Penn-Star Ins. Co. v. Swords
| Decision Date | 21 September 2017 |
| Docket Number | Case No.: 4:17-CV-1041-VEH |
| Court | U.S. District Court — Northern District of Alabama |
| Parties | PENN-STAR INSURANCE COMPANY, Plaintiff, v. ERIC STEVEN SWORDS, BILLY DENSON, d/b/a DENSON HOUSE & MOBILE HOME, and CHRIS HAYES, Defendants. |
This is a civil action filed by the plaintiff, Penn-Star Insurance Company ("Penn-Star") against the defendants, Eric Steven Swords, Billy Denson d/b/a Denson House & Mobile Home ("Denson"), and Chris Hayes. Penn-Star seeks a declaration of its rights under a commercial insurance policy issued to Denson. Specifically, Penn-Star seeks an order from this Court holding that it has no duty to defend or indemnify Denson and Hayes in a currently pending state court lawsuit filed against Denson and Hayes in the Circuit Court of Marshall County, Alabama. (See doc. 1 at 8-11)1; (Doc. 1 at 2).2
This case is before the Court on Denson's and Hayes's (the "Movants") Motion To Dismiss for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). The Movants' argument is two-fold. (See generally doc. 1). First, theMovants argue that "[t]he Declaratory Judgment should be dismissed and/or stayed because the relief sought requires determination of parallel factual and legal issues pending adjudication in an ongoing State Court action." (Doc. 9 at 2) (emphasis omitted). Second, the Movants argue that "[t]he Plaintiff's Duty to Indemnify under its policy of insurance is not ripe for adjudication and therefore the Court lacks subject-matter jurisdiction." (Doc. 9 at 6) (emphasis omitted). In the alternative, the Movants ask the Court to stay the proceedings. (Doc. 9 at 7). Penn-Star opposes the Motion To Dismiss the duty to defend claim but is unopposed to staying the issue of the duty to indemnify. (Doc. 12 at 2-7).
For the reasons stated herein, the motion will be GRANTED in part and DENIED in part.
Rule 12(b)(6) motions argue that a complaint has "fail[ed] to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). A complaint has to state "a short and plain statement of the claim showing that the pleader is entitled to relief." Id. at 8(a)(2).
The Supreme Court gave more clarity on these standards in the Twombly and Iqbal cases. In Iqbal, the court stated that:
To survive a motion to dismiss, a complaint must contain sufficientfactual matter, accepted as true, to "state a claim to relief that is plausible on its face." A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting another source).
The Supreme Court went on to explain how courts should evaluate complaints. Id. at 679.
Additionally, the Court must take "the allegations in the complaint as true and constru[e] them in the light most favorable to the nonmoving party." Kizzire v. Baptist Health System, Inc., 441 F.3d 1305, 1308 (11th Cir. 2006).
A motion to dismiss the complaint based on ripeness implicates Federal Rule of Civil Procedure 12(b)(1). See Little v. Strange, 796 F. Supp. 2d 1314, 1318 (M.D. Ala. 2011). The standard for 12(b)(1) motions is as follows:
A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction asserts either a facial or factual challenge to the complaint. A factual attack challenges "the existence of subject matter jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings, such as testimony and affidavits, are considered."A facial attack, on the other hand, challenges the complaint on its face and "require[s] the court merely to look and see if [the] plaintiff has sufficiently alleged a basis of subject matter jurisdiction." Under these review mechanisms, a "'court has the power to dismiss for lack of subject matter jurisdiction on any of three separate bases: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.' "
Id. at 1318-19 (internal citations omitted). Finally, Federal Rule of Civil Procedure 12(h)(3) states that "[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." FED. R. CIV. P. 12(h)(3).
"Penn-Starr [sic] issued a policy of commercial general liability insurance to named insureds Billy Denson and Denson House & Mobile Home Movers bearing policy number PAC7072344, with an effective period from 9/4/2014 through 9/4/2015, subject to an each occurrence limit of $1,000,000." (Doc. 1 at 4). The underlying state court action originates from a workplace accident occurring on January 28, 2015. (Doc. 1 at 3). The Complaint states:
(Doc. 1 at 3-4). Swords sued Denson and Hayes on February 19, 2016. (Doc. 1-1 at2).
12. Against the defendants to this action, Swords asserts claims for Workers Compensation; employer's liability pursuant to Ala. Code §25-6-1 (1975); negligence; wantonness; and willful conduct pursuant to Ala. Code §25-5-11 (1975). The complaint seeks damages for permanent injury, including the amputation of both arms, permanent injury, permanent impairment, past and future medical bills, pain and suffering, mental anguish, lost wages and unspecified compensatory and punitive damages, in addition to a determination of permanent and total disability.
(Doc. 1 at 4). "The claim was tendered to Penn-Star for the defense of the insured(s) and/or employees and indemnity entered for any judgment entered against it." (Doc. 1 at 4).
In the present declaratory action, Penn-Star cites to numerous provisions in the commercial general liability insurance policy. (Doc. 1 at 5-8).3 Among other provisions, Penn-Star cited to the "employee injury exclusion(s)" and the "auto liability exclusion." (See doc. 1 at 5-8). The Court draws the conclusion that Penn-Star cites these lengthy provisions to argue that either, or both, of the provisions exempts them from the duty to defend, or indemnify, Denson and Hayes.
The Declaratory Judgment Act is codified in 28 U.S.C. §2201(a).4 The Act "gives federal courts competence to make a declaration of rights; it does not impose a duty to do so." Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th Cir. 2005) (citing Brillhart v. Excess Ins. Co. of America, 316 US. 491, 494 (1942)). The Act does not give "'an absolute right upon the litigant.'" See id. (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 289-90 (1995)).
The Movants argue that "the relief sought requires determination of parallel factual and legal issues pending adjudication in an ongoing State Court action." (Doc. 9 at 2) (emphasis omitted). The Movants go on to argue that "the relief sought . . . is incapable of being decided before these factual/legal issues are adjudicated" and that proceeding with the case would "cause unnecessary litigation, duplicative discovery, the potential for inconsistent results and a burden on the Federal Judicial Economy." (Doc. 9 at 4-5). In response, Penn-Star argues that "[t]he duty to defend is ripe for adjudication, the resolution of which will not require discovery or factualdeterminations in the underlying action." (Doc. 12 at 5).
First, the Court examines whether the Court is compelled to await the result of the state court proceeding.
Under Alabama law, "[a]n insurance company's duty to defend its insured from suit is determined by the language of the insurance policy and by the allegations in the complaint filed against the insured." St. Paul Fire & Marine Ins. Co. v. Town of Gurley, Ala., 2012 WL 3637690 at *4 (N.D. Ala. Aug. 22, 2012) (quoting another source). Disputes over "whether an insurer has a duty to defend a suit against its insured is generally considered a controversy ripe for declaratory relief." Id. Often, a court is able to resolve this issue "based upon the pleading prior to resolution of the underlying lawsuit." Id. This is different from the duty to indemnify:
"The duty to defend is based on the potential that the trial of the underlying suit against the insured may develop facts showing that the occurrence is within the coverage; the duty to pay the judgment or reasonable settlement is based on facts having been established which show the occurrence to actually have been within the coverage."
Id. at *3 (quoting 16 Couch on Insurance 3d § 227:21) (emphasis added by the St. Paul court). Given this black letter law, the Court can adjudicate the duty to defend claim without needing to wait on the state court.
Second, the Court looks to see if this is a case of parallel litigation, and if it is, whether the Court ought to abstain.
Parallel litigation is "where 'substantially the same parties are contemporaneously litigating substantially the same...
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