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Pittsfield Development LLC v. The Travelers Indemnity Co.

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

July 22, 2019



          John Z. Lee, United States District Judge.

         Plaintiffs, Pittsfield Development, LLC (“Pittsfield Development”), Pittsfield Residential II, LLC (“Pittsfield Residential”), and Pittsfield Hotel Holdings, LLC (“Pittsfield Hotel”), have filed this lawsuit against Defendant, The Travelers Indemnity Company (“Travelers”), for breach of contract and, in the alternative, reformation of contract. Travelers has moved to dismiss certain of Plaintiffs' claims pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(1), and 12(b)(6). For the following reasons, Travelers's motion [36] is granted in part and denied in part.

         Background [1]

         Pittsfield Development purchased the Pittsfield Building (“the Building”), located at 55 East Washington Street in Chicago, Illinois, in 2000. Am. Compl. ¶¶ 1, 12, ECF No. 25. The Building has since been divided into four separately deeded subdivisions, three of which are owned by Plaintiffs: Pittsfield Development owns and operates the ground floor, the basement, the subbasement, a portion of floor 22, and all of floors 23-40; Pittsfield Residential owns floors 10- 12; and Pittsfield Hotel owns and operates floors 2-9. Id. ¶¶ 1-5, 8-9.

         Travelers has been Pittsfield Development's insurance carrier since the purchase of the Building in 2000. Id. ¶ 14. Pittsfield Development obtained insurance for the Building through insurance brokers Carbone & Malloy, Inc. (“Carbone”). Id. ¶ 15. According to Plaintiffs, Carbone acted as Travelers's agent-not Plaintiffs'-in the course of these transactions. Id. ¶ 16.

         Pittsfield Development's insurance policy from Travelers provides that any affiliated companies in which the first named insured maintains more than 50% ownership interest and has active management are additional named insureds, provided that the first named insured notifies Travelers within 90 days from when the affiliate or subsidiary company was acquired or formed. Id. ¶ 13. Plaintiffs allege, however, that while preparing insurance applications for Pittsfield Development, Carbone erroneously listed “Pittsfield Building, LLC” as the first named insured on the policy--but that entity does not exist and did not exist at the time the policy was first issued. Id. ¶¶ 18-19. Plaintiffs state that they repeatedly asked Travelers to correct this error, but it was never fixed. Id. ¶ 20.

         Floors 2-9 of the Building were conveyed to Pittsfield Hotel in 2015, and Plaintiffs allege that Pittsfield Development timely notified Carbone of the change. Id. ¶ 22. Subsequently, in June 2016, Carbone prepared another application for insurance coverage (the “Application”) for the Building. Id. ¶ 23. The Application again incorrectly listed Pittsfield Building, LLC as the first insured, and listed Pittsfield Development and Pittsfield Residential as additional insureds. See id., Ex. 2 (“Application”) at 2[2], ECF No. 25-2. Pittsfield Hotel was not listed on the Application, but the building description included “offices 2-8th flr's” and “9-12th apts, ” id. at 3, and Pittsfield Hotel owns floors 2-9. Am. Compl. ¶ 4. After receiving the Application, Travelers issued an insurance policy (the “Policy”) covering the Building through July 2017. Id. ¶ 24. The Policy provided coverage for physical loss or damage to the Building, including floors 2-9. Id. ¶¶ 25- 28. In accordance with the Application, the first named insured on the Policy was Pittsfield Building, LLC. See id., Ex. 1 (“Policy”) at 2[3], ECF No. 25-1.

         Two pipes burst on the tenth floor of the Building on December 17, 2016, causing water damage to floors 1-10. Am. Compl. ¶¶ 33-34. Plaintiffs notified Travelers of the damage on the day it occurred. Id. ¶ 35. Travelers's claims adjuster inspected the property on January 23, 2017. Id. ¶ 38. In July 2017, Plaintiffs sent Travelers an estimate of their damages, in the amount of $8, 592, 961.40. Id. ¶ 41. The next month, Travelers sent Plaintiffs checks for $147, 589.04 and $43, 212.74, for partial payment of the damages. Id. ¶¶ 43, 45. It then sent a final check and estimate of damages to Plaintiffs in January 2018. Id. ¶ 46. Travelers estimated the total amount of damages at $401, 537.95. Id. ¶ 46. Plaintiffs attribute the discrepancy between the two estimates to the fact that Travelers reportedly found that floors 2-9 were vacant when the damage occurred, and thus replacement costs could not be claimed for those floors. Id. ¶¶ 47-48. According to Plaintiffs, the floors were under construction, not vacant. Id. ¶ 48.

         Plaintiffs filed this action, bringing claims for breach of contract (Count I) and, in the alternative, reformation of contract based on mutual mistake (Count II).

         Legal Standard

         I. Federal Rule of Civil Procedure 12(b)(1)

         A motion to dismiss under Rule 12(b)(1) tests the jurisdictional sufficiency of the complaint. “When ruling on a motion to dismiss for lack of subject-matter jurisdiction under [Rule] 12(b)(1), the district court must accept as true all well-pleaded factual allegations, and draw reasonable inferences in favor of the plaintiff.” Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995). But the court “may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists.” Capitol Leasing Co. v. F.D.I.C., 999 F.2d 188, 191 (7th Cir. 1993) (quoting Grafon Corp. v. Hauserman, 602 F.2d 781, 783 (7th Cir. 1979)).

         “[I]f the complaint is formally sufficient but the contention is that there is in fact no subject matter jurisdiction, the movant may use affidavits and other material to support the motion.” United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003) (emphasis in original), overruled on other grounds by Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845, 848 (7th Cir. 2012). “The burden of proof on a 12(b)(1) issue is on the party asserting jurisdiction.” Id.

         II. Federal Rules of Civil ...

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