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Allied World National Assurance Company, et al v. Sk Pm Corp.

November 15, 2012


The opinion of the court was delivered by: Jennifer L. Thurston United States Magistrate Judge


Plaintiffs Allied World National Assurance Company and Allied World Assurance Company seek leave to file an amended complaint to include additional facts and remove parties who Plaintiffs have voluntarily dismissed. (Doc. 95). Defendants have not opposed the motion.*fn1 Having reviewed the motion and related documents, the Court finds the matter suitable for decision without oral argument pursuant to Local Rule 230(g). For the reasons set forth below, Plaintiffs' motion for leave to amend the complaint is GRANTED.

I. Factual and Procedural History

Plaintiffs initiated this action by filing a complaint on July 14, 2010, seeking "to obtain a judicial determination and declaration regarding the parties' rights and obligations with respect to two insurance policies." (Doc. 1 at 8). Plaintiffs allege Defendants are insureds under Policy No. 2 C011427/001, issued by Allied World National to S.K. Foods PM Corporation for coverage that 3 commenced February 19, 2009 and ended on August 17, 2009 ("the Primary Policy"). Id. In addition, 4 Plaintiffs allege Defendants sought coverage from Allied World "under Excess Directors & Officers 5 Liability Insurance Following Form Policy No. C011818/001, which was to be issued to S.K. Foods 6 PM Corp. for the April 8, 2009 to February 19, 2010 Policy Period" ("the Excess Policy"). (Doc. 1 at 7 8). However, Plaintiffs assert Defendants failed to pay the requisite premium for the Excess Policy. 8

Id. 9

According to Plaintiffs, Defendants represented to Plaintiffs during the underwriting process for the Primary and Excess Policies that SK Food Group, encompassing entities owned and operated by Scott Salyer and his family, "was in good financial health and had strong revenues and profits." (Doc. 1 at 9). However, Plaintiffs assert that Defendants knew this information was false, and knew it would be necessary for several entities "to reorganize, through bankruptcy or otherwise, and sell substantially all of their assets in order to satisfy debts owed. . ." Id.

Plaintiffs allege neither the Primary Policy nor Excess Policy would have been issued had they known the truth regarding SK Food Group's financial condition. (Doc. 1 at 9). Therefore, Allied World seeks to rescind certain coverage provisions of the Primary Policy. Id. at 8. Further, Plaintiffs seek "a declaration that the Excess Policy was never effectively issued or delivered as a result of Defendants' non-payment of premium, and is inoperative." Id. In the alternative, Plaintiffs seek to rescind provisions of the Excess Policy for misrepresentation and concealment of material facts. Id.

On April 29, 2010, Scott Salyer ("Salyer") was indicted for racketeering, wire fraud, falsification of records, and conspiracy in restraint of trade arising out of his operation of SK Foods. On April 28, 2011, defendants filed a motion to stay the proceeding pending resolution of the criminal case pending against Salyer (Doc. 59), which was granted by the Court on July 28, 2011. (Doc. 75).

The parties filed a joint status report on May 17, 2012, reporting that "Salyer pleaded guilty to one count of racketeering and one count of price fixing," and he was scheduled to be sentenced on July 10, 2012. (Doc. 90 at 4-5). As part of the plea agreement, the remaining charges against Salyer were to be dropped at the time of sentencing. Id. at 5. Plaintiffs informed the Court they intended "to file an amended complaint adding Salyer's admitted criminal conduct as an additional basis for 2 rescission of the policies." Id. at 6. On May 22, 2012, the Court approved the parties' stipulation to 3 allow Plaintiffs to file a motion to amend the complaint, with the stay remaining in place. (Doc. 91). 4

On October 17, 2012, Plaintiffs filed their motion for leave to file an amended complaint.

(Doc. 95). On October 18, 2012, the Court held a scheduling conference, and ordered pleading 6 amendments be sought no later than December 14, 2012. (Doc. 103).

II. Legal Standards for Leave to Amend 8

Under Fed. R. Civ. P. 15(a), a party may amend a pleading once as a matter of course within 21 days of service, or if the pleading is one to which a response is required, 21 days after service of a motion under Rule 12(b), (e), or (f). "In all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave." Fed. R. Civ. P. 15(a)(2). Here, defendants filed answers on September 17, 2010, and October 6, 2010. (Docs. 27-28). Therefore, Plaintiffs require either consent of Defendants or leave of the Court to file an amended complaint.

Granting or denying leave to amend a complaint is in the discretion of the Court, Swanson v. United States Forest Service, 87 F.3d 339, 343 (9th Cir. 1996), though leave should be "freely give[n] when justice so requires." Fed. R. Civ. P. 15(a)(2). "In exercising this discretion, a court must be guided by the underlying purpose of Rule 15 to facilitate decision on the merits, rather than on the pleadings or technicalities." United States v. Webb, 655 ...

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