United States District Court, N.D. Alabama, Middle Division
MEMORANDUM OPINION AND ORDER
VIRGINIA EMERSON HOPKINS UNITED STATES DISTRICT JUDGE
INTRODUCTION AND PROCEDURAL HISTORY
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).
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.
Motions have substantial overlap in arguments, and the Court
will address both Motions together. Both Motions are ripe for
this Court's disposition.
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).
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
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
(Doc. 93-1 at 3). The policy also states regarding additional
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
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).
Federal Rule of Civil Procedure 12(b)(6)
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”).
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.
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.
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).
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
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
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). 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 ...