Judge denies Jung Hotel's motion to amend lawsuit against insurance companies

By Scott Holland | May 13, 2019

NEW ORLEANS — A federal judge pushed back on a company’s attempt to further intervene in a lawsuit regarding insurance coverage.

Jung LLC, which already intervened in a breach of contract suit that McDonnel Group LLC brought against Starr Surplus Lines Insurance Co. and Lexington Insurance Co., argues the insurers did not fulfill obligations to fully cover losses under two builders' risk policies related to water damages and broken elevators in the Jung Hotel.

Although Jung had already intervened, it filed a motion seeking to amend its complaint under state law, asserting it is entitled to recover, as an additional ensured entity, damages coming from refusal to pay the McDonnel claims in full.

In an opinion issued April 17, Judge Joseph Wilkinson Jr. explained McDonnel sued Starr on Feb. 9, 2018, and added Lexington as a defendant on April 4, 2018. A district judge set June 22 as the deadline for amendment pleadings, but on Nov. 7 granted Jung leave to intervene. The insurers moved for summary judgment against Jung on Feb. 11, asking Jung’s claim be dismissed, then on Feb. 20 filed another summary judgment motion arguing the policies don’t cover Jung’s claim.

According to Wilkinson, Jung failed to establish good cause to make an amendment after the June 22 deadline, which was never extended.

“As an initial matter,” Wilkinson wrote, “Jung's original memorandum in support of this motion failed to address its proposed amendment under the Rule 16(b) factors, but rather limited its briefing to the Rule 15(a) standard. Not until its reply brief was permitted did Jung argue that its proposed amendment met the Rule 16(b) ‘good cause’ requirement.”

Jung argued the “interests of justice” favor allowing the amendment and alleged bad faith on the part of the insurers in delaying payment to McDonnel. Jung further said it acquired documents to support those claims after filing its Nov. 7 motion.

“The discovery Jung cites in support of its proposed amendment consists of document attachments to its opposition memorandum to a pending motion for summary judgment filed on March 4,” Wilkinson wrote. “I am unpersuaded by the nature and content of these materials that Jung lacked sufficient evidentiary and legal support for the new claims it now seeks to assert to include them in its original complaint of intervention at the time it was filed.”

Jung also pointed to a recent decision granting another party to file its initial intervention in the matter, but Wilkinson clarified there is a different standard for allowing amendments to standing interventions.

Wilkinson said that allowing Jung to amend would require additional discovery as well as undermine the legal basis of the pending summary judgment motions, meaning “the potential prejudice to Insurers in allowing this untimely amendment is substantial and strongly militates against a finding” that Jung has good cause.

The district judge twice continued the discovery deadline and trial date, and while a third appears unlikely, Wilkinson said, a new trial date and discovery deadline could make things easier on the insurers.

“On the other hand,” Wilkinson wrote, “the passage of time has complicated and made more difficult their burden in doing so. Defendants have already invested time, resources and money in litigating Jung's existing claims, including through the filing of two summary judgment motions. This factor militates against allowing Jung to amend.”

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