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Richard C. Gramlich, (SBN 014449) 

SEVENTH FLOOR CAMELBACK ESPLANADE II 

2525 EAST CAMELBACK ROAD 

PHOENIX, ARIZONA 85016-4237 

TELEPHONE: (602) 255-6000 

FACSIMILE: (602) 255-0103 

E-Mail: RCG@tblaw.com

Attorneys for Plaintiff 

THE UNITED STATES DISTRICT COURT 

 DISTRICT OF ARIZONA 

SOUTHWEST ENERGY SYSTEMS, LLC, 

an Arizona limited liability company, 

 Plaintiff, 

 vs. 

THE PHOENIX INSURANCE COMPANY, 

a Connecticut corporation; THE CHARTER 

OAK FIRE INSURANCE COMPANY, a 

Connecticut corporation, 

Defendants.

Case No. 2:17-CV-04241-PHX-JZB

FIRST AMENDED COMPLAINT 

AND JURY DEMAND 

(Breach of Contract and Bad Faith) 

(Jury Trial Demanded) 

 Plaintiff, Southwest Energy Systems, LLC (“Southwest Energy”), by its attorneys, 

Tiffany & Bosco, P.A., for its First Amended Complaint against Defendants The Phoenix 

Insurance Company (“Phoenix”) and The Charter Oak Fire Insurance Company (“Charter 

Oak”) (collectively as underwriters for Travelers Indemnity Company “Travelers”) alleges 

as follows: 

GENERAL ALLEGATIONS 

 1. Southwest Energy is an Arizona limited liability company authorized to do 

business within the State of Arizona. 

 2. Phoenix is a Connecticut corporation authorized to do business within the 

State of Arizona, which entered into an insurance contract, for policy years 2012-2013, and 

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caused acts to occur in Arizona. 

 3. Charter Oak is a Connecticut corporation authorized to do business within the 

State of Arizona, which entered into an insurance contract, for policy years 2013-2015, and 

caused acts to occur in Arizona. 

 4. All acts complained of herein occurred in Arizona between diverse parties 

and the amount in controversy is in excess of $75,000.00, such that this Court has 

jurisdiction and venue pursuant to 28 U.S.C. § 1332. 

 5. Southwest Energy was covered up to $2,000,000 under Commercial General 

Liability policies (“Policies”) issued by Travelers from January 13, 2012 through January 

13, 2015 and underwritten by Phoenix from January 13, 2012 to January 13, 2013 and 

Charter Oak from January 13, 2013 to January 13, 2015. 

 6. At the time Southwest Energy applied for its Policies with Travelers, 

Southwest Energy indicated that it was an “electrical testing contractor,” which tests 

electrical apparatus, and that it also performs “engineering studies.” 

 7. Pursuant to the terms of the Policies, Southwest Energy was to be covered for 

“bodily injury” or “property damage,” which “occurred” during the Policy periods. 

 8. Southwest Energy’s coverage included “Products-Completed Operations 

Hazard,” which covers claims for “bodily injury” arising out of Southwest Energy’s 

completed work. 

 9. Southwest Energy’s Policies excluded “bodily injury” or “property damage” 

arising out of the rendering or failure to render any professional services, but only with 

respect to: 

A. Providing or hiring independent professionals to provide 

architectural, engineering or surveying services to others in 

any insured’s capacity as an architect, engineer or surveyor; 

and 

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B. Providing or hiring independent professionals to provide, 

architectural, engineering or surveying services in 

connection with construction work any insured performs 

(hereinafter “Professional Services Exclusion”). 

 10. Notwithstanding the Professional Services Exclusion, Travelers previously 

covered damage to a Southwest Energy customer’s equipment caused by arcing and a fire 

while Southwest Energy was performing electrical testing services, on or about July 18, 

2012. (The “Molycorp Claim,” Travelers’ Claim No. ETX5783.) This claim arose out of 

Southwest Energy’s electrical testing services. 

 11. Notwithstanding the foregoing Professional Services Exclusion, Travelers 

also provided coverage for a Southwest Energy customers’ electrical equipment, which 

was damaged on or about January of 2013 while Southwest Energy was performing 

electrical testing services. (The “ATKN/TEP” Claim, Travelers’ Claim No. AJY3056.) 

This claim arose out of Southwest Energy’s electrical testing services. 

 12. On or about November 17, 2011, Truland Systems Corporation (“Truland”) 

entered into a contract with Southwest Energy (the “Truland Agreement”) to perform a 

“protective device coordination study,” “an arc flash hazard analysis,” and an “arc flash 

label installation.” (A true and correct copy of which is attached hereto as Exhibit A.) 

The subject claim does not arise out of these services. 

 13. On or about January 13, 2012, the Truland Agreement was amended by 

adding a change order for Southwest Energy to: “Provide all NETA third party testing on 

all substations and UPS switch gears in DCM1, DCM2, DCM3, and DCM4 as required by 

the 2009 NETA Acceptance Testing Manual and Specifications ...” (the “Truland Change 

Order.”) 

 14. Between August 2012 and September 2013, there were ten separate “ArcFault Events” at the Camp Williams Utah Project (the “Project”), which was being 

constructed by Balfour-Beatty/DPR/Big D (“BDB”) as a joint venture, for the United 

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States Army Corp of Engineers. 

 15. Following the Arc-Fault Events, BDB brought claims against its 

subcontractors, including Truland, for the damage and delays caused to the electrical 

equipment at the Project. 

 16. Following the claim made against it by BDB, Truland filed a demand for 

arbitration against Southwest Energy, on May 27, 2014, alleging claims for indemnity for 

the ten Arc-Fault Events, should it be found liable to BDB (the “Litigation”). (A true and 

correct copy of which is attached hereto as Exhibit B.) 

 17. Truland’s demand for arbitration made reference to expert allegations which 

alleged that Southwest Energy engaged in “abusive handling” while it was performing its 

“testing services on the equipment,” resulting in the ten Arc-Fault Events and the damage 

to the Project’s equipment. 

 18. The subject claims for the Arc-Fault Events were alleged to arise out of the 

electrical testing services which Southwest Energy was performing pursuant to the Truland 

Change Order. 

 19. On or about December 24, 2013, Truland tendered directly to Travelers, on 

behalf of it and Southwest Energy, a demand for coverage and defense of the property 

damage claims arising out of the ten Arc-Fault Events. 

 20. On or about February 19, 2014, Travelers denied the tender from Truland, on 

behalf of itself and Southwest Energy, citing, among other things, the Professional Services 

Exclusion. 

 21. On October 9, 2015, Southwest Energy re-tendered to Travelers the defense 

and indemnity of the Truland claims against Southwest Energy, arising out of the ten ArcFault Events. 

 22. Travelers failed to investigate, adjust and respond to Southwest Energy’s reCase 2:17-cv-04241-DLR Document 24 Filed 01/18/18 Page 4 of 8
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tender of defense and indemnity for almost a year. 

 23. It wasn’t until September 21, 2016 that Travelers denied Southwest Energy’s 

October 9, 2015 re-tender, citing the Professional Services Exclusion, among other 

provisions, and refused the defense or indemnity of the claim. 

24. The allegations in Truland’s Complaint for Arbitration were sufficient to 

trigger coverage under Travelers’ Policies and a duty to defend Southwest Energy. 

 25. Travelers, in denying Southwest Energy’s tender, ultimately placed its own 

interests ahead of those of its insured, by refusing to defend and indemnify Southwest 

Energy in the Litigation. 

26. Southwest Energy’s defense costs and fees in the Litigation totaled 

$314,686.52. (A true and correct copy of the itemization reflecting same is attached hereto 

as Exhibit C.) 

FIRST CLAIM FOR RELIEF 

(Breach of Contract) 

 27. Southwest Energy incorporates herein all averments set forth in the 

paragraphs above. 

 28. Southwest Energy is an insured under the Policies. 

 29. Under the Policies, Travelers’ underwriters, Phoenix and Charter Oak, had an 

obligation to indemnify and pay the defense costs and fees in the Litigation. 

 30. Despite Southwest Energy’s demands, Travelers breached its Policies by 

failing and refusing to indemnify and defend Southwest Energy in the Litigation, forcing 

Southwest Energy to fund the defense of same itself. 

 31. As a result of Travelers’ failure to honor its defense and indemnity 

obligations under the Policies, Southwest Energy has been damaged in an amount to be 

determined at trial. 

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 32. This matter arises out of contract such that Southwest Energy is entitled to 

recover its attorney’s fees and costs pursuant to the terms of the Policies and/or A.R.S. § 

12-341.01. 

SECOND CLAIM FOR RELIEF 

(Bad Faith)

 33. Southwest Energy incorporates herein all averments set forth in the 

paragraphs above. 

 34. Travelers’ underwriters, Phoenix and Charter Oak, knowingly or recklessly 

denied payment of Southwest Energy’s defense costs and fees, and to indemnify it in the 

Litigation. 

 35. Travelers’ knowing denial of a defense and indemnity was unreasonable. 

 36. Travelers failure to indemnify and pay Southwest Energy’s defense costs and 

fees in the Litigation is unreasonable and in bad faith for the reasons outlined herein, 

including, without limitation: 

A. Travelers denied to pay Southwest Energy’s defense costs and fees in 

the Litigation, despite the fact that its obligation to provide a complete 

indemnity and defense was not “fairly debatable;” 

B. Travelers failed to promptly investigate, adjust and issue payments 

due under its Policies with Southwest Energy; 

C. Travelers placed its interests before those of its insured, by seeking to 

reduce its own exposure, while Southwest Energy was forced to 

advance the very defense costs and fees Travelers had agreed to pay 

and had a contractual duty to pay; 

D. Travelers deprived Southwest Energy of the benefits and security it 

was entitled to under the Policies; 

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E. Travelers has forced Southwest Energy to file suit to recover the 

benefits it is owed under the Policies; and 

F. Travelers’ refusal to fund Southwest Energy’s defense costs and fees 

in the Litigation is otherwise a knowing and/or reckless violation of 

controlling law and industry standard. 

 37. Travelers knowingly and intentionally failed to pay Southwest Energy’s 

defense costs and fees in the Litigation, despite its knowledge that Southwest Energy 

would incur unjustified and significant financial harm as a result of Travelers’ conduct. 

 38. As a result of Travelers’ unreasonable failure to honor its indemnity and 

defense obligations, Southwest Energy has been damaged in an amount to be determined at 

trial. 

WHEREFORE, Southwest Energy prays for judgment against Travelers’ 

underwriters, Phoenix Insurance Company and Charter Oak Fire Insurance Company, as 

follows: 

1. Awarding judgment in Southwest Energy’s favor and against Travelers in the 

amount of damages incurred by Southwest Energy as the result of the 

unlawful acts pled above, plus prejudgment interest and attorney’s fees and 

costs as permitted by law; 

2. Punitive damages; and 

3. For such further and additional relief as the Court deems necessary and/or 

proper under the circumstances. 

/// 

/// 

/// 

/// 

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DATED this 18th day of January, 2018. 

 

 TIFFANY & BOSCO, P.A.

 By: /s/ Richard C. Gramlich Richard C. Gramlich 

 Seventh Floor Camelback Esplanade II 

 2525 East Camelback Road 

 Phoenix, Arizona 85016 

 Attorneys for Plaintiff 

COPY of the foregoing served on 

this 18th day of January, 2018: 

William C. Reeves 

LAW OFFICES OF MORALES 

 FIERRO REEVES 

2151 Salvio Street, Suite 280 

Concord, California 94520 

COPY of the foregoing mailed 

even date to: 

Jamie Alexander Glasser 

Myles Patrick Hassett 

HASSETT LAW FIRM, PLC 

1221 East Osborn Road, Suite 200 

Phoenix, Arizona 85014-5541 

Attorneys for Intervenor

 /s/ Elizabeth Franklin 

Case 2:17-cv-04241-DLR Document 24 Filed 01/18/18 Page 8 of 8