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HMV Indy I, LLC v. HSB Specialty Insurance Co.

United States District Court, S.D. Indiana, Indianapolis Division

September 4, 2019

HMV Indy I, LLC, Plaintiff,
v.
HSB Specialty Insurance Company, Defendant.

          ORDER

          Hon. Jane Magnus-Stinson, Chief Judge United States District Court

         Plaintiff HMV Indy I, LLC (“HMV Indy I”) owns and operates three large solar energy generation projects in Indianapolis, Indiana (the “Projects”). The Projects were built on the roofs of three commercial buildings owned by Duke Realty Limited Partnership (“Duke Realty”)[1] and located at 8258 Zionsville Road, Indianapolis, Indiana (“Building 98”), 53555 West 76th Street, Indianapolis, Indiana (“Building 87”), and 4945 West 86th Street, Indianapolis, Indiana (“Building 129”). HMV Indy I is insured by HSB Specialty Insurance Company (“HSB”) under HSB Specialty Insurance Policy No. NHX5212203 (the “Policy”). On April 24, 2017, a large fire broke out on the roof of Building 98 and caused significant damage and losses. HMV Indy I initiated this litigation against HSB to collect unpaid insurance benefits under the Policy for property damage, business income, and other covered damages. HMV Indy I also alleges that HSB denied insurance benefits in bad faith. HSB has filed a Motion to Dismiss HMV Indy I's claim for Breach of the Duty of Good Faith and Fair Dealing and an accompanying Memorandum of Law in Support of that motion (collectively “Motion to Dismiss”), [Filing No. 26; Filing No. 27], which is now ripe for the Court's decision.

         I.

         Standard of Review

         Under Rule 12(b)(6), a party may move to dismiss a claim that does not state a right to relief. The Federal Rules of Civil Procedure require that a complaint provide the defendant with “fair notice of what the . . . claim is and the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007)). In reviewing the sufficiency of a complaint, the Court must accept all well-pled facts as true and draw all permissible inferences in favor of the plaintiff. See Active Disposal Inc. v. City of Darien, 635 F.3d 883, 886 (7th Cir. 2011). A Rule 12(b)(6) motion to dismiss asks whether the complaint “contain[s] 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). The Court will not accept legal conclusions or conclusory allegations as sufficient to state a claim for relief. See McCauley v. City of Chi., 671 F.3d 611, 617 (7th Cir. 2011). Factual allegations must plausibly state an entitlement to relief “to a degree that rises above the speculative level.” Munson v. Gaetz, 673 F.3d 630, 633 (7th Cir. 2012). This plausibility determination is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id.

         II.

         Background

         The following are the factual allegations in the Amended Complaint-the operative complaint in this case-which the Court must accept as true at this time:

         On April 24, 2017, a fire broke out on the roof of Building 98 that was caused by “arcing, burning and melting” of electrical connectors. [Filing No. 18 at 1-2.] The fire destroyed a large portion of that roof and several solar panels and accompanying wiring, cable trays, and combiner boxes on the roof. [Filing No. 18 at 4.] On April 26, 2017, HMV Indy I notified HSB of the fire and submitted a claim for losses under the Policy. [Filing No. 18 at 7.] In all, the fire caused $989, 837 in property damages to HMV Indy I at Building 98. [Filing No. 18-2 at 13.] Repairs to Building 98 were completed and energy production from the Project on the Building 98 roof recommenced on December 14, 2017. [Filing No. 18 at 7.]

         Along with the property damage repairs at Building 98, HMV Indy I conducted inspections of its other projects at Buildings 87 and 129. [Filing No. 18 at 5.] These inspections revealed arcing, burning, and melting like that which caused the Building 98 fire. This discovery prompted HMV Indy I to immediately shut down Projects 87 and 129 as well. [Filing No. 18 at 6.] The defects at Buildings 87 and 129 caused an additional $95, 408 in property damages to HMV Indy I, raising the total property damages to $1, 085, 245. [Filing No. 18-2 at 13.] The repairs on Buildings 87 and 129 were completed, and project operations resumed at those locations on September 27, 2017. [Filing No. 18 at 18.] In addition to the property damages, HMV Indy I also suffered $983, 386 in losses stemming from business interruption while all three Projects were temporarily shut down for the repairs. [Filing No. 18-2 at 6.]

         Under the Policy, all three buildings are “covered property, ” and the fire was a “covered cause of loss.” [Filing No. 18-2 at 10-11; Filing No. 18-2 at 23.] Furthermore, the Policy provides for coverage of “Serial Losses” as defined in Section E9:

Serial Losses
a. This provision applies if:
(1) The Covered Cause of Loss results from a defect in design, material, manufacture, or construction; and
(2) You have other “covered property” of the same type, design, material, ...

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