Selective Ins. Co. of Am. v. Moseley

SELECTIVE INSURANCE COMPANY OF AMERICA, Plaintiff, v. JOHNNY D. MOSELEY et al., Defendants.

Case No. 19-cv-01054 (APM)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

July 30, 2021

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

Plaintiff Selective Insurance Company of America ("Selective") has moved for summary judgment on its breach of contract claim against Defendants Moseley Construction Group, Inc. ("MCG") and Johnny D. Moseley and Alisa Moseley, MCG's owners.

For the reasons that follow, the court grants in part and denies in part Selective's motion for summary judgment.

II. BACKGROUND

A. Factual Background

This case arises from a General Agreement of Indemnity ("Indemnity Agreement") pursuant to which Defendants agreed to indemnify Selective for any losses that Selective, as surety, sustained on a construction project. MCG, a general contractor that typically works on commercial construction projects, entered a contract with 5th Street Partners, LLC to construct the District of Columbia's Short-Term Family Housing Facility in Ward 4. See Pl.'s Mot. for Summ. J., ECF No. 51 [hereinafter Pl.'s Mot.], Pl.'s Stmt. of Material Facts in Supp. of Mot. for Summ. J., ECF No. 51-2 [hereinafter Pl.'s Facts], ¶¶ 1, 14. In partial consideration for Selective agreeing to issue a payment bond and a performance bond on behalf of MCG for the Ward 4 project, Defendants executed the Indemnity Agreement. See id. ¶ 6.

The Indemnity Agreement provides that Selective has "the right to adjust, settle or compromise any claim, demand, suit or judgment upon any of the Bonds procured or executed by it and [its] decision thereon shall be final and binding upon the Indemnitors." Verified Compl., ECF No. 1 [hereinafter Compl.], Ex. B, ECF No. 1-2 [hereinafter Indemnity Agreement], ¶ 7. It also provides:

The Indemnitors hereby jointly and severally covenant, promise and agree to exonerate, indemnify and save harmless Surety . . . from and against any and all liability, loss, cost, damage and expense of whatsoever kind or nature, . . . which Surety may sustain, incur, be put to or to which it may be exposed (1) by reason of having executed any Bond or other instrument or any renewal, modification, continuation, substitution or extension thereof, (2) by reason of the failure of any one or more of the Indemnitors to perform or comply with the promises, covenants and conditions of this Agreement or, (3) in enforcing any of the promises, covenants or conditions of this Agreement.

Id. ¶ 3. Finally, the Indemnity Agreement provides that "vouchers or other evidence of such payments sworn to by a duly authorized representative of Surety shall be prima facie evidence of the fact and extent of the liability of the Indemnitors to Surety." Id.

MCG completed the Ward 4 project in the fall of 2018. See Pl.'s Facts ¶ 17. After the project's completion, Selective received claims against the payment bond from numerous MCG subcontractors, suppliers, labor contractors, and others (collectively, the "Claimants"). See id. ¶ 18. In response, Selective paid claims totaling $850,664.36. See id. ¶ 26. Specifically, Selective made the following payments to Claimants:

Claimant

Amount Paid

AMC Industries, Inc.

$94,042.71

Ecospaces, LLC

$152,887.20

First Choice Masonry Inc.

$92,963.00

Foam InSEALators of MD and VA

$9,434.44

Hugee Corporation

$198,588.93

Hugee Corporation

$13,773.52

Tradesmen International LLC

$107,685.35

Tradesmen International LLC

$18,789.21

Rich Moe Enterprises, LLC

$62,500.00

Eastcoast Siding, Inc.

$100,000.00

Defendants did not reimburse or indemnify Selective for these payments. See id. ¶ 27. Additional facts relevant to these payments are set forth below.

1. AMC Industries, Inc.

On or about January 25, 2019, AMC Industries, Inc. ("AMC") initiated a claim against the payment bond for $136,042.71 and subsequently submitted to Selective a Proof of Claim Affidavit under oath. Id. ¶ 28. Selective has introduced an affidavit from its claims representative, Jonathan Panico, stating that it "conducted a good faith investigation" into AMC's claim before making payment. See id.; Pl.'s Mot., Decl. of Jonathan Panico, ECF No. 51-4 [hereinafter Panico Decl.], ¶ 8. Panico does not, however, detail what steps Selective took as part of its investigation. See Panico Decl. ¶ 8.

MCG disputes whether Selective undertook a good-faith investigation, asserting that Selective failed to raise certain defenses to AMC's claim that MCG had identified. Specifically, MCG informed Selective that AMC was not entitled to payment because AMC "was a constant source of delay," submitted "numerous invoices that were unsupported and inflated," and "causedsignificant damage to the Project's roof" that AMC was supposed to pay to repair. Mosely Construction Group, Inc.'s Opp'n to Selective Insurance Company of America's Mot. for Summ. J., ECF No. 52 [hereinafter MCG Opp'n], Ex. 2, ECF No. 52-2 [hereinafter MCG's Ex. 2], at 4.¹ Additionally, MCG asserted that Selective could not pay AMC without assurance that MCG was not liable for liquidated damages claimed by the D.C. Department of General Services ("DGS"), the project owner, because, according to MCG, "if MCG is somehow liable to DGS for liquidated damages, AMC is similarly liable because AMC repeatedly delayed the project." Id. at 5. Notwithstanding these objections, Selective resolved AMC's claim by paying it $94,042.71—more than $42,000 less than the claim amount—and AMC in return provided Selective a "Partial Release and Agreement." Pl.'s Facts ¶ 28.

Thereafter, AMC sued Selective in D.C. Superior Court for the balance of the payment that AMC claimed it was owed for its work on the Ward 4 project, and Selective filed a third-party complaint against all Defendants, including MCG. See Pl.'s Reply to Opp'ns to Mot. for Summ. J., ECF No. 54 [hereinafter Pl.'s Reply], Ex. 3, ECF No. 54-5 [hereinafter AMC Settlement Agreement], at 1. Ultimately, MCG agreed to pay AMC $25,000 to resolve the Superior Court lawsuit. See Pl.'s Reply at 14; AMC Settlement Agreement at 1-2.

2. Ecospaces, LLC

On or about February 25, 2019, Ecospaces, LLC ("Ecospaces") made a claim against the payment bond for $152,887.20 and submitted to Selective a Proof of Claim Affidavit under oath. Pl.'s Facts ¶ 29. Selective asserts that it investigated the claim in "good faith" before making payment. See id.; Panico Decl. ¶ 8.

MCG disputes that Selective performed a good-faith investigation into Ecospaces' claim. During Selective's inquiry, MCG urged that Ecospaces was not entitled to payment because Ecospaces had defaulted on its obligations, an allegation that MCG supported by supplying Selective with a letter it had sent to Ecospaces' bond company declaring Ecospaces in default. See MCG Opp'n, MCG's Response to Selective's Stmt. of Material Facts, ECF No. 52-2 [hereinafter MCG's Facts], ¶ 29; MCG's Ex. 2, at 5-6. Additionally, MCG asserted that Ecospaces might be on the hook for $210,000 in liquidated damages assessed by DGS, and, given this potential liability, "Ecospaces is potentially liable to MCG for an amount greater than any amount MCG owes Ecospaces." See MCG's Ex. 2, at 6; MCG's Facts ¶ 29. Despite these objections, Selective fully resolved Ecospaces' claim with a $152,887.20 payment on May 10, 2019. See Pl.'s Facts ¶ 29.

Months later, MCG's principal, Johnny Moseley, appears to have confirmed the bona fides of Ecospaces' claim. In an email dated August 19, 2019, Johnny Moseley wrote 5th Street Partners, the prime contractor on the project. He stated: "Two checks you don't mention are the Selective-Hugee and Selective-Ecospace. My advice is for you to release those checks asap. They are the only 2 clean reimbursements to the bonding company [Selective]." Pl.'s Reply, Ex. 5, ECF No. 54-7 [hereinafter Pl.'s Reply Ex. 5], at 2.

3. First Choice Masonry, Inc.

On or about December 17, 2018, First Choice Masonry, Inc. ("First Choice Masonry") submitted a claim against the payment bond for $364,778.54, supported by a Proof of Claim Affidavit under oath. See Pl.'s Facts ¶ 30. Selective claims that it initiated a good-faith investigation into First Choice Masonry's claim before making payment. See id.; Panico Decl. ¶ 8.

MCG again counters that Selective failed to raise certain defenses to payment. MCG informed Selective that First Choice Masonry was not entitled to payment for the full amount because the company had submitted change orders that it was not entitled to submit and that were not approved by DGS. See MCG's Ex. 2, at 6. Additionally, MCG asserted that it incurred additional costs due to First Choice Masonry's defective work and that First Choice Masonry would liable for any liquidated damages assessed by DGS due to that defective work. See id. at 6-7. MCG also claimed that Selective should have raised "the 'pay-if-paid' defense"—that is, that MCG would owe First Choice Masonry for work performed on certain change orders only if MCG was first paid by the project owner—against First Choice Masonry's claim. MCG's Facts ¶ 30.

Selective partially resolved First Choice Masonry's claim with a $92,963 payment, and First Choice Masonry in turn provided Selective a "Partial Release and Assignment." See Pl.'s Facts ¶ 30. First Choice Masonry then sued Selective and MCG in this court for the additional compensation that it claimed it was owed; Selective cross-claimed against MCG. Pl.'s Reply, Ex. 4, ECF No. 54-6 [hereinafter First Choice Masonry Settlement], at 1-2. The parties settled First Choice Masonry's lawsuit, with MCG agreeing to pay First Choice Masonry $102,500. See id. at 2; Pl.'s Reply at 14.

4. Foam InSEALators of MD and VA

On or about October 30, 2018, Foam InSEALators of MD and VA ("Foam InSEALators") initiated a claim against the payment bond for $74,616.56 and submitted a Proof of Claim Affidavit under oath. See Pl.'s Facts ¶ 31. Following an investigation that Selective asserts was conducted in "good faith," Selective...