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RLI Insuance Co. v. Langan Engineering, Environmental, Surveying and Landscape Architecture, D.P.C.

United States District Court, N.D. California

September 11, 2019

RLI INSUANCE COMPANY, Plaintiff,
v.
LANGAN ENGINEERING, ENVIRONMENTAL, SURVEYING AND LANDSCAPE ARCHITECTURE, D.P.C., et al., Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS Re: Dkt. No. 14

          Susan Illston United States District Judge.

         Before the Court is a motion to dismiss the plaintiff's complaint filed by Langan Engineering, Environmental, Surveying and Landscape Architecture, D.P.C., Langan Engineering & Environmental Services, Inc. (collectively “Langan”), and T&R Consolidated (erroneously named in the Complaint as Treadwell & Rollo, Inc.) (collectively, “defendants”). Pursuant to Civil Local Rule 7-1(b), the Court finds this matter appropriate for resolution without oral argument and VACATES the hearing set for September 13, 2019.

         BACKGROUND

         This lawsuit arises out of four excess insurance policies - the 2014, 2015, 2016, and 2017 policies, respectively - that Langan took out from plaintiff RLI Insurance Company (“RLI”). Dkt. No. 14 at 4 (Motion to Dismiss). RLI alleges Langan falsely answered two questions on its application for the 2014, 2015, and 2016 policies. Compl. ⁋⁋ 18, 20, 31, 33, 44, 46. Specifically, RLI's application asked Langan:

28(b). Is the Applicant (after proper inquiry of each Director, Officer or Partner of the Applicant or other prospective insured party) aware of any circumstance, incident, situation or accident during the past ten years which may result in a claim being made against the Applicant, its Predecessors in business, or any of the present or past Partners, Officers or Directors of the Applicant.
28(d). Has the Applicant or any other party proposed for insurance knowledge of injury to people or damage to property during the [last] five years on or at projects where the Applicant has rendered professional services?

         Compl. ⁋⁋ 17, 19, 30, 32, 43, 45. Langan answered “no” to both of those questions for the 2014, 2015, and 2016 policies. Id. Langan did not answer the questions one way or another for the 2017 policy. Id. ⁋⁋ 55, 56. RLI's complaint alleges Langan's answers were false because Langan was aware of potential liability due to Langan's 2010 purchase of various T&R Consolidated (“T&R”) assets and concurrent acquisition of many of the principals and staff of T&R. Compl. ⁋ 10. T&R was a geotechnical engineering firm which performed work on the Millennium Tower project in San Francisco, including preparation of reports relating to the projected settling of the building in light of the soil on which it was constructed. Compl. ⁋ 6. In 2005, T&R estimated up to six inches of potential long-term settlement at the Millennium Tower site. Dkt. No. 14 at 1 (Motion to Dismiss). After construction began on Millennium Tower, but prior to its completion, the Tower had already settled more than six inches. Id. During the course of due diligence prior to purchasing T&R, the complaint alleges Langan learned that T&R notified its insurance carrier in 2008 of a potential claim regarding accelerated, excessive and/or differential settlement of Millennium Tower. Compl. ⁋ 7.

         In April, 2015, Langan notified its primary insurance carrier, Markel, of a “circumstance” it asked to be handled by its 2014-2015 Primary Policy with Markel. Compl. ⁋ 35. The “circumstance” Langan reported related to T&R's allegedly faulty work at Millennium Tower and the resulting allegations of excessive or differential settlement and resulting structural damage. Id.

         In August 2016, Langan was named in various lawsuits under a theory of successor liability for T&R's work on Millennium Tower. Dkt. No. 14 at 4 (Motion to Dismiss). These cases were ultimately consolidated under lead case Laura Lehman v. Transbay Joint Powers Authority, et al., San Francisco Superior Court, No. CGC-16-553758. Id. The complaint alleges August 2016 is the first time Langan informed RLI of a potential claim. Compl. ⁋ 119.

         LEGAL STANDARD

         Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This “facial plausibility” standard requires the plaintiff to allege facts that add up to “more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While courts do not require “heightened fact pleading of specifics, ” a plaintiff must allege facts sufficient to “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555, 570.

         In deciding whether the plaintiff has stated a claim upon which relief can be granted, the Court must assume that the plaintiff's allegations are true and must draw all reasonable inferences in the plaintiff's favor. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, the court is not required to accept as true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).

         DISCUSSION

         I. CLAIMS ...


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