642 F.Supp.3d 1273
D. Kan.2022Background
- Plaintiffs Dover Group, LLC and Eucalyptus Real Estate, LLC operate related businesses; Dover signed an Administrative Service Organization (ASO) Agreement with Innovative Work Comp Solutions (Innovative/INVO) for workers’ compensation services after broker and Innovative representations that related entities would be covered.
- Innovative/INVO drafted the Agreement; the Agreement lists Dover as the client but plaintiffs allege the parties intended it to cover both Dover and Eucalyptus.
- United Wisconsin issued a workers’ compensation policy (identified on a Certificate of Liability Insurance) naming Innovative and LCF Dover LLC as insureds; plaintiffs allege United Wisconsin knew plaintiffs were sister companies, accepted premiums tied to Eucalyptus payroll, and intended coverage for Eucalyptus.
- On May 10, 2019, Eucalyptus employee Robert Teague was injured; plaintiffs allege Innovative/INVO and United Wisconsin refused to defend or pay benefits under the Agreement and the Policy.
- United Wisconsin moved to dismiss under Rule 12(b)(6), arguing it is not a party to the ASO Agreement and there is no actual controversy; the court converted the post-answer 12(b)(6) motion into a Rule 12(c) motion and denied dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness / conversion of 12(b)(6) to 12(c) | United Wisconsin's renewed 12(b)(6) is untimely under the scheduling order and Rule 12(b)(6). | Court may convert a post-answer 12(b)(6) to a Rule 12(c) motion and address the merits. | Court converted the motion to a Rule 12(c) motion and found it timely. |
| Whether United Wisconsin must be dismissed because it is not a party to the ASO Agreement | Plaintiffs seek declarations about both the ASO Agreement and the United Wisconsin Policy; United Wisconsin insured coverage and thus is a proper defendant. | United Wisconsin argues it is not a party to the ASO Agreement, so no actual controversy exists with respect to that contract. | Court denied dismissal, finding an actual controversy exists about the scope of the Policy United Wisconsin issued (and that Dover is listed as insured). |
| Third-party beneficiary standing under the Policy | Plaintiffs allege United Wisconsin issued the Policy intending to cover plaintiffs as sister companies (NCCI form, premiums paid). | United Wisconsin argues plaintiffs have not identified a specific contract provision showing they are intended beneficiaries and thus lack standing. | Court declined to dismiss on pleadings; plaintiffs may later be required to show a contractual provision conferring a benefit. Court left the issue for later dispositive motions. |
| Consideration of arguments raised first in reply briefs | Plaintiffs implicitly argue defendant should not prevail on arguments raised only in reply. | United Wisconsin raised new points in its reply (e.g., burden of proof for third‑party beneficiary, lack of injured employee for Dover). | Court refused to consider arguments raised for the first time in the reply (treated as waived). |
Key Cases Cited
- Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138 (10th Cir. 2000) (Rule 12(c) standard and accepting well-pleaded allegations on judgment on the pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility and rejection of legal conclusions as facts)
- Minshall v. McGraw Hill Broad. Co., 323 F.3d 1273 (10th Cir. 2003) (arguments raised first in a reply are waived)
- Smith v. United States, 561 F.3d 1090 (10th Cir. 2009) (courts may consider exhibits attached to a complaint when ruling on a motion to dismiss)
- Tri-State Truck Ins., Ltd. v. First Nat’l Bank of Wamego, Kan., 535 F. App’x 653 (10th Cir. 2013) (Kansas law on third-party beneficiaries)
- State ex rel. Stovall v. Reliance Ins. Co., 107 P.3d 1219 (Kan. 2005) (burden on third party to show contract provision benefiting them)
- Noller v. GMC Truck & Coach Div., 772 P.2d 271 (Kan. 1989) (distinguishing intended versus incidental third‑party beneficiaries)
- Swearingen v. Honeywell, Inc., 189 F. Supp. 2d 1189 (D. Kan. 2002) (conversion of post-answer Rule 12(b)(6) motion to Rule 12(c) and Rule 12(h)(2) permit defense in 12(c) motion)