United States District Court, N.D. Alabama, Eastern Division
MEMORANDUM OPINION AND ORDER
K. KALLON UNITED STATES DISTRICT JUDGE.
Insurance Company brings this declaratory judgment action
pursuant to 28 U.S.C. § 2201 and Federal Rule of Civil
Procedure 57 to determine its rights under a commercial
general liability policy it issued to I-20 HD Ultra Lounge
with respect to a pending lawsuit filed against Ultra Lounge
in state court. Doc. 1. Ultra Lounge has counter-claimed
against Scottsdale, alleging six state law claims. Doc 6.
Scottsdale has moved to dismiss the counterclaims, and Ultra
Lounge has moved to partially dismiss Scottsdale's
claims. Docs. 9-10; 15. Ultra Lounge has also moved to amend
to restate its counterclaims and to add purported necessary
parties. Doc. 24. The motions are fully briefed and ripe for
review. See docs. 14, 18, 17, 23. For the reasons
stated more fully below, Ultra Lounge's motion to dismiss
is granted, Ultra Lounge's motion to amend is granted in
part, and Scottsdale's motion to dismiss is granted in
STANDARD OF REVIEW
Federal Rule of Civil Procedure 8(a)(2), a pleading must
contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.”
“[T]he pleading standard Rule 8 announces does not
require ‘detailed factual allegations,' but it
demands more than an unadorned,
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007)). Mere “labels and conclusions” or
“a formulaic recitation of the elements of a cause of
action” are insufficient. Id. (citations and
internal quotation marks omitted). By contrast with Rule
8(a)'s fairly liberal pleading standard, Federal Rule of
Civil Procedure 9(b) requires a party to “state with
particularity the circumstances constituting fraud or
Rule of Civil Procedure 12(b)(6) permits dismissal when a
complaint fails to state a claim upon which relief can be
granted. “To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to
state a claim to relief that is plausible on its face.”
Id. (citations and internal quotation marks
omitted). A complaint states a facially plausible claim for
relief “when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Id. (citation omitted). Ultimately, this inquiry is
a “context-specific task that requires the reviewing
court to draw on its judicial experience and common
sense.” Id. at 679.
action arises out of an insurance dispute between Scottsdale
and its policyholder Ultra Lounge, a night club operator.
Ultra Lounge purchased from Scottsdale a general liability
insurance policy, effective October 1, 2014 to October 1,
2015, which provided coverage for “bodily injury”
and “property damages” caused by an
“occurrence.” Doc. 1 at 6; see doc. 1-1.
The policy obligated Scottsdale to defend Ultra Lounge
against any “suit” seeking damages to which the
insurance applies. Docs. 1 at 6; 1-1 at 9.
March 2016, Margie Ree Bonner-Mitchell
(“Mitchell”) filed suit against Ultra Lounge and
Nikolaus Danvar Mitchell (“Nikolaus”) in the
Circuit Court of Calhoun County, Alabama. See Mitchell v.
I-20 Ultra Lounge, LLC, No. 11-CV-2016-900112.00 (Ala.
Cir. Ct. Mar. 3, 2016). Mitchell alleged that Nikolaus'
car hit her while she was walking, causing her to sustain
bodily injuries. Doc. 1-2 ¶ 10. Nikolaus had allegedly
been drinking alcoholic beverages at an Ultra Lounge bar
before driving his car that night. Id. ¶ 11.
For her injuries, Mitchell seeks compensatory and punitive
damages from Ultra Lounge for various tort claims, and
violations of Alabama's “Dram Shop Act, ”
Alabama Administrative Code 20-X-5-.14. Doc. 1-2 at 3-8.
filed the present action seeking declaratory judgment that it
does not owe coverage to Ultra Lounge for the
Mitchell action, that it has no duty to defend Ultra
Lounge against the Mitchell action, and that it has
no duty to indemnify Ultra Lounge against the
Mitchell action or for any damages or judgment
awarded against Ultra Lounge. Doc. 1 at 11. Specifically,
Scottsdale alleges that “endorsements” added to
the parties' insurance agreement created policy
exclusions related to liquor liability, assault and/or
battery, and punitive or exemplary damages that bar coverage
for the Mitchell action. See docs. 1 at
7-11; 1-1 at 31-32, 43, 83.
Ultra Lounge's Motion to Partially
Lounge contends that the duty to indemnify declaratory
judgment claim is not yet ripe for adjudication in light of
the pending Mitchell action. Doc. 15. Under Alabama
law,  an insurer's duties to defend and
indemnify are distinct, and therefore “must be analyzed
separately.” United States Fid. & Guar. Co. v.
Armstrong, 479 So.2d 1164, 1167 (Ala. 1985) (citations
omitted). The duty to defend “is more extensive than
[the] duty to [indemnify], ” and is generally
determined by looking to the allegations in the underlying
state action. Ladner & Co. v. S. Guar. Ins. Co.,
347 So.2d 100, 102-03 (Ala. 1977). By contrast, whether a
duty to indemnify exists depends “on the facts adduced
at the trial of the action” against the insured.
Hartford Cas. Ins. Co. v. Merchs. & Farmers
Bank, 928 So.2d 1006, 1013 (Ala. 2005); see Tanner
v. State Farm Fire & Cas. Co., 874 So.2d 1058, 1066
(Ala. 2003) (“The insured's conduct rather than the
allegedly injured person's allegations determine whether
the insurer has a duty to indemnify.”). Accordingly,
contrary to Scottsdale's contentions, “[t]he duty
to indemnify does not rise out of a duty to defend” and
cannot be determined prior to the resolution of the
underlying state action. Alabama Gas Corp. v. Travelers
Cas. & Sur. Co., 990 F.Supp.2d 1163, 1167 (N.D. Ala.
2013), aff'd, 568 Fed.Appx. 837 (11th Cir.
2014); see, e.g., State Farm Fire &
Cas. Co. v. GHW, 56 F.Supp.3d 1210, 1215 (N.D. Ala.
2014) (“It is too early for the Court to address the
indemnity issue because the state court action against [the
insured] remains pending.”); Pharmacists Mut. Ins.
Co. v. Godbee Med. Distributors, Inc., 733 F.Supp.2d
1281, 1286 (M.D. Ala. 2010) (“[A] determination of the
duty to indemnify cannot be made at a preliminary stage in
the proceedings, when it is still possible for the plaintiff
in the underlying lawsuit to change the theory of liability
and assert a claim that is covered by the policy at
court records indicate that the Mitchell action
remains pending. See Mitchell v. I-20 Ultra Lounge,
LLC, No. 11-CV-2016-900112.00 (Ala. Cir. Ct. Mar. 3,
2016). Therefore, “[b]ecause the underlying action is
still pending in state court, the court . . . concludes that
the duty to indemnify issue is not yet ripe, and it will thus
not rule on the issue.” Employers Mut. Cas. Co. v.
Smith Const. & Dev., LLC, 949 F.Supp.2d 1159, 1176
(N.D. Ala. 2013). See also Allstate Ins. Co. v. Employers
Liab. Assurance Corp., 445 F.2d 1278, 1281 (5th Cir.
1971) (“[N]o action for declaratory relief will lie to
establish an insurer's liability . . . until a judgment
has been rendered against the insured since, until such
judgment comes into being, the liabilities are contingent and
may never materialize.”).Accordingly, Ultra Lounge's
motion to dismiss this claim is due to be granted.