United States District Court, D. Colorado
PINON SUN CONDOMINIUM ASSOCIATION, INC., a Colorado non-profit corporation, Plaintiff,
v.
ATAIN SPECIALTY INSURANCE COMPANY, a foreign corporation, INDIAN HARBOR INSURANCE COMPANY, a foreign corporation, and GREAT LAKES INSURANCE, SE f/k/a GREAT LAKES REINSURANCE UK Plc, a foreign corporation, Defendants. GREAT LAKES INSURANCE, SE f/k/a GREAT LAKES REINSURANCE UK Plc, a foreign corporation, Defendant and Third-Party Plaintiff,
v.
CLAIM SOLUTIONS LLC, a Colorado limited liability company, SCOTT BENGLEN, individually, SHALZ CONSTRUCTION LLC, a Colorado limited liability company; and BRADLEY SHALZ, individually, Third Party Defendants.
REPORT AND RECOMMENDATION ON PLAINTIFF AND
THIRD-PARTY DEFENDANTS' MOTIONS TO DISMISS PURSUANT TO
FED. R. CIV. P. 12(B)(6) (DOCKET NOS. 52 & 64)
Michael J. Watanabe, United States Magistrate Judge.
This
matter is before the Court on Plaintiff Pinon Sun Condominium
Association, Inc. (“Pinion Sun”) and Third-Party
Defendants Claim Solutions, LLC, Scott Benglen, Shalz
Construction, LLC, and Bradley Shalz's (collectively
“Movants”) Motions to Dismiss Pursuant to
Fed.R.Civ.P. 12(b)(6) (Docket Nos. 52 & 64). In the
subject motions, Movants seek to dismiss Defendants and
Third-Party Plaintiffs Great Lakes Insurance, SE f/k/a Great
Lakes Reinsurance (UK) Plc's (“Great Lakes”),
Atain Specialty Insurance Case Company (“Atain”)
and Indian Harbor Insurance Company's (“Indian
Harbor”) (collectively “Defendants”)
Counterclaims and Third-Party Complaints for Damages and
Declaratory Judgment (Docket Nos. 12 & 51.). Judge
Christine M. Arguello referred the subject motions to the
undersigned Magistrate Judge. (Docket No. 82) The Court has
reviewed the subject motions (Docket Nos. 52 & 64),
Defendants' Responses (Docket Nos. 80 & 84), and
Movants' Replies. (Docket Nos. 91 & 92.) The Court
has taken judicial notice of the Court's file, and
considered the applicable Federal Rules of Civil Procedure
and case law. The Court now being fully informed makes the
following findings of fact, conclusions of law, and
recommendation.
I.
PROCEDURAL AND FACTUAL HISTORY
a.
Procedural History
Pinon
Sun initiated this action on June 30, 2017 by filing a
Complaint and Jury Demand against Great Lakes for its
unreasonable failure to pay on an insurance policy in the
aftermath of a 2016 hail and windstorm. (Docket No. 1.) In
response, Great Lakes filed a Counterclaim and Third Party
Complaint for Damages and Declaratory Judgment against Pinon
Sun; Claim Solutions, LLC and its managing partner, Scott
Benglen (collectively “Solutions”); and Shalz
Construction LLC and its manager, Bradley Shalz (collectively
“Shalz”). (Docket No. 12.) As discussed below,
Great Lakes alleges that Pinon Sun and these Third-Party
Defendants conspired with each other to commit insurance
fraud. Pinon Sun, Solutions, and Shalz filed Answers denying
the various claims for relief. (Docket Nos. 19, 32 & 33.)
Then, on September 22, 2017, Pinon Sun filed an Amended
Complaint (Docket No. 37) which added Atain and Indian
Harbor, the excess carriers under the insurance policy, as
defendants. Great Lakes and Atain and Indian Harbor
subsequently filed fundamentally identical Third-Party
Complaints against Pinon Sun and the Third Party Defendants.
(Docket Nos. 49 & 51.) Movants now request that all but
the breach of contract counterclaims be dismissed for failing
to state plausible claims for relief. (Docket Nos. 52 &
64.)
b.
Factual Background
The
following allegations are taken from Defendants'
Counterclaims and Third-Party Complaints for Damages and
Declaratory Judgment. (Docket Nos. 49 & 51.)
Defendants
issued an All Risk Property Damage Coverage Form, Policy
Number AIN11039 (the “Policy”), through the
Commercial Industrial Building Owners Alliance, Inc.
(“CIBA”) insurance program, to Pinon Sun for a
condominium complex it owned in Colorado Springs, Colorado.
(Docket Nos. 49 ¶¶ 12-14 & 51 ¶¶
201-03.)
On July
28, 2016, Pinon Sun, through Solutions, filed a claim under
the Policy for hail loss. (Docket Nos. 49 ¶ 18 & 51
¶ 207.) Defendants allege that Solutions then entered
into a conspiracy with Shalz to commit insurance fraud by
claiming an amount for roofing repairs in excess of the
actual damage, and then dividing the excess proceeds between
themselves. (Docket Nos. 49 ¶ 20 & 51 ¶ 209.)
They did this by (1) failing to obtain open competitive
bidding for the replacement of the roof; (2) failing to enter
into a written contract setting forth the scope of the work
and the cost of the services, as required by Colorado law;
(3) creating and submitted a false invoice for repairs; (4)
making various false claims concerning the siding repairs;
and (5) submitting multiple Sworn Statements in Proof of Loss
far in excess of the reasonable cost of repair or
replacement. (Docket Nos. 49 ¶¶ 21-29 & 51
¶¶ 210-218.) Defendants allege that Solutions was
the agent of Pinon Sun, and therefore Pinon Sun is legally
liable for the fraud and misrepresentations of Solutions.
(Docket Nos. 49 ¶ 30 & 51 ¶ 219.)
Defendants
assert eight claims for relief: (1) breach of contract
against Pinon Sun; (2) fraud and misrepresentation against
Pinon Sun, Solutions, and Shalz; (3) insurance fraud against
Pinon Sun, Solutions, and Shalz; (4) civil conspiracy against
Pinon Sun, Solutions, and Shalz; (5) civil theft against
Pinon Sun, Solutions, and Shalz; (6) violation of the
Colorado Organized Crime Act, C.R.S. § 18-17-104
(“COCCA”), against Pinon Sun, Solutions, and
Shalz; (7) violation of the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. § 1962
(“RICO”), against Pinon Sun, Solutions, and
Shalz; and (8) for declaratory judgment. (Docket Nos. 49
¶¶ 34-88 & 51 ¶¶ 223-76.)
Movants
now seek to dismiss all of Defendants' claims for relief,
except the breach of contract claim. Movants argue that
Defendants' merely cite the elements of each claim
without providing a factual basis to support each element.
II.
LEGAL STANDARD
In
evaluating a motion to dismiss under Rule 12(b)(6), a court
must accept as true all well-pleaded factual allegations in
the complaint, view those allegations in the light most
favorable to the plaintiff, and draw all reasonable
inferences in the plaintiff's favor. Brokers'
Choice of America, Inc. v. NBC Universal, Inc., 757 F.3d
1125, 1135-36 (10th Cir. 2014); Mink v. Knox, 613
F.3d 995, 1000 (10th Cir. 2010). Conclusory allegations are
insufficient. Cory v. Allstate Ins., 583 F.3d 1240,
1244 (10th Cir. 2009). Instead, in the complaint, the
plaintiff must allege a “plausible” entitlement
to relief. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555-556 (2007). A complaint warrants dismissal if it
fails “in toto to render plaintiffs'
entitlement to relief plausible.” Twombly, 550
U.S. at 569 n.14 (italics in original). “In determining
the plausibility of a claim, we look to the elements of the
particular cause of action, keeping in mind that the Rule
12(b)(6) standard does not require a plaintiff to set forth a
prima facie case for each element.” Safe Street
Alliance v. Hickenlooper, 859 F.3d 865, 878 (10th Cir.
2017) (citation, internal quotation marks, and alteration
omitted). A court may not assume that a plaintiff can prove
facts that have not been alleged, or that a defendant has
violated laws in ways that a plaintiff has not alleged.
Associated Gen. Contractors of Cal., Inc. v. Cal. State
Council of Carpenters, 459 U.S. 519, 526 (1983); see
also Whitney v. New Mexico, 113 F.3d 1170, 1173-74 (10th
Cir. 1997) (court may not “supply additional factual
allegations to round out a plaintiff's complaint”).
The “‘burden[, however, ] is on the moving party
to prove that no legally cognizable claim for relief
exists.'” Hall v. Oliver, Civil Action No.
15-cv-01949-RBJ-MJW, 2017 WL 1437290, at *4 n.1 (citing 5B
Charles Alan Wright & Arthur R. Miller, Federal Practice
& Procedure § 1357 (3d ed.)).
III.
ANALYSIS
a.
Fraud/Misrepresentation Claims
Defendants'
Second Claims for Relief allege that Pinon Sun, Solutions,
and Shalz made false representations of material fact
regarding the actual cost and scope of repairs; that
Defendants relied on those misrepresentations; and that, as a
result, they were damaged in the amount that they paid out
under the policy. (Docket Nos. 49 ¶¶44- 53 & 51
¶¶ 233-41.) In their Third Claims for Relief, they
allege that Pinon Sun “and its agents, Solutions[, ]
and Shalz, ” conspired to commit insurance fraud by
providing “statements in support of a claim for payment
of a benefit under the insurance policy in excess of the
actual loss.” (Docket Nos. 49 ¶¶ 54-57 &
51 ¶¶ 242-45.)
Movants
argue that Defendants' misrepresentation and insurance
fraud claims fail for several reasons. First, they contend
that Defendants failed to plead these claims with
particularity. Second, they claim that Defendants failed to
allege that Shalz is an agent acting on Pinon Sun's
behalf, or that Pinon Sun consented to any alleged fraudulent
actions by Shalz or Solutions. Finally, Movants state that
insurance fraud and claims for misrepresentation are only
coverage defenses. Defendants maintain that they sufficiently
alleged both claims.
i.
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