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Centex Homes v. Everest National Insurance Co.

United States District Court, D. Nevada

September 29, 2017

CENTEX HOMES, Plaintiff,


          Gloria M. Navarro, Chief Judge United States District Judge.

         Pending before the Court is the Motion to Dismiss, (ECF No. 19), filed by Defendant Lexington Insurance Company (“Defendant”). Plaintiff Centex Homes (“Plaintiff”) filed a Response, (ECF No. 28), and Defendant filed a Reply, (ECF No. 34).[1] For the following reasons, the Motion to Dismiss is DENIED in part and GRANTED in part.

         I. BACKGROUND

         The instant dispute arises out of a state court action involving property damage from subcontractors that worked for Plaintiff to build a housing development (“the development”). On February 15, 2013, homeowners in the development filed an amended complaint in state court against Plaintiff alleging that Plaintiff is liable for defective and negligent engineering and construction on homes in the development. (See Compl. ¶ 43, ECF No. 1); See Pensi Callaway, et al. v. Centex Homes, Eighth Judicial District Court, Clark County, Nevada, Case No. A-13-674439-D (“Callaway action”). Plaintiff alleges that the Callaway action seeks damages arising out of the work or ongoing operations of various subcontractors that were insured through Defendant. (Id. ¶ 44). As a result of the Callaway action, Plaintiff claims that it has incurred significant costs. (Id. ¶ 45).

         Defendant issued insurance policies to the subcontractors Desert Plastering, LLC, and L&S Air Conditioning, Inc. (collectively the “subcontractors”) that worked on the development. (Id. ¶¶ 31-35). Defendant's polices were endorsed to cover Plaintiff as an “additional insured” with respect to liability arising out of the subcontractor's respective work. (Id. ¶ 36). Plaintiff alleges that the policies required Defendant to defend Plaintiff against all claims that create potential liability for covered property damage or bodily injury. (Id. ¶ 37). On September, 11, 2012, Plaintiff tendered the defense and indemnity of the Callaway action to Defendant under the policies that were issued to the subcontractors. (Id. ¶ 56). Plaintiff claims that on December 12, 2012, and February 8, 2013, Defendant improperly breached its duty to defend Plaintiff in the Callaway action under the insurance policies issued to the subcontractors. (Id. ¶¶ 57-60). Specifically, Plaintiff alleges that it was forced to spend significant time and money defending itself against the Callaway action because Defendant failed to meet its duty pursuant to the policies. (Id. ¶ 61).

         Based on these allegations, Plaintiff asserts the following causes of action against Defendant: (1) breach of contract; (2) breach of the implied duty of good faith and fair dealing; (3) violations of Nevada's Unfair Claims Settlement Practices Action under NRS § 686A.310; and (4) declaratory relief. (Id. ¶¶ 67-88). In the instant motion, Defendant requests that the Court dismiss all of Plaintiff's claims, as well as Plaintiff's prayer for attorney's fees and punitive damages. (Mot. to Dismiss 2:3-7, ECF No. 19).


         Dismissal is appropriate under Rule 12(b)(6) where a pleader fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A pleading must give fair notice of a legally cognizable claim and the grounds on which it rests, and although a court must take all factual allegations as true, legal conclusions couched as factual allegations are insufficient. Twombly, 550 U.S. at 555. Accordingly, Rule 12(b)(6) requires “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. “To survive a motion to dismiss, 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 Twombly, 550 U.S. at 570). “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. This standard “asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.

         If the Court grants a motion to dismiss for failure to state a claim, leave to amend should be granted unless it is clear that the deficiencies of the complaint cannot be cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). Pursuant to Rule 15(a), the court should “freely” give leave to amend “when justice so requires, ” and in the absence of a reason such as “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc.” Foman v. Davis, 371 U.S. 178, 182 (1962).


         A. Breach of Contract

         In Nevada, to succeed on a claim for breach of contract a plaintiff must show: (1) the existence of a valid contract; (2) that the plaintiff performed or was excused from performance; (3) that the defendant breached the terms of the contract; and (4) that the plaintiff was damaged as a result of the breach. See Restatement (Second) of Contracts § 203 (2007); see also Bernard v. Rockhill Dev. Co., 734 P.2d 1238, 1240 (Nev. 1987); see also Brochu v. Foote Enterprises, Inc., No. 55963, 2012 WL 5991571 at *5 (Nev. 2012) (“To prove a breach of contract, the plaintiff must show an existing valid agreement with the defendant, the defendant's material breach, and damages.”).

         Under Nevada law, “an insurer bears a duty to defend its insured whenever it ascertains facts which give rise to the potential of liability under the policy.United Nat'l Ins. Co. v. Frontier Ins. Co., 99 P.3d 1153, 1158 (Nev. 2004). “If there is any doubt about whether the duty to defend arises, this doubt must be resolved in favor of the insured.” Id. Additionally, “[w]hile clauses providing coverage are interpreted broadly so as to afford the greatest possible coverage to the insured, clauses excluding coverage are interpreted narrowly against the insurer.” Nat'l Union Fire Ins. Co. of State of Pa. v. Reno's Exec. Air, Inc., 682 P.2d 1380, 1383 (Nev. 1984).

         Plaintiff's first cause of action alleges that it is covered under Defendant's insurance policies as “additional insureds, ” and that Plaintiff “performed all obligations owing under each of the policies in connection with its tender of defense, and [Plaintiff] has satisfied all relevant conditions precedent.” (Compl. ¶¶ 31-37, 68, ECF No. 1).

         Defendant claims that Plaintiff “alleged only conclusions in support of its breach of contract claim.” (Mot. to Dismiss 12:20). Moreover, Defendant avers that the insurance policies' language demonstrates that Plaintiff's breach of contract claim fails. (See Id. 13:6). Specifically, the parties dispute whether or not the Callaway action involves construction defects from ongoing operations or completed work because the policies only cover ongoing construction. (See Id. 14:15-23); (see also Resp. 6:4-9, ECF No. 28); (see also Ex. 1 to App. to Mot. to Dismiss at 6, ECF No. 20-1) (emphasis added).

         Neither party disputes the existence of a valid contract. Because a valid contract exists and Plaintiff alleges that the contract was breached, Plaintiff has met the first and second requirements for a breach of contract claim. Additionally, Plaintiff claims that Defendant “failed to ...

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