United States District Court, D. Minnesota
N. ERICKSEN UNITED STATES DISTRICT JUDGE.
Lunde brought this action against the Cincinnati Insurance
Company (“Cincinnati”), seeking a declaratory
judgment, and alleging breach of contract and breach of the
duties of good faith and fair dealing. Cincinnati moved to
dismiss the two breach claims. For the reasons set forth
below, that motion is denied in part and granted in part.
times relevant to this matter, Lunde was an employee and
officer of BankFirst, a South Dakota subsidiary of Marshall
BankFirst Corporation (“Marshall”). In 2008,
Cincinnati issued a Financial Institution Blue Chip Policy
(“the Policy”) to Marshall. The Policy included
directors and officers (“D&O”) coverage,
under which Cincinnati agreed to pay certain costs and losses
that Marshall's directors and officers might incur from
claims for “wrongful acts, ” and/or to defend
those insureds against such claims. ECF No. 15-1 at 10. The
original policy period ran from April 6, 2008 to April 6,
2009. ECF No. 15-1 at 7. Cincinnati subsequently issued an
extended reporting endorsement that permitted claims from
April 6, 2009 to April 6, 2010. ECF No. 15-2 at 37.
April 3, 2009, an attorney representing BankFirst's
directors and officers allegedly notified Cincinnati that
“the [i]nsureds have become aware of potential
claims” of possible wrongful acts involving, among
other things, a $228 million loan for a condominium
development in Florida known as Lake Austin Properties.
See Compl. ¶¶ 26-28. On March 26, 2010,
the Federal Deposit Insurance Company sent a demand letter to
BankFirst directors and officers, including Lunde, seeking
damages for alleged “wrongful acts” in connection
with various loans. Compl. ¶ 29. Cincinnati was notified
of the FDIC demand letter. Compl. ¶ 30.
December 21, 2016, Lunde was indicted by a federal grand jury
on charges of conspiracy and bank fraud in connection with
the Lake Austin Properties loan. Pl.'s Mem. at 2. Lunde
tendered the defense of the indictment to Cincinnati on May
22, 2017. Compl. ¶ 34. Cincinnati denied Lunde's
coverage on July 27, 2017. ECF No. 15-5.
November 27, 2017, Lunde moved to dismiss the charges against
her, alleging prosecutorial misconduct. Compl. ¶ 12. The
government issued a superseding indictment on December 13,
2017 that contained no allegations against Lunde. Compl.
¶ 14. On December 26, 2017, the criminal matter was
terminated as to Lunde. Compl. ¶ 15. Lunde contends that
she incurred “hundreds of thousands of dollars in
defense costs” during the course of the criminal case
against her, Compl. ¶ 12. She asserts these costs should
have been covered under the Policy.
survive a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), “a complaint must contain
sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.'”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. “A
pleading that offers ‘labels and conclusions' or
‘a formulaic recitation of the elements of a cause of
action will not do.'” Id. (quoting
Twombly, 550 U.S. at 555 (1955)). Plausibility is
assessed by “draw[ing] on . . . judicial experience and
common sense.” Id. at 679. Moreover, courts
must “review the plausibility of the plaintiff's
claim as a whole, not the plausibility of each individual
allegation.” Zoltek Corp. v. Structural Polymer
Grp., 592 F.3d 893, 896 n.4 (8th Cir. 2010).
complaint comprises three counts. Count One seeks declaratory
judgment as to the disputed insurance coverage, Count Two is
for breach of contract, and Count Three is for breach of the
duties of good faith and fair dealing. Cincinnati has moved
to dismiss the second and third counts only. That motion is
denied in part and granted in part.
Breach of Contract
Two of Lunde's complaint alleges that Cincinnati breached
the Policy by refusing to defend or indemnify Lunde for the
claims asserted in the criminal indictment against her. That
count also includes a claim for extra-contractual damages if
Cincinnati's breach was in bad faith.
breach of contract claim easily withstands Cincinnati's
Rule 12 challenge. Under Minnesota law, the elements of
breach of contract are “(1) formation of a contract,
(2) performance by plaintiff of any conditions precedent to
his right to demand performance by the defendant, and (3)
breach of the contract by defendant.” Park Nicollet
Clinic v. Hamann, 808 N.W.2d 828, 833 (Minn.
2011). Assuming as true Lunde's factual
allegations regarding Cincinnati's contractual
obligations, Compl. ¶¶ 18-33, she has clearly
stated a plausible claim for breach. ...