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H.S. Martin Construction, Corp. v. Lee County School Board

United States District Court, W.D. Virginia, Big Stone Gap Division

December 21, 2016


          Ilya I. Berenshteyn and K. Justin Hutton, The Senter Law Firm, Bristol, Tennessee, and Russell L. Egli, Egli Law and Loss Claim Specialist, Knoxville, Tennessee, for Plaintiff

          Melissa W. Robinson and Johneal M. White, Glenn Robinson & Cathey, PLC, Roanoke, Virginia, for Defendant Risk Management Programs Inc.; and Jennifer D. Royer, Guynn & Waddell, P.C., Salem, Virginia, for Defendant Lee County School Board.


          James P. Jones United States District Judge.

         In this case invoking the court's diversity jurisdiction, the plaintiff, H.S. Martin Construction Corp., doing business as Insurance Claims Construction Services (“H.S. Martin”), has asserted two breach-of-contract claims against defendant Lee County School Board (“School Board”), as well as a claim of bad faith breach of contract against defendant Risk Management Programs, Inc. (“Risk Management”), and a claim of intentional interference with prospective economic advantage against defendants Robinson & Associates, Inc. (“Robinson”), Highlands Claims Services, LLC (“HCS”), and William Curtis Prater. The School Board and Risk Management have moved to dismiss the Amended Complaint for failure to state any viable claims against them. In response, H.S. Martin has moved for leave to amend its Amended Complaint. For the reasons that follow, I will grant the motions to dismiss and deny the Motion for Leave to Amend Complaint.


         The plaintiff alleges the following facts, which I must accept as true for the purpose of deciding the pending motions.

         H.S. Martin is a Tennessee corporation with its principal place of business in Tennessee. The School Board, a public entity located in Lee County, Virginia, owns and operates Pennington Gap Middle School (“Middle School”) and Lee County High School (“High School”). Risk Management is a group self-insurance risk pool based in Richmond, Virginia. Robinson is a Virginia corporation with a principal place of business in Lynchburg, Virginia. HCS is a Virginia corporation with a principal place of business in Abingdon, Virginia.[1] Prater, a citizen of Virginia, was a senior claims specialist working for Robinson and HCS. He was hired by Risk Management to work as the claims adjuster for the School Board for claims related to damages sustained during two separate weather incidents that occurred in 2014 and 2015. Prater was named as a defendant in this lawsuit, but he died several months before the plaintiff filed its original complaint in this case, and Prater's estate has not been served with process.

         A. The Middle School.

         On July 27, 2014, the Middle School suffered damage due to a weather incident. The same day, the School Board contacted H.S. Martin and requested estimates for emergency mitigation and reconstruction. A representative of the School Board signed an Authorization to Pay form that stated:

I am authorizing the third party named below to be added as a “named party” on the initial and all future “approved” payments from the claim payable proceeds as a result of my insurance claim arising out of Hail damage. Claim number: 052B2014107694 I understand that I will be named and listed on the initial and subsequent checks, due to me being the named insured on the policy in force and binding contract I have with you, as being my insurance carrier.
I am invoking my right as a policy holder through the “Terms and Conditions” portion of my policy, for cause that if a situation arises out of the handling of my claim, that the third party named below will be able to discuss, negotiate, and assist in concluding my insurance claim on my behalf.
I am giving my allocation to them as the named insured on the policy, or appointed representative of the named insured.
This joint agreement allows third party to protect and preserve their security interest through and by, being a named party on the insurance proceeds, payable through endorsed check from you as my insurance carrier and or Mortgage Company.
I also understand that my signing of this agreement does not waive any of my rights as the named insured or policy holder.

(Compl. Ex. 6, ECF No. 1-6.) The “Third Party Information” portion of the form was filled in with the name, address, phone number, and tax identification number of H.S. Martin.

         H.S. Martin's work at the Middle School was directed by representatives of the School Board, Prater, and Risk Management. On August 13, 2014, H.S. Martin contacted Prater to request partial payment for work completed up to that time. When it did not receive payment, H.S. Martin asked representatives of the School Board for instruction on how to bill for the emergency mitigation work that had been completed.

         On September 10, 2014, a representative of Risk Management informed H.S. Martin and the School Board that it would release $250, 000 as advance payment for work completed and would not issue any further payments until all work was completed. On September 24, 2014, representatives of the School Board authorized payment of $250, 000 to H.S. Martin. On September 26, 2014, representatives of the School Board and Risk Management discussed meeting with H.S. Martin to reach an agreed price for the emergency mitigation work that had been completed and the remaining repairs to be completed. Sometime after September 27, 2014, H.S. Martin received check number 147010 in the amount of $250, 000.

         On October 1, 2014, H.S. Martin contacted representatives of the School Board and Risk Management to discuss issues of water leaks through the temporary repairs and the use of additional personnel to monitor barriers and keep students out of work areas. H.S. Martin suggested spraying for airborne contaminates, and representatives of the School Board directed H.S. Martin to spray. On October 2, 2014, Prater represented that Risk Management had authorized thermal fogging and additional workers to provide on-site supervision, and he directed H.S. Martin to complete work on the Middle School roof as quickly as possible while also taking every measure to avoid further leaks.

         On October 17, 2014, Alan Ingles, Maintenance Superintendant for the School Board, sent an email to representatives of Risk Management asserting that he had not received requested paperwork from Risk Management and that he needed the paperwork to show to the School Board. Prater was responsible for providing the paperwork to Risk Management, the School Board, and H.S. Martin. Prater responded, asserting that the agreed price estimate would require one large appraisal of the loss because Risk Management preferred to issue one payment per claim, and that he had not been able to complete the appraisal.

         On October 28, 2014, H.S. Martin contacted representatives of the School Board and Risk Management to request payment of additional funds for the Middle School project. The following day, Ingles requested that Risk Management pay H.S. Martin for the work completed to date.

         On November 13, 2014, Prater represented to the School Board and H.S. Martin that the agreed price appraisal had been completed and forwarded to Risk Management. Risk Management inspected the property on November 18, 2014, with Garry Smith, Vice President of H.S. Martin. On December 23, 2014, Risk Management issued a check to H.S. Martin in the amount of $692, 608.05, indicating that the money was payment for “Roof Repair, First Dry Out, Second Dry Out, Third Dry Out, Fourth Dry Out, Agg Shop building, Football Field Lights, Alternative Ed Building, Janitorial Equipment Building, Greenhouse Building, and Structural Repairs.” (Am. Compl. ¶ 50, ECF No. 32.) Risk Management indicated that an additional $88, 435.68 was owed for the work listed, but that money was being withheld pending receipt of further information from H.S. Martin. The total price for all work completed was $1, 491, 614.00, and the School Board and Risk Management paid a total of $942, 608.05.

         H.S. Martin provided the further information requested. On May 22, 2015, H.S. Martin completed all work and requested payment in full for its services. Representatives of the School Board forwarded the request for final payment to Risk Management. School Board representatives were sent copies of correspondence throughout the mitigation and construction process and did not direct H.S. Martin to discontinue its work at the Middle School. H.S. Martin has not received payment of the outstanding balance of $549, 005.95 for work performed at the Middle School.

         B. The High School.

         On January 6, 2015, the High School suffered damage from a weather incident. The following day, Ingles contacted Smith and informed him that an insurance claim had been submitted to Risk Management for the weather damage. That day, at the request of Ingles and the School Board, H.S. Martin began making emergency repairs to the High School. On January 12, 2015, the Director of Maintenance, as a representative of the School Board, signed an Authorization to Pay form for claim number 052B2015118636, arising out of water damage at the High School, that named H.S. Martin as the third ...

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