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American Safety Indemnity Company v. Fairfield Shopping Center, LLC

United States District Court, N.D. Alabama, Southern Division

November 20, 2014

AMERICAN SAFETY INDEMNITY COMPANY, Plaintiff,
v.
FAIRFIELD SHOPPING CENTER, LLC, et al., Defendants.

MEMORANDUM OPINION & ORDER

STACI G. CORNELIUS, Magistrate Judge.

This is an action for a declaratory judgment commenced by American Safety Indemnity Company pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201. American Safety names as defendants Fairfield Shopping Center, LLC, GE Commercial Finance Property Corp., ISAOA (individually and as an assignee of certain insurance claims), Indian Harbor Insurance Company, and United National Insurance Company.[1] Specifically, American Safety seeks a determination (1) of its rights and duties under an insurance policy issued to Fairfield, and (2) whether insurance policies issued to Fairfield by United National and Indian Harbor afford coverage for losses Fairfield and its mortgagee, GE, purportedly incurred as a result of a single theft on November 20, 2010. (Doc. 1 at ¶ 2). Pending is a motion to dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure filed by United National. (Doc. 14). American Safety has responded (Doc. 22), and United National has replied (Doc. 24). The undersigned heard oral argument on United National's motion to dismiss on November 3, 2014. ( See Docs. 43 & 47; docket entry dated November 3, 2014). Also pending is a motion for summary judgment filed by Indian Harbor. (Doc. 36).

For the reasons discussed below, there is no justiciable controversy between American Safety and either United National or Indian Harbor and, therefore, the district court lacks subject matter jurisdiction over American Safety's claims against these defendants. United National's motion to dismiss is due to be granted, and Indian Harbor's motion for summary judgment is due to be denied as moot. American Safety's claims against United National and Indian Harbor are due to be dismissed, and United National and Indian Harbor are due to be dismissed as defendants.

I. Background

A. American Safety's Complaint

In or about August of 2010, Fairfield sought insurance coverage from American Safety for a vacant building located at 6501 E J Oliver Blvd., Fairfield, AL 35064. (Doc. 1 at ¶ 21). American Safety issued an insurance policy to Fairfield that provided coverage for the vacant property effective September 15, 2010. ( Id. at ¶ 24). American Safety cancelled the policy on February 2, 2011. ( Id. ). In addition to its policy with American Safety, Fairfield obtained insurance policies from United National and Indian River. ( Id. at ¶¶ 38-39).

On or about November 18, 2011, Fairfield submitted a claim to American Safety for losses totaling $3, 464, 724.88, purportedly resulting from a single theft that occurred at the vacant property on November 20, 2010. ( Id. at ¶ 32). On or about May 18, 2012, GE, as mortgagee of the vacant property, submitted an identical claim to American Safety. ( Id. at ¶ 33). (On September 27, 2011, Fairfield assigned its interest in any insurance claims and the proceeds thereof to GE. ( Id. at ¶ 31).) American Safety does not allege either Fairfield or GE has submitted a claim to United National or Indian Harbor for the losses in question. ( See Doc. 1).

American Safety contends it does not owe coverage for the losses claimed by Fairfield or GE because Fairfield's act and/or omissions voided the policy ( Id. at Counts I-III & IX), GE breached a condition precedent to coverage under the policy ( Id. at Count X), and/or the purported losses are excluded by the policy ( Id. at Counts IV & XIII). However, American Safety claims to the extent the policy does provide coverage for the losses, insurance policies issued to Fairfield by United National and Indian Harbor may provide duplicative coverage. ( Id. at ¶¶ 38-39, Counts VIII & XV). American Safety contends the United National and Indian Harbor policies may provide primary or, in the alternative, proportional coverage for the losses claimed by Fairfield and GE. ( Id. at Counts VIII & XV). American Safety asks the district court to determine which insurance company owes what amount. ( Id. at ¶ 121(h)).

B. United National's Motion to Dismiss

As grounds for its motion to dismiss, [2] United National contends there is no case or controversy between itself and American Safety, which deprives the district court of subject matter jurisdiction. (Doc. 14). United National first argues there is a defect in the parties to this action, citing Provident Life & Acc. Ins. Co. v. Transamerica-Occidental Life Ins. Co., 850 F.2d 1489 (11th Cir. 1988). ( Id. at ¶ 5). United National also contends there is no legal relationship between itself and American Safety because Fairfield has not submitted any claim to United National for the losses in question. ( Id. at ¶ 6).

In response, American Safety contends Provident Life actually supports the existence of subject matter jurisdiction in this case and that federal courts have consistently ruled on the merits of declaratory judgment actions seeking determinations of primary versus excess coverage and interpretations of "other insurance" clauses. (Doc. 22 at 6-7). In reply, United National contends the additional cases relied upon by American Safety are distinguishable because the insureds had made claims on the policies at issue in those cases. (Doc. 24 at 2-3).

II. Discussion

Federal courts are courts of limited jurisdiction. University of South Alabama v. American Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999). Article III, Section 2 of the United States Constitution only empowers them to hear "cases" and "controversies." U.S. Const. art. III, § 2; see also Hendrix v. Poonai, 662 F.2d 719, 721 (11th Cir. 1981). The Declaratory Judgment Act, 28 U.S.C. § 2201, permits federal courts to declare the rights of parties in cases of "actual controversy." 28 U.S.C. § 2201; see also Hendrix, 662 F.2d at 721. The "actual controversy" requirement under the Declaratory Judgment Act mirrors the "case or controversy" requirement under the Constitution. Provident Life, 850 F.2d at 1491. The standard for determining either requirement is the same. Hendrix, 662 F.2d at 721.

Whether a justiciable controversy exists is determined as of the filing of the complaint, Atlanta Gas Light Co. v. Aetna Cas. and Sur. Co., 68 F.3d 409, 414 (11th Cir. 1995), and on a case-by-case basis, Hendrix, 662 F.2d at 721-22. The determination turns on "whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.'" Wendy's Intern., Inc. v. City of Birmingham, 868 F.2d 433, 436 (11th Cir. 1989) (quoting Maryland Casualty Co. v. Pacific Oil Co., 312 U.S. 270, 273 (1941)). "The controversy must be definite and concrete, touching the legal relations of parties having adverse legal interests.'" Hendrix, 662 F.2d at 721 (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937). Otherwise put, to be justiciable, a controversy "must be such that it can presently be litigated and decided and not hypothetical, conjectural, conditional or based upon the possibility of a factual ...


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