Insight Investments LLC v. North American Specialty Insurance Company

UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
INSIGHT INVESTMENTS, LLC, )
)
Plaintiff, )
)
v. ) Case No. CIV-20-788-G
)
NORTH AMERICAN SPECIALTY )
INSURANCE COMPANY, )
)
Defendant/Third-Party Plaintiff, )
)
v. )
)
SASHA M. BELL, )
)
Third-Party Defendant. )
ORDER
Now before the Court are Defendant/Third-Party Plaintiff North American
Specialty Insurance Company’s (“NASIC”) Motion for Partial Summary Judgment and
Declaratory Relief (Doc. No. 93) and supplement thereto (Doc. No. 196), seeking relief
against Third-Party Defendant Sasha M. Bell. Bell has responded to the Motion (Doc. No.
204), and NASIC has replied (Doc. No. 207).
I. STANDARD OF REVIEW
Summary judgment is a means of testing in advance of trial whether the available
evidence would permit a reasonable jury to find in favor of the party asserting a claim. The
Court must grant summary judgment when “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
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A party moving for summary judgment has the burden of showing that the
undisputed material facts require judgment as a matter of law in its favor. See Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). To defeat summary judgment, the
nonmovant need not convince the Court that it will prevail at trial, but it must cite sufficient
evidence to allow a reasonable jury to find in the nonmovant’s favor—i.e., to show that
there is a question of material fact that must be resolved by the jury. See Garrison v.
Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005). The Court must then determine
“whether the evidence presents a sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a matter of law.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).
Parties may establish the existence or nonexistence of a material disputed fact by:
• citing to “depositions, documents, electronically stored information,
affidavits or declarations, stipulations . . . , admissions, interrogatory
answers, or other materials” in the record; or
• “showing that the materials cited do not establish the absence or presence of
a genuine dispute, or that an adverse party cannot produce admissible
evidence to support the fact.”
Fed. R. Civ. P. 56(c)(1)(A), (B). Though the Court is only required to consider the
materials cited by the parties, it may also consider other materials in the record. See Fed.
R. Civ. P. 56(c)(3). While the Court views the evidence and the inferences drawn from the
record in the light most favorable to the nonmoving party, see Pepsi-Cola Bottling Co. of
Pittsburg v. PepsiCo, Inc., 431 F.3d 1241, 1255 (10th Cir. 2005), “[t]he mere existence of
a scintilla of evidence in support of the [nonmovant’s] position will be insufficient; there
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must be evidence on which the jury could reasonably find for the [nonmovant].” Liberty
Lobby, 477 U.S. at 252.
When the moving party has the burden of proof at trial, “a more stringent summary
judgment standard applies.” Pelt v. Utah, 539 F.3d 1271, 1280 (10th Cir. 2008). The
moving party cannot carry its burden by “pointing to parts of the record that [the movant]
believes illustrate the absence of a genuine issue of material fact.” Id. Rather, to obtain
summary judgment on its own claim or defense, a movant “must establish, as a matter of
law, all essential elements of the issue before the nonmovant can be obligated to bring
forward any specific facts alleged to rebut the movant’s case.” Id. Thus, if a party who
would bear the burden of persuasion at trial lacks sufficient evidence on an essential
element of a claim or defense, all other factual issues concerning the claim or defense
become immaterial. See Celotex, 477 U.S. at 322; Adler v. Wal-Mart Stores, Inc., 144 F.3d
664, 670 (10th Cir. 1998).
II. THE SUMMARY JUDGMENT RECORD
The facts relied upon in the discussion below are uncontroverted or, where
genuinely disputed, identified as such and viewed in the light most favorable to the
applicable nonmoving party.
A. The Project
This case involves contracts relating to a construction project overseen by the U.S.
Army Corps of Engineers for the renovation of a medical facility at Vance Air Force Base
near Enid, Oklahoma (the “Project”). United Excel Corporation (“UEC”) was the prime
contractor for the Project. UEC subcontracted with Icon Construction, Inc. (“Icon”) to
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design, manufacture, and install modular buildings as a temporary medical and office
facility during construction, which the parties and agreements referred to as the
“Temporary Phasing Facility” or “TPF.” On September 14, 2017, NASIC issued a
“Subcontract Performance Bond” and a “Subcontract Labor and Material Payment Bond”
(the “Materials Bond”) (collectively, the “Bonds”) on behalf of Icon to ensure performance
of the subcontract between Icon and UEC as well as payment for labor and materials. See
NASIC’s Mot. Ex. 3 (Doc. No. 93-3) at 1-2. After the execution of the UEC-Icon
Subcontract, the issuance of the Materials Bond, and the construction and delivery of the
TPF, Icon entered into a transaction with Plaintiff Insight Investments, LLC (“Insight”),
whereby Insight agreed to pay Icon $410,000 immediately in exchange for monthly
payments over the course of the Project and a share of the proceedings from selling the
TPF after the Project was completed. Icon failed to make the required monthly payments
to Insight. Op. & Order of May 23, 2022 (Doc. No. 162) at 2, 10-11. Icon also failed to
make payments to its other creditors, who in turn sought payment under the Bonds. See
NASIC’s Mot. at 2.
Insight commenced this litigation, seeking to collect from NASIC under the
Materials Bond. See Am. Compl. (Doc. No. 15) ¶¶ 48-73. NASIC asserts third-party
claims against Bell for breach of contract, contractual exoneration, specific
performance/injunctive relief, and quia timet. See Third-Party Compl. (Doc. No. 34) at 8-
17.
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B. The General Indemnity Agreement
On June 1, 2015—well before the Project that spawned this litigation commenced—
Bell and Icon (collectively, the “Indemnitors”) executed a General Indemnity Agreement
(the “Indemnity Agreement”) promising to indemnify NASIC for losses arising from surety
bonds executed by NASIC. See Indem. Agreement (Doc. No. 141-1) at 1, 4-5. Bell signed
the Indemnity Agreement, both in her capacity as Chairman of the Board of Icon and in
her personal capacity. See id. at 4-5. All signatories are listed as having a Texas address,
and the signature of the notary public indicates that the Indemnity Agreement was executed
in Texas. See id.
The Indemnity Agreement provides, in relevant part:
2. Indemnity: The Indemnitors shall exonerate, hold harmless and
indemnify the Surety from and against any and all Loss. For the purpose of
this Agreement, Loss means any liability, loss, costs, damages, attorneys’
fees, consultants’ fees, and other expenses, including interest, which the
Surety may sustain or incur by reason of, or in consequence of, the execution
of the Bonds (or any renewals, continuations or extensions). Loss includes
but is not limited to the following: (a) sums paid or liabilities incurred in the
settlement of claims; (b) expenses paid or incurred in connection with the
investigation of any claims; (c) sums paid in attempting to procure a release
from liability; (d) expenses paid or incurred in the prosecution or defense of
any suits; (e) any judgments under the Bonds; (f) expenses paid or incurred
in enforcing the terms of this Agreement; (g) sums or expenses paid or
liabilities incurred in the performance of any Bonded contract or related
obligation; and (h) expenses paid in recovering or attempting to recover
losses or expenses paid or incurred. Loss expressly includes attorney fees
incurred in defending claims, protecting the Surety’s interests in any
bankruptcy or insolvency proceeding, arranging for the Surety’s performance
of its obligations, evaluating, settling, and paying claims, seeking recovery
under the terms of this Agreement from the Indemnitors, and pursuing the
Surety’s common law rights to seek recovery of losses from others, including
third parties. The Indemnitors agree that their liability shall be construed as
the liability of a compensated Surety, as broadly as the liability of the Surety
is construed toward its obligee or other claimants.
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. . . .
9. Claim Settlement: The Surety shall have the right to decide and
determine in its sole discretion whether any claim, liability, suit or judgment
made or brought against the Surety or any of the Indemnitors on any Bond
shall or shall not be paid, compromised, resisted, defended, tried or appealed,
and the Surety’s decision shall be final, binding and conclusive upon the
Indemnitors. The Surety shall be entitled to immediate reimbursement for
any and all Loss under this Agreement. The Surety shall have no obligation
to tender its defense to any Indemnitor. If the Surety elects not to tender its
defense to any Indemnitor, then the Indemnitors shall nevertheless remain
liable to the Surety for all Loss. An itemized statement of payments made
by the Surety sworn to by an officer of the Surety shall be prima facie
evidence of the liability of the Indemnitors to reimburse the Surety.
10. Waiver of Notice: Prior and subsequent to entering into this
Agreement, the Indemnitors agree to keep themselves fully apprised of the
business dealings of the Principal. The Indemnitors shall not rely on the
Surety to provide any information concerning the Principal’s business
dealings. The Indemnitors waive notice of the following: (a) execution of
Bonds; (b) the acceptance of this Agreement; (c) any change in the contract
price, plans or specifications of any Bonded contract; (d) any notice of
default, claim or liability of the Surety; (g) any changes in the signatories to
this Agreement; (h) the execution of Bonds by the Surety on behalf of entities
not signatory to this Agreement and submitted by any of the Indemnitors;
and (i) any act, fact or information coming to the notice or knowledge of the
Surety concerning or affecting its rights or liabilities under the Bonds or the
rights or liabilities of the Indemnitors.
Id. at 1-2.
C. NASIC’s Demand upon Bell
NASIC asserts that as a result of issuing the Bonds, it has suffered losses, costs, and
expenses totaling $387,204.45, not including the costs and attorney’s fees incurred in
defending the instant litigation. See NASIC’s Mot. at 2; id. Ex. 1, Matthews Aff. (Doc.
No. 93-1) at 11. NASIC has demanded indemnification from Bell, but she has not
complied. See NASIC’s Mot. at 5; Matthews Aff. at 2; NASIC’s Mot. Ex. 4, Oct. 13, 2018
Demand Letter (Doc. No. 93-4) at 2. In connection with this litigation, NASIC has
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produced the following itemized statement of payments it made “in good faith” under the
Bonds:
See Matthews Aff. at 2, 11.
III. DISCUSSION
NASIC seeks summary judgment on its claim that Bell has breached the Indemnity
Agreement by refusing NASIC’s request for indemnification. NASIC also moves for entry
of summary judgment on its request for a declaratory judgment finding Bell liable for any
losses, costs, and expenses incurred by NASIC in this action.
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A. Choice of Law
The Indemnity Agreement does not contain a choice of law provision.1 In diversity
actions, choice of law is determined by the law of the forum state, in this case Oklahoma.
See Elec. Distribs., Inc. v. SFR, Inc., 166 F.3d 1074, 1083 (10th Cir. 1999). Under
Oklahoma law, “[a] contract is to be interpreted according to the law and usage of the place
where it is to be performed, or, if it does not indicate a place of performance, according to
the law and usage of the place where it is made.” Okla. Stat. tit. 15, § 162. In the context
of insurance policies, the Tenth Circuit has held that the parties’ designation of a place for
payment of premiums and benefits constitutes the place of performance under Oklahoma
law. See Cudd Pressure Control, Inc. v. N.H. Ins. Co., 645 F. App’x 733, 740-41 (10th
Cir. 2016). “Nevertheless, when the language of the contract does not directly or implicitly
indicate a place of performance, [the Court] will resort to applying the law of the state of
contracting.” Id. at 241.
Here, though the Indemnity Agreement concerns the Indemnitors’ obligation to
make payments to NASIC, it does not specify where or how the payments are to be made.
Accordingly, the Court finds that the Indemnity Agreement neither implicitly nor explicitly
indicates a place of performance. Because the Indemnity Agreement was executed in
Texas and does not specify a place of performance, the Court concludes that the contract
is governed by Texas law. See Indem. Agreement at 4-5; Cudd Pressure Control, 645 F.
App’x at 741.
1 Neither party addresses choice of law in its briefing.
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B. Bell’s Obligation to Indemnify NASIC
1. NASIC’s Prima Facie Case
“An indemnity agreement is a promise to safeguard or hold the indemnitee harmless
against either existing and/or future loss liability.” Dresser Indus., Inc. v. Page Petroleum,
Inc., 853 S.W.2d 505, 508 (Tex. 1993). “Words of an indemnity agreement are to be given
their ordinary or common meaning in determining the intent of the parties.” Krueger Eng’g
& Mfg. Co. v. Admiral Truck Servs., Ltd., No. 14-01-00035-CV, 2002 WL 576083, at *4
(Tex. App. Apr. 18, 2002).2
Here, the Indemnity Agreement provides that Bell is to indemnify surety NASIC
for all Loss, as that term is defined in the Indemnity Agreement, and that “[a]n itemized
statement of payments made by the Surety sworn to by an officer of the Surety shall be
prima facie evidence of the liability of the Indemnitors to reimburse the Surety.” Indemnity
Agreement at 1-2. Similar prima facie evidence provisions have been recognized as
enforceable by Texas courts. See, e.g., Liberty Mut. Ins. Co. v. CL Carson, Inc., No. A-
11-CA-543, 2013 WL 12392522, at *5 (W.D. Tex. June 19, 2013); Safeco Ins. Co. of Am.
v. Gaubert, 829 S.W.2d 274, 282-83 (Tex. App. 1992). NASIC has produced a sworn
2 Under Texas law, agreements seeking “to exculpate a party from the consequences of its
own negligence” are subject to certain fair notice requirements. Dresser Indus., 853
S.W.2d at 508. These requirements are inapplicable “when the indemnitee establishes that
the indemnitor possessed actual notice or knowledge of the indemnity agreement.” Id. at
508 n.2. Because the Indemnity Agreement at issue here sought to exculpate NASIC from
the consequences of the actions of third-party Icon, the Dresser Industries fair notice
requirements were not triggered. To the extent Bell argues that NASIC’s own negligence
led to its losses, see Bell’s Resp. at 7-8, the fair notice requirements are still inapplicable
because the record indicates that Bell had actual notice and knowledge of the Indemnity
Agreement. See id. Ex. 1, Bell Decl. (Doc. No. 204-1) ¶¶ 4-5.
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itemized statement in accordance with the terms of the Indemnity Agreement. See
Matthews Aff. at 11. Therefore, to avoid summary judgment on NASIC’s claim that Bell
has breached that agreement, Bell “must allege that the agreement is invalid or
unenforceable” or otherwise point to competent evidence creating a genuine issue as to
“the fact and extent of” Bell’s liability as an indemnitor. U.S. Fire Ins. Co. v. Rey-Bach,
Inc., No. CIV.A.3:02-CV-2133, 2004 WL 1836314, at *2 (N.D. Tex. Aug. 16, 2004); see
Merchs. Bonding Co. v. Gandler-Snider Eng’g Co., No. 3:98-CV-0499, 1999 WL 500226,
at *5 (N.D. Tex. July 14, 1999).
2. Bell’s Response
a. Economic Duress
Bell implicitly argues that the Indemnity Agreement is invalid because it was signed
under economic duress. See Bell’s Resp. at 3. According to Bell, NASIC agent Doug
Moore threatened that NASIC would cancel all of Icon’s surety bonds if Bell did not sign
the Indemnity Agreement, which would have “ruined [Icon] and destroyed Bell
financially.” Id. at 2.
NASIC contends that Moore was Icon’s insurance and bonding agent and not
NASIC’s agent, representative, or employee. See NASIC’s Reply at 2. Even if Moore was
NASIC’s agent, however, Bell’s argument would still fail. To establish the affirmative
defense of economic duress, Bell must show: (1) a threat by NASIC “to do something that
[NASIC] has no legal right to do; (2) illegal exaction or some fraud or deception; and (3)
imminent restraint such as to destroy free agency without present means of protection.”
Krueger Eng’g & Mfg. Co., 2002 WL 576083, at *6. Importantly, a lawful threat of loss
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of future business is not economic duress. See id. (“If Admiral had refused to provide the
requested indemnification, KEMCO could have rightfully cancelled the contract and gotten
its trucking services elsewhere.”). Though the prospect of losing NASIC’s bonding may
have presented Bell with a difficult business decision, she has not shown that NASIC used
fraud, physical restraint, or other improper means to achieve her acquiescence.
Accordingly, Bell has not shown that she signed the Indemnity Agreement under economic
duress and cannot defeat NASIC’s claim on this basis.
b. Substantiation of Claims
Next, Bell argues that NASIC has failed to produce sufficient proof that it actually
incurred the losses for which it seeks indemnification. Bell also asserts that NASIC made
payments on claims without having adequately investigated them. See Bell’s Resp. at 3-8.
As discussed, the Indemnity Agreement provides that a sworn itemized statement
of losses is prima facie evidence of the Indemnitors’ liability to NASIC. See Indemnity
Agreement at 1-2. Accordingly, Bell has no grounds to demand that NASIC produce
“documents . . . such as bills and invoices” to support its demand. Bell’s Resp. at 3.
Instead, NASIC having produced the prima facie evidence agreed to by the parties, it is
Bell’s burden to point to evidence showing that the payments were not actually incurred.
See U.S. Fire Ins. Co., 2004 WL 1836314, at *2.
As to Bell’s argument that NASIC inadequately investigated the claims on the
bonds, the Indemnity Agreement grants NASIC “the right to decide and determine in its
sole discretion” whether to settle claims and provides that NASIC’s decision “shall be
binding and conclusive upon the Indemnitors.” Indemnity Agreement at 2. In Ford v.
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Aetna Insurance Co., as here, “the indemnity agreement vested the surety with the
exclusive right to determine whether claims under the bond should be settled.” Associated
Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 285 (Tex. 1998) (citing Ford v.
Aetna Ins. Co., 394 S.W.2d 693 (Tex. App. 1965)). The Texas court determined
“that the surety was limited only by bad faith, which exceeds negligence or even gross
negligence.” Id. (noting that “bad faith” “requires proof of an improper motive or willful
ignorance of the facts”). And, even if NASIC was subject to an additional good-faith
requirement, Texas law characterizes the good-faith obligation of indemnitees with the
express authority to settle claims as “discretion limited only by the bounds of fraud,” with
no requirement to conduct a reasonable investigation. Id. at 284 (internal quotation marks
omitted).
NASIC has presented evidence that it settled the claims in good faith. See Matthews
Aff. at 2. Because Bell has pointed to no evidence suggesting that NASIC’s conduct in
investigating and settling the claims was fraudulent, improperly motivated, or otherwise
contrary to the terms of the Indemnity Agreement, she has failed to show a genuine
question as to whether the handling of those claims precludes NASIC’s recovery for breach
of the Indemnity Agreement. Cf. Ford, 394 S.W.2d at 698 (“Bad faith on the part of [the
indemnitee] may be urged . . . as a defense, but where a genuine issue of material fact in
such respect is not raised by the summary judgment evidence, [the indemnitor’s] reliance
on such defense would be ineffective.”).
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c. Ripeness
Bell nominally argues that NASIC’s claims against her are not ripe for adjudication.
See Bell’s Resp. at 9-10. “Constitutional ripeness is based on Article III’s requirement that
federal courts hear only ‘[c]ases’ and ‘[c]ontroversies.’” United States v. Cabral, 926 F.3d
687, 693 (10th Cir. 2019) (alterations in original) (quoting U.S. Const. art. III, § 2).
“Because federal courts cannot give advisory opinions, the matter must come to the court
in ‘clean-cut concrete form.’” Id. (quoting New Mexicans for Bill Richardson v. Gonzales,
64 F.3d 1495, 1499 (10th Cir. 1995)). “The ripeness doctrine addresses a timing question:
when in time is it appropriate for a court to take up the asserted claim.” United States v.
Sup. Ct. of N.M., 839 F.3d 888, 903 (10th Cir. 2006) (alteration, emphasis, and internal
quotation marks omitted).
In the instant Motion, NASIC seeks relief for breach of a contract that provides for
indemnification on claims NASIC already has paid. Accordingly, the Court finds that the
facts are sufficiently developed and the issues ripe for adjudication. See Cabral, 926 F.2d
at 693.
C. Declaratory Judgment
Finally, NASIC requests the Court issue “summary declaratory relief” establishing
Bell’s liability under the Indemnity Agreement for all attorney’s fees and costs incurred by
NASIC in defending against Insight’s claim, as well as “any other losses should it be
determined that Insight is entitled to recover from [NASIC].” NASIC’s Mot. at 9-10.
“Under Fed. R. Civ. P. 57 and 28 U.S.C. § 2201, the proper procedure by which to
obtain a declaratory judgment is to file ‘an appropriate pleading’ seeking a declaration of
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rights. 28 U.S.C. § 2201(a). A ‘pleading’ includes a complaint or an answer; it does not
include a motion. Fed. R. Civ. P. 7(a).” Mission Air Support, Inc. v. KSNL Aero, LLC,
No. CIV-21-1034-D, 2022 WL 18909355, at *1 (W.D. Okla. Apr. 29, 2022). NASIC did
not seek entry of such a declaratory judgment in its Third-Party Complaint, has not sought
leave to amend that pleading, and has not cited authority for the Court’s consideration of
this request at summary judgment. The Court therefore denies this “procedurally
improper” request. Id.; accord Est. of Gonzales ex rel. Gonzales v. Brown, No. 12-CV-
495, 2014 WL 4748604, at *5 (N.D. Okla. Sept. 23, 2014).
CONCLUSION
For the foregoing reasons, Defendant/Third-Party Plaintiff North American
Specialty Insurance Company’s Motion for Partial Summary Judgment and Declaratory
Relief (Doc. No. 93) is GRANTED IN PART and DENIED IN PART, as follows:
1. Defendant/Third-Party Plaintiff North American Specialty Insurance Company
is entitled to summary judgment on its breach of contract claim against Third-
Party Defendant Sasha M. Bell in the amount of $387,204.45; and
2. The Motion is denied as to the request for issuance of a declaratory judgment.
Judgment in accordance with this Order shall be entered at the conclusion of this
litigation. The equitable claims raised in the Third-Party Complaint remain pending.
IT IS SO ORDERED this 20th day of September, 2024.
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