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Sexton v. American National Property and Casualty Co.

United States District Court, D. Kansas

July 27, 2015

RONALD SEXTON, Plaintiff,
v.
AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY, Defendant.

MEMORANDUM AND ORDER

ERIC F. MELGREN, District Judge.

Plaintiff Ronald Sexton brings suit against American National Property and Casualty Company ("ANPAC"). He claims that ANPAC had a duty to defend him in underlying litigation, and ANPAC's failure to defend was in bad faith. ANPAC filed a Motion to Dismiss (Doc. 7) asserting that Sexton fails to state a claim for relief because ANPAC had no duty to defend Sexton. Because the Court agrees with ANPAC, the Court grants ANPAC's motion.

I. Factual and Procedural Background

Plaintiff Sexton is a resident of Kansas who owns a home in Mission Hills, Kansas. Defendant ANPAC is a property and casualty insurance company with its principal place of business in Springfield, Missouri. The current dispute between these parties is related to an underlying dispute over the construction of a driveway at Sexton's home.

On September 27, 2010, Sexton entered into a contract with Tholen Construction to have a driveway installed at his home. As part of the contract, Sexton agreed to pay Tholen Construction a total of $126, 942 in payments to become due at various stages of completion. Tholen Construction hired several subcontractors to perform the work, including Long's Lawn and Landscape and C.A. Enterprises.

ANPAC was Tholen Construction's insurance company. ANPAC issued a Contractor Advantage Policy of insurance, effective December 7, 2010, to December 7, 2011. Tholen Construction agreed that it would add Sexton as an additional insured to Tholen Construction's insurance policy, and Sexton advanced payment to Tholen Construction for the additional insured coverage.

During and after the construction, a dispute arose between Sexton and Tholen Construction, and its subcontractors, regarding the performance of work on the project. Although the contract required the completion of the driveway in approximately seven weeks, Tholen Construction took over one year to install the driveway and allegedly walked off of the job in October 2011, prior to the driveway's completion. In addition, Tholen Construction damaged Sexton's property during the course of construction.

Sexton alleges that during the construction of the driveway, he was forced to pay C.A. Enterprises, one of Tholen Construction's subcontractors, directly to avoid the threat of a lien being placed on his property because Tholen Construction was not timely paying its subcontractors. Sexton paid C.A. Enterprises more than $50, 000. Tholen Construction was aware that Sexton had made payments to C.A. Enterprises.

On March 5, 2012, Tholen Construction and Long's Lawn and Landscape filed a Petition against Sexton in the district court in Johnson County, Kansas. On the same day, Tholen Construction filed a motion to stay pending mandatory arbitration. On March 30, 2012, Tholen Construction filed its Demand for Arbitration with the American Arbitration Association. The Johnson County lawsuit and the arbitration are referred to as the "underlying litigation."

In the underlying litigation, Tholen Construction alleged that Sexton failed to pay Tholen Construction for the fair value of the work provided.[1] On May 2, 2012, Sexton filed an answer and asserted several counterclaims, including fraud, Kansas Consumer Protection Act ("KCPA") violations, slander of title, negligence, and breach of contract. On May 22, 2013, the district court in Johnson County compelled arbitration, and arbitration began in June 2013.

Sexton filed this suit in this Court against ANPAC on August 1, 2014. At the time it was filed, the arbitration hearing had already taken twenty-three days and was ongoing.[2] Sexton, as an additional insured under Tholen Construction's insurance contract with ANPAC, contends that several of the claims asserted against him in the underlying litigation triggered potential coverage under the insurance policy. He asserts that ANPAC has repeatedly refused to defend him in the underlying litigation, and ANPAC's refusal to defend is in bad faith. Sexton also contends that ANPAC repeatedly favored the rights of its other insured, Tholen Construction, to the detriment of Sexton's rights under the policy. Sexton asserts four claims: (1) declaratory relief-duty to defend, (2) breach of contract, (3) breach of good faith and fair dealing, and (4) equitable estoppel. The first three claims are all related to ANPAC's alleged failure to defend. The fourth claim asserts that ANPAC should be equitably estopped from claiming any forfeiture or cancellation of the policy due to Tholen Construction's alleged failure to pay. Defendant ANPAC has now filed a Motion to Dismiss stating that Sexton fails to state a claim.

II. Legal Standard

Under Rule 12(b)(6), a defendant may move for dismissal of any claim for which the plaintiff has failed to state a claim upon which relief can be granted.[3] Upon such motion, the court must decide "whether the complaint contains enough facts to state a claim to relief that is plausible on its face.'"[4] A claim is facially plausible if the plaintiff pleads facts sufficient for the court to reasonably infer that the defendant is liable for the alleged misconduct.[5] The plausibility standard reflects the requirement in Rule 8 that pleadings provide defendants with fair notice of the nature of the claims as well as the grounds upon which each claim rests.[6] Under Rule 12(b)(6), the court must accept as true all factual allegations in the complaint, but need not afford such a presumption to legal conclusions.[7] Viewing the complaint in this manner, the court must decide whether the plaintiff's allegations give rise to more than speculative possibilities.[8] If the allegations in the complaint are "so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs have not nudged their claims across the line from conceivable to plausible.'"[9]

Both parties rely upon documents outside of the pleadings. Sexton attached to his Complaint a portion of the insurance policy between ANPAC and Sexton. ANPAC attached to its Motion to Dismiss (1) the complete insurance policy, (2) a copy of the Demand for Arbitration (underlying litigation), and (3) a July 17, 2013, letter from ANPAC denying Sexton's request to defend him in the underlying litigation. Two of these documents, the insurance policy and the Demand for Arbitration, are central to Sexton's claims and are referenced throughout the Complaint.[10] Notwithstanding the general principle that the Court should not consider matters outside the complaint without converting a motion to dismiss to a motion for summary judgment, "if a plaintiff does not incorporate by reference or attach a document to its complaint, but the document is referred to in the complaint and is central to the plaintiff's claim, a defendant may submit an indisputably authentic copy to the court to be considered on a motion to dismiss."[11] Thus, the Court will consider the insurance policy and the Demand for Arbitration in deciding ANPAC's Motion to Dismiss.[12]

Sexton, nevertheless, argues that if the Court considers the documents that ANPAC attached to its Motion to Dismiss, the Court should convert ANPAC's motion to one for summary judgment. Sexton then includes numerous documents with his response. The Court declines to consider these additional documents or convert the motion to one for summary judgment. As noted above, the two documents that the Court will consider are repeatedly referred to throughout the Complaint and are central to Sexton's claim. Accordingly, it is ...


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