Phila. Indem. Ins. Co. v. Transit U, Inc.

Decision Date22 July 2021
Docket NumberCivil Action No. 20-01216-RGA
Citation550 F.Supp.3d 140
Parties PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff, v. TRANSIT U, INC.; Jolly Trolley Transportation Service, LLC; Jolly Trolley Limousine Service, LLC ; Jolly Trolley School Bus, LLC; David O. Hastings; Christine D. Hastings; William Hastings; David T. Hastings; Thomas Dowd; and National Indemnity Company, Defendants.
CourtU.S. District Court — District of Delaware

Bruce W. McCullough, BODELL BOVE, LLC, Wilmington, DE; Ronald P. Schiller, Matthew N. Klebanoff, Daniel P. Kaufman, HANGLEY ARONCHICK SEGAL PUDLIN & SCHILLER; Philadelphia, PA, Attorneys for Plaintiff.

David J. Soldo, Damon B. Ferrara, MORRIS JAMES LLP, Wilmington, DE, Attorneys for Defendant National Indemnity Co.

Daniel P. Bennett, MINTZER, SAROWITZ, ZERIS, LEDVA & MEYERS, LLP, Wilmington, DE, Attorney for All Other Defendants.


Andrews, United States District Judge:

Before the Court is Defendant National Indemnity Company's Motion to Dismiss, or in the Alternative, to Stay Plaintiff's claims for failure to state a claim as well as Defendants Transit U., Inc., Jolly Trolley Transportation Service, LLC, Jolly Trolley Limousine Service, LLC, Jolly Trolley School Bus, LLC, David O. Hastings, Christine D. Hastings, William Hastings, D. Turner Hastings, and Thomas Dowd's Motion to Stay Proceedings. (D.I. 30, 34).

The motions were fully briefed. (D.I. 31, 36, 37, 39, 40, 41).


In October 2016, a truck towing a homemade trailer overturned and injured twenty-six of the passengers. (D.I. 1 at ¶ 46; D.I. 31 at 6). The vehicles and driver had been hired to transport passengers from Dewey Beach, Delaware to the Indian River Life Saving Station, also located in Delaware. (D.I. 1 at ¶ 45). Two actions by injured passengers were filed in the Superior Court of Delaware (Kent County) against Defendants Jolly Trolley Transportation Service, LLC ("Transport"), Transit U, Inc. ("Transit"), Jolly Trolley Limousine Service, LLC ("Limo"), Jolly Trolley School Bus, LLC ("Bus"), Thomas Dowd, an employee of Transit and the driver of the vehicles at issue, and the individuals that owned these companies: David O., Christine, William, and David T. Hastings (the "Hastings"). (D.I. 1 at ¶¶ 2, 50). The claims were consolidated into one action (the "State Action"). (D.I. 31 at 6).

Transport owned the truck and homemade trailer and leased them to its parent company, Transit. (D.I. 1 at ¶¶ 44, 53). Transit and Transport insured the vehicles with a commercial auto policy (the "Transport Policy") issued by Defendant National Indemnity Company ("National Indemnity"). (Id. at ¶ 30).

Limo, a separate subsidiary of Transit, did not own, lease, or operate the vehicles involved in the accident. (Id. at ¶ 4). Limo maintained a different insurance policy for its vehicles (the "PIIC Policy") with Plaintiff Philadelphia Indemnity Insurance Company ("PIIC"). (Id. at ¶¶ 25, 29; D.I. 1, Ex. C). "Limo is listed as the ‘First Named Insured’ " and "Transit is listed as a ‘Named Insured’ " on that policy. (D.I. 1 at ¶ 25). The PIIC Policy contains an MCS-90B endorsement with a "limit of liability of $5 million," which essentially states that "PIIC will pay a final judgment against Limo involving negligence in the operation of a vehicle, regardless of whether the vehicle qualifies as a covered ‘auto’ in the PIIC Policy, and subject to all other terms, conditions, and requirements of the MCS-90B Endorsement." (Id. at ¶¶ 38-39). The MCS-90B Endorsement functions as a surety agreement and allows PIIC to recoup from Limo any amount it pays for a final judgment against Limo. (Id. at ¶ 43). The purpose of such an endorsement is to satisfy a motor carrier's minimum levels of financial responsibility in order to cover public liability and property damage as required by Section 18 of the Bus Regulatory Reform Act of 1982. (Id. at ¶¶ 32, 36) (citing 49 U.S.C. § 31138(a)(1) ).

PIIC denied coverage for the accident at issue "because it did not involve automobiles covered under the policy that PIIC issued to Limo." (Id. at ¶ 3). Nevertheless, Plaintiff still provided a courtesy defense to Transit and Limo in the State Action subject to a full reservation of its rights, including the right to withdraw from the defense. (Id. at ¶¶ 3, 72). Plaintiff believed a judgment against Limo could potentially trigger its surety obligations under the MCS-90B Endorsement. (Id. at ¶ 3).

In August 2020, Limo's counsel planned to move for "summary judgment" seeking Limo's "dismissal" from the State Action, but Defendants’ personal counsel instructed Limo's counsel not to do so. (Id. at ¶¶ 74, 78). Plaintiff believed that this evidenced an improper attempt to access the surety limits of Limo's MCS-90B Endorsement even though Limo lacked involvement in the accident. (Id. at ¶ 79). In response, PIIC withdrew its defense of Transit on July 13, 2020. (Id. at ¶ 73). A few months later, the parties moved for entry of a final judgment against the defendants including Limo. (Id. at ¶¶ 96-99). Plaintiff filed a motion to intervene in the State Action on September 3, 2020. (D.I. 31 at 10). While that motion was under consideration, Plaintiff filed suit in this Court against Defendants Transit, Transport, Limo, Bus, the Hastings, Dowd, and National Indemnity on September 11, 2020. (D.I. 40 at 2).

Plaintiff alleges the same claims in this case as it did in the State Action except for two additional claims against National Indemnity—a party only to this case. (D.I. 1 at ¶¶ 101-156; D.I. 36, Ex. A at ¶¶ 145-187). The counts which overlap with those in the State Action are:

(1) Alter-ego liability against the Hastings Defendants [(Count I)]; (2) Declaratory Judgment that the MCS-90B Endorsement applies only to Limo [(Count II)]; (3) Declaratory Judgment that Plaintiff has no duty to defend in the underlying. lawsuits [(Count III)]; (4) Fraud against [all] defendants [except National Indemnity (Count VI)]; and (5) Tortious interference with contractual relations against the Hastings defendants [(Count VII)].

(D.I. 36 at 6). The counts unique to this case are (1) "declaratory judgment that the policies issued by National Indemnity to Transit, Transport and Bus cover the accident of up to $5 million under each policy (Count IV)" and (2) "contribution and indemnification" from National Indemnity for any judgment Plaintiff is required to pay (Count V). (D.I. 37 at 19).

National Indemnity filed a motion to dismiss Counts IV and V of Plaintiff's Complaint and, to the extent they apply to National Indemnity, Counts II and III for failure to state a claim under Rule 12(b)(6). (D.I. 34; D.I. 36 at 6-7). National Indemnity alternatively requests that this Court stay the proceedings. (D.I. 34; D.I. 36 at 9). Defendants Transit, Transport, Bus, Dowd, and the Hastings (collectively "Jolly Trolley Defendants") filed a motion to stay the proceedings pending the outcome of the State Action. (D.I. 30).


Rule 8 requires a complainant to provide "a short and plain statement of the claim showing that the pleader is entitled to relief ..." Fed. R. Civ. P. 8(a)(2). Rule 12(b)(6) allows the accused party to bring a motion to dismiss the claim for failing to meet this standard. A Rule 12(b)(6) motion may be granted only if, accepting the well-pleaded allegations in the complaint as true and viewing them in the light most favorable to the counter-complainant, a court concludes that those allegations "could not raise a claim of entitlement to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 558, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

"Though ‘detailed factual allegations’ are not required, a complaint must do more than simply provide ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action.’ " Davis v. Abington Mem'l Hosp., 765 F.3d 236, 241 (3d Cir. 2014) (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ). I am "not required to credit bald assertions or legal conclusions improperly alleged in the complaint." In re Rockefeller Ctr. Props., Inc. Sec. Litig. , 311 F.3d 198, 216 (3d Cir. 2002). A complaint may not be dismissed, however, "for imperfect statement of the legal theory supporting the claim asserted." See Johnson v. City of Shelby, 574 U.S. 10, 11, 135 S.Ct. 346, 190 L.Ed.2d 309 (2014).

A complainant must plead facts sufficient to show that a claim has "substantive plausibility." Id. at 12, 135 S.Ct. 346. That plausibility must be found on the face of the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "A claim has facial plausibility when the [complainant] pleads factual content that allows the court to draw the reasonable inference that the [accused] is liable for the misconduct alleged." Id. Deciding whether a claim is plausible will be a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679, 129 S.Ct. 1937.

In certain circumstances, a federal court may stay the proceedings. For legal claims, federal courts "have a virtually unflagging obligation ... to exercise the jurisdiction given them" except in certain exceptional circumstances when a parallel state court action exists. Colorado River Water Conservation Dist. v. U.S. , 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) ; Ryan v. Johnson, 115 F.3d 193, 195-96 (3d Cir. 1997).

For declaratory judgment claims, the standard is different. The Declaratory Judgment Act states that "any court of the United States ... may declare the rights of and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2202(a). When only declaratory relief is sought, federal courts are granted more flexibility in exercising their discretion to hear the case. See Brillhart v. Excess Ins. Co. of America , 316 U.S. 491, 494-95, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942) ; Wilton v. Seven Falls Co. , 515 U.S....

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