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Skinnner Pile Driving, Inc. v. Atlantic Specialty Insurance Co.

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

March 31, 2015

SKINNNER PILE DRIVING, INC., Plaintiff/Counter Defendant,
v.
ATLANTIC SPECIALTY INSURANCE COMPANY, Defendant/Counter Claimant.

ORDER

KATHERINE P. NELSON, Magistrate Judge.

This action is before the Court on the Motion for Leave to Intervene (Doc. 20) filed by Natures Way Marine, LLC ("Natures Way") pursuant to Federal Rule of Civil Procedure 24. Though given the opportunity ( see Doc. 21), no party has filed opposition to the motion. With the consent of the parties (Doc. 4), this action has been referred to the undersigned Magistrate Judge to conduct all proceedings in this action, including trial; to order entry of final judgment; and to conduct all post-judgment proceedings, in accordance with 28 U.S.C. ยง 636(c) and Federal Rule of Civil Procedure 73. ( See Doc. 5).

I. Background

This action involves an insurance coverage dispute arising from an incident in which a Linkbelt Crane attached to a barge was damaged while the crane and barge were in the custody and control of Plaintiff Skinner Pile Driving, Inc. ("Skinner"). Skinner sought coverage for the damage to the crane under its policy of insurance with Defendant Atlantic Specialty Insurance Company ("Atlantic"). After Atlantic denied the claim, Skinner filed the present action against Atlantic, alleging breach of contract, fraud, misrepresentation, deceit, and bad faith. Atlantic filed a counterclaim for declaratory judgment as to the rights, remedies, obligations, and liabilities of Skinner and Atlantic under the subject insurance policy, claiming that it owes no coverage for damage to the crane due to certain exclusions in the insurance policy. ( See Doc. 1-1; Doc. 2; Doc. 15 at 2-3).

In its motion to intervene (Doc. 20), Natures Way asserts that it is the owner of the damaged crane and barge, which it had chartered to Skinner for use in a project in Florida, during which the damage allegedly occurred. Natures Way has demanded that Skinner pay for the damages to the crane, but Skinner has refused, citing an inability to pay "and/or" its intention to seek coverage for the damage under its insurance policy with Atlantic. In its proposed Complaint in Intervention (Doc. 20-1), Natures Way asserts only a breach of contract claim against Skinner, alleging that "Skinner breached its duties under the Charter Agreement by (a) failing and refusing to pay monies due for the hire of the Barge and Crane, and b) failing and refusing to pay monies due for the damage to the Crane." Natures Way demands $60, 000 for "unpaid charter hire" and $30, 715 for the cost of repairs to the crane. Natures Way asserts no claim against Atlantic. Natures Way argues that it is entitled to both intervention of right under Rule 24(a) and permissive intervention under Rule 24(b).

II. Intervention of Right under Rule 24(a)

Rule 24(a)(2) provides that, "[o]n timely motion, the court must permit anyone to intervene who[] claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest."[1] "Rule 24(a)(2) requires a third party moving for intervention of right show:[] (1) his application to intervene is timely; (2) he has an interest relating to the property or transaction which is the subject of the action; (3) he is so situated that disposition of the action, as a practical matter, may impede or impair his ability to protect that interest; and (4) his interest is represented inadequately by the existing parties to the suit.'" Huff v. Comm'r of IRS, 743 F.3d 790, 795-96 (11th Cir. 2014) (quoting Fox v. Tyson Foods, Inc., 519 F.3d 1298, 1302-03 (11th Cir. 2008) (quoting Chiles v. Thornburgh, 865 F.2d 1197, 1213 (11th Cir. 1989))) (internal citation omitted). "Intervention of right is only available if the interest asserted is direct, substantial, [and] legally protectable.' In other words, the intervenor must be at least a real party in interest in the transaction which is the subject of the proceeding.'" Id. at 796 (quoting Athens Lumber Co., Inc. v. Fed. Election Comm'n, 690 F.2d 1364, 1366 (11th Cir. 1982) (citations omitted)).[2] "In deciding whether a party has a protectable interest, ...courts must be flexible' and must focus[ ] on the particular facts and circumstances' of the case." Id. (quoting Chiles, 865 F.2d at 1214).

The Court finds that Natures Way has not shown entitlement to intervene of right because it has not demonstrated a direct, substantial, and legally protectable interest "in the transaction which is the subject of this action" - the insurance policy between Skinner and Atlantic. Natures Way, noting that "[t]he issue of how the damage occurred - which is a threshold question to whether or not insurance coverage exists - will be decided in this lawsuit[, ]" argues that "[c]ertainly, the owner of property has a sufficiently protectable interest in participating in such determination." (Doc. 20 at 4). In support of this proposition, Natures Way cites Diaz v. Southern Drilling Corp., 427 F.2d 1118 (5th Cir. 1970), [3] in which the former Fifth Circuit held: "We do not believe... that the interest[ in the subject of the action] has to be of a legal nature identical to that of the claims asserted in the main action... All that is required by the terms of [Rule 24(a)(2)] is an interest in the property or other rights that are at issue, provided the other elements of intervention are present." 427 F.2d at 1124.

Diaz, however, is distinguishable. In Diaz, the United States government "intervened...because it wanted to assert a lien (unrelated to the underlying issues) on a fund before the court." Id. In finding that the government properly intervened of right under Rule 24(a)(2), the court stated: "[T]he Government in this case is asserting a tax lien, clearly a legally cognizable interest in property, which it seeks to attach to a res that is before the court. Interests in property are the most elementary type of right that Rule 24(a) is designed to protect...We hold that the Government is asserting an interest in the property that is the subject of the suit within the meaning of Rule 24(a)." Id.

Natures Way has asserted no "legally cognizable interest" similar to the government's tax lien in Diaz (e.g., a judgment against Skinner for damages to the crane). Indeed, in upholding the government's intervention in Diaz, the court rejected application of cases cited by the appellants because they were "cases in which intervention was denied because the interest was speculative or had no legally protectable nature." Id. at 1124 & n.2. As to this line of reasoning, the Court finds Mt. Hawley Insurance Co. v. Sandy Lake Properties, Inc., 425 F.3d 1308, 1311 (11th Cir. 2005) (per curiam), to be on point.

There, an insurer, Mt. Hawley, filed a declaratory judgment action against two insured property owners, claiming that it had no duty to defend or indemnify the insureds under the subject policy for a drowning death occurring on the insureds' property. See Mt. Hawley Ins., 425 F.3d at 1309-10. After the property owners failed to respond to the declaratory judgment action and the insurer had moved for default judgment, Andre Rigaud, the personal representative for the decedent, who prior to the declaratory judgment action had filed a wrongful death action against the insureds, filed a motion to intervene in the declaratory judgment action under both Rule 24(a) and Rule 24(b), attempting to argue that Mt. Hawley should not be able to deny coverage. See id. The Eleventh Circuit, affirming the district court's denial of the motion to intervene of right, rejected the personal representative's argument that he had "a direct, substantial, and legally protectable interest in the subject matter of the declaratory action because if Mt. Hawley owes neither a defense nor coverage to [the insureds], then Rigaud will not have [a] pool or fund from which to recover his damages.'" Id. at 1311. In so doing, the Eleventh Circuit stated:

This Court has held that a legally protectable interest "is something more than an economic interest." United States v. South Fla. Water Mgmt. Dist., 922 F.2d 704, 710 (11th Cir. 1991) (quotation marks and citation omitted). "What is required is that the interest be one which the substantive law recognizes as belonging to or being owned by the applicant." Id. (quotation marks and citation omitted). Thus, a legally protectable interest is an interest that derives from a legal right.
In this case, Rigaud's interest in the subject matter of the declaratory action is purely economic. Rigaud is not a party to the Mt. Hawley insurance policy and has no legally protectable interest in that insurance policy. Rigaud fails to cite any legally protectable interest and states only that there will be less money available from which he can recover his wrongful death damages if Mt. Hawley is released from defending and providing coverage to Muria International and Sandy Lake Properties. Further, Rigaud's interest is purely speculative because it is contingent upon his prevailing against Muria International and Sandy Lake Properties in the wrongful death action.

Id. (footnote omitted).[4] Accord Canal Indem. Co. v. Dueitt, Civil Action No. 10-0526-WS-B, 2011 WL 335166, at *1 (S.D. Ala. Jan. 31, 2011) (Steele, C.J.) ("An injured party has no legally protected interest in an insurance policy to which it is not a party; its economic interest in having proceeds from a tortfeasor's insurance policy available to satisfy any judgment does not satisfy this standard." (citing Mt. Hawley Ins., 425 F.3d at 1311))

Here, it is the insured, Skinner, who initiated this action, claiming breach of an insurance contract and related torts against its insurer, Atlantic, who counterclaimed for declaratory judgment. Nevertheless, in essence this action, like Mt. Hawley, "involve[s] an insurance coverage dispute." Id. at 1310. Like the would-be intervenor in Mt. Hawley, Natures Way has not claimed it is a party to the Atlantic insurance policy and has not claimed a legally protectable interest in that policy (e.g., additional named insured; third-party beneficiary status). Rather, Natures Way's interest in the subject matter of this action is "purely economic" - that is, there may be "less money available from which [it] can recover" on its claims against Skinner for breach of the charter agreement and the damage to the crane.[5] Moreover, Natures Way's interest in the outcome of this action is "purely speculative, " as it is "contingent upon [its] prevailing against" Skinner on its own breach of contract and/or property damage claims. Indeed, Natures Way's Complaint in Intervention appears to seek to use this action as a vehicle to litigate those very issues, which are based on a contract entirely separate from and independent of the insurance policy currently at issue.[6]

Because Natures Way has not demonstrated it has an interest relating to the property or transaction which is the subject of this action, Huff, 743 F.3d at 795, the Court need not decide whether the other factors for intervention of right are satisfied, and Natures Way's motion to intervene (Doc. 20) is due to be DENIED as to its request for intervention of right under Rule 24(a).

III. Permissive Intervention under Rule 24(b)

Under Rule 24(b)(1)(B), "[o]n timely motion, the court may permit anyone to intervene who[] has a claim or defense that shares with the main action a common question of law or fact."[7] "In exercising this discretion, the court must consider whether the intervention will unduly delay or prejudice the adjudication of the original parties' rights." Fed.R.Civ.P. 24(b)(3). See also Mt. Hawley Ins., 425 F.3d at 1312 ("Permissive intervention under Fed. R. Civ. Proc. 24(b) is appropriate where a party's claim or defense and the main action have a question of law or fact in common and the intervention will not unduly prejudice or delay the adjudication of the rights of the original parties.'" (quoting Georgia v. United States Army Corps of Eng'rs, 302 F.3d 1242, 1250 (11th Cir. 2002))). "[W]hen the grounds for denying coverage are irrelevant to the issues in the underlying action, there is no common question of law or fact..." Reed v. Barnett, Civil Action No. 09-0200-WS-N, 2010 WL 5239249, at *2 (S.D. Ala. Dec. 15, 2010) (Steele, C.J.) (citing generally Mt. Hawley Ins. ).

In Mt. Hawley, the insurer's declaratory judgment action asserted that the insureds'"refusal to notify Mt. Hawley of the wrongful death action and refusal to cooperate in their defense against the wrongful death action had so prejudiced Mt. Hawley that coverage under the Mt. Hawley policy had been waived." 425 F.3d at 1310. The would-be intervenor, the personal representative of the decedent, "argued that, contrary to Mt. Hawley's assertions, [the insureds] were cooperating in the defense of the wrongful death suit" and "that Rigaud's counsel had notified Mt. Hawley of the wrongful death suit, and thus, Mt. Hawley could not be prejudiced by lack of notice." Id.

In affirming the district court's denial of permissive intervention, the Eleventh Circuit stated:

The lack of cooperation that Mt. Hawley asserts in the declaratory judgment action is irrelevant to the issue of fault in the wrongful death action. Specifically, the primary issue in the declaratory judgment action is whether Mt. Hawley owes insurance coverage to Muria International and Sandy Lake Properties under the insurance agreement. The issue of insurance coverage is unrelated to the issue of fault in the wrongful death action. Further, we do not see how Rigaud's intervention will help resolve the issue of whether Muria International and Sandy Lake Properties are entitled to insurance coverage pursuant to a policy with Mt. Hawley. Thus, the district court did not abuse its discretion in denying Rigaud's motion for permissive intervention.

Id. at 1312.

In its declaratory judgment counterclaim, Atlantic cites the following policy exclusions as grounds for denying coverage to Skinner:

III. Exclusions from Coverage

This insurance does not apply to loss, damage, liability, or expense directly or indirectly caused by, or contributed to or resulting from:
A. Wear and tear, gradual deterioration, rust, corrosion, dampness of atmosphere, freezing or extremes of temperature;
B. An original defect in the property;
C. Mechanical or electrical breakdown or failure...

(Doc. 2 at 7-8). In a letter to Skinner denying coverage (which Skinner has attached to its Complaint), Atlantic, citing to this provision of the policy, stated: "This policy provides coverage for fortuitous or accidental damages to the leased crane but excludes damages resulting from mechanical or electrical breakdown or failure." (Doc. 1-1 at 8). In the report of the parties' planning meeting under Federal Rule of Civil Procedure 26(f), Atlantic asserts that "[t]he crane was in poor repair prior to the loss resulting in the alleged damage." (Doc. 15 at 3).

For its part, Skinner asserts that the crane was damaged when one of its employees "accidentally failed to secure the boom before exiting the crane, " resulting in "the boom collaps[ing] and sustaining damage." (Doc. 1-1 at 3-4). "In other words, " according to Skinner, "the fall was not due to a mechanical error, but by an event that would be covered under the policy in question." (Doc. 15 at 2).

Natures Way's charter agreement with Skinner provides: "Throughout the Charter Period, Charterer shall, at its sole cost and expense, maintain the Barges in accordance with good commercial marine maintenance practices and shall maintain and preserve the Barges, in as good condition, working order and repair as when first delivered to Charterer for service hereunder, ordinary wear and tear (as defined in Section 14) only excepted." (Doc. 20-1 at 15). Section 14 of the agreement defines "ordinary wear and tear" as "the wear and tear which would normally be expected to occur during the careful, proper and prudent use of the Barges over the period of time involved, assuming proper maintenance and compliance with the other terms of this Charter." ( Id. at 17).

It appears, then, that the cause of the damage to the crane is a question of fact common to both whether Skinner must pay Natures Way for the damage under the charter agreement and whether Atlantic owes coverage for the damage under its policy with Skinner. Thus, Natures Way has sufficiently carried its burden under Rule 24(b)(1)(B) in showing that its claim in intervention against Skinner shares with a common question of fact with the main action. Compare Travelers Indem. Co. v. Bastianelli, 250 F.R.D. 82, 85-86 (D. Mass. 2008) ("Given the present posture of this litigation, the Intervenors have an interest in establishing under whose direction the truck was being driven at the time of the accident. This fact will affect liability in the state court action as well as the availability of insurance coverage... [T]his court finds that the Intervenors have satisfied the requirements of Fed.R.Civ.P. 24(b) and have shown that their participation as defendants in this action will promote the full development of the underlying factual issues as well as the just and equitable adjudication of the pending coverage dispute.") with Canal Indem., 2011 WL 335166, at *3 ("Whether the individual was Buena Vista's employee or an independent contractor certainly affects Buena Vista's liability to Roberta, but Livingston has not attempted to show that his status is a question relevant to whether Livingston is liable to Roberta or to whether Buena Vista owes Livingston indemnity. On this record, the Court must conclude that the independent contractor issue is irrelevant to Livingston's claim or defense and thus inadequate as a matter of law to support permissive intervention." (footnote omitted)).

A motion to intervene, whether under Rule 24(a) or Rule 24(b), must be "timely." As to this issue, the Eleventh Circuit has held:

In determining whether a motion to intervene was timely, we consider (1) the length of time during which the proposed intervenor knew or reasonably should have known of the interest in the case before moving to intervene; (2) the extent of prejudice to the existing parties as a result of the proposed intervenor's failure to move for intervention as soon as it knew or reasonably should have known of its interest; (3) the extent of prejudice to the proposed intervenor if the motion is denied; and (4) the existence of unusual circumstances militating either for or against a determination that their motion was timely. Chiles, 865 F.2d at 1213. However, we must also keep in mind that "[t]imeliness is not a word of exactitude or of precisely measurable dimensions. The requirement of timeliness must have accommodating flexibility toward both the court and the litigants if it is to be successfully employed to regulate intervention in the interest of justice." Id. (quoting McDonald v. E.J. Lavino Co., 430 F.2d 1065, 1074 (5th Cir. 1970)).

Georgia v. U.S. Army Corps of Eng'rs, 302 F.3d at 1259. Rule 24(b) also requires that a court "consider whether [permissive] intervention will unduly delay or prejudice the adjudication of the original parties' rights." Fed.R.Civ.P. 24(b)(3).

Neither of the original parties have opposed Natures Way's motion, and considering the record, the Court finds no reason to believe that permissive intervention will cause undue delay or prejudice to the original parties, or that the motion is untimely. Cf. Georgia v. U.S. Army Corps of Eng'rs, 302 F.3d at 1259-60 ("Georgia contends that SeFPC's motion is untimely because SeFPC knew of the litigation and had copies of the papers in the case since February 2001, and did not move to intervene until August 2001, after discovery was largely complete and the parties had agreed upon a schedule for the briefing of the case. We do not believe that a delay of six months in itself constitutes untimeliness. See [ Chiles, 865 F.2d at 1213] (finding motion timely when filed seven months after the case was filed). Although in Chiles we observed discovery had not yet begun, in this case SeFPC's intervention did not delay the proceedings and the court had yet to take significant action. Therefore, we do not believe that the existing parties will be prejudiced by SeFPC's intervention, and SeFPC would be prejudiced if its motion is denied. See id. Accordingly, we find that its motion to intervene was timely.").[8]

Accordingly, the Court finds that Natures Way's motion to intervene (Doc. 20) is due to be GRANTED as to its request for permissive intervention under Rule 24(b).

IV. Conclusion

In accordance with the foregoing analysis, it is ORDERED that Natures Way's Motion for Leave to Intervene (Doc. 20) is GRANTED as to its request for

DONE and ORDERED. permissive intervention under Rule 24(b) and DENIED as to its request for intervention of right under Rule 24(a). Natures Way shall file and serve its Complaint in Intervention no later than Tuesday, April 7, 2015.


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