Union Insurance v. Hull & Co.

831 F. Supp. 2d 1060, 2011 WL 6762922, 2011 U.S. Dist. LEXIS 147014
CourtDistrict Court, S.D. Iowa
DecidedDecember 19, 2011
DocketNo. 4:10-cv-00337-JEG
StatusPublished
Cited by2 cases

This text of 831 F. Supp. 2d 1060 (Union Insurance v. Hull & Co.) is published on Counsel Stack Legal Research, covering District Court, S.D. Iowa primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Union Insurance v. Hull & Co., 831 F. Supp. 2d 1060, 2011 WL 6762922, 2011 U.S. Dist. LEXIS 147014 (S.D. Iowa 2011).

Opinion

ORDER

JAMES E. GRITZNER, Chief Judge.

This matter is before the Court on Motion to Dismiss by Defendant Brown & Brown, Inc. (Brown), pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. Plaintiff Union Insurance Company (Union) resists. Also pending before the Court is Union’s Motion to Compel Arbitration. Defendants Hull & Company, Inc. (Hull), and Brown (collectively, Defendants) resist. On November 9, 2011, the Court held a hearing on the motions. Attorneys Jeffrey Lanz and Stephanie Tipton represented Union, and attorney John Clendenin represented Brown and Hull. The matters are fully submitted and ready for disposition.

I. BACKGROUND

Hull is a wholly-owned subsidiary of Brown. On April 1, 2000, Hull entered into an Agency-Company Agreement (the Agreement) with five insurance companies (the companies), including Union, which is an Iowa insurance company, wherein the companies agreed to give Hull the authority to make binding proposals for insurance contracts for the companies under certain conditions. In the Agreement, Hull is referred to as “Agency,” and Union, along with the other companies, as “Company.” The relevant language of the Agreement provides,

Subject to requirements imposed by law, the terms of this Agreement, the underwriting rules and regulations as contained within the Agent’s Manual, and where applicable Addendum I, Agency is authorized to receive, accept and strictly in accordance with Company binding guidelines, bind proposals for contracts of insurance for risks located in the Agency state of domicile and any other states where Agency holds a proper non-resident license and for which a commission is specified in the current Commission Schedule.... It is further understood and agreed that Agency shall under no circumstances have authority to bind any risk for: (1) Any coverage when such authority has been restricted by submission or prohibited list published in the Agents Manual or any other written notice given to Agency.

Agreement, Pl.’s Br. Supp. Mot. Compel Arbitration Ex. D ¶ 1(A), ECF No. 35-4.

Union issued a commercial umbrella insurance policy (the Umbrella Policy) to the Thirsty Parrot Bar and Grill (Thirsty Parrot), a Colorado restaurant and bar. Hull had placed the Umbrella Policy over a commercial general liability primary policy issued by Mt. Hawley (the Mt. Hawley Policy), which provided limits of $1,000,000 per occurrence and $2,000,000 in the aggregate. The declaration page of the Umbrella Policy stated limits of $1,000,000 per occurrence and $1,000,000 in the aggregate [1064]*1064over the Mt. Hawley Policy. The Mt. Hawley Policy, however, had an assault and battery endorsement with a $500,000 “wasting” sub-limit.1

An employee of the Thirsty Parrot seriously injured a patron, and the patron brought claims against the Thirsty Parrot and the employee for assault, battery, and negligent hiring. Union defended Thirsty Parrot, and the case eventually settled for $1,000,000; Union paid $800,000 toward the settlement. Union also incurred loss adjustment expenses of $19,492.91. The Mt. Hawley policy paid based on the assault and battery endorsement. However, with $300,000 incurred in defense fees, only $200,000 from that policy was paid toward the settlement amount.

Union then sought coverage for the balance of the settlement amount ($819,-492.91) from its reinsurer pursuant to a facultative reinsurance agreement; the reinsurer refused, claiming that Union breached a warranty agreement, which provided that there would be $1,000,000 in underlying general liability coverage. Union and the reinsurer arbitrated that dispute. Union requested that Defendants join in that arbitration, but Defendants declined to do so. As a result of arbitration, Union only received a partial award of $273,978.78 from the reinsurer. Union then filed this lawsuit against Hull and Brown to recover the balance Union paid.

Union’s Second Amended Complaint seeks an order from this Court compelling Defendants to arbitrate this matter under 9 U.S.C. § 4, or, in the alternative, Union seeks damages for breach of contract or indemnification as outlined in the Agreement. On May 17, 2011, Union filed a Motion to Compel Arbitration, and Brown filed its Motion to Dismiss under Rule 12(b)(6), arguing that Union had not adequately pled a claim against it. Both motions were timely resisted.

II. DISCUSSION

A. Brown’s Motion to Dismiss

“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, 129 S.Ct. 1937, 1949, 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)). “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.; see also Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir.2008) (noting that a complaint “must include sufficient factual information to provide the ‘grounds’ on which the claim rests, and to raise a right to relief above a speculative level” (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 129 S.Ct. at 1949; see also Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (explaining that “a plaintiffs obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do” (alterations in original)).

[1065]*1065Brown argues in its Motion to Dismiss that Union’s Second Amended Complaint cannot withstand a 12(b)(6) motion. Union counters that there are sufficient facts pled based on the alter ego doctrine, piercing the corporate veil, and the “identity rule.”2 It is undisputed that Hull is a wholly-owned subsidiary of Brown. Union alleges that an in-house attorney for Brown, Mr. King, made statements that implied that Hull employees were also Brown employees. Union argues — based solely on these facts — that it has pled facts sufficient to withstand a 12(b)(6) motion. Additionally, Union blames Hull for not “dispel[ling] its belief [that Hull and Brown are the same entity] so as to avoid needlessly naming Brown [] as a party. Brown [ ] steadfastly refused to work with Union on this issue. As such, Union felt compelled to add Brown [] as a party.” Pl.’s Resp. Def.’s Mot. Dismiss 3, EOF No. 43.

Under Iowa law,3 courts may disregard the corporate form under the alter ego doctrine “if the entity is ‘merely an instrumentality or device set up to ensure the avoidance of the legal obligations.’ ” HOK Sport, Inc. v. FC Des Moines, L.C., 495 F.3d 927, 935 (8th Cir.2007) (quoting Benson v. Richardson,

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831 F. Supp. 2d 1060, 2011 WL 6762922, 2011 U.S. Dist. LEXIS 147014, Counsel Stack Legal Research, https://law.counselstack.com/opinion/union-insurance-v-hull-co-iasd-2011.