Jones Stephens Corp. v. Coastal Ningbo Hardware Manufacturing Co., Ltd.

          MEMORANDUM OPINION

          KARON OWEN BOWDRE CHIEF UNITED STATES DISTRICT JUDGE.

         Despite the tangled web of insurance coverage in this case, a relatively simple question comes before the court: for which torts are Defendants plausibly liable for allegedly incorporating a void exclusion into liability insurance policies?

         Defendants Great American E&S Insurance Co., New Century Insurance Services, Inc., and AmWINS Insurance Brokerage of California, LLC filed Rule 12(b)(6) motions to dismiss five of nine counts in Plaintiff Jones Stephens's amended complaint. (Docs. 75, 95, and 96, respectively).^[1] Defendants contend that Jones Stephens has not alleged that they plausibly committed the torts of civil conspiracy, negligence or wantonness, or to rtious interference with contract by allegedly modifying insurance policies to deny coverage to Jones Stephens for products liability claims.

         For the following reasons, the court will DENY IN PART and GRANT IN PART the motions to dismiss, after which the civil conspiracy claim against all Defendants, the negligence and wantonness claim against Great American, and the several claims the Defendants have not moved to dismiss will remain.

         I. STANDARD OF REVIEW

         A motion to dismiss challenges the legal sufficiency of a complaint. Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a defendant can move to dismiss a complaint for “failure to state a claim upon which relief can be granted.” The complaint will survive the motion to dismiss if it alleges “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

         For a complaint to be “plausible on its face, ” it must contain enough “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). And the court accepts as true the factual allegations in the complaint. Id.

         But not all allegations can defeat a motion to dismiss. “[L]abels and conclusions” and speculation “will not do.” Twombly, 550 U.S. at 555. So, the court will look only at well-pled facts, and if those facts, accepted as true, state a plausible claim for relief, then the complaint will survive the motion to dismiss. Iqbal, 556 U.S. at 678.

         II. FACTS

         Jones Stephens, an Alabama corporation, is a wholesale distributor of plumbing products and sells primarily to wholesale resellers. It purchased several products from Coastal Ningbo, a Chinese corporation, from June 2007 to August 2015 and sold those products in the United States.

         Jones Stephens required Costal Ningbo to maintain United States general liability insurance policies for the products it sold to Jones Stephens as a condition precedent for Jones Stephens's purchases. Jones Stephens also required Coastal Ningbo to name Jones Stephens as an additional insured party on those insurance policies.

         Coastal Ningbo purchased general liability insurance policies for the products it shipped to Jones Stephens from Great American. New Century and AmWINS “were the insurance brokers and agents involved in negotiating the insurance coverage.” (Doc. 68 at ¶ 4). From 2007 to 2015, Costal Ningbo periodically sent Jones Stephens updates to its proof of insurance indicating good standing and Jones Stephens's status as an additional insured under the Great American policies.

         Jones Stephens also alleges that it and Coastal Ningbo had a written contract under which Coastal Ningbo agreed to defend and indemnify Jones Stephens against claims arising out of Jones Stephens's distribution of Coastal Ningbo's products.

         In August 2015, Jones Stephens stopped buying Coastal Ningbo's products. Then, according to Jones Stephens, Coastal Ningbo repudiated its obligation to defend and indemnify Jones Stephens from liability arising out of Coastal Ningbo's products. (Doc. 68 at ¶ 31). Jones Stephens also alleges that all Defendants worked together to incorporate an exclusion into the Great American insurance policies, made effective retroactively as of the policies' commencement dates, that excluded coverage for claims arising on or after June 26, 2015. (Id. at ¶¶ 32-33). According to Jones Stephens, “[t]his exclusion creates inherent ambiguities in the applicable policies, is void as a matter of law, and violates public policy.” (Id. at ¶ 34). And Jones Stephens alleges that, after incorporating the exclusion, “Great American, counter to its obligation under its policies, without any reasonable basis, and absent any arguable reason, has systematically and continually denied Plaintiff's request for defense and indemnification for claims involving Coastal Ningbo's products.” (Id. at ¶ 35).

         Relying on these factual allegations, Jones Stephens brings nine counts in its amended complaint: (1) declaratory judgment that Great American is obligated to defend and indemnify Jones Stephens; (2) bad faith against Great American for endorsing the exclusion and denying Jones Stephens's claims; (3) breach of contract against Coastal Ningbo for refusing to defend and indemnify Jones Stephens; (4) common law indemnity against Coastal Ningbo for a specific product that it sold to Jones Stephens; (5) civil conspiracy against all Defendants for conspiring to modify the insurance policies; (6) negligence and wantonness against Great American, New Century, and AmWINS for breaching their duty of care owed to Jones Stephens by modifying the insurance policies; (7) negligent failure to procure insurance against New Century and AmWINS; (8) unjust enrichment against Great American, New Century, and AmWINS for the insurance premiums Jones Stephens paid; and (9) tortious interference with contract against all Defendants for depriving Jones Stephens of its contractual rights to defense and indemnification from Coastal Ningbo and Great American.

         Great American, New Century, and AmWINS have moved the court to dismiss counts five through nine under Rule 12(b)(6) of the Federal Rules of Civil Procedure. So the court turns next to whether the amended ...