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Cincinnati Insurance Co. v. B & B Paving Inc.

United States District Court, D. North Dakota

April 4, 2018

The Cincinnati Insurance Company, an Ohio Corporation, Plaintiff,
v.
B & B Paving, Inc. d/b/a B & B Dirtworks, Michael Baumgartner, Nancy Baumgartner, Defendants.

          ORDER DENYING REQUEST FOR CERTIFICATION OF QUESTIONS

          Charles S. Miller, Jr., Magistrate Judge.

         Before the court is The Cincinnati Insurance Company (“Cincinnati”)'s Motion to Certify Questions of Law to the North Dakota Supreme Court, wherein Cincinnati requests the court certify four questions to the North Dakota Supreme Court. (Doc. No. 43). B & B Paving, Inc., Michael Baumgartner, and Nancy Baumgartner (“the Defendants”) oppose the motion. (Doc. No. 46).

         I. BACKGROUND

         The court has previously set forth the entire factual background of this dispute. (Doc. Nos. 27, 42); see also Cincinnati Ins. Co. v. B & B Paving, Inc., No. 1-16-cv-340, 2017 WL 4246865 (D.N.D. September 25, 2017) (“Cincinnati I”); Cincinnati Ins. Co. v. B & B Paving, Inc. No. 1-16-cv-340, 2018 WL 504400 (D.N.D. January 22, 2018) (“Cincinnati II”).

         Generally speaking, Cincinnati and the Defendants executed two surety bonds for various construction services to be provided by the Defendants. As is relevant to this case, those bonds are identical. Cincinnati and the Defendants also executed corresponding indemnity agreements, under which the Defendants agreed to indemnify Cincinnati “and hold it harmless from and against any and all liability, losses, costs, damages, attorneys' fees, disbursements and expenses of whatever kind or nature which the Surety may sustain or incur by reason or in consequence of having executed or procured the execution of the” Surety Bonds. (Doc. Nos. 1-1, 1-2). The Defendants executed these indemnity agreements jointly and severally. Cincinnati ultimately received and paid out claims under the bonds totaling $82, 064.95. (Doc. No. 33-1). Cincinnati also incurred $13, 985.70 in costs, expenses, and attorneys fees in discharging its obligations under the surety bonds and in prosecuting this breach of contract case under the indemnity agreements. In sum, Cincinnati sought judgment for $96.050.65, which was inclusive of the paid bond claims, attorneys' fees, and costs and expenses.

         In Cincinnati I, the court granted Cincinnati's motion for summary judgment insofar as the Defendants breached the indemnity agreements for not indemnifying Cincinnati. The court further concluded Cincinnati was entitled to judgment in the amount of $82, 064.95, which represented the amounts paid out under the bonds. The court, however, denied Cincinnati's motion as to the remaining $13, 985.70 without prejudice because Cincinnati had not itemized the requested expenses to the court's satisfaction and the court had doubts about whether North Dakota law allowed for the collection of that amount. The court directed Cincinnati to provide supplemental briefing and affidavits as to the itemization issue and the court's collectability concerns.

         In Cincinnati II, the court considered the supplemental briefing and affidavits submitted by Cincinnati. (Doc. Nos. 38, 41). The supplemental itemized statement of loss indicated Cincinnati sought three categories of damages: (1) amounts paid out under the surety bonds; (2) investigation expenses; and (3) attorneys' fees. As concluded in Cincinnati I, the court concluded Cincinnati was entitled to $82, 064.95 under category (1). The court further concluded Cincinnati was entitled to $27.00 under category (2). The court, however, concluded Cincinnati was not entitled to attorney's fees under category (3) because N.D.C.C. § 28-26-04, as applied by the North Dakota Supreme Court in Hartford Acc. & Indem. Co. v. Anderson, 155 N.W.2d 728 (N.D. 1968), invalidated the attorney's fees provisions Cincinnati sought to enforce. Accordingly, the court concluded Cincinnati was entitled to $82, 091.95 and directed Cincinnati to provide a calculation of potentially applicable prejudgment interest under N.D.C.C. § 32-03-04 and N.D.C.C. § 47-14-05 for purposes of entering final judgment. Instead of doing so, Cincinnati filed the instant motion.

         II. DISCUSSION

         Cincinnati requests the court certify the following four questions to the North Dakota Supreme Court under N.D. R. App. P. 47(a):

1. Is an indemnity agreement “evidence of a debt” for purposes of N.D.C.C. § 28-26-04?
2. Does an indemnity agreement meet the definition of a bond or note for purposes of N.D.C.C. § 28-26-04?
3. Does N.D.C.C. § 28-26-04 invalidate or void an attorneys' fee provision in an indemnity agreement executed in favor of a surety as consideration for the surety's insurance of a surety bond?
4. Does N.D.C.C. § 28-26-04 permit a surety to recover attorneys' fees and costs in an action based on contractual indemnity, for losses incurred by a surety in discharging its obligations under a bond and in enforcing the terms of the indemnity agreement, where the indemnity agreement provides for attorneys' fees and legal costs?

         (Doc. No. 43). Cincinnati argues certification is warranted because of a “grave conflict in the precedent created by the Supreme Court of North Dakota in whether attorneys' fees provisions in indemnity agreements are subject to the State's invalidation statute, N.D.C.C. § 28-26-04.” (Doc. No. 44 p. 2). The Defendants argue certification is unwarranted because Hartford plainly holds attorney's fees provisions contained in indemnity ...


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