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Diocese of St. Cloud v. Arrowood Indemnity Co.

United States District Court, D. Minnesota

March 5, 2018

DIOCESE OF ST. CLOUD; CHURCH OF SAINT JOSEPH, ST. JOSEPH; CHURCH OF THE SACRED HEART OF JESUS, DENT; CHURCH OF SAINT ANTHONY OF PADUA, ST. CLOUD; CHURCH OF OUR LADY OF VICTORY, FERGUS FALLS; CHURCH OF SAINT ANNE, KIMBALL; CHURCH OF SAINT JAMES, RANDALL; CHURCH OF SAINT LOUIS BERTRAND, FORESTON; CHURCH OF SAINT BONIFACE, COLD SPRING; CHURCH OF THE ASSUMPTION, EDEN VALLEY; CHURCH OF SEVEN DOLORS, ALBANY; CHURCH OF SAINT MARY OF THE PRESENTATION, BRECKENRIDGE; CHURCH OF THE HOLY CROSS, ONAMIA; CHURCH OF SAINT GALL, TINTAH; CHURCH OF SAINT OLAF, ELBOW LAKE; CHURCH OF THE IMMACULATE CONCEPTION, OSAKIS; CHURCH OF SAINT PETER, DUMONT; CHURCH OF AVE MARIA, WHEATON; CHURCH OF THE HOLY SPIRIT, ST. CLOUD; CHURCH OF THE HOLY ANGELS OF ST. CLOUD, ST. CLOUD f/k/a Holy Angels Congregation of St. Cloud, St. Cloud; CHURCH OF SAINT HEDWIG f/k/a Church of All Saints, Holdingford; CHURCH OF IMMACULATE CONCEPTION, NEW MUNICH; CHURCH OF SAINT PAUL, SAUK CENTRE; CHURCH OF SAINT. JOSEPH, CLARISSA; CHURCH OF THE SACRED HEART, STAPLES; CHURCH OF SAINT STANISLAUS, SOBIESKI; CHURCH OF SAINT PETER, ST. CLOUD; CHURCH OF SAINT ANDREW, ELK RIVER; CHURCH OF SAINT EDWARD, BOWLUS; CHURCH OF SAINT PAUL, ST. CLOUD; and CHURCH OF ST. MARY'S CATHEDRAL OF ST. CLOUD, ST. CLOUD f/k/a Church of the Immaculate Conception, St. Cloud, Plaintiffs,
v.
ARROWOOD INDEMNITY COMPANY, individually and as successor to Royal Indemnity Company, Connecticut Indemnity Company, The Fire & Casualty Insurance Company, Security Insurance Company of Hartford, Connecticut Specialty Insurance Company, New Amsterdam Casualty Company, and Orion Capital Companies; THE OF ST. BENEDICT, d/b/a St. John's Abbey; THE CONTINENTAL INSURANCE COMPANY; ST. PAUL FIRE AND MARINE INSURANCE COMPANY; TRAVELERS INDEMNITY COMPANY; CHURCH MUTUAL INSURANCE COMPANY; and HARTFORD ACCIDENT AND INDEMNITY COMPANY, Defendants.

          John H. Faricy, Jr., FARICY LAW FIRM, P.A., for plaintiffs.

          Robert D. Brownson, Olivia M. Cooper, and Aaron M. Simon, BROWNSON NORBY, PLLC, and Dennis N. Ventura and Kathleen M. Hart, TRESSLER LLP for defendant Arrowood Indemnity Corporation.

          MEMORANDUM OPINION AND ORDER

          JOHN R. TUNHEIM CHIEF JUDGE

         Plaintiffs the Diocese of St. Cloud (“the Diocese”) and various Catholic parishes located in Minnesota (collectively, “Plaintiffs”) brought this insurance coverage action to determine which parties will pay compensation to victims of clerical abuse that have filed claims in state court. Plaintiffs brought claims for declaratory relief against their own alleged insurers, Arrowood Indemnity Company (“Arrowood”), Church Mutual Insurance Company, St. Paul Fire and Marine Insurance Company, and Hartford Accident and Indemnity Company (collectively, “Plaintiffs' Insurers”). They brought additional claims against Arrowood for breach of contract, promissory estoppel, bad faith/breach of fiduciary duty, fraudulent misrepresentation, and tortious interference with contractual relations. Plaintiffs also brought a claim for declaratory relief against a fellow Catholic religious organization, The Order of St. Benedict (“the Abbey”), and its insurers, but the Court dismissed that claim.

         Presently before the Court is Arrowood's Partial Motion to Dismiss, which the Court will grant. Because Plaintiffs' Complaint fails to allege sufficient facts to survive a motion to dismiss on Counts Five, Six, Seven, and Eight, the Court will dismiss those claims without prejudice.

         BACKGROUND

         I. FACTUAL BACKGROUND

         A. The Plaintiffs

         The Diocese is a Catholic diocese corporation in St. Cloud, Minnesota. (Notice of Removal ¶ 1, Ex. 1 (“Compl.”) ¶ 4, June 12, 2017, Docket No. 1.) The remaining Plaintiffs are “separate and independent Catholic parish corporations” located in Minnesota. (Compl. ¶¶ 5-7.) The Diocese is organized and operates under Minn. Stat. § 315.16; the remaining Plaintiffs are organized and operate under Minn. Stat. § 315.15. (Id. ¶¶ 4, 5-7.)

         In May 2013, the Minnesota Legislature passed the Minnesota Child Victims Act, Minn. Stat. § 541.073, which allowed individuals to file sexual abuse claims that had previously been time-barred. (Id. ¶ 2.) More than 75 related actions have been filed against the Diocese, and the remaining Plaintiffs have each been named as a defendant in one or more actions. (Id. ¶ 3.) The actions involve some combination of public nuisance, private nuisance, negligence, negligent supervision, and negligent retention. (Id.) Plaintiffs refer to these actions collectively as “the Claims.” (Id. ¶ 3.)

         B. Defendant Arrowood

         Arrowood is a Delaware corporation with its principal place of business in North Carolina. (Id. ¶ 9.) Plaintiffs allege that Arrowood conducted business and provided insurance in Minnesota at times relevant to the Claims. (Id.) They also allege that Arrowood “took over the assets and liabilities of legacy insurance companies in order to make a profit by denying claims.” (Id.) According to Plaintiffs, Arrowood is the successor to at least seven companies: Royal Indemnity Company, Connecticut Indemnity Company, The Fire & Casualty Insurance Company, Connecticut Specialty Insurance Company, New Amsterdam Casualty Company, Orion Capital Companies, and Security Insurance Company of Hartford. (Id.) Plaintiffs allege that Arrowood insured the Diocese at least from April 1964 to December 1, 1971, under various policies. (Id. ¶¶ 18-19.) Plaintiffs allege that Arrowood has improperly denied coverage under at least one of these policies. (Id. ¶ 20.) Plaintiffs also allege that Arrowood issued policies to other Plaintiffs in periods ranging from as early as 1955 to 1967. (See id. ¶¶ 21-28.)

         C. Causes of Action Against Arrowood

         Plaintiffs allege seven causes of action against Arrowood, two of which are alleged against all of Plaintiffs' Insurers.

         1. Counts Two and Three: Declaratory Relief Against Plaintiffs' Insurers

         In their second cause of action, Plaintiffs request a judicial determination of the rights and duties of Plaintiffs' Insurers “with respect to their obligation to provide a defense and investigation and pay for defense and investigations with respect to [the Claims] against the Plaintiffs.” (Id. ¶ 43.) In their third cause of action, Plaintiffs request a judicial determination of the rights and duties of Plaintiffs' Insurers with respect to their obligation to indemnify Plaintiffs against “all sums that the Plaintiffs have paid or will be obligated to pay in payment of settlements or judgments arising from past, present and future Claims.” (Id. ¶¶ 49-51.)

         2. Count Four: Breach of Contract Against Arrowood

         In their fourth cause of action, Plaintiffs allege that Arrowood breached its contract by failing to defend and indemnify Plaintiffs for the Claims in accordance with their insurance coverage. (Id. ¶ 55.) Plaintiffs seek damages, interest, costs, and attorneys' fees. (Id. at 21, ¶ 4.)

         3. Count Five: Promissory Estoppel Against Arrowood

         In their fifth cause of action, Plaintiffs allege that Arrowood had previously promised to pay for certain defense and indemnity costs, that Arrowood intended that Plaintiffs rely on that promise, and that Plaintiffs did in fact rely on that promise to their detriment. (Id. ¶¶ 58-60.) Plaintiffs seek damages, interest, costs, and attorneys' fees. (Id. at 21, ¶ 5.)

         4. Count Six: Bad Faith/Breach of Fiduciary Duty Against Arrowood

         In their sixth cause of action, Plaintiffs allege that Arrowood agreed in the early 1990s to defend and settle cases against the Diocese but later failed to do so. (Id. ¶¶ 62-63.) Plaintiffs allege that, based on Arrowood's representations, there was no dispute as to coverage for a period of time, and Arrowood formed a fiduciary relationship with the Diocese. (Id. ¶ 63.) Plaintiffs allege that Arrowood breached the resulting fiduciary duty to the Diocese by misrepresenting the extent and nature of the coverage available under its policies, failing to defend and indemnify the Diocese, and failing to communicate with the Diocese. (Id. ¶ 63.) Plaintiffs seek damages, interest, costs, and attorneys' fees. (Id. at 21, ¶ 6.)

         5. Count Seven: Fraudulent Misrepresentation Against Arrowood

         In their seventh cause of action, Plaintiffs allege that Arrowood misrepresented that it could not confirm coverage for a time period relevant to the Claims when Arrowood knew or should have known that its predecessors had afforded coverage to Plaintiffs during the time period in question and had sufficient information to reconstruct the essential terms and conditions of the policies. (Id. ¶ 66.) Plaintiffs further allege that Arrowood misrepresented that the Claims were subject to an aggregate limit when it knew or should have known that there was no aggregate limit. (Id.) Plaintiffs allege that Arrowood wrongly denied their claims on those grounds and that they relied to their detriment upon Arrowood's misrepresentations. (Id. ¶¶ 66-69.) Plaintiffs seek damages, interest, costs, and attorneys' fees. (Id. at 22, ¶ 7.)

         6. Count Eight: Tortious Interference with Contractual Relations Against Arrowood

         In their eighth and final cause of action, Plaintiffs allege that Arrowood has “adopted a business model that involves obtaining the assets and liabilities of certain insurers” and “caused and engaged in the unjustified practice of denying Plaintiffs' valid claims for coverage in order to reap profits from the investment of assets received from its predecessor insurers.” (Id. ¶¶ 71-72.) Plaintiffs allege that Arrowood “has intentionally and without justification procured the breach” of their insurance contracts with Arrowood's predecessor insurance companies. (Id. ¶ 73.) Plaintiffs seek damages, interest, costs, and attorneys' fees. (Id. at 22, ¶ 8.)

         II. ...


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