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CXA Corp. v. American Family Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

November 7, 2016

CXA CORPORATION, Plaintiff,
v.
AMERICAN FAMILY INSURANCE COMPANY, Defendant.

          MEMORANDUM OPINION AND ORDER

          Honorable Marvin E. Aspen United States District Judge.

         Presently before us is Defendant American Family Insurance Company's ("American Family") motion to join The Austin 1900 Building Corporation ("Austin 1900") as a plaintiff in this suit brought by Plaintiff CXA Corporation ("CXA") against American Family for breach of an insurance contract. (Mot. for Joinder (Dkt. No. 28).) For the reasons stated below, we deny American Family's motion.

         BACKGROUND

         American Family issued an insurance policy to Austin 1900 effective March 31, 2014 through March 31, 2015 for the property at 6001 West Dickens Avenue, Chicago, Illinois (the "insured property" or the "property"). (Compl. (Dkt. No. 1), Ex A atPg. ID #12.) Austin 1900 has owned the insured property at all times relevant to this lawsuit. (Compl. ¶ 8.)

         The insurance policy contains a mortgageholders clause which provides coverage specifically to the mortgageholder for loss in certain circumstances. (Id., Ex. A. at Pg. ID #99.) Two sections of that clause are relevant here. First, under Section 2(b), American Family promises to provide coverage to the property's mortgageholder for covered losses. (Id.) Second, under Section 2(d), American Family promises to provide coverage to the mortgageholder in some instances for losses that are not covered. (Id.) Section 2(d) provides that, when the insurer denies a claim because of the named insured's act or failure to comply with the policy terms, the insurer may still provide coverage to the mortgageholder so long as the mortgageholder has "notified [the insurer] of any change in ownership, occupancy or substantial change in risk known to the mortgageholder." (Id.)

         The insurance policy identifies the mortgageholder of the property as CLMG Corporation as Servicer for Beal Bank - Nevada ("Beal Bank" or "CLMG"). (Id. at Pg. ID #78.) On or around January 8, 2014, Beal Bank assigned the note, mortgage, and loan documents for the insured property to LNV Corporation. (Compl., Ex. B at Pg. ID #130-31.) On that same day, LNV Corporation assigned the note, mortgage, and loan documents for the insured property to CXA. (Id. at Pg. ID #124-25.) On the basis of that assignment, CXA claims it is the mortgageholder of the property. (Compl. ¶ 15.)

         On or around December 15, 2014, the roof collapsed at the property. (Id. ¶ 18.) After the roof collapsed, Austin 1900 submitted an insurance claim, which American Family denied. (Compl., Ex. C at Pg. ID #136-37.) CXA claims a right to the insurance claim because it alleges it is the mortgageholder of the property. In a July 23, 2015 letter, American Family stated that the collapse resulted from uncovered "long term wear and tear, rot and deterioration, " and therefore it would not "honor any claim for damage or repair." (Id.) CXA contends that "snow and ice accumulation" caused the roof to collapse, and therefore American Family should pay for the loss. (Compl. ¶ 18.) The disagreement over whether American Family should have covered the loss forms the basis of the present suit. (Id. ¶¶ 21-25.)

         CXA filed suit against American Family on December 17, 2015, alleging that American Family breached its insurance contract with CXA, as mortgageholder, when it refused to pay CXA for losses associated with the roof collapse at the insured property. American Family filed the instant motion for joinder of Austin 1900 on July 26, 2016. (Mot. for Joinder.)

         LEGAL STANDARD

         Rule 19 governs joinder of mandatory parties. Fed.R.Civ.P. 19(a). The aim of Rule 19 is to "permit joinder of all materially interested parties to a single lawsuit so as to protect interested parties and avoid waste of judicial resources." Askew v. Sheriff of Cook Cnty., Ill. 568 F.3d 632, 634 (7th Cir. 2009); Moore v. Ashland Oil, 901 F.2d 1445, 1447 (7th Cir. 1990). The party moving for joinder has the burden to demonstrate that we should join the absent party if feasible. Florian v. Sequa Corp., No. 98 C 7459, 2002 WL 31844985, at *3 (N.D. 111. Dec. 18, 2002) (citing Pudela v. Swanson, No. 91 C 3559, 1996 WL 754106, at *4 (N.D. 111. Dec. 31, 1996); cf. NanoeXa Corp. v. Univ. of Chicago, No. 10 C 7177, 2011 WL 4729797, at *1 (N.D. 111. Oct. 6, 2011) (observing that, for the purposes of a Rule 12(b)(7) motion to dismiss for failure to join a party under Rule 19, it is the moving party's burden to demonstrate the absent party is a necessary and indispensable party under Rule 19).

         To determine if an absent party must be joined under Rule 19, we first determine whether the absent party is "required to be joined if feasible" under Rule 19(a). Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 481 (7th Cir. 2001); Moore, 901 F.2d at 1447. A party is required to be joined if feasible if:

(A) in that person's absence, the court cannot accord complete relief among existing parties; or
(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may:
(i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise ...

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