Opinion
Civil No. 2005-112.
February 28, 2007
Andrew Simpson, Esq., For the plaintiff, Lexington Ins. Co. William J. Glore, Esq., For the defendants, Jacobs Indus. Maintenance Co., and Jacobs Eng'g Co. Michael J. Sanford, Esq., For the defendant, Sanford, Amering Assoc. W. Bruce Cole, Esq., For the defendants, Hovensa, LLC, Bryant, Barnes Moss Beckstedt, LLP, Mike Petievich, Daryl Kramer, and John Paulus. George H Logan, Esq., For the defendants, Jackson Lewis, LLP and Dudley, Clark Chan LLP. Michael J. Sanford, Esq., For the defendant, Sanford, Amering Assoc. Lee J. Rohn, Esq., For the defendants, Rogelio Allen, Hector Arroyo, Edgar Berrios, Beverly Bonhomme, Dennis Dariah, Christine Durrand, Alfia Hawley, Mervyn Henry, Andre Mamassaram, Raymond Alleyne, Donald Audain, Jessica Baptiste, Kenneth Blake, Janis Browne, Nigel Cupid, Rashida George, Virginnie George, Marcelle Heywood, Malcolm Maccow, Luis Montalvo, Julien St. Rose, Shirlene Taylor.
ORDER
On August 5, 2005, plaintiff, Lexington Insurance Company ("Lexington") brought this action for statutory interpleader pursuant to 28 U.S.C. § 1335. Defendants answered and asserted counterclaims, including a counterclaim by Rogelio Allen, Hector Arroyo, the Estate of Edgar Berrios, Beverly Bonhomme, Dennis Dariah, Alfia Hawley, Mervyn Henry, Andre Manassaram, Raymond Alleyne, Donald Audian, Jessica Baptiste, Kenneth Blake, Janis Browne, Nigel Cupid, Rashida George, Virginnie George, Michelle Heywood, Malcolm Maccow, Luis Montalvo, Julien St. Rose, and Shirlene Taylor (collectively, the "employees").
On October 31, 2005, Lexington filed a motion to dismiss the counterclaims brought by the employees, asserting that they failed to state a claim upon which relief could be granted pursuant to Federal Rule of Civil Procedure 12(b)(6).
This Court granted the motion at a hearing on October 16, 2006.
I. FACTS
Hovensa, LLC ("Hovensa") operates an oil refinery in St. Croix. Jacobs Industrial Maintenance Company, LLC, ("Jacobs Industrial") had an on-going contract with Hovensa to perform certain maintenance work at Hovensa's oil refinery. Jacobs Engineering Group, Inc. ("Jacobs Engineering") is an affiliate of Jacobs Industrial. Lexington issued two employment practices liability insurance policies which provided coverage for defendants Jacobs Industrial and Jacobs Engineering (collectively, "Jacobs"), as well as Hovensa (collectively, the "insureds"). The policies covered the periods from September 30, 2000, to September 30, 2001, and September 30, 2001 to September 30, 2002. Each policy limited coverage to $3,000,000.
Over the insurance policy periods, the employees filed suits against the insureds for causes of action including discrimination and wrongful termination. All parties agree that the insurance policies entitle the insureds to some compensation from Lexington. At present, more than a dozen claims are pending. Together, the insurance policies have $3,585,603.67 remaining before they will reach their limit (collectively, the "remaining funds"). The insureds have not assigned any rights under the contract to the employees.
The employees and Hovensa negotiated a proposed settlement agreement ("Hovensa's proposed settlement"). The proposed settlement allegedly would have resolved all of the employees' claims against Hovensa. However, Lexington would have needed to contribute the remaining funds to the settlement. Jacobs did not consent to using the remaining funds for the settlement, and Lexington refused to pay the remaining funds into the settlement. Settlement negotiations between Hovensa and the employees ended unsuccessfully on June 28, 2005.
Lexington filed the instant action in August, 2005, alleging that Hovensa and Jacobs have brought conflicting claims for the remaining funds based on the employees' legal action, and that statutory interpleader is an appropriate mechanism for distributing the remaining funds.
On October 17, 2005, the employees responded to Lexington's Complaint with counterclaims, asserting entitlement to damages based on bad faith and breach of contract. According to the employees, Lexington improperly exhausted the policy with excessive defense costs and failed to fulfill contract obligations by denying funds to Hovensa's proposed settlement. On October 31, 2005, Lexington filed the instant motion.
II. DISCUSSION
Motions to dismiss for failure to state a claim on which relief can be granted are decided in accordance with Federal Rule Civil of Procedure 12(b)(6). All material allegations are taken as admitted, all facts are construed in a light most favorable to the non-moving party, and all reasonable inferences are drawn for the non-moving party's benefit. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969); Alston v. Parker, 363 F.3d 229, 223 (3d Cir. 2004). The Court will grant the motion only if no set of facts in support of claims pled would entitle the non-moving party to relief. Morse v. Lower Marion School District, 132 F.3d 902, 906 (3d Cir. 1997); but see id. ("[A] court need not credit a complaint's bald assertions or legal conclusions when deciding a motion to dismiss) (citations omitted).
III. ANALYSIS
The employees allege that Lexington committed a breach of contract and a breach of its duty of good faith and fair dealing when it refused to apply the remaining funds to Hovensa's proposed settlement. To state a claim for breach of contract, the employees must assert standing as a threshold matter.
The employees acknowledge that they were not parties to the insurance policy contracts. Accordingly, they do not have standing to sue Lexington. Margras v. Puerto Rican American Ins. Co., 551 F. Supp. 427, 427-28 (D.V.I. 1982) ("The Virgin Islands has no statute which authorizes a direct action by the injured party against the insurer of the tortfeasor. Nor is there any applicable procedural rule through which such an action could be inferred."); see also Allan D. Windt, Insurance Claims Disputes, § 9:34 (4d 2006) (observing the majority rule that "[a]n insurer does not owe a duty of good faith to the claimant suing the insured.")
Indeed, counsel for the employees advised:
"We do agree that it is the law of the Virgin Islands that we do not have substantive- or standing because the contract is between the insureds and the insurer."
(Mot. to Dismiss H'rg, Oct. 19, 2006).
Moreover, there is absolutely no indication in the policies that (1) such a duty was created, requiring Lexington to pay settlement claims, and (2) that the parties to the contract intended for that duty to be enforceable by the employees. Cf. Restatement (Second) of Contracts § 304, cmt. b (1979) (reflecting "the basic principle that the parties to a contract have the power, if they so intend, to create a right in a third person."); see also Livingston v. N. Belle Vernon Borough, 91 F.3d 515, 526 n. 11 (3d Cir. 1996).
IV. CONCLUSION
The employees' counterclaims fail to state a claim upon which relief could be granted.
Accordingly, it is hereby ORDERED that the motion to dismiss the claims of the employees is GRANTED;
It is further ORDERED that employees' counterclaims are DISMISSED.