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Ohio Security Insurance Co. v. Watchdog Security, LLC

United States District Court, D. Oregon, Eugene Division

March 2, 2018

OHIO SECURITY INSURANCE COMPANY Plaintiff,
v.
WATCHDOG SECURITY, LLC, Defendant.

          ORDER

          THOMAS M. COFFIN UNITED STATES MAGISTRATE JUDGE.

         Plaintiff seeks recovery in this action for property damage caused by a fire. There is diversity of citizenship between the parties.

         In its original complaint, plaintiff asserted one claim for relief entitled "reckless misrepresentation" and defendant brought a motion to dismiss for failure to state a claim. The court noted at oral argument that the motion appeared meritorious, but allowed plaintiff its request to amend the complaint.

         In the amended complaint, plaintiff adds a second claim for relief entitled "negligent misrepresentation." The parties provided supplemental briefing and defendant's motion to dismiss the amended complaint for failure to state a claim is presently before the court.

         Factual Background

         Plaintiff is Ohio Security Insurance Company (Ohio Insurance). Ohio Insurance provided property insurance to its insured Ehler Enterprises Oregon, LLC (Ehler) for Ehler's building.

         Ehler leased a suite in its building to Bend Trend Homes (BTH).

         BTH had allegedly entered into a Client Agreement with defendant Watchdog Security, LLC (Watchdog Security). In the Client Agreement between BTH and Watchdog Security, Watchdog Security agreed to provide monitoring services for a burglar alarm inside the BTH suite. In the event a burglar alarm was received, Watchdog allegedly promised to transmit such alarm to the police or fire department. Plaintiff clarified at oral argument that the Client Agreement was intended for burglar alarm services and not for fire.

         In May 2013, BTH decided to replace its telephone system, and as a result of the change, the telephone connection between the burglar alarm for the suite and Watchdog Security's central monitoring system was severed. Ohio Insurance alleges that because the telephone line was severed, Watchdog Security lost the ability to monitor the system in 2013, and that BTH paid Watchdog Security a quarterly fee to monitor the alarm for two years up to the time of the fire in 2015.

         On July 30, 2015, an intruder, who was suffering from the delusion that he was being chased by marauding ninjas, broke into the suite to save himself. The burglar alarm for the suite was triggered. However, to hasten a response from the police department, the intruder started a fire in the suite. Ohio Insurance alleges that the fire started in the BTH suite spread from its initial area in origin, and proceeded to do damage throughout the entire building.

         Ohio Insurance alleges as its first claim a claim for "reckless misrepresentation." Ohio Insurance alleges that Watchdog Security promised BTH that it would communicate the information of a triggered burglar alarm to authorities, failed to notify BTH that it had lost its ability to moniter the burglar alarm, and that by accepting a fee, its conduct amounted to a reckless disregard by Watchdog Security for the fact it could not notify the Bend Police Department of an unlawful entry into the suite.

         Plaintiff Ohio Insurance has not alleged the existence of a contract between itself and defendant Watchdog Security. Nor has Ohio Insurance alleged the existence of a contract between its insured Ehler and defendant Watchdog Security.

         In its amended complaint, Ohio Insurance asserts a second claim entitled negligent misrepresentation. Ohio Insurance alleges that its insured, Ehler, the building owner, was an intended beneficiary of the Client Agreement for burglar ...


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