Scott v. The Buckner Co.

          ORDER DENYING AS MOOT DEFENDANT'S FIRST MOTION TO DISMISS AND DENYING DEFENDANT'S SECOND MOTION TO DISMISS

          William J. Martínez United States District Judge

         In this action, Plaintiffs Joel Scott and Caron Scott (“Plaintiffs”) bring various claims against Defendant The Buckner Company, Inc. (“Defendant”). (ECF No. 24.) Before the Court are Defendant's (1) Motion to Dismiss for Improper Venue (“First Motion to Dismiss”; ECF No. 14); and (2) Reasserted Motion to Dismiss for Improper Venue in Response to Plaintiffs' First Amended Complaint (“Second Motion to Dismiss”; ECF No. 39). For the reasons set forth below, the Court denies as moot the First Motion to Dismiss and denies the Second Motion to Dismiss.

         I. BACKGROUND

          Plaintiffs are residents of Colorado. (ECF No. 24 at 1, ¶ 1.) Defendant is a Utah corporation in the business of procuring insurance, and whose principal place of business is in Salt Lake City, Utah. (ECF Nos. 24 at 1, ¶ 2 & 14 at 2.) Silverhawk Enterprises, Inc. (“Silverhawk”), is a Utah corporation that builds custom homes, and whose principal place of business is located in Utah. (ECF Nos. 24 at 2-3, ¶¶ 6, 9 & 37 at 2.)

         In 2012, Plaintiffs hired Silverhawk to build an approximately $800, 000 home in Salida, Colorado (the “Home”). (ECF No. 24 at 2, ¶ 6.) Before construction commenced, Silverhawk contacted Defendant's employee, Beat Koszinowski (“Koszinowski”), to obtain liability insurance for the project. (Id. at 3, ¶ 9.) Koszinowski had been Silverhawk's insurance agent for several years. (Id.)

         Since the Home was to be built outside of Utah, the state where Silverhawk is based and most of its construction projects occur, Silverhawk's principal, Thomas Hasleton (“Hasleton”), allegedly “approached Koszinowski for the express purpose of ensuring that the work on the [Home] would be covered by liability insurance.” (Id.) In doing so, Hasleton allegedly described the project to Koszinowski, advised him that the Home would be built in Colorado, and expressly directed him to acquire full coverage for the project. (Id.) Koszinowski then procured for Silverhawk liability insurance policies from Mid-Continent Casualty Company (“Mid-Continent”). (Id. at 2, ¶¶ 7-8.)

         Sometime after Koszinowski had procured the initial insurance policy, Silverhawk's lender wanted proof that the project was insured. (Id. at 3, ¶ 10.) Thus, the lender requested that Silverhawk have Defendant complete two Evidence of Property Insurance (“EOI”) forms with respect to the coverage Defendant had procured for Silverhawk for the project. (Id.) In the first EOI, Defendant stated that Silverhawk was covered by an “Installation/Builders Risk/Course of Construction Coverage” policy issued by Great American Insurance Group (who is apparently Mid-Continent's parent company) for a period of one-year starting on November 3, 2011. (Id.; see also ECF No. 38-1 at 1.) In addition, the first EOI stated that the “project location” was in Salida, Colorado. (ECF No. 24 at 3, ¶ 10; see also ECF No. 38-1 at 1.)

         In the second EOI, Defendant stated that Silverhawk was covered by a policy issued by Great American Insurance Group for “[b]lanket builders risk/course of construction of residential 1-6 family dwellings within the States of Utah, Wyoming and Colorado.” (ECF No. 24 at 3, ¶ 10; see also ECF No. 38-1 at 2.) Additionally, the second EOI stated that the property was located in Salida, Colorado. (ECF No. 24 at 3, ¶ 10; see also ECF No. 38-1 at 2.) Plaintiffs claim that Defendant also “issued Certificates of Liability Insurance for each of the years that the [H]ome was being constructed, indicating that Silverhawk was insured under the Mid-Continent Policies for work on the [H]ome.” (ECF No. 24 at 3, ¶ 10.)

         According to Plaintiffs, as a result of Defendant's alleged representations to Silverhawk that the project was covered by liability insurance, Silverhawk in turn informed Plaintiffs that the project was insured. (Id. at 3-4, ¶¶ 9, 11.) Plaintiffs allege that they “relied on the existence of liability insurance in deciding to move forward with the construction of their home by Silverhawk.” (Id. at 4, ¶ 11.)

         Construction began near the end of 2012 and the Home was substantially completed by the end of 2014. (Id. at 2, 4, ¶¶ 6, 12.) After the Plaintiffs moved into the Home, they discovered several defects in the property that they believed were caused by Silverhawk and its subcontractors. (Id. at 4, ¶ 12; see also ECF No. 37 at 3.) Plaintiffs claim that they spent approximately $260, 000 correcting the defects and repairing the damage. (Id.)

         On September 28, 2015, Plaintiffs brought action against Silverhawk, Hasleton, and others in the Chaffee County District Court in Salida, Colorado (the “state action”). (Id. at 4, ¶ 14.) In that lawsuit, Plaintiffs sought reimbursement for the expenses they incurred in correcting the construction defects. (Id.) After Silverhawk informed Koszinowski of the claims against it, Defendant reported the state action to Mid-Continent. (Id. at 4, ¶ 15.) Mid-Continent, however, denied coverage to Silverhawk for the claims made against it by the Plaintiffs. (Id.) In particular, Mid-Continent denied Silverhawk's “request for a defense and indemnity because each of its Policies [with Mid-Continent] contained endorsements that eliminated coverage for liability arising out of Silverhawk's ongoing or completed construction operations performed in the State of Colorado.” (Id. at 4-5, ¶ 15.) Thus, Plaintiffs allege that Defendant “acquired no liability coverage at all for Silverhawk for the construction of the [Home].” (Id. at 5, ¶ 15.)

         After being denied insurance coverage, Silverhawk and Hasleton expended approximately $90, 000 over the next three years defending themselves in the state action. (Id. at 5, ¶ 16; see also ECF No. 37 at 4.) In August 2018, the parties to the state action reached a settlement, whereby Silverhawk and Hasleton agreed to pay $97, 500 as partial reimbursement for the expenses Plaintiffs incurred to correct the construction defects. (Id.) “Silverhawk and Hasleton subsequently assigned their rights and claims against [Defendant] under Utah law to the [Plaintiffs].” (ECF No. 37 at 4; see also ECF No. 24 at 5, ¶ 20.) This lawsuit followed. (ECF No. 1.)

         II. PROCEDURAL HISTORY

         On January 18, 2019, Plaintiffs filed this action against Defendant. (Id.) In the Amended Complaint, Plaintiffs assert four claims against Defendant. Three of these claims-negligent failure to procure, breach of contract to procure insurance, and negligent misrepresentation-were assigned to Plaintiffs by Silverhawk and Hasleton and are brought under Utah law. (ECF No. 37 at 4; see also ECF No. 24 at 7-9.) While the fourth and final claim is also one for negligent misrepresentation, this claim is asserted against Defendant under Colorado law. (ECF No. 37 at 4; see also ECF No. 24 at 6.)

         On March 1, 2019, Defendant filed its First Motion to Dismiss. (ECF No. 14.) In that motion, Defendant asks the Court to dismiss Plaintiffs' Complaint “and/or change venue to the U.S. District Court for the District of Utah pursuant to Fed.R.Civ.P. 12(b)(3).” (Id. at 1.) On March 12, 2019, Plaintiffs filed an Amended Complaint while Defendant's First Motion to Dismiss was still pending before ...