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The Cincinnati Insurance Co. v. Reflok, Inc.

United States District Court, D. Idaho

October 10, 2016

THE CINCINNATI INSURANCE COMPANY, an Ohio corporation; and THE CINCINNATI INDEMNITY COMPANY, an Ohio corporation, Plaintiff,
v.
REFLOK, INC., f/k/a REFLOK-NORTH AMERICA, INC., an Idaho corporation; DIRECT EXPANSION SOLUTIONS, INC., a Texas corporation; DMG CORPORATION, a California corporation; HAVTECH, INC., a Delaware corporation; NORMAN S. WRIGHT MECHANICAL EQUIPMENT CO., LLC, a California limited liability company; and DOE DEFENDANTS 1 through 5, Defendants.

          SOHA & LANG, P.S. Gary Sparling, Soha & Lang, P.S. Attorneys for Plaintiff The Cincinnati Insurance Company and The Cincinnati Indemnity Company.

          COMPLAINT FOR DECLARATORY RELIEF 28 U.S.C. § 1332(A)(2)

         Plaintiffs The Cincinnati Insurance Company and The Cincinnati Indemnity Company (collectively hereinafter, “Cincinnati”) allege as follows:

         I. NATURE OF ACTION

         1. In this action, Plaintiffs Cincinnati seek a declaration pursuant to 28 U.S.C. § 2201(a), regarding the extent of their obligation, if any, to defend, indemnify or pay insurance benefits under policies of insurance issued in Idaho to Defendant Reflok-North America, Inc. (the “Policies” as further defined below), with respect to underlying products liability claims and lawsuits against their Named Insured and/or multiple additional insureds under the Policies. Such underlying claims and lawsuits include, without limitation, the following:

a. BWY 8 Hotel Partnership Ltd. v. EBCO General Contractor, Ltd., et al., Harris County, Texas, District Court Cause No. 2014-64032 (the “BWY 8 Hotel Lawsuit”);
b. Singpoli (Hop Kin) Construction & Decoration (Nevada), et al., v. DMG Corp., et al., Los Angeles County, California, Central District Superior Court No. BC619609 (the “Singpoli Lawsuit”);
c. Atrium Center for Rehabilitation, in Brooklyn, New York;
d. Texas Gulf Coast Regional Airport, in Angleton, Texas;
e. Buffalo Soldiers Museum, in Houston, Texas;
f. LaPorte Fire Station, in LaPorte, Texas;
g. Kenmore Apartments, in Washington, D.C.;
h. Archer Western Contractors, Ltd., in Irving, Texas;
i. Santa Fe Police Station, in Santa Fe, Texas;
j. Alamo Stadium, in San Antonio, Texas;
k. Durant Hotel, in Berkeley, California;
l. U.C. Berkeley Eshleman Hall, in Berkeley, California;
m. The Gables Park Plaza, in Austin, Texas;
n. Twin Pines Nursing Home, in Victoria, Texas;
o. Neff White Elementary School, in Houston, Texas;
p. Peach Creek Elementary School, in Splendora, Texas;
q. Nazareth House, in California;
r. Hospice of Humboldt, Bldg. C, in Eureka, California; and
s. Drury Hotel, in San Antonio, Texas.

         2. The foregoing claims and lawsuits are collectively referenced herein as the “Underlying Claims.”

         II. PARTIES

         3. Plaintiff The Cincinnati Insurance Company is an Ohio corporation having its principal place of business in Fairfield, Ohio.

         4. Plaintiff The Cincinnati Indemnity Company is an Ohio corporation having its principal place of business in Fairfield, Ohio.

         5. Plaintiffs will hereinafter be collectively referenced as “Cincinnati.” 6. On information and belief, defendant Reflok, Inc. f/k/a Reflok-North America, Inc. (“Reflok”) is an Idaho corporation having its principal place of business in Meridian, Idaho.

         7. On information and belief, defendant Direct Expansion Solutions, Inc. (“DXS”) is a Texas corporation having its principal place of business in Austin, Texas.

         8. On information and belief, defendant DMG Corporation (“DMG”) is a California corporation having its principal place of business in Orange, California.

         9. On information and belief, defendant Havtech, Inc. (“Havtech”) is a Delaware corporation having its principal place of business in Olney, Maryland.

         10. On information and belief, defendant Norman S. Wright Mechanical Equipment Company, LLC, (“Wright”) is a California limited liability company having its principal place of business in Brisbane, California.

         11. The true names and capacities of Defendants Doe One through Doe Five are presently unknown to Cincinnati, which therefore sues those defendants by fictitious names. Cincinnati will seek leave of this Court to amend this Complaint when said true names and capacities have been ascertained. Each reference in this Complaint to a “Doe Defendant” or a specially named defendant refers also to all Defendants sued under fictitious names.

         12. Defendants DXS, DMG, Havtech, Wright, and Doe Defendants One through Five are collectively referenced herein as the “Vendor/Distributor Defendants.”

         III. JURISDICTION AND VENUE

         13. Subject Matter Jurisdiction. This Court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332(a)(1) because this controversy is between citizens of different states and because the matter in controversy exceeds, exclusive of interest and costs, the sum specified by 28 U.S.C. § 1332(a).

         14. Personal Jurisdiction. This Court has personal jurisdiction over defendant Reflok, which is an Idaho corporation having its principal place of business in Meridian, Idaho. This Court has personal jurisdiction over the other defendants because, on information and belief, each Vendor/Distributor Defendant transacted business within this state by contracting to purchase and to be the exclusive distributor of Reflok Products in defined geographic areas of the United States and by purchasing and accepting legal responsibility for the Reflok Products so purchased in the State of Idaho. By so doing, each Vendor/Distributor Defendant purposefully availed itself of the privilege of conducting business in the State of Idaho by, inter alia, reaching out beyond its state to create continuing relationships and obligations with Reflok, by purchasing and accepting ownership of goods in the State of Idaho, and by agreeing that the laws of the State of Idaho would govern their relationship with Reflok, thereby invoking the benefits and protections of this state's laws. Cincinnati's claims in this action arise out of each defendant's forum-related activities.

         15. Venue. Venue is properly laid in this Court because Reflok is located in this district and, on information and belief, all other defendants accepted possession and legal responsibility for goods purchased from Reflok in this district. The goods so purchased from Reflok and liability claims related thereto are the subject matter of the Underlying Claims.

         IV. FACTUAL ALLEGATIONS

         16. Reflok manufactures and/or supplies aluminum tubing, connectors, and Variable Refrigerant Volume (“VRV”) fittings under the “Reflok” label or brand name (the “Reflok Products”).

         17. Reflok entered into a “Sales Distributor Agreement for Commercial HVAC-VRV/VRF Systems” or a similar agreement with each Vendor/Distributor Defendant (the “Agreements”). A sample form of Sales Distributor Agreement is attached hereto as Exhibit A.

         18. In the Agreements, Reflok appointed each respective Vendor/Distributor Defendant to be its exclusive sales distributor for the sale of certain Reflok Products within a specified sales territory.

         19. The Agreements state, inter alia, that the Reflok Products were delivered to the Vendor/Distributor Defendants “F.O.B. Reflok-NA's manufacturing or distribution facilities.” Reflok or its agents have indicated to Cincinnati that such facilities are located in Idaho.

         20. The Agreements state, inter alia, that “this Agreement shall be governed by the laws of the State of Idaho, without regard to the choice-of-laws or conflicts-of-law's provisions of such state which would apply the laws of any other jurisdiction.” (See, e.g., Exhibit A ¶ XI.E.)

         21. The Cincinnati Insurance Company issued Commercial General Liability Insurance to Reflok under Policy No. ENP 010 75 50, which was in effect from September 22, 2011 to September 22, 2012.

         22. The Cincinnati Indemnity Company issued Commercial General Liability Insurance to Reflok under Policy No. ENP 010 75 50, which was in effect for three consecutive annual periods from September 22, 2012 to September 22, 2015.

         23. The Cincinnati Insurance Cincinnati Insurance Company Policy No. ENP 010 75 50 and The Cincinnati Indemnity Company Policy No. ENP 010 75 50 will be collectively referenced herein as the “Policies.”

         24. The Policies contain endorsements providing limited coverage for vendors that distribute or sell Reflok's Products in the regular course of the vendor's business, subject to certain terms and limitations.

         25. The Policies also contain certain conditions, limitations and exclusions, including, without limitation:

a. A threshold insuring requirement of “property damage” during the policy period;
b. An exclusion for “property damage” for which Reflok is obligated to pay damages by reason of the assumption of liability in a contract or agreement, subject to certain exceptions (the ...

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