United States District Court, D. Connecticut
RULING ON MOTION TO DISMISS
MICHAEL P. SHEA, U.S.D.J.
Plaintiff,
Endurance American Specialty Insurance Company
(“Endurance”), brought this action on February 1,
2018, against William Kramer & Associates, LLC's
(“WKA”) related to WKA's assessment of
damages to the Caravelle Resort in Myrtle Beach, South
Carolina following Hurricane Matthew in October 2016. (ECF
No. 1.) Endurance asserts negligence claims for failure to
disclose and failure to mitigate, as well as a claim for
breach of fiduciary duty. (ECF No. 1.) Two additional
property insurers of the Caravelle Resort, James River
Insurance Company (“James River”), and AXIS
Surplus Insurance Company (“AXIS”) intervened as
plaintiffs and assert the same claims against WKA. (See ECF
Nos. 32, 34.)
On
August 31, 2018, WKA filed a third-party complaint against
Madsen, Kneppers and Associates, Inc. (“Madsen”)
for common law indemnification, asserting that Madsen is
liable for all or part of any damages that WKA owes the
plaintiff and intervenor plaintiffs. (ECF No. 58 (hereinafter
“Third-Party Complaint”).) Madsen moves to
dismiss the Third-Party Complaint for failure to state a
claim. (ECF No. 82.) For the reasons explained below,
Madsen's motion to dismiss is GRANTED.
I.
Factual Allegations
Common
Allegations
The
facts below are drawn from all operative complaints,
including WKA's Third-Party Complaint against Madsen.
(Endurance Compl, ECF No. 1; Axis Compl., ECF No. 32; James
River Compl., ECF No. 34; Third-Party Compl., ECF No. 58.)
Accordingly, these allegations are taken as true for the
purposes of deciding the present motion to dismiss.
On
October 8, 2016, Hurricane Matthew caused damage to The
Caravelle Resort in Myrtle Beach, South Carolina
(“Caravelle”). (ECF No. 1 ¶ 12; ECF No. 32
¶ 12; ECF No. 34 ¶ 12; ECF No. 58 ¶ 5.)
Caravelle held insurance policies issued by Endurance
American Specialty Insurance Company
(“Endurance”), Liberty Surplus Insurance
Corporation (“Liberty”), James River Insurance
Company (“James River”), and AXIS Surplus
Insurance Company (“AXIS”) (hereinafter
Endurance, Liberty, AXIS, and James River collectively
referred to as “the Market”). (ECF No. 1
¶¶ 6-9; ECF No. 32 ¶¶ 6-9; ECF No. 34
¶¶ 7-9; ECF No. 58 ¶ 6-7.)[1] On October 10,
2016, Caravelle submitted a claim to the Market (the
“Claim”) for the damages caused by Hurricane
Matthew. (ECF No. 1 ¶ 13; ECF No. 32 ¶ 13; ECF No.
34 ¶ 13; ECF No. 58 ¶ 7.) William Kramer &
Associates, LLC's (“WKA”), an independent
loss adjustment firm, was appointed as loss adjuster as
required under the Market Policies, and was assigned to
adjust all claims related to damage from Hurricane Matthew.
(ECF No. 1 ¶¶ 10-11, 14; ECF No. 32 ¶¶
10-11, 14; ECF No. 34 ¶¶ 10-11, 14; ECF No. 58
¶ 8.) WKA began evaluating the damages and taking steps
to mitigate the potential for further damage on October 14,
2016. (ECF No. 1 ¶¶ 15-16; ECF No. 32 ¶¶
15-16; ECF No. 34 ¶¶ 15-16; ECF No. 58 ¶ 9.)
Allegations
of the Underlying Complaints Against WKA The following facts
are taken from the Plaintiffs and Intervenor Plaintiffs'
complaints against WKA. (See Endurance Compl, ECF No. 1; Axis
Compl., ECF No. 32; James River Compl., ECF No. 34.) These
facts are set forth only to provide context for WKA's
third-party allegations; the Court does not accept them as
true for the purposes of deciding this motion.
After
WKA began its work, the Market retained Madsen, Kneppers and
Associates, Inc. (“Madsen”), a construction
consulting and engineering firm, to assist in the
investigation and adjustment process and to develop protocols
for remediating and repairing the damage caused by Matthew.
(ECF No. 1 ¶¶ 17-18; ECF No. 32 ¶¶ 17-18;
ECF No. 34 ¶¶ 17-18.) Madsen was tasked with
identifying the damage proximately caused by Matthew and
reporting its findings and recommendations to WKA to the
Market. (ECF No. 1 ¶¶ 18-19; ECF No. 32
¶¶ 18-19; ECF No. 34 ¶¶ 18-19.)
On
November 2, 2016, WKA estimated that the total loss estimate
for mitigation and reconstruction was $2.9 million. (ECF No.
1 ¶ 20; ECF No. 32 ¶ 20; ECF No. 34 ¶ 20.)
Over the following weeks, WKA's estimate rose repeatedly.
(ECF No. 1 ¶ 21; ECF No. 32 ¶ 21; ECF No. 34 ¶
21.) AXIS and James River retained an independent adjusting
firm to peer review WKA's work. (ECF No. 1 ¶¶
9, 21-22; ECF No. 32 ¶¶ 9, 21-22; ECF No. 34
¶¶ 8, 21-22.) On December 30, 2016, WKA reported a
revised estimated total loss value of $18 million. (ECF No. 1
¶ 23; ECF No. 32 ¶ 23; ECF No. 34 ¶ 23.) The
Market agreed to resolve Caravelle's Claim on January 27,
2017 for $24 million. (ECF No. 1 ¶ 24; ECF No. 32 ¶
24; ECF No. 34 ¶¶ 24-25.)
Endurance,
James River, and Axis allege that WKA failed to disclose
“material facts and issues, ” including that
Caravelle's “claimed damages were either
preexisting or not proximately caused by Hurricane
Matthew.” (ECF No. 1 ¶ 26; ECF No. 32 ¶ 26;
ECF No. 34 ¶ 29.) More specifically, WKA did not relay
“material information” it received from Madsen,
including Madsen's concerns regarding rooms designated
for reconstruction that were unaffected by Hurricane Matthew.
(ECF No. 1 ¶¶ 27-29; ECF No. 32 ¶¶ 27-29;
ECF No. 34 ¶¶ 30-32.) The Market relied upon
WKA's representations “without being informed that
much of the repair and reconstruction was unwarranted or
unrelated to Hurricane Matthew damage.” (ECF No. 1
¶ 30; ECF No. 32 ¶ 30; ECF No. 34 ¶ 33.) As a
result of WKA's failure to disclose relevant and material
information to the Market about the source of the damage, the
Market paid for the rehabilitation of the entire resort
instead of only Hurricane Matthew-specific damages. (ECF No.
1 ¶ 32; ECF No. 32 ¶ 32; ECF No. 34 ¶ 35.) The
Market alleges WKA knew or should have known that if it had
properly disclosed material information, the Market
“would not have agreed to pay for the scope of damages
assessed by WKA.” (ECF No. 1 ¶ 31; ECF No. 32
¶ 31; ECF No. 34 ¶ 34.)
Allegations
of WKA's Third-Party Complaint Against Madsen
The
factual allegations below are drawn from WKA's
Third-Party Complaint (ECF No. 58) against Madsen and are
accepted as true for the purpose of adjudicating this motion.
On
October 14, 2016, WKA began to inspect and assess the damage
to Caravelle caused by Hurricane Matthew. (ECF No. ¶ 9.)
During the course of WKA's work it became necessary to
engage a construction consulting firm. (Id. ¶
10.) “Madsen was engaged to provide remediation and
repair consulting with respect to the Claim.”
(Id. ¶ 11.) “WKA relied on Madsen with
regard to certain aspects of the adjustment of the Claim,
including but not limited to remediation and repair.”
(Id. ¶ 12.) On November 2, 2016, Madsen
provided WKA with a damage estimate of $3.1 million, which
WKA conveyed to Endurance and Liberty. (Id. ...