Gootee Construction, Inc. v. Travelers Property Casualty Company of America, No. 2:2015cv03185 - Document 28 (E.D. La. 2016)
Court Description: ORDER AND REASONS denying Travelers's MOTION 20 to Dismiss for Failure to State a Claim. Because the Court rules on Traveler's motion to dismiss Gootee's first amended complaint in this order, Travelers's MOTION 10 to dismiss Gootee's original complaint is denied as moot.. Signed by Judge Sarah S. Vance on 4/15/16. (jjs)
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Gootee Construction, Inc. v. Travelers Property Casualty Company of America Doc. 28 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA GOOTEE CONSTRUCTION, INC. CIVIL ACTION VERSUS NO. 15-3185 TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA SECTION: R (4) ORD ER AN D REASON S Defendant Travelers Property Casualty Com pany of Am erica m oves the Court to dism iss plaintiff Gootee Construction, Inc.’s first am ended com plaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim .1 In its first am ended com plaint, Gootee seeks a declaratory judgm ent on the issue of Travelers’s duty to defend Gootee in a Louisiana state court lawsuit, dam ages for Travelers’s alleged breach of contract in failing to defend Gootee, and statutory penalties for Travelers’s alleged bad faith. 2 For the following reasons, the Court denies the m otion.3 I. BACKGROU N D This action arises out of Gootee Construction’s allegedly defective subcontracting work on the “St. Mary’s Construction Project,” a construction project to rebuild a local high school after Hurricane Katrina. After being sued in state court by the project’s 1 R. Doc. 20 . 2 See generally R. Doc. 12 at 17-18. 3 Because the Court rules on Travelers’s m otion to dism iss Gootee’s first am ended com plaint in this order, Travelers’s m otion to dism iss Gootee’s original com plaint is denied as m oot. See R. Doc. 10 . 1 Dockets.Justia.com general contractor and denied a defense by its insurance company, Gootee filed this declaratory and breach of contract action against Travelers, alleging Travelers breached its duty to defend Gootee in the underlying litigation. A. Th e U n d e rlyin g St. Mary’s Litigatio n According to Gootee’s com plaint, St. Mary’s Academ y contracted with Satterfield & Pontikes Construction Group, LLC (“Satterfield”) in October 20 0 9 to rebuild part of St. Mary’s high school cam pus after Hurricane Katrina.4 Satterfield hired Gootee as a subcontractor to perform the heating, ventilating, air conditioning, and plum bing work on the St. Mary’s Construction Project.5 After St. Mary’s declared the project substantially com plete in February 20 11, it failed to pay Satterfield the full contract price for the work. Satterfield, in turn, failed to pay Gootee its full subcontract price. 6 In J une 20 11, Gootee sued St. Mary’s and Satterfield in state court, seeking to recover the rem ainder of the subcontract price for Gootee’s construction work.7 St. Mary’s then sued Satterfield, alleging that Satterfield and its subcontractors failed to perform their work on the St. Mary’s Construction Project in a “good and workm anlike m anner.”8 4 See R. Doc. 12 at 3 ¶ 8. 5 Id. 6 Id. at 4 ¶¶ 14-18. 7 Id. at 5 ¶ 20 . 8 Id. at 12. 2 Satterfield filed a third-party dem and against Gootee, as well as other subcontractors who worked on the St. Mary’s Construction Project.9 In its third-party dem and, Satterfield alleges that Gootee m ust defend and indem nify Satterfield against St. Mary’s claim s for dam ages.10 Satterfield’s state-court dem and reads in relevant part: In October 20 0 9, St. Mary’s . . . and S&P [Satterfield] entered into a written agreem ent for S&P to serve as the general contractor and furnish labor, services, m aterials, and equipm ent for the construction of im provem ents to im m ovable property owned by St. Mary’s on a project known as St. Mary’s Perm anent High School Cam pus . . . . S&P and each of the Subcontractors entered into a written agreem ent whereby each of the Subcontractors was to provide certain labor, services, m aterials, and/ or equipm ent for the Project . . . all in accordance with the term s of the respective Subcontract and the Project Plans and Specifications. St. Mary’s has filed suit against S&P for damages and has alleged that som e part of each of the Subcontractors’ work or m aterials is defective, incom plete, and or not in accordance with the Project Plans and Specifications, and that, as a result, St. Mary’s has incurred dam ages or will incur dam ages. Further, St. Mary’s has alleged it is entitled to dam ages as a result of the late com pensation [sic] of or delay on the Project. S&P has defended against St. Mary’s suit concerning alleged delays and the defective or deficient work or work not perform ed in accordance with the Project Plans and Specifications. Such work includes labor, m aterials, equipm ent or work perform ed at least in part by each of the Subcontractors. S&P has also incurred dam ages as a result of delayed perform ance of the work on the Project. To the extent that these dam ages are not recoverable against St. Mary’s, each of the Subcontractors is liable to S&P for all delay dam ages to the extent of each Subcontractor’s delayed perform ance of work or work caused delay. To the extent of any proven Subcontractor defective work or delay on the Project, the respective Subcontractor negligently perform ed its work on the Project or, in the alternative, has breached its respective Subcontract. 11 9 Id. at 8 ¶ 35. 10 Id. at ¶ 36. 11 R. Doc. 12-15 at 5-6. 3 These allegations form the basis of Gootee’s current claim s against Travelers. B. Go o te ’s Ge n e ral In s tan t Litigatio n Co m m e rcial Liability Po licy an d th e Gootee alleges that it subm itted Satterfield’s third-party dem and against Gootee to Travelers on March 11, 20 15, seeking a defense in the state-court litigation.12 At the tim e Gootee filed its com plaint in this Court several m onths later, Travelers had not yet decided whether to defend Gootee against Satterfield.13 Gootee’s claim for a defense by Travelers depends on a series of com m ercial general liability policies, all of which contain m aterially the sam e relevant provisions.14 First, Gootee’s liability policies provide that Travelers “will pay those sum s that the insured becom es legally obligated to pay as dam ages because of . . . ‘property dam age’ to which this insurance applies.”15 The policies also provide that Travelers has the “duty to defend the insured against any ‘suit’ seeking those dam ages.”16 Under the policies, “property dam age” is either “physical injury to tangible property” or “loss of use of tangible property that is not physically injured.”17 12 R. Doc. 12 at 8 ¶¶ 39-40 . 13 Id. at 9 ¶ 42. 14 See generally R. Docs. 12-1, 12-2, 12-3, 12-4, 12-5, 12-6. 15 See, e.g., R. Doc. 12-1 at 8, § 1, ¶1(a). 16 Id. 17 Id. at 22 ¶ 17(a)-(b). 4 C. Trave le rs ’s Mo tio n to D is m is s Travelers now m oves to dism iss Gootee’s com plaint under Federal Rule of Civil Procedure 12(b)(6).18 Though Travelers contends that three elem ents m ust be m et for Gootee’s insurance coverage to apply (an “occurrence” and resulting “property dam age” within the policy period), the only issue presented by the m otion to dism iss is whether the underlying petition against Gootee sufficiently alleges “property dam age.” According to Travelers, neither Gootee’s allegedly defective work nor the alleged delay of the St. Mary’s Construction Project constitutes “property dam age,” as that term is defined by Gootee’s insurance policies.19 Gootee opposes the m otion, arguing that the underlying pleadings do not unam biguously exclude the possibility of coverage, as Travelers contends. 20 II. LEGAL STAN D ARD To survive a Rule 12(b)(6) m otion to dism iss, the plaintiff m ust plead “enough facts to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 697 (20 0 9) (quoting Bell Atl. Corp. v. Tw om bly , 550 U.S. 544, 570 (20 0 7)). A claim is facially plausible when the plaintiff pleads facts that allow the court to “draw the reasonable inference that the defendant is liable for the m isconduct alleged.” Id. at 678. A court m ust accept all well-pleaded facts as true and m ust draw all reasonable inferences in favor 18 R. Doc. 20 . In its m otion, Travelers incorporates the argum ents it m ade in its m otion to dism iss Gootee’s original com plaint (R. Doc. 10 ). See R. Doc. 20 -1 at 1. 19 See generally R. Doc. 10 . 20 R. Doc. 23. 5 of the plaintiff. See Lorm and v. US Unw ired, Inc., 565 F.3d 228, 239 (5th Cir. 20 0 9); Baker v. Putnal, 75 F.3d 190 , 196 (5th Cir. 1996). A legally sufficient com plaint m ust establish m ore than a “sheer possibility” that the plaintiff's claim is true. Iqbal, 556 U.S. at 678. It need not contain detailed factual allegations, but it m ust go beyond labels, legal conclusions, or form ulaic recitations of the elem ents of a cause of action. Id. In other words, the face of the com plaint m ust contain enough factual m atter to raise a reasonable expectation that discovery will reveal evidence of each elem ent of the plaintiff's claim . Lorm and, 565 F.3d at 257. If there are insufficient factual allegations to raise a right to relief above the speculative level, or if it is apparent from the face of the com plaint that there is an insuperable bar to relief, the claim m ust be dism issed. Tw om bly , 550 U.S. at 555. In considering a m otion to dism iss for failure to state a claim , a court m ust typically lim it itself to the contents of the pleadings, including their attachm ents. Collins v. Morgan Stanley Dean W itter, 224 F.3d 496, 498 (5th Cir. 20 0 0 ). “If, on a m otion under 12(b)(6) . . . m atters outside the pleadings are presented to and not excluded by the court, the m otion m ust be treated as one for sum m ary judgm ent under Rule 56.” Fed. R. Civ. P. 12(d). Nevertheless, uncontested docum ents referred to in the pleadings m ay be considered by the Court without converting the m otion to one for sum m ary judgm ent even when the docum ents are not physically attached to the com plaint. See Great Plains Trust Co. v. Morgan Stanley Dean W itter & Co., 313 F.3d 30 5, 313 (5th Cir. 20 0 2). The Court m ay also consider docum ents attached to a m otion to dism iss without converting the m otion into one for sum m ary judgm ent if the docum ents are referred to in the com plaint and are central to the plaintiff's claim . Causey v. Sew ell Cadillac– Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 20 0 4). 6 III. D ISCU SSION A. An In s u re r’s D u ty to D e fe n d u n d e r Lo u is ian a Law The parties agree, and the Court also finds, that Louisiana law applies to Gootee’s claim s against Travelers. When determ ining an insurer’s duty to defend under Louisiana law, courts apply the so-called “eight corners rule.” Under this rule, a court com pares the allegations of the petition against the insured with the language of the insurance policy. Martco Ltd. P’ship v. W ellons, Inc., 588 F.3d 864, 872 (5th Cir. 20 0 9); see also Lodw ick, LLC v. Chevron USA, Inc., 126 So.3d 544, 550 (La. App. 2 Cir. 20 13) (“[Under] the ‘eight corners rule’ . . . an insurer m ust look to the ‘four corners’ of the plaintiff’s petition and the ‘four corners’ of its policy to determ ine whether it has a duty to defend.”). The insurer has a duty to defend its insured if the underlying petition “disclose[s] even a possibility of liability under the policy.” Vaughn v. Franklin, 785 So. 2d 79, 84 (La. App. 1 Cir. 20 0 1) (citing Steptore v. Masco Constr. Co., 643 So. 2d 1213, 1218 (La. 1994)); accord Martco Ltd., 588 F.3d at 872-73. “In other words, the test is not whether the allegations unam biguously assert coverage, but whether they do not unam biguously exclude coverage.” Johnson v. Misirci, 955 So. 2d 715, 718 (La. App. 4 Cir. 20 0 7). Indeed, the duty to defend “exist[s] if there is at least a single allegation in the petition under which coverage is not unam biguously excluded.” Yarborough v. Fed. Land Bank of Jackson, 731 So.2d 482, 487-88 (La. App. 2 Cir. 1999) (collecting cases). The court m aking this determ ination m ust liberally interpret the underlying petition and assum e all allegations to be true. Martco Ltd., 588 F.3d at 873; Vaughn, 785 So. 2d at 83-84 (quoting Am . Hom e Assur. Co. v. Czarniecki, 230 So. 2d 253, 259 (La. 7 1969)). If the insured bears its burden of dem onstrating that any allegations possibly fall within coverage, the burden shifts to the insurer to prove that the underlying petition states only facts that fall within an exclusion from coverage. Id. at 872. In determ ining whether Travelers has a duty to defend Gootee in the underlying state-court suit here, the Court looks only to Satterfield’s third-party dem and against Gootee and Gootee’s insurance policy with Travelers. Despite its apparent awareness of Louisiana’s “eight corners rule,” Gootee asks the Court to consider a num ber of extraneous docum ents, including opinions issued by the Orleans Parish Civil District Court, correspondence between Travelers and Gootee or Satterfield, St. Mary’s expert report, and St. Mary’s petition against Satterfield--none of which are cognizable in determ ining Travelers’s duty to defend because these docum ents are not incorporated in the underlying petition against Gootee. See generally Lam ar Advert. Co. v. Cont’l Cas. Co., 396 F.3d 654, 660 (5th Cir. 20 0 5) (“Whether an insurer has a duty to defend is determ ined solely by com par[ing] the allegations in the com plaint against the insured with the term s of the policy at issue . . . .” (em phasis added)); Lauren Plaza Assocs., Ltd. V. Gordon H. Kolb Devs., Inc., 12 F.3d 20 8, 1993 WL 52990 9, at *5 (5th Cir. 1993) (refusing to consider the allegations of the com plaint on which the com plaint against the insured is based). Gootee argues that Satterfield’s allegation that St. Mary’s incurred dam ages or will incur dam ages as a result of Gootee’s allegedly defective or incom plete work discloses at least the possibility of coverage because these dam ages m ay include “property dam age,” as defined by its policy with Travelers. Gootee cites two cases that support its argum ent. 21 21 Gootee cites several other cases in its opposition for the idea that “a contractor’s defective or substandard work is an occurrence for purposes of 8 First, in Stew art Interior Contractors, LLC v. Metalpro Industries, LLC, a subcontractor sued a supplier for the dam ages the subcontractor incurred as a result of using the supplier’s allegedly defective steel studs during construction. 969 So. 2d 653, 656 (La. App. 4 Cir. 20 0 7). The subcontractor alleged that its dam ages included “the costs of the steel studs; installation, repair and rem oval costs; loss of incom e, profits, capital and m onies withheld under the contract; expert, engineering, and attorney’s fees, and costs associated with delays in the construction project.” Id. at 659. The subcontractor also alleged that the defective studs caused physical dam ages to sheetrock used in the construction project. Id. The Louisiana Fourth Circuit Court of Appeal rejected the insurance com pany’s argum ent that the subcontractor’s claim s for breach of contract and redhibition dam ages, as a result of the defective studs, could never constitute “property dam age” under the applicable policy, which defined “property dam age,” like Travelers does here, as “physical dam age to tangible property” or “loss of use of tangible property.” See id. at 660 . Gootee also relies on Grim aldi Mechanical, LLC v. The Gray Insurance Co., 933 So.2d 887 (La. App. 4 Cir. 20 0 6). In Grim aldi, the underlying petition alleged that the insured, a m echanical contractor, dam aged the property owner of a construction project by perform ing “nonconform ing . . . and defective work” and “fail[ing] to perform the work in a thorough workm anlike m anner.” Id. at 893. The petition against the insured also triggering the initial grant of coverage and an insurer’s duty to defend.” R. Doc. 23 at 11 (em phasis added). But the issue here is not whether Satterfield’s underlying petition sufficiently alleges an “occurrence” within the m eaning of Gootee’s insurance policy. Rather, the issue is whether Satterfield’s petition sufficiently alleges property dam age. Travelers does not challenge Gootee’s ability to prove an occurrence. 9 incorporated two exhibits, the m ost relevant of which described the insured’s “nonconform ing pipe installation [that] was unacceptable due to incom plete calculations.” Id. at 894. The court held that these allegations sufficiently alleged that “property dam age,” within the m eaning of the insurance policy “m ay have occurred” or “m ay have arisen” and that therefore the insured could overcom e the insurer’s m otion for sum m ary judgm ent. Id. at 896-87. The court also noted the inherent difficulty the insured bears in “relying upon the [petition] and corresponding exhibits of an adverse party to allege that property dam age m ay have occurred.” Id. at 897. The Court finds that in light of the foregoing authorities, and accepting the allegations of Satterfield’s petition against Gootee as true, Gootee has plausibly alleged that he is entitled to a defense from Travelers. Although Satterfield’s petition is inartfully drafted, the Court can reasonably infer from the allegations that Gootee perform ed subcontracting work on the St. Mary’s im m ovable property, in connection with the reconstruction of St. Mary’s high school. The allegation that St. Mary’s has incurred dam ages or will incur dam ages “as a result [of]” Gootee’s allegedly defective or incom plete construction work sufficiently im plies that St. Mary’s seeks to recover for dam age to tangible property, potentially including, but not lim ited to, the defective work itself. Cf. Martco Ltd. P’ship v. W ellons, Inc., 588 F.3d 864, 873 (5th Cir. 20 0 9) (finding “the dem and for repair dam ages” to the defective work could “m ake out a claim for injury to som e item of tangible property caused by the insured”). Travelers’s m otion to dism iss depends entirely on the argum ent that defective or incom plete work, in and of itself, does not constitute “property dam age.” Even if this is true, Satterfield’s petition against Gootee at least raises the possibility that St. Mary’s has suffered injury to other property “as a result [of]” Gootee’s defective work, which 10 Travelers concedes would satisfy its definition of “property dam age.”22 Satterfield’s failure to use the m agic words “property dam age” is not outcom e-determinative. See generally City of Plaquem ine v. N. Am . Constructors. Inc., 683 So. 2d 386, 388 (La. App. 1 Cir. 1996) (finding the absence of specific details “does not defeat [the] conclusion that the allegations state, at least rudim entarily, a claim which m ay be covered by the insurance contract”). As the Fifth Circuit holds, The scope of the duty to defend is interpreted broadly: Where the com plaint does not state facts sufficient to clearly bring the case within or without the coverage, the general rule is that the insurer is obligated to defend if there is, potentially, a case under the com plaint within the coverage of the policy. Nat’l Cas. Co. v. W . W orld Ins. Co., 669 F.3d 60 8, 612-13 (5th Cir. 20 12).23 Accordingly, the Court finds that Gootee has plausibly alleged that Travelers owes it a duty to defend because there m ay be “at least a single allegation in the [underlying] petition under which coverage is not unam biguously excluded.” See Yarborough v. Fed. Land Bank of Jackson, 731 So.2d 482, 487-88 (La. App. 2 Cir. 1999) (collecting cases). As a result, the Court need not address the parties’ argum ents regarding whether Satterfield’s allegations of “late com pletion” (incorrectly written as “late com pensation” 22 See R. Doc. 10 -1 at 14 (“As explained by Louisiana’s leading insurance treatise, [t]he defective construction itself does not trigger coverage under a CGL policy. Instead, coverage is triggered under the CGL policy in effect when that defect causes physical injury to tangible property (e.g., the roof leaks or the wall collapses).”). 23 Though the court in National Casualty Co. applied Texas law, the principles of insurance law under Louisiana law are the sam e. See, e.g., LCS Corr. Servs., Inc. v. Lexington Ins. Co., 80 0 F.3d 664, 668 n.5 (5th Cir. 20 15) (“The parties cite authority from both Texas and Louisiana in support of their respective positions . . . and we discern no substantive differences in the relevant insurance laws of the two states.”). 11 in the petition) or “delay” fall under the “loss of use” definition of “property dam age” in Gootee’s insurance policy. Usually, at this point, the insurer bears the burden to prove that the underlying petition states only facts that fall within an exclusion from coverage. Martco Ltd., 588 F.3d at 872. But as noted, the only issue presented by Travelers’s m otion is whether underlying petition contained plausible allegations of “property dam age. Finding that it does, the Court denies the m otion to dism iss. IV. CON CLU SION For the foregoing reasons, the Court DENIES Travelers’s m otion to dism iss. New Orleans, Louisiana, this 15 th day of April, 20 16. ____________________________________ SARAH S. VANCE UNITED STATES DISTRICT J UDGE 12
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