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Lavaland, LLC v. Erie Insurance Exchange

September 22, 2009

LAVALAND, LLC, PLAINTIFF,
v.
ERIE INSURANCE EXCHANGE, DEFENDANT.



The opinion of the court was delivered by: Herndon, Chief Judge

MEMORANDUM AND ORDER

I. Introduction

Before the Court is Defendant's motion to dismiss for lack of subject matter jurisdiction (Doc. 7). Plaintiff has not filed a response to Defendant's motion but instead has filed a motion for leave to amend its Complaint (Doc. 11). For the reasons discussed below, the Court determines that it does not have subject matter jurisdiction and therefore GRANTS Defendant's motion to dismiss (Doc. 7).

II. Background

Plaintiff Lavaland, LLC ("Lavaland") filed a two count complaint against Erie Insurance Exchange ("Erie"). Lavaland alleges that it owned a two story commercial building in Belleville, Illinois which was insured by Erie (Doc. 2 ¶¶4 & 5). On March 12, 2008, the commercial building was accidently ignited by roofing contractor, Reinhardt Building & Roofing, Inc. when it attempted to install a bituminous rubber torch down roof (Id. at ¶6). Lavaland alleges that Erie adjuster Bruce Kauffman told Lavaland owner Alba Vusch that Erie would attempt to repair the smoke damaged wood, but if it was unable to do so that Erie would replace the damaged wood (Id. at ¶ 8). All Clean Restoration Services, Inc. was hired to remediate the smoke damaged wood with dry ice, but were unsuccessful in their attempts. Kauffman then hired ServPro of Champaign-Urbana to remediate the wood with soda blasting, but they too were unsuccessful (Id.) Erie hired Russ Erlinger Construction Co., Inc. to provide an estimate for the repair of the building but later denied Erlinger's bid and sent Kauffman to inspect the amount of damage and prepare a preliminary estimate of repair costs (Id. at ¶ 9-10). Lavaland hired Genco Construction to prepare an estimate of repairs which Lavaland alleges was the only complete estimate to repair all of the damage caused by the fire (Id. at ¶ 11). Kauffman provided a second estimate of the repairs, suggesting that the walls could be cleaned and a false roof installed to cover the burnt and smoke damaged wood. Kauffman sent the Richardson Engineering Group, Inc. to review the building and determine if installing a false ceiling was structurally viable (Id. at ¶ 12).

In August, 2008 Erie replaced Kauffman with "Senior Property Claims Specialist" Trevor Rittick who, without seeing the damage to the building, provided an estimate that repair costs should not exceed $83,200.33, a figure Lavaland alleges is far lower than the estimates provided by both Genco and Kauffman (Id. at ¶ 13). Lavaland alleges that Erie rejected Genco's estimate on the erroneous belief that Genco's estimate required nominal lumber as opposed to dimensional lumber (Id. at ¶ 14). Rittick also allegedly refused the estimate because it recommended the roof be removed and replaced, but Lavaland argues that the roof must be replaced because much of the decking, rafters, and support are charred.

Lavaland's Complaint alleges breach of contract against Erie, arguing that Erie breached their contract in numerous ways by, among other things, rejecting and refusing to approve estimates, refusing to repair the entire roof, insisting upon the lowest estimate even though it was written by Rittick who had allegedly never seen the building, and failing to provide for mold remediation. Count II of Lavaland's Complaint also alleges that Erie has violated § 155 of the Illinois Insurance Code. In its Complaint, Lavaland alleges that the Court had jurisdiction based on diversity jurisdiction (Doc. 2 ¶1). Plaintiff alleged that it was an Illinois limited liability company while Erie Insurance Exchange was an alleged foreign insurance company having its principal place of business in Pennsylvania.

Defendant has filed a motion to dismiss for lack of jurisdiction, arguing that this Court does not have diversity jurisdiction over this action as Lavaland is a citizen of Illinois (Doc. 7). Plaintiff does not dispute that diversity jurisdiction is lacking, but instead has filed a motion to amend its Complaint in order to proceed against the diverse members of Erie (Doc. 11). Defendant has filed a response, opposing Plaintiff's motion to amend the Complaint (Doc. 16). Plaintiff has filed a reply (Doc. 18).*fn1

III. Discussion

A. Legal Standard

Defendants' Motion is made pursuant to FEDERAL RULE OF CIVIL PROCEDURE 12(b)(1), which allows a party to raise as a defense, by motion, a federal court's lack of subject matter jurisdiction over Plaintiff's claims. FED.R.CIV.P. 12(b)(1). The Seventh Circuit has stated that although a plaintiff may easily defeat a Rule 12(b)(6) motion to dismiss for failure to state a claim, the same is not true for a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction. Bastien v. AT & T Wireless Services, Inc., 205 F.3d 983, 990 (7th Cir. 2000).When a defendant makes this challenge, the plaintiff bears the burden of establishing jurisdiction. The Court must "accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff." St. John's United Church of Christ v. City of Chicago, 502 F.3d 616, 625 (7th Cir. 2007) (citation omitted). Yet, if necessary, the Court may also look beyond the jurisdictional allegations to evidence outside of the pleadings to determine whether federal subject matter jurisdiction exists. Id. (citations omitted).

B. Analysis

Defendant has filed a motion to dismiss for lack of jurisdiction, arguing that this Court does not have jurisdiction because Plaintiff Lavaland and Defendant Erie Insurance Exchange are both citizens of Illinois. Plaintiff's Complaint alleges that this Court has jurisdiction over this case pursuant to 28 U.S.C. § 1332(a) and that both parties are diverse because Lavaland is a limited liability company with its principal place of business in Illinois and Erie is a foreign insurance company with its principal place of business in Pennsylvania (Doc. 2 ¶2 &3). However, Defendant argues that it is a reciprocal insurance exchange organized under the Insurance Company Law of Pennsylvania and that control of the insurance exchange is vested in its subscribers, some of which are citizens of Illinois.

28 U.S.C. ยง 1332 provides that a district court "shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between - (1) citizens of different states." When determining diversity jurisdiction, a corporation is considered a citizen of the State its incorporated in and the State where it has its principal place of business. However, an unincorporated business is a citizen of the state where its owners, partners, or other principals are located. Meyerson v. Harrah's East Chicago Casino, 266 ...


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