Am. Nat'l Prop. & Cas. Co. v. Gulf Coast Aerial, LLC

• Decision Date: 29 August 2019
• Docket Number: CIVIL ACTION NO. 1:19-00198-KD-N
• Parties: AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY, Plaintiff, v. GULF COAST AERIAL, LLC f/k/a Gulf Coast Aerial Advertising, LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of Alabama

AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY, Plaintiff, v. GULF COAST AERIAL, LLC f/k/a Gulf Coast Aerial Advertising, LLC, et al., Defendants.

CIVIL ACTION NO. 1:19-00198-KD-N

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

August 29, 2019

REPORT AND RECOMMENDATION

This action is before the Court on the motions to dismiss, stay, and/or abstain (Docs. 12, 17), and separate supporting memorandum (Doc. 13), filed by Defendants Leslie Fields, as administrator for the Estate of Bradley John LaFleur, deceased; Gulf Coast Aerial, LLC f/k/a Gulf Coast Aerial Advertising, LLC ("Gulf Coast"); and Richard Michael Collins.¹ The assigned District Judge referred the motions to the undersigned Magistrate Judge for appropriate action under 28 U.S.C. § 636(a)-(b), Federal Rule of Civil Procedure 72, and S.D. Ala. GenLR 72(a). See S.D. Ala. GenLR 72(b); (5/21/2019 & 5/31/2019 electronic references). Plaintiff American National Property and Casualty Company ("American National") filed separate responses (Docs. 23, 24) in opposition to the motions,² and Fields filed a reply (Doc. 25) to the response to her motion. The motions are now under submission. (See Doc. 22). Upon consideration, the undersigned finds that the Defendants' motions are due to be GRANTED in part and DENIED in part.

I. Background

American National initiated this declaratory judgment action by filing a complaint (Doc. 1) with the Court on April 18, 2019. In response to the Court's order directing it to correct certain deficiencies in its allegations demonstrating subject matter jurisdiction (Doc. 7), American National filed its Amended Complaint for Declaratory Judgment (Doc. 10),³ which is currently the operative complaint in this action.⁴ The Amended Complaint seeks a declaration of rights as to American National's duty to defend and indemnify its insureds in a wrongful death action pending in the Circuit Court of Baldwin County, Alabama (Case No. 05-CV-2018-901313) (hereinafter, "the State Court Action"), under an aircraft insurance policy (Policy No. AC-03158-00) (hereinafter, "the Policy") issued to Gulf Coast "and its individual executive officers and members" providing coverage for two of Gulf Coast's aircraft.⁵ The State Court Action was brought against Gulf Coast and its managing member Collins by Fields as administrator of the estate of decedent LaFleur, who was killed in an airplane crash that occurred shortly after takeoff in Foley, Alabama, on August 4, 2018.⁶ The pilot of the airplane, who was also killed, is alleged to have been acting as an employee of Gulf Coast at the time of the crash. American National claims that neither Gulf Coast nor Collins is due coverage under the subject policy because of an exclusion for "bodily injury" to "passengers" that occurs when an insured aircraft is engaged in "aerial advertising," as those terms are defined in the subject policy.⁷

II. Analysis

A. Ripeness

The Defendants first argue that American National's duty-to-indemnify declaratory judgment claim is not ripe for adjudication because the insureds have not yet been held liable in the State Court Action. In making this argument, the Defendants do not make clear whether they are asserting that the Court lacks subject matter jurisdiction over the claim because it is not ripe for purposes of Article III justiciability, that the Court should exercise discretion to not hear it due to prudential considerations, or both.⁸

In American Fidelity & Casualty Co. v. Pennsylvania Threshermen & Farmers' Mutual Casualty Insurance Co., 280 F.2d 453 (5th Cir. 1960), the former Fifth Circuit Court of Appeals affirmed a district court's dismissal of a duty-to-indemnify declaratory judgment claim where the underlying civil action was still pending against the insureds, noting that such a "request sought a declaration on a matter which might never arise." 280 F.2d at 461.⁹ The panel further stated: "[I]t is not the function of a United States District Court to sit in judgment on ... nice and intriguing questions which today may readily be imagined, but may never in fact come to pass. The mandatory obligation of a District Court to accept and determine a suit for declaratory relief is not commensurate with the full scope of a 'case or controversy' within the constitutional sense ... The District Court was careful to make his dismissal without prejudice to those further rights, and it was well within its considered judicial discretion to decline to express legal opinions on academic theoreticals which might never come to pass." Id.

While this holding from American Fidelity & Casualty was couched in terms of "judicial discretion" to decline to hear a declaratory judgment action, another former Fifth Circuit panel later characterized it in more absolute terms, citing American Fidelity & Casualty as holding "that no action for declaratory relief will lie to establish an insurer's liability in a policy clause contest such as the one at bar until a judgment has been rendered against the insured since, until such judgment comes into being, the liabilities are contingent and may never materialize." Allstate Ins. Co. v. Employers Liab. Assur. Corp., 445 F.2d 1278, 1281 (5th Cir. 1971). See also Halder v. Standard Oil Co., 642 F.2d 107, 110 (5th Cir. Unit B Apr. 6, 1981) (citing American Fidelity & Casualty and a 1972 Fifth Circuit case, without explanation, in support of the following statement: "This circuit has held that the district courts lack jurisdiction to express legal opinions based upon hypothetical or academic facts."). Arguably, though, Allstate Insurance Co.'s broad statement can be considered non-binding dicta, since in the next sentence the Allstate Insurance panel found that there was "no question ... that such a judgment ha[d] been rendered establishing liability" in that case. Allstate Ins. Co., 445 F.2d at 1281. See also Mid-Continent Cas. Co. v. Delacruz Drywall Plastering & Stucco, Inc., 766 F. App'x 768, 771 (11th Cir. 2019) (per curiam) (unpublished) (characterizing as dicta Allstate Insurance's characterization of American Fidelity & Casualty).¹⁰

Moreover, in Edwards v. Sharkey, 747 F.2d 684 (11th Cir. 1984), a panel of the Eleventh Circuit Court of Appeals, while noting that American Fidelity & Casualty had "cautioned against the exercise of jurisdiction in suits for declaratory judgment when the question of the apportionment of insurance coverage may never arise due to the lack of a judgment establishing the liability of the insured[,]" nevertheless recognized that "[t]his caution ... is predicated on the traditional discretion of federal courts exercising jurisdiction over declaratory judgment actions." 747 F.2d at 686 (citing Am. Fid. & Cas., 280 F.2d at 461).¹¹ Arguably, that statement is also dicta, since the panel also held that "even if there was no 'case or controversy' before the district court because of the lack of a judgment against the insured, the settlement of the tort actions provides the necessary establishment of the insured's liability." 747 F.2d at 687.¹² However, Edwards's view of American Fidelity & Casualty was recently reaffirmed in Mid-Continent Casualty Company, in which an Eleventh Circuit panel affirmed a district court's dismissal of a duty-to-indemnify declaratory judgment as unripe, stating:

In our view, the district court did not abuse its discretion in concluding that MCC's duty (or lack of a duty) to indemnify Delacruz is unripe. See Am. Fid. & Cas. Co. v. Penn. Threshermen & Farmers' Mut. Cas. Ins. Co., 280 F.2d 453, 461 (5th Cir. 1960). We have not directly addressed whether it is appropriate for a district court to assess an insurer's duty to indemnify before the underlying lawsuit is resolved. We have considered the issue, however, in an unpublished opinion. See J.B.D. Constr., Inc. v. Mid-Continent Cas. Co., 571 F. App'x 918, 927 (11th Cir. 2014) ("The duty to indemnify is dependent upon the entry of a final judgment, settlement, or a final resolution of the underlying claims.") (citing Northland Cas. Co. v. HBE Corp., 160 F. Supp. 2d 1348, 1360 (M.D. Fla. 2001) ).

As the district court noted in its order, many district courts in this circuit have ruled that an insurer's duty to indemnify is not ripe until the underlying lawsuit is resolved or the insured's liability is established. See Mid-Continent Cas. Co. v. G.R. Constr. Mgmt., Inc., 278 F. Supp. 3d 1302, 1306 (M.D. Fla. 2017); Evanston Ins. Co. v. Gaddis Corp., 145 F. Supp. 3d 1140, 1153 (S.D. Fla. 2015); Nationwide Mut. Fire Ins. Co. v. Dillard House, Inc., 651 F. Supp. 2d 1367, 1372-73 (N.D. Ga. 2009); Northland Cas. Co., 160 F. Supp. 2d at 1360; Guaranty Nat'l Ins. Co. v. Beeline Stores, Inc., 945 F. Supp. 1510, 1514-15 (M.D. Ala. 1996). Our fellow circuit courts have applied the same rule. See, e.g., Nationwide Ins. v. Zavalis, 52 F.3d 689, 693 (7th Cir. 1995) ("[T]he duty to indemnify is not ripe for adjudication until the insured is in fact held liable in the underlying suit.").

We agree with these cases and the district court's conclusion that MCC's duty to indemnify Delacruz is not ripe for adjudication until the underlying lawsuit is resolved. Indeed, the former Fifth Circuit in American Fidelity & Casualty Co., 280 F.2d at 461, held that a declaratory judgment action concerning an apportionment issue between insurers was not ripe until the insured's liability was established because the issue "might never arise." It ruled that the district court did not abuse its discretion by dismissing the insurer's complaint without prejudice because "[t]he damage suits had never been tried[,] [n]o one had yet paid or become legally liable to pay[, and] [w]hether anything will be paid or be legally payable, no one, on this record, yet knows." Id. at 457-58. And "it is not the function of a United States District Court to sit in judgment on these nice and intriguing questions which today may readily be imagined, but may never in fact

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