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Earnest Issacs Lumber Co., Inc. v. The Cincinnati Specialty Underwriters Insurance Co.

United States District Court, E.D. Kentucky, Central Division, Lexington

October 26, 2018



          Danny C. Reeves United States District Judge.

         Plaintiff Earnest Issacs Lumber Company, Inc.&#3');">39;s property was destroyed in a fire. Defendant Cincinnati Specialty Underwriters Insurance Company insured the property. It contends the plaintiff has not cooperated in its investigation regarding the fire. The plaintiff disagrees and asserts that it has fully cooperated in the defendant&#3');">39;s unnecessarily lengthy investigation and it is entitled to recover the policy limits. The defendant has filed a motion for judgment on the pleadings [Record No. 8], which will be denied because substantial questions remain regarding the plaintiff&#3');">39;s actions during the defendant&#3');">39;s investigation of the loss.

         I. Background

         Earnest Isaacs Lumber Company, Inc. (the “plaintiff” or the “Lumber Company”) purchased a fire insurance policy (“the Policy”) from Cincinnati Specialty Underwriters Insurance Company (the “defendant” or “CSU”), covering property at 880 Cow Creek Road in Ravenna, Kentucky. [Record No. 1-3');">3, p. 18] A fire occurred at the property on or about May 22, 2017');">17, and the plaintiff submitted a claim to CSU. Id. CSU informed Earnest Isaacs approximately four months later that it had “serious concerns that the fire may have been incendiary or intentionally set.” [Record No. 5-2, p. 5] It reminded Isaacs of his duties in the event of a loss and advised him that CSU would keep him informed during the investigation. Id., pp. 2-5.

         CSU filed a petition under Kentucky Rule of Civil Procedure 27.01 in Estill County Circuit Court in April 2018, in which it sought a pre-suit order requiring the production of cellular telephone records and providing it authority to take the deposition of a records custodian for cellular telephone carriers. [Record No. 1-3');">3, 6');">p. 6] The Lumber Company filed a Counterclaim in which it alleged that it had cooperated fully in CSU&#3');">39;s year-long investigation and sought judgment in the amount of the policy limits. Id., p. 18. The circuit court denied CSU&#3');">39;s request for pre-petition relief under Kentucky Civil Rule 27.01 on June 8, 2018. Id., p. 24. The Lumber Company&#3');">39;s Counterclaim became a Complaint for all intents and purposes and was removed to this Court on June 11, 2018. [See Record No. 1.]

         CSU filed an Answer and Counterclaim on June 18, 2018. It alleged that it was still investigating the loss with the concern that the fire was intentionally set. [Record No. 6 at p. 11] In its Counterclaim, CSU seeks a declaratory judgment that it is not required to provide coverage with respect to the fire loss because the Lumber Company and its employees have not complied with the investigation requirements under the Policy. Specifically, CSU contends that the Lumber Company has failed to produce requested documents, that it has failed to provide authorization to obtain information from its tax preparer, and that its representatives have not signed the transcripts of their examinations under oath. CSU also claims that the Lumber Company breached the express terms of the Policy by filing suit without fulfilling the conditions precedent for doing so.

         The defendant did not answer or otherwise respond to CSU&#3');">39;s Counterclaim. CSU filed a motion for judgment on the pleadings on July 24, 2018, arguing that it is entitled to judgment on the Lumber Company&#3');">39;s Complaint, as well as its unanswered Counterclaim. [Record No. 8] CSU requested, in the alternative, that the Court stay the litigation until CSU completes its claim investigation. Id.

         The Court granted the plaintiff an extension of time in which to respond to CSU&#3');">39;s motion to dismiss. [Record No. 13');">3] The Lumber Company filed its response to the motion on September 14, 2018, as well as an untimely Answer to CSU&#3');">39;s counterclaim. [Record Nos. 15, 17');">17] The parties subsequently filed a joint motion for an extension of time in which CSU could tender a reply in support of its motion to dismiss, but the Court denied that motion. [Record No. 20]

         II. Standard of Review

         A party&#3');">39;s motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure is appropriate when there is no issue of material fact and the moving party is entitled to judgment as a matter of law. JPMorgan Chase Bank, N.A. v. Winget, 3');">3d 577');">510 F.3');">3d 577, 582 (6th Cir. 2007). The Court accepts as true “all well-pleaded material allegations, ” but “need not accept as true legal conclusions or unwarranted factual inferences.” Id. at 581-82 (quoting Mixon v. Ohio, 3');">3 F.3');">3d 3');">389');">193');">3 F.3');">3d 3');">389, 400 (6th Cir. 1999)).

         Motions to dismiss under 12(c) are reviewed under the same standard as those under 12(b)(6). Lindsay v. Yates, 498 F.3');">3d 43');">34, 43');">37 n.5 (6th Cir. 2007). To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must allege sufficient factual matter to state a claim for relief that is plausible on the face of the complaint. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); Peatross v. City of Memphis, 3');">3d 23');">33');">3');">818 F.3');">3d 23');">33');">3, 23');">39-40 (6th Cir. 2016). The Court may consider “the Complaint and any exhibits attached thereto, public records, items appearing in the record of the case and exhibits attached to the defendant&#3');">39;s motion to dismiss so long as they are referred to in the Complaint and are central to the claims contained therein.” Bassett v. Nat&#3');">39;l Collegiate Athletic Ass&#3');">39;n, 28 F.3');">3d 426');">528 F.3');">3d 426, 43');">30 (6th Cir. 2008).

         III. Discussion

         A. The Lumber Company&#3');">39;s Failure to File a Timely Answer to CSU&#3');">39;s Counterclaim

         The Lumber Company alleges in its Complaint that it has cooperated fully in CSU&#3');">39;s investigation. It further contends that it is entitled to payment in the amount of the Policy limits, which is not enough to make it whole. CSU&#3');">39;s Counterclaim claims just the opposite- that the Lumber Company has failed to cooperate, that its actions amount to a breach of the Policy, and that it is not entitled to coverage for the fire loss. In light of the parties&#3');">39; competing claims, it is ...

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