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Thomas Thompson, An Individual v. Avigators Insurance Company

March 28, 2012

THOMAS THOMPSON, AN INDIVIDUAL PLAINTIFF,
v.
AVIGATORS INSURANCE COMPANY, AND DOES 1 THROUGH 20 INCLUSIVE DEFENDANTS.



The opinion of the court was delivered by: T. Miller Jefffrey United States District Judge

JM

ORDER DENYING MOTION TO DISMISS Docket No. 7

This case arises from an insurance coverage dispute between Navigators Insurance Company ("Navigators"), Thompson Builders, Inc. ("TBI"), and Thomas Thompson ("Thompson"). Navigators originally filed suit in February 2011 seeking rescission of the insurance policy they issued to TBI because of alleged misrepresentations made by TBI when applying for the policy (Case No. 11-cv-381, referred to as "Case #1"). In October of 2011, TBI and Thomas Thompson (who was not a named party in Case #1) filed a procedurally deficient counterclaim. Four days later, Thompson filed a separate suit against Navigators based on the same set of events (Case No. 11-cv-2509, "Case #2"). Navigators moved to dismiss the counterclaim in Case #1 and the complaint in Case #2. The court granted the first motion to dismiss due to non-opposition, but required further briefing on the motion in Case #2. The court now DENIES Navigators' motion to dismiss.

I. BACKGROUND

A. Underlying Facts

According to Navigators' complaint in Case #1, TBI submitted an application for commercial general liability insurance on December 1, 2009. Nav. Compl. ¶ 8. At some point on or around December 14, 2009, TBI began working on a project with Vanderbuilt Construction "to provide roofing demolition services on a commercial structure located in National City, California, that had been damaged by fire." ¶ 22. One of Vanderbuilt's employees, Colin Butler, was injured when he fell through a hole in the roof. Butler is seeking damages in state court from both TBI and Thompson based on his injury ("Butler case" or "Butler litigation").

B. Procedural History of Both Cases

Navigators' complaint seeks rescission of the insurance policy based on misrepresentations allegedly made by TBI in its application for the policy. First, the completed application stated that 100% of its work was on residential property. Second, it stated that no applicant acted in the capacity of a General Contractor, Builder, Construction Manager, Project Manager or Developer. Third, it represented that TBI had not performed any repair of fire damage in the past five years and that there were no plans to do so in the next year. Finally, TBI stated that it had not performed any roofing or demolition projects in the past ten years, nor did it plan to perform any in the future. ¶¶ 10-13.

Based on its belief that these misrepresentations can be the basis for rescission of the policy, Navigators' complaint includes causes of action for both negligent and intentional misrepresentation and seeks declaratory relief stating that Navigators has no duty to defend or indemnify TBI in the Butler litigation. TBI filed an answer on April 14, 2011. On May 26, the court issued a scheduling order stating that any motion to amend the pleadings should be filed and heard on or before October 24, 2011. Without seeking leave to amend, TBI filed a counterclaim against Navigators and also purported to add Thomas Thompson as a counterclaimant. Navigators moved to dismiss, pointing out the impropriety and untimeliness of the counterclaim.

Case #2 was filed by Thomas Thompson against Navigators on October 28, 2011, four days after TBI was notified of the procedural problems associated with its counterclaims. Thompson's complaint alleges that he was an insured under the policy while acting as an officer, director, and shareholder of TBI. The complaint lists causes of action for breach of the duty of good faith and fair dealing and for breach of contract based on Navigators' failure to provide defense and indemnity in the Butler case and on Navigators' refusal to make payments on the insurance policy.

II. LEGAL STANDARD AND DISCUSSION

On a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the court examines the legal sufficiency of the pleadings. De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978). The Supreme Court has held that in order to survive a 12(b)(6) motion, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

Navigators does not seek dismissal based on general insufficiency of the facts pled in Thompson's complaint, but instead argues that (1) Thompson cannot bring an individual claim for coverage under the policy at all, and (2) Thompson's complaint is procedurally ...


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