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Kmart Corp. v. Footstar

April 14, 2010

KMART CORPORATION, A MICHIGAN CORPORATION, PLAINTIFF,
v.
FOOTSTAR, INC., A DELAWARE CORPORATION, AND LIBERTY MUTUAL FIRE INSURANCE COMPANY, A WISCONSIN CORPORATION DEFENDANTS.



The opinion of the court was delivered by: Susan E. Cox United States Magistrate Judge

Magistrate Judge Susan E. Cox

MEMORANDUM OPINION AND ORDER

On July 27, 2005, Judy Patrick ("Patrick") was shopping at a Kmart and, while being assisted by an employee, Patrick was struck and injured by a stroller that fell off a shelf. Patrick sued Kmart and the case settled. In this case, Kmart seeks indemnification from Footstar, Inc ("Footstar") and Footstar's insurer, Liberty Mutual Fire Insurance Company ("Liberty Mutual"), because the employee helping Patrick was, allegedly, a Footstar employee. Liberty Mutual now seeks to dismiss two counts against it in the Amended Complaint, Counts III and IV, arguing that Kmart has not pleaded sufficient facts to show compliance with certain conditions precedent in the relevant insurance policy, which is attached to the Amended Complaint as Exhibit B. That motion is denied [dkt 50].

I. Procedural Background

On June 15, 2009, Kmart filed its original complaint against Footstar, seeking indemnification for costs incurred in the Patrick suit. The original complaint contained two counts against Footstar only. On October 30, 2009, Kmart filed its Amended Complaint adding Liberty Mutual as a defendant. The Amended Complaint alleges four counts: (I) breach of contract against Footstar; (II) declaratory judgment against Footstar; (III) breach of contract against Liberty Mutual; and (IV) declaratory judgment against Liberty Mutual.

Subsequent to the Court setting a briefing schedule for the instant motion, Kmart moved for leave to file a Second Amended Complaint [dkt 63]. The Court denied that motion but noted that we would consider the proposed Second Amended Complaint when deciding this motion. As discussed below, the Court finds that the Amended Complaint is sufficient for purposes of this motion. However, the Second Amended Complaint bolsters Kmart's opposition to this motion. The Court will, therefore, give leave to Kmart to file its Proposed Second Amended Complaint.

II. Facts

Because there are two complaints, the Amended Complaint, upon which the motion to dismiss is based, and the proposed Second Amended Complaint, which Kmart heavily relied on during oral argument on this motion, we must distinguish the two complaints. For purposes of clarity we will briefly outline the allegations in the Amended Complaint and then highlight certain additional allegations that are included in the proposed Second Amended Complaint.

A. Amended Complaint

In its Amended Complaint, Kmart alleges that in June 1995, Kmart and Footstar entered into an agreement with respect to the operation of the footwear departments in various Kmart stores. On August 24, 2005, a new agreement was reached that superseded the June 1995 agreement and remained in effect through December 31, 2008 (hereinafter the "Master Agreement"), which is attached to the Amended Complaint as Exhibit A. The Master Agreement provided that Footstar would operate (by their partially and wholly owned subsidiaries) certain footwear departments in Kmart. This included Kmart store number 4296, where Patrick was injured.

Kmart then alleges that the Master Agreement contained a provision requiring Footstar to provide insurance for Kmart for any personal injury arising out of Footstar's work.*fn1 Kmart alleges that Footstar contracted with Liberty Mutual and obtained a Commercial General Liability Policy (hereinafter the "Policy").*fn2 Under the Policy, "insured" is defined to include, any person, organization, state or other political subdivision, trustee or estate for whom you have agreed in writing to provide liability insurance. . . .*fn3 Kmart alleges, therefore, that it is an insured under the Policy.

The Amended Complaint also claims that on May 17, 2006, Patrick and her husband filed suit for the injuries Patrick suffered at the Kmart store (hereinafter the "Underlying Suit").*fn4 The accident occurred, according to Kmart, while an employee of Footstar was helping Patrick. But Patrick filed suit against only Kmart.*fn5 In oral argument, however, counsel for Kmart stated that there was a second amended complaint in the Underlying Suit that named Footstar as a defendant, but the Court does not have this document and, therefore, we cannot rely on it. Kmart alleges that it "timely notified" Footstar of the Underlying Suit and that, in turn, Footstar notified Liberty Mutual.*fn6 Liberty Mutual then provided a defense for Footstar but refused to defend and indemnify Kmart.*fn7 Kmart also alleges that it and the Patricks arranged a mediation conference and that Liberty Mutual and Footstar attended that conference, but did not offer any money towards settlement.*fn8

Kmart further alleges that it attempted, throughout the pendency of the Underlying Suit, to acquire a copy of the Policy, to determine whether it was covered under the Policy but that Liberty Mutual and Footstar refused.*fn9

The Amended Complaint further alleges that on October 28, 2008, Kmart settled the Underlying Suit with the Patricks for $300,000. In addition, Kmart alleges that it incurred $141,755.92 in attorneys fees in defending the Underlying Suit.

B. Proposed Second Amended Complaint

In its proposed Second Amended Complaint Kmart adds allegations to those already contained in the Amended Complaint. First, Kmart adds the allegation that the terms of the Policy did not require Kmart to notify Liberty Mutual.*fn10 Furthermore, Kmart alleges that Liberty Mutual never raised any complaints with regard to Kmart's notification, or lack of notification, to Liberty Mutual during the pendency of the Underlying Suit.*fn11 Kmart also alleges that Liberty Mutual knew Kmart had been sued but never contacted Kmart to ask it if it wanted Liberty Mutual to provide a defense.*fn12 Kmart references documents attached to its proposed Second Amended Complaint to support certain allegations that Liberty Mutual attempted to avoid providing coverage to Kmart and, by avoiding its obligation, Kmart was permitted to settle the Underlying Suit with or without Liberty Mutual's consent.*fn13 And though Kmart has already alleged that Liberty Mutual attended the mediation conference, it now adds to that ...


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