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Grange Mutual Casualty Co. v. Indian Summer Carpet Mills Inc.

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

July 23, 2018

GRANGE MUTUAL CASUALTY COMPANY, Plaintiff,
v.
INDIAN SUMMER CARPET MILLS, INC., et al., Defendants.

          Philip W. Savrin Admitted Pro Hac Vice, William H. Buechner, Jr. Admitted Pro Hac Vice FREEMAN MATHIS & GARY, LLP Kori L. Clement (with express permission) Alabama State Bar No. CLEMK5125 HARE & CLEMENT, P.C. Attorneys for Plaintiff

          Stephen F. Casey Alabama State Bar No. CAS001, Emily Sides Bonds Alabama State Bar No. BON014, J. David Moore Alabama State Bar No. MOO076, JONES WALKER LLP Attorneys for Defendant Indian Summer Carpet Mills, Inc.

          MEMORANDUM OPINION AND CONSENT ORDER ENTERING DECLARATORY RELIEF IN FAVOR OF PLAINTIFF

          ANNEMARIE CARNEY AXON UNITED STATES DISTRICT JUDGE

         Plaintiff Grange Mutual Casualty Company (“Grange”) initiated this declaratory judgment action against defendants Indian Summer Carpet Mills, Inc. (“Indian Summer”), the Water Works and Sewer Board of the City of Gadsden, (“Gadsden”) and the Water Works and Sewer Board of the Town of Centre (“Centre”), invoking this court's diversity jurisdiction. (See Doc. 1).[1] For its relief, Grange asks the court to declare that Grange has no duty to defend or indemnify Indian Summer for claims asserted against Indian Summer by the Water Works Defendants in two separate underlying water pollution lawsuits. (Docs. 1 and 28). In the two underlying lawsuits, the Water Works Defendants allege that Indian Summer and numerous other defendants discharged toxic chemicals that contaminated the water in the Coosa River, causing them to suffer damages, which include past and present monitoring and testing expenses, lost revenue and profits, and expenses for remediating their water systems. (Docs. 28-1 and 28-2). The Water Works Defendants assert negligence, nuisance, trespass, and wantonness claims against Indian Summer and other defendants in these underlying actions, and seek punitive damages and injunctive relief. (Docs. 28-1 and 28-2).

         This action is before the court on Grange and Indian Summer's consent motion to enter declaratory relief in favor of the plaintiff. (Doc. 25). The court, (Hopkins, J.), previously reserved ruling on the consent motion and ordered Grange to brief the court on various issues, including whether Grange's indemnity claim is ripe for adjudication, and to file an amended complaint demonstrating that the amount in controversy meets the requirement for diversity jurisdiction. (Doc. 26). Grange responded to the court's order by filing an amended complaint and additional briefing on December 18, 2017. (Docs. 27 and 28). Upon consideration of the amended complaint, the consent motion, and Grange's additional briefing, and for the reasons explained below, the court finds that it has jurisdiction over Grange's declaratory judgment claims, that Grange's indemnity claim is ripe for adjudication, and that the consent motion is due to be granted.

         I. DISCUSSION

         A. The Court's Jurisdiction Over this Action

         “Courts have an independent obligation to determine whether subject-matter jurisdiction exists, even when no party challenges it.” Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010). As the party seeking federal jurisdiction, Grange bears the burden of establishing the existence of subject matter jurisdiction in this action. See Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 752 (11th Cir. 2010).

         Grange filed this declaratory judgment action in diversity. (Doc. 1 at 3). The court has diversity jurisdiction when there is complete diversity of citizenship and the amount in controversy exceeds $75, 000, exclusive of costs and interest. 28 U.S.C. § 1332(a). “In a declaratory judgment action, ‘for amount in controversy purposes, the value of declaratory relief is the value of the object of the litigation measured from the plaintiff's perspective.' . . . Thus, when an insurer seeks a judgment declaring the absence of liability under a policy, the value of the declaratory relief to the plaintiff-insurer is the amount of potential liability under its policy.” First Mercury Ins. Co. v. Excellent Computing Distributors, Inc., 648 Fed.Appx. 861, 865 (11th Cir. 2016) (citing Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1268 (11th Cir. 2000) and Stonewall Ins. Co. v. Lopez, 544 F.2d 198, 199 (5th Cir. 1976)) (alterations and emphasis in original omitted).

         In its amended complaint, Grange alleged facts establishing complete diversity of citizenship. (Doc. 28 at 1-3). With respect to the amount-in-controversy requirement, Grange asserts that the cost of defending Indian Summer in the underlying actions will exceed $75, 000. (Doc. 28 at 3). In support of its assertion, Grange submitted a declaration stating that the defense counsel retained by Grange to defend Indian Summer in the two underlying actions estimates that the pre-trial defense costs will be $91, 300. (Doc. 27-1 at 4). Based on the estimated defense costs alone, Grange's potential liability exceeds $75, 000, exclusive of costs and interest, and the amount-in-controversy requirement is satisfied.[2] Thus, the court has subject matter jurisdiction over Grange's declaratory judgment claims.

         B. Grange's duty to indemnify claim is ripe.

         Grange asks the court to declare that it has no duty to defend or indemnify Indian Summer for claims asserted against it in the underlying actions. (Docs. 1 and 28). Because those underlying actions are still pending and Indian Summer's potential liability has not been determined, the court, (Hopkins, J.), ordered Grange to submit briefing regarding whether its claim is ripe with respect to its duty to indemnify. (Doc. 26 at 7-12).[3]

         An insurer's duty to defend is broader than its duty to indemnify, and if there is no duty to defend, there is also no duty to indemnify. Shafe v. Am. States Ins. Co., 653 S.E.2d 870, 873-075 (Ga.App. 2007).[4] As a result, if an insurer has no duty to defend an insured, a declaratory judgment claim regarding the insurer's duty to indemnify is ripe even if the underlying action is still pending. See, e.g., Nat'l Cas. Co. v. Pickens 582 Fed.Appx. 839, 839 (11th Cir. 2014) (affirming the district court order finding that the insurer “did not have a duty to defend, and thus did not have a duty to indemnify [the insured] in the state court action”); Auto-Owners Ins. Co. v. McMillan Trucking Inc., 242 F.Supp.3d 1259, 1266 (N.D. Ala. 2017) (citations omitted).

         In this case, Grange and Indian Summer agree that Grange does not have a duty to defend Indian Summer in the underlying actions based on the pollution exclusion in Grange's Commercial General Liability and Commercial Umbrella insurance policies. (Doc. 25 at 3). Indeed, the insurance policies at issue do not apply to claims of “‘[b]odily injury' or ‘property damage' arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants' . . . .” (Doc. 28-3 at 28).[5] The Supreme Court of Georgia has held that pollution exclusions such as the exclusion contained in the Grange policies are enforceable and apply to environmental claims similar to the claims asserted against Indian Summer in the underlying lawsuits. See Racetrac Petroleum, Inc. v. Ace ...


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