United States District Court, D. Arizona
NEIL V. WAKE, District Judge.
Before the Court is Defendants' Motion to Dismiss First Amended Complaint (Doc. 32). For the reasons that follow, the Motion will be denied.
I. FACTUAL ALLEGATIONS AND POLICY LANGUAGE
On May 15, 2003, Plaintiff 11333, Inc., f/k/a/Investors Mortgage Holdings, Inc., became the "exclusive manager" of IMH Secured Loan Fund, LLC ("the Fund"). (Doc. 23 at 2-3.) In that capacity, Plaintiff was responsible for servicing the Fund's loans, managing, operating and developing the Fund's properties, and purchasing liability and other insurance on those properties. ( Id. at 3.) According to Plaintiff, it "had a fiduciary responsibility for the safekeeping and use of all of the Fund's assets and funds." ( Id. ) Plaintiff hired Defendant HUB International Insurance Services, Inc. ("HUB") to assist in buying mortgage bankers/brokers insurance for Plaintiff. ( Id. at 1-3.) HUB obtained a policy from Defendants Underwriters at Lloyd's, London ("Underwriters"), which are "not an insurer, but a marketplace where various underwriters agree to underwrite portions of a particular risk." (Doc. 34 at 4 n.1; Doc. 23 at 1, 3.) That initial policy, which had an effective date of May 23, 2007, was renewed on June 25, 2008, with a "Certificate Period" covering June 22, 2008, through June 22, 2009. (Doc. 23 at 3; Doc. 33-1 at 5.) Under Insuring Agreement 11.1 of the renewed policy ("Policy"), Underwriters "undert[ook] and agree[d] to indemnify the Insured" for:
Insuring Agreement (11) - Mortgage Errors and Omissions
(11.1) Mortgagee Interest
Loss to the Insured's mortgagee interest in real property or to an Investor's interest in real property on whose behalf the Insured is servicing a mortgage, which loss is discovered by the Insured during the Certificate Period, provided that such loss is a direct result of an error or negligent omission on the part of the Insured or its Designated Agent in failing to obtain or maintain
(i) Fire and Extended Coverage insurance, or
(ii) Homeowner's Insurance, or
(iii) Mortgage Redemption Life insurance, Accident and Health insurance, or Accidental Death and Dismemberment insurance, or
(iv) Flood insurance covering real property located in special flood hazard areas (where flood insurance has been made available under the provisions of the National Flood Insurance Reform Act of 1994 and any amendments thereto)
if, by reason of such error or negligent omission, at the time of the loss there is no such insurance in force or such insurance in force is inadequate as to amount or such insurance in force fails to contain a mortgagee clause.
Mortgagee Interest is further extended to include ownership interest in real property obtained through foreclosure or by receipt of deed in lieu of foreclosure but in respect of (i), (ii) and (iv) above.
(Doc. 33-1 at 17-18 (emphasis added).) Pursuant to Insuring Agreement 11.6(ii), Underwriters also undertook to indemnify Plaintiff for:
(11.6) Insurance Requirement Errors and Omissions
(ii) Loss to the Insured's Mortgagee interest or Owner interest, including when acting as a mortgage servicing agent or in a legal fiduciary capacity, in real property, which loss was discovered by the Insured during the Certificate Period by reason of physical loss or damage to said real property directly caused by those perils covered under Fire and Extended Coverage Insurance or Flood Insurance in such amount as is required to be insured by the mortgagor to comply with the National Flood Insurance Reform Act of 1994 or any amendments thereto, provided that such loss to the Insured's interest is a direct result of
(a) the non-existence or inadequacy as to amount of such insurance[.]
( Id. at 20 (emphasis added).) At oral argument, counsel for Plaintiff characterized Insuring Agreements 11.1 and 11.6(ii), both of which provide first-party coverage, as functionally identical for the purposes of this Motion. ...