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Continental Insurance Co. v. Daikin Applied Americas Inc.

United States District Court, D. Minnesota

December 17, 2019

The Continental Insurance Company, Plaintiff,
v.
Daikin Applied Americas, Inc., Defendant.

          ORDER

          HILDY BOWBEER UNITED STATES MAGISTRATE JUDGE

         This matter is before the Court on The Continental Insurance Company's Motion for Leave to Supplement and Amend Complaint [Doc. No. 299]. Plaintiff moves to amend its complaint to delete certain claims and to supplement its complaint with a new claim for breach of an implied contract. Defendant does not challenge the motion insofar as it seeks to strike certain claims, but it opposes the addition of the new claim, arguing that it is untimely and that Plaintiff has failed to show good cause for the modification. For the reasons set forth below, the Court grants the motion as to the deletion of certain claims and denies the motion as to the addition of the new claim for breach of contract.

         I. BACKGROUND

         A. Procedural History

         Plaintiff sold general liability insurance policies to McQuay-Perfex, Inc, a Minnesota corporation. (Am. Compl. ¶¶ 8-9 [Doc. No. 42].) Over the course of its history, McQuay-Perfex merged with other entities and changed its name several times, including, mostly recently, to Daikin Applied Americas, Inc., the named Defendant in this case. (Id. ¶¶ 9-14.) As the successor-by-merger to McQuay-Perfex and its other iterations, Defendant has been named in several suits arising out of the manufacturing and sale of products containing asbestos. (Id. ¶¶ 7, 14.) Defendant tendered the defense of those suits to Plaintiff on the ground that the liability insurance policies issued by Plaintiff covered those claims. Plaintiff undertook to defend Defendant in those cases, but it expressly reserved the right to disclaim coverage, including the duty to defend, on the ground that the claims were not covered by Plaintiff's policies. (Id. ¶ 27.) It filed the instant action in part to determine the rights of the parties with respect to the liability insurance policies. (Id. ¶¶38-40.)

         On August 14, 2019, the Honorable Donovan W. Frank, United States District Judge, ruled on the parties' Motions for Partial Summary Judgment and issued a Declaratory Judgment Order that Plaintiff did not owe Defendant a duty to defend against any asbestos-related suits except those specifically alleging the liability of McQuay-Perfex. [Doc. No. 290 at 16.] He ruled that Plaintiff is not obligated to defend Defendant “with respect to entities or liabilities acquired by McQuay-Perfex's successor after the expiration of the final Policy.” (Id.) “Therefore, Continental's duty to defend arises only where an Asbestos Suit alleges liability arising out of McQuay-Perfex or where Daikin Applied has been sued as a successor to McQuay-Perfex, ” but not to suits “where Daikin Applied is named individually or as a successor to entities other than McQuay-Perfex. (Id. at 16-17.)

         B. Allegations in the Proposed Amended Complaint

         A month after Judge Frank's decision, Plaintiff notified Defendant that it was withdrawing from its defense in all of the asbestos suits that did not name McQuay-Perfex. (Stroup Letter [Doc. No. 301-3].) Plaintiff also demanded reimbursement of the costs it incurred while representing Defendant in the non-covered suits. The insurance contract between Plaintiff and Defendant did not specifically require such reimbursement, but Plaintiff argues the parties had an implied contract to that effect based on Plaintiff's July 8, 2015, reservation of rights letter, in which Plaintiff, inter alia, reserved “the right to recover any defense costs or indemnity payments should it be determined that [Plaintiff] had no duty to incur such costs of [sic] payments.” (Id. [Doc. No. 301-3 at 13].)

         Defendant refused to reimburse Plaintiff, so Plaintiff seeks to amend its Amended Complaint to add a new claim for breach of the implied contract and a “holding that [Plaintiff] is entitled to reimbursement of the defense costs it paid in defense of the non-covered Asbestos Suits.” (Proposed Am. Compl. (Redline version) ¶¶ 58, 62 [Doc. No. 301-2].)

         II. DISCUSSION

         A. Amendment of Pleadings

         A court should freely grant leave to amend[1] a pleading “when justice so requires.” Fed.R.Civ.P. 15(a)(2). But even under this liberal standard, parties do not have an absolute right to amend their pleadings. Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir. 2008). The decision whether to permit amendment falls within the sound discretion of the district court. Bell v. Allstate Life Ins. Co., 160 F.3d 452, 454 (8th Cir. 1998). A court may deny leave to amend “based upon a finding of undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies in previous amendments, undue prejudice to the non-moving party, or futility.” Baptist Health v. Smith, 477 F.3d 540, 544 (8th Cir. 2007) (citation omitted). Particularly, “when a motion to amend is filed after the expiration of the applicable deadline in the Court's Scheduling Order, Rule 15(a)'s permissive test no longer applies, and instead the tougher “good cause” standard applies under Rule 16(b)(4).” Target Corp. v. LCH Pavement Consultants, LLC, 960 F.Supp.2d 999, 1004 (D. Minn. 2013). “The good cause standard is an exacting one, and requires a demonstration that the Scheduling Order cannot reasonably be met despite the diligence of the party seeking the extension.” E.E.O.C. v. Hibbing Taconite Co., 266 F.R.D. 260, 265 (D. Minn. 2009) (internal quotations omitted). “Allowing a party to bring a motion to amend outside the applicable scheduling order's deadline without showing that the party diligently tried but was unable to comply with that deadline would potentially undermine these fundamental principles of our civil justice system.” Target Corp., 960 F.Supp.2d at 1006-07.

         B. Contingency and Ripeness

         Plaintiff seeks to amend its complaint with a new claim for breach of implied contract, based on Defendant's refusal to reimburse Plaintiff for the costs it incurred representing Defendant in the non-covered suits. Plaintiff argues that the claim is new because it is “based on recent events.” (Pl.'s Mem. at 1 [Doc. No. 300].) The recent events Plaintiff references are (1) Judge Frank's ruling on August 14, 2019 and (2) Defendant's subsequent refusal to reimburse ...


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