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City of Orem v. Essex Insurance Co.

United States District Court, D. Utah

October 27, 2017

CITY OF OREM and JAMES LAURET, Plaintiffs,
v.
EVANSTON INSURANCE COMPANY, Defendant

          MEMORANDUM DECISION AND ORDER GRANTING DEFENDANT'S OF ACTION

          JILL N. PARRISH UNITED STATES DISTRICT COURT JUDGE.

         Judge Jill N. Parrish Magistrate Judge Paul M. Warner Before the Court is Defendant's Motion to Dismiss Third Cause of Action (ECF No. 64). For the reasons set forth below, the motion is GRANTED. Plaintiffs' third cause of action is dismissed without prejudice. Plaintiffs have fourteen days from the date of this Order to amend their complaint.

         I. INTRODUCTION

         This is an insurance case. Plaintiffs City of Orem and James Lauret (collectively, “Orem”) were sued when two minor children were injured at the 2014 City of Orem Summerfest Parade. Orem sought indemnifications from its insurer, Evanston Insurance Company (formerly known as Essex Insurance Company). Evanston refused to indemnify Orem, citing an endorsement that Evanston claims is part of Orem's policy. Orem claims that the endorsement is not part of the policy and brought claims against Evanston for declaratory relief, breach of contract, and breach of the implied covenant of good faith and fair dealing. Evanston has now moved to dismiss Orem's third cause of action, breach of the implied covenant of good faith and fair dealing, on the grounds that Orem has failed to allege that Evanston denied coverage in bad faith. The Court agrees and therefore dismisses Orem's third cause of action without prejudice.

         II. FACTUAL ALLEGATIONS[1]

         Evanston issued a general liability insurance policy (the “Policy”) to Orem for the purpose of providing various coverages for the 2014 Summerfest Parade. See Compl. ¶ 8. The Policy requires that Evanston defend lawsuits and indemnify Orem from liability for occurrences within the scope of the Policy. See Compl. ¶ 10.

         During the 2014 Summerfest Parade, two children were injured. Compl. ¶ 7. The children's parents sued Orem based on the injuries. Compl. ¶ 6. Orem tendered the lawsuit to Evanston. Compl. ¶ 11. But Evanston denied coverage. Compl. ¶ 12.

         Evanston denied coverage based on an exclusion that Orem claims “was not part of the [P]olicy.” Compl. ¶ 24. The endorsement is titled the Special Event and Spectator Liability Exclusions (the “Endorsement”). ECF No. 73-5 at 3. The Endorsement provides, in relevant part:

This insurance does not apply to “bodily injury, ” “property damage, ” or “personal and advertising injury”: . . .
b. Arising out of any charges or allegations of negligent hiring, training, placement or supervision;
c. Arising out of participating, in any capacity, in a demonstration, exhibition, contest, competition, show, race, performance, game or other special event . . . .

ECF No. 73-5 at 3.

         In support of the third cause of action, Orem alleges that “[Evanston] has breached the covenant of good faith and fair dealing by, among other things, denying coverage based upon an endorsement which was not part of the [P]olicy.” Compl. ¶ 24. Orem fails to allege any facts relevant to the determination of whether Evanston breached the covenant of good faith and fair dealing. See generally Compl. For example, Orem does not allege that Evanston (1) did not diligently investigate the claim, (2) did not fairly evaluate the claim, or (3) did not act promptly and reasonably after evaluation of the claim. See generally Compl.

         III. ...


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