goes to a court's subject matter jurisdiction, which may be challenged in a motion to dismiss under Rule 12(b)(1). St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989); see Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1121-22 (9th Cir. 2010) ("The Article III case or controversy requirement limits federal courts' subject matter jurisdiction by requiring . . . that claims be 'ripe' for adjudication.") (internal citation omitted). "If a claim is unripe, federal courts lack subject matter jurisdiction and the complaint must be dismissed." S. Pac. Transp. Co. v. City of Los Angeles, 922 F.2d 498, 502 (9th Cir. 1990). "[R]ipeness is a means by which federal courts may dispose of matters that are premature for review because the plaintiff's purported injury is too speculative and may never occur." Chandler, 598 F.3d at 1122. "The central concern of the ripeness inquiry is whether the case involves uncertain or contingent future events that may not occur as anticipated, or indeed may not occur at all." Id. at 1122-23. In the context of private party disputes where one party seeks a declaratory judgment, the Ninth Circuit has recognized the standard for ripeness as "whether there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 671 (9th Cir. 2005) (citing Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941)).

To survive a motion to dismiss under Rule 12(b)(6), "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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Thus, the Court "accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). On the other hand, the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). Nor is the Court "required to accept as true allegations that contradict exhibits attached to the Complaint or matters properly subject to judicial notice, or allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). "In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the...