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Zaragon Holdings, Inc. v. Indian Harbor Insurance Co.

April 25, 2008


The opinion of the court was delivered by: Judge Joan H. Lefkow


Zaragon Holdings, Inc. ("Zaragon") brought this action against Indian Harbor Insurance Company ("Indian Harbor"), alleging that Indian Harbor wrongfully denied an insurance claim for damage to property owned by Zaragon. Zaragon's claim contains three counts: (I) Indian Harbor's wrongful denial of the claim caused Zaragon to suffer economic damages; (II) Indian Harbor breached the insurance contract in violation of Illinois law; and (III) Indian Harbor vexatiously and unreasonably denied Zaragon's claim in violation of Illinois law.

Before the court is Indian Harbor's motion to dismiss Zaragon's complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Indian Harbor argues that Zaragon fails to state a claim because it relies on unrelated insurance policies and inapplicable state law. Alternatively, Indian Harbor moves for a more definite statement under Rule 12(e) and moves to strike portions of the insurance policy attached to Zaragon's complaint pursuant to Rule 12(f).

For the following reasons, the court will grant in part and deny in part Indian Harbor's motion to dismiss and deny Indian Harbor's motions to strike and for a more definite statement [#14].


Indian Harbor removed this action to federal court from the Circuit Court of Cook County pursuant to 28 U.S.C. § 1332. Though Zaragon does not contest federal jurisdiction, the court has an independent duty to verify its own jurisdiction. See Johnson v. Wattenbarger, 361 F.3d 991, 992 (7th Cir. 2004). Whether Zaragon's claim satisfies the $75,000 amount in controversy required by § 1332 is, at first glance, unclear. Zaragon seeks "in excess of $50,000" through each of three similar legal theories. In addition, Zaragon attached to its complaint more than fifty receipts, which it characterizes as a "true and correct copy" of the insurance claim it submitted to Indian Harbor; by the court's calculation, these receipts total less than $60,000. See Compl. at 2 & ex. B.

In support of its assertion of federal jurisdiction, however, Indian Harbor submits a document it describes as "Plaintiff's Property Loss Notice," which states that the "probable amount [of the] entire loss" is $120,000. Such estimates can serve as proof of the amount in controversy. See Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 541 (7th Cir. 2006). Moreover, statutory or punitive damages may count toward the amount in controversy when they are available as a matter of state law, so long as there is not a legal certainty that the plaintiff will be unable to recover enough to satisfy the jurisdictional amount. See Del Vecchio v. Conseco, Inc., 230 F.3d 974, 978 (7th Cir. 2000); see also Jump v. Schaeffer & Assocs. Ins. Brokerage, Inc., 123 Fed. Appx. 717, 719--20 (7th Cir. 2005). Zaragon alleges that Indian Harbor's denial of its claim was "vexatious and unreasonable," which could entitle it to attorney's fees and additional statutory damages of $60,000 or 60% of compensatory damages. 215 Ill. Comp. Stat. Ann. 5/155. Where a party's allegation of the amount in controversy is uncontested, as is the case here, a court must accept it "unless it is clear 'beyond a legal certainty that the plaintiff would under no circumstances be entitled to recover the jurisdictional amount.'" Cadek v. Great Lakes Dragaway, Inc., 58 F.3d 1209, 1211--12 (7th Cir. 1995) (quoting Risse v. Woodard, 491 F.2d 1170, 1173 (7th Cir. 1974)). In light of the Plaintiff's Property Loss Notice and the possibility of statutory damages, the court concludes that there is no legal certainty that the amount in controversy is less than $75,000 and, therefore, that it has jurisdiction over the subject matter of this case.


Zaragon purchased an insurance policy from Indian Harbor for apartment buildings owned by Brahms Associates LLC, a Zaragon subsidiary. Compl. at 1. The policy apparently contains no choice of law provision. The insured property was located in Louisville, Kentucky. The parties' relationship, however, is not exclusive to Kentucky. Zaragon is incorporated in Illinois, and Indian Harbor is incorporated in North Dakota. The insurance contract was signed and delivered in Illinois. Pl.'s Resp. at 2. Zaragon was a named beneficiary of the policy, which ran from August 15, 2006 to August 15, 2007. Compl. at 1.

Zaragon alleges that the buildings were damaged by driving rain on September 22 and 23, 2006. Compl. at 2. Zaragon made a claim for damages with Indian Harbor, which Indian Harbor, through U.S. Adjustment Corp., denied on December 5, 2006. Id. Zaragon now challenges the denial of the claim. Zaragon states three interrelated theories for recovery. Count I alleges that "as a direct or proximate result of the wrongful acts or omissions on the part of Defendant, Plaintiff has become liable for large sums of money for repair and rehabilitation for it[]s buildings . . . resulting in economic damages to the Plaintiff." Id. at 1--2. Count II alleges that Indian Harbor breached the insurance contract in violation of Illinois law, specifically 215 Ill. Comp. Stat. Ann. 5/155. Id. at 3--4. Count III alleges that Indian Harbor vexatiously and unreasonably denied Zaragon's insurance claim in violation of 215 Ill. Comp. Stat. Ann. 5/155. Id. at 4--5.


A defendant may bring a motion under Rule 12(b)(6) to dismiss a complaint for failure to state a claim upon which relief may be granted. E.E.O.C. v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007). "To state such a claim, the complaint need only contain a 'short and plain statement of the claim showing that the pleader is entitled to relief.'" Id. (quoting Fed. R. Civ. P. 8(a)(2)). For the purposes of a Rule 12(b)(6) motion, the court takes as true all well-pleaded allegations in the plaintiff's complaint and draws all reasonable inferences in favor of the plaintiff. Jackson v. E.J. Brach Corp., 176 F.3d 971, 977 (7th Cir. 1999). In order to survive a motion under Rule 12(b)(6), the complaint must describe the claim in sufficient detail to give the defendant "fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, - U.S. -, 127 S.Ct. 1955, 1964, 167 L.Ed. 2d 929 (2007). The allegations must also be "enough to raise a right to relief above the speculative level." Twombly, 127 S.Ct. at 1965 (citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216, at 235--36 (3d ed. 2004)).

In ruling on a motion under Rule 12(e), the court considers whether "a pleading to which a responsive pleading is allowed . . . is so vague or ambiguous that the party cannot reasonably prepare a response." Fed. R. Civ. P. 12(e). If so, the court may order a more definite statement. Id. The standard for a Rule 12(e) motion is interrelated with the minimum requirement under Rule 8(a)(2) of a short, plain statement of the claim. See Taurus IP, LLC v. Ford Motor Co., - F. Supp. 2d -, 2008 WL 656533, at *4 (W.D. Wis. Feb. 4, 2008). Rule 12(e) is "designed to strike at unintelligibility rather than want of detail. If the pleading meets the requirements of Rule 8 . . . and fairly notifies the opposing party of the nature of the claim, a motion for a more definite statement should not be granted." Flentye v. Kathrein, 485 F. Supp. 2d 903, 911 (N.D. Ill. 2007) (quoting Wishnick v. One Stop Food & Liquor Store, Inc., 60 F.R.D. 496, 498 (N.D. Ill. 1973)).

A Rule 12(f) motion asks the court to "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). Motions to strike are generally disfavored because of the likelihood that they may only serve to delay proceedings. Heller Financial, Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989). Nevertheless, a motion to strike may sometimes be "a useful means of removing 'unnecessary clutter' from a case, which will in effect expedite the ...

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