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Arch Specialty Insurance Company v. Skandia Construction Services

July 25, 2011

ARCH SPECIALTY INSURANCE COMPANY, PLAINTIFF,
v.
SKANDIA CONSTRUCTION SERVICES, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge

ORDER RE MOTION TO DISMISS AND MOTION TO STRIKE

Pending are Plaintiff's motion to dismiss certain counterclaims [doc. # 16] and Defendants' motion to strike [doc. # 30]. For the reasons set forth below, Plaintiff's motion to dismiss is GRANTED in part and DENIED in part, and Defendants' motion to strike is DENIED.

I. BACKGROUND

A. Complaint

This case arises from an insurance policy issued by Plaintiff to Defendants related to an apartment construction project. The policy required Defendants to pay a $750,000 deposit premium that was adjustable per a Premium Computation Endorsement. The Premium Computation Endorsement provides that the premium base be determined by the total costs of construction.

An audit conducted upon completion of the project determined that the actual total construction costs were $10,777,614 -- almost $3 million more than the estimated cost. Pursuant to the formula set forth in the Premium Computation Endorsement, the final earned premium was determined to be $1,010,401, which exceeded the deposit premium of $750,000 by $260,401. Plaintiff brings claims for breach of contract and unjust enrichment to recover this difference.

B. Counterclaims

Defendants bring counterclaims against Plaintiff, Mark Conklin, and Continental Commercial Insurance Brokers (CCI). Mr. Conklin is an employee of CCI. Defendants assert that both Mr. Conklin and CCI are agents of Plaintiff and are Plaintiff's co-conspirators.

Defendants allege that the insurance policy was purchased in reliance upon representations by Mr. Conklin and CCI that any additional premium charged would be based upon a computation of the total construction cost and total sales of the project. Defendants assert that total sales of apartment units are projected to be $16 million less than anticipated and that the audit was flawed, in part, because of a failure to include the total sales of the project as a factor in the final adjusted premium. Defendants bring nine counterclaims, nearly all relating to Mr. Conklin and CCI's alleged misrepresentations regarding how additional premium would be calculated.

II. STANDARD

To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must meet the requirements of Rule 8(a)(2), which requires the pleader to make a "short and plain statement of the claim." This motion should be granted only where a plaintiff's complaint lacks a "cognizable legal theory" or sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). When reviewing a motion to dismiss, the allegations of material fact in plaintiff's complaint are taken as true and construed in the light most favorable to the plaintiff. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Although detailed factual allegations are not required, factual allegations "must be enough to raise a right to relief above the speculative level." Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965 (2007). "A plaintiff's obligation to prove 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." Id. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not show[n] that the pleader is entitled to relief." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009) (internal quotation marks omitted).

III. DISCUSSION

A. Arch's Liability For Broker's Actions

Plaintiff Arch Specialty Insurance Company ("Arch") seeks dismissal of all of the counterclaims brought against it on the ground that it cannot be held liable any acts or omissions by the broker -- Mr. Conklin and CCI. Defendants raise two independent theories that would result in such liability: (1) Mr. Conklin and CCI were acting as ...


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