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Catlin Syndicated Ltd. v. Ramuji, LLC

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

October 4, 2017

CATLIN SYNDICATE LIMITED, Plaintiff,
v.
RAMUJI, LLC d/b/a BUDGET INN and PEOPLES INDEPENDENT BANK, Defendants. RAMUJI, LLC, PEOPLE'S INDEPENDENT BANK, Counterclaim/Third Party Plaintiffs, GREAT AMERICAN ASSURANCE COMPANY Third-Party Plaintiff Intervenor,
v.
RANDY JONES & ASSOCIATES, INC., JON PAIR, CERTAIN UNDERWRITERS AT LLOYD'S, LONDON SUBSCRIBING SEVERALLY TO POLICY NO. ULL 20018, named as “SYNDICATE 1414 AT LLOYD'S ASCOT UNDERWRITING LIMITED, SYNDICATE 5820 AT LLOYD'S ANV SYNDICATES LIMITED, SYNDICATE 727 AT LLOYD'S S.A. MEACOCH & COMPANY LIMITED, and SYNDICATE 1861 at LLOYD's ANV SYNDICATED LIMITED, Third-Party Defendants.

          MEMORANDUM OPINION AND ORDER

          VIRGINIA EMERSON HOPKINS UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION AND PROCEDURAL HISTORY

         Great American Insurance Company (“Great American”) filed a complaint for declaratory judgment (the “Complaint”) on July 12, 2017. In the Complaint, Great American requests certain declaratory relief such as “an order from the Court declaring that Lloyd's is required to cover People's claim” (doc. 93 at 9-10), “an order from the Court declaring Great American's rights and obligations under the Great American Policy as to Peoples” (doc. 93 at 10), and other alternative relief (doc. 93 at 10).

         Subsequently, Certain Underwriters at Lloyd's Subscribing Severally to Policy No. ULL20018 (the “Underwriters”) filed a Motion To Dismiss (the “Underwriters Motion) on July 31, 2017. (Doc. 100). After that, Randy Jones & Associates (“Jones”) and Jon Pair (“Pair”) filed a Motion To Dismiss (the “Jones/Pair Motion”) on August 3, 2017. (Doc. 102). Great American responded to the Underwriters' Motion on August 14, 2017. (Doc. 103). Great American responded to the Jones/Pair Motion on August 17, 2017. (Doc. 104).

         The Motions have substantial overlap in arguments, and the Court will address both Motions together. Both Motions are ripe for this Court's disposition.

         II. RELEVANT BACKGROUND

         “Great American issued the Great American Policy to Peoples [Independent Bank].” (Doc. 93 at 6) (Peoples Independent Bank will be referred to as “PIB”). PIB had a mortgage on Ramuji's motel in Boaz, Alabama. (Doc. 46 at 3); see also (Doc. 93 at 6). Great American alleges that PIB's mortgage to Ramuji required Ramuji to have an insurance policy on which PIB was a named insured. (Doc. 93 at 6). Great American further alleges that Ramuji obtained that policy and named PIB “as a ‘mortgagee with ‘additional interest' on the Lloyd's Policy from as early as August 8, 2014, through the date of the April 2, 2016 fire loss at the Insured Property.” (Doc. 93 at 6) (citing Doc. 12, ¶ 3, Exs. 2, 3). Great American claims that Jones and Pair acted for Lloyd's and gave information to PIB that “People's was a named mortgagee on the Lloyd's policy.” (Doc. 93 at 6).

         Ramuji's motel burned down on April 2, 2016. (Doc. 93 at 7). “On August 16, 2016, Lloyd's informed [Ramuji] that it was denying coverage for the loss.” (Doc. 93 at 7). Afterwards, PIB filed a claim to recover on the Great American policy relative to the loss. (Doc. 93 at 7).[1] That policy states:

In return for payment of all premium due and your compliance with all applicable provisions of this policy, we will insure you against direct loss or damage to property in which you have:
a. a mortgagee interest, and acceptable hazard insurance has been cancelled or has not been received from the mortgagor

(Doc. 93-1 at 3). The policy also states regarding additional hazard insurance:

If the property is covered by the debtor's acceptable hazard insurance, this insurance shall not apply and shall not contribute to the payment of any loss. If the property is covered by another insurance other than the debtor's acceptable hazard insurance, our coverage shall be excess of the amount due from that other insurance. In the event that your ownership or mortgagee interest in the property or the replacement cost of the property is greater than our Limit of Liability, any purchase by you of specific excess insurance from another insurer shall not be considered other insurance.

(Doc. 93-1 at 12). Great American also claims its policy allows it to become a subrogee if it makes payment to PIB. (Doc. 93 at 8).

In its Complaint, Great American asks for the following:
26. These facts create a justiciable controversy over whether Lloyd's is contractually liable to Peoples, which in turn will determine whether Great American is or is not liable to Peoples. In order to clarify and settle the legal relations, obligations, and rights existing between Great American and Peoples, between Peoples and Lloyd's, and between Peoples and Great American and Lloyd's, Jon Pair, and Randy Jones, Great American requests an order from the Court declaring that Lloyd's is required to cover Peoples' claim, as Peoples is a protected mortgagee on the Lloyd's Policy, relative to the April 2, 2016 loss to the Insured Property, irrespective of whether the Mortgagor's claim is covered by the Policy or whether any acts or omissions of the Mortgagor void some or all of the coverage under the Lloyd's Policy as to the Mortgagor.
27. Great American further requests an order from the Court declaring Great American's rights and obligations under the Great American Policy as to Peoples. Specifically, Great American requests that the Court declare that, by the terms of the Great American Policy, Great American is not obligated to cover Peoples claim relative to the April 2, 2016 fire loss because the Lloyd's Policy covers Peoples' claim under that policy.

(Doc. 93 at 9-10). Alternatively, Great American asks for the following:

28. In the alternative, Great American requests that the Court declare that Lloyd's is contractually bound by and otherwise estopped from denying Peoples' claim under the Lloyd's Policy based on the acts and omissions of its agents, Randy Jones and Jon Pair, in failing to secure coverage for Peoples under the Lloyd's Policy and due to the misrepresentations of Randy Jones and Jon Pair as agents of Lloyd's relative to the Lloyd's Policy.
29. In the alternative, Great American requests that the Court declare that Lloyd's, Randy Jones, and Jon Pair are liable to Peoples and Great American (as subrogee to Peoples) based on their acts and omissions in failing to secure coverage for Peoples under the Lloyd's Policy and for the misrepresentations of Randy Jones and Jon Pair relative to the Lloyd's Policy.

(Doc. 93 at 10).

         II. STANDARDS

         A. Federal Rule of Civil Procedure 12(b)(6)

         A Rule 12(b)(6) motion attacks the legal sufficiency of the complaint. See Fed. R. Civ. P. 12(b)(6) (“[A] party may assert the following defenses by motion: (6) failure to state a claim upon which relief can be granted[.]”). The Federal Rules of Civil Procedure require only that the complaint provide “‘a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957) (footnote omitted) (quoting Fed.R.Civ.P. 8(a)(2)), abrogated by Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007); see also Fed. R. Civ. P. 8(a) (setting forth general pleading requirements for a complaint including providing “a short and plain statement of the claim showing that the pleader is entitled to relief”).

         While a plaintiff must provide the grounds of his entitlement to relief, Rule 8 does not mandate the inclusion of “detailed factual allegations” within a complaint. Twombly, 550 U.S. at 555, 127 S.Ct. at 1964 (quoting Conley, 355 U.S. at 47, 78 S.Ct. at 103). However, at the same time, “it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). “[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.” Twombly, 550 U.S. at 563, 127 S.Ct. at 1969.

         “[A] court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 679, 129 S.Ct. at 1950. “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. “When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. (emphasis added). “Under Twombly's construction of Rule 8 . . . [a plaintiff's] complaint [must] ‘nudge[] [any] claims' . . . ‘across the line from conceivable to plausible.' Ibid.” Iqbal, 556 U.S. at 680, 129 S.Ct. at 1950-51.

         A claim is plausible on its face “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949. “The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556, 127 S.Ct. at 1965).

         B. Standing

         “[T]he core component of standing is an essential and unchanging part of the case-or-controversy requirement of Article III.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). The Constitution has three requirements for standing:

First, the plaintiff must have suffered an “injury in fact”-an invasion of a legally protected interest which is (a) concrete and particularized . . . and (b) “actual or imminent, not ‘conjectural' or ‘hypothetical, ' ” . . . Second, there must be a causal connection between the injury and the conduct complained of-the injury has to be “fairly ... trace[able] to the challenged action of the defendant, and not ... th[e] result [of] the independent action of some third party not before the court.”. . . Third, it must be “likely, ” as opposed to merely “speculative, ” that the injury will be “redressed by a favorable decision.”

Id. at 560-61 (internal citations omitted) (emphasis added). “The party invoking federal jurisdiction bears the burden of establishing these three elements.” Id. at 561 (citing another source). “At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss we ‘presum[e] that general allegations embrace those specific facts that are necessary to support the claim.” Id.

The Declaratory Judgment Act states as follows:
(a) In a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

28 U.S.C. § 2201(a). “The main purpose of a declaratory judgment action is to have coverage issues decided in advance.” American Bankers Ins. Co. of Florida v. Mitchell, 2008 WL 2634368 at *2 (S.D. Ala. July 3, 2008).[2] The Eleventh Circuit, in Emory v. Peeler, spoke to the issue of declaratory judgments and the “actual controversy” requirement:

[A] declaratory judgment may only be issued in the case of an “actual controversy.” That is, under the facts alleged, there must be a substantial continuing controversy between parties having adverse legal interests. Lake Carriers' Association v. MacMullan, 406 U.S. 498, 506, 92 S.Ct. 1749, 1755, 32 L.Ed.2d 257 (1972); Golden v. Zwickler, 394 U.S. 103, 108, 89 S.Ct. 956, 959-60, 22 L.Ed.2d 113 (1969); Sullivan v. Division of Elections, 718 F.2d 363, 365 (11th Cir.1983). The plaintiff must allege facts from which the continuation of the dispute may be reasonably inferred. Ciudadanos Unidos de San Juan v. Hidalgo County Grand Jury Commissioners, 622 F.2d 807, 821-22 (5th Cir.1980), cert. denied, 450 U.S. 946, 101 S.Ct. 1479, 67 L.Ed.2d 613 (1981). Additionally, the continuing controversy may not be conjectural, hypothetical, or contingent; it must be real and immediate, and create a definite, rather than speculative threat of future injury. City of Los Angeles v. Lyons, 461 U.S. 95, 103 S.Ct. 1660, 1666, 75 L.Ed.2d 675 (1983); Golden v. Zwickler, 394 U.S. at 108, 89 S.Ct. at 959-60; Wolfer v. Thaler, 525 F.2d 977, 979 (5th Cir.), cert. denied, 425 U.S. 975, 96 S.Ct. 2176, 48 L.Ed.2d 800 (1976). The remote possibility that a future injury may happen is not sufficient to satisfy the “actual controversy” requirement for declaratory judgments. See City of Los Angeles v. Lyons, 461 U.S. at 103, 103 S.Ct. at 1666 (1983).

Emory v. Peeler, 756 F.2d 1547, 1552 (11th Cir. 1985) (internal footnotes omitted).The Fifth Circuit stated:

‘Where there is an actual controversy over contingent rights, a declaratory judgment may nevertheless be granted.' AmericanMachine & Metals v. De Bothezat Impeller Co., 2 Cir. 1948, 166 F.2d 535, 536. Since there can be no doubt that an actual controversy exists between Jernigan and Seguros, the mere prospectivity of future payments ...

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