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Great Lakes Reinsurance, Plc v. Hayden

United States District Court, Tenth Circuit

May 20, 2013

GREAT LAKES REINSURANCE (UK), PLC, Plaintiff,
v.
SHAWN HAYDEN d/b/a HAYDEN OPERATING, Defendant.

MEMORANDUM AND ORDER

KATHRYN H. VRATIL, District Judge.

On April 3, 2011, a grass fire damaged and destroyed property of Shawn Hayden d/b/a Hayden Operating. Great Lakes Reinsurance (UK) PLC brings suit for declaratory judgment that its insurance policy does not cover the destroyed and damaged property. This matter is before the Court on defendant's Motion To Dismiss (Doc. #9) filed March 3, 2013. For the following reasons the Court overrules the motion.

Legal Standard

In ruling on a motion to dismiss under Rule 12(b)(6), Fed. R. Civ. P., the Court assumes as true all well-pleaded factual allegations and determines whether they plausibly give rise to an entitlement of relief. Ashcroft v. Iqbal , 556 U.S. 662, 679 (2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter to state a claim which is plausible - and not merely conceivable - on its face. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007). In determining whether a complaint states a plausible claim for relief, the Court draws on its judicial experience and common sense. Iqbal , 556 U.S. at 679-80.

Factual Background

The complaint alleges the following facts.

Great Lakes Reinsurance issued an insurance policy providing coverage for damage to certain equipment owned by Hayden Operating. On April 3, 2011, a grass fire damaged and destroyed property owned by Shawn Hayden d/b/a Hayden Operating. Hayden claimed losses of $100, 000. The parties dispute whether the insurance policy covers the property damaged and destroyed by the fire. According to Great Lakes Reinsurance, the policy only covered "Liz 3" (a.k.a. Liz Smith #3), which the policy describes as a salt water disposal well located "in the open" within "a dike." Following an investigation of the loss, Great Lakes Reinsurance determined that its policy did not cover the damaged property. On September 7, 2011, Great Lakes Reinsurance denied coverage, finding that the fire did not destroy the Liz Smith #3, but only destroyed business and personal property around a small storage building located some distance away from, but adjacent to, Liz Smith #3.

On October 17, 2012, counsel for Hayden Operating objected to the denial of coverage and submitted an inventory of destroyed business and personal property. The list included items not submitted in the original inventory of losses and exceeded the original stated value of $100, 000. The Great Lakes Reinsurance policy contains a 12-month contractual limitation on filing suit on a claim.

Great Lakes Reinsurance seeks a declaratory judgment that the policy does not cover the loss of any property that was damaged or destroyed by the fire on April 3, 2011, and that all claims which Hayden could have brought for damages arising out of the fire are barred by the 12-month contractual limitation on filing suit. On April 3, 2013, in the District Court of Haskell County, Kansas, Hayden sued Great Lakes Reinsurance and four others. According to Hayden, "the same issues between the parties to this action are also a part of Shawn Hayden d/b/a Hayden Operating v. Great Lakes Reinsurance (UK) PLC, Stanley Brown d/b/a Midwest Regional Agency, Bell & Clements Limited, Chris-Leef General Agency, Inc., and Marie Katie Limon d/b/a Limon Agency, case number 13-CV-11 filed in the District Court of Haskell County, Kansas on April 3, 2013." Notice Of Concurrent State Court Action (Doc. #13) at 1. The Court takes judicial notice that the case is pending. See St. Louis Baptist Temple, Inc. v. Fed. Deposit Ins. Corp. , 605 F.2d 1169, 1172 (10th Cir. 1979); see also Notice Of Concurrent State Court Action (Doc. #13) filed April 18, 2013 at 1 (asking Court to take judicial notice of "pendency thereof").[1]

Analysis

Under Rules 12(b)(1), (6) and (7), Fed. R. Civ. P., defendant moves to dismiss for lack of subject matter jurisdiction, failure to state a claim and failure to join a necessary party under Rule 19, Fed.R.Civ.P. Defendant does not distinguish between his requests for dismissal under 12(b)(1) and (6). He simply argues that the Court should decline jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201. Under Rule 12(b)(7), defendant argues that various intermediaries involved in consummating the insurance policy agreement are required parties because they might be liable to defendant.

I. Declaratory Judgment Act

The Declaratory Judgment Act states in part that "[i]n a case of actual controversy, " the Court "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." 28 U.S.C. § 2201(a). A live controversy between the parties exists here - plaintiff contends that its insurance policy did not cover the damage which the grass fire caused to defendant's property, while defendant contends that the policy did (or should have, had defendant's agents not "dropped the ball"). But even when a suit otherwise satisfies the prerequisites of subject matter jurisdiction, the Court has discretion to determine whether and when to entertain an action under the Declaratory Judgment Act. Wilton v. Seven Falls Co. , 515 U.S. 277, 282 (1995). In determining whether to exercise its discretion, the Court considers (1) whether a declaratory action would settle the controversy; (2) whether it would serve a useful purpose in clarifying the legal relations at issue; (3) whether the declaratory remedy is being used merely for the purpose of procedural fencing or to provide an arena for a race to res judicata; (4) whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and (5) whether an alternative remedy is better or more effective. Mid-Continent Cas. Co. v. Village at Deer Creek Homeowners Ass'n, Inc. , 685 F.3d 977, 80-81 (10th Cir. 2012); State Farm Fire & Cas. Co. v. Mhoon , 31 F.3d 979, 982-83 (10th Cir. 1994).

Here, the first Mhoon factor weighs in favor of plaintiff.[2] This declaratory judgment action will settle the issue whether defendant's insurance policy covers the loss caused by the grass fire. Defendant contends that plaintiff's claim is ill-suited for a declaratory judgment action because it involves numerous factual issues regarding what property was damaged and what property the policy covered. Just because a "dispute turns upon questions of fact does not withdraw it... from judicial cognizance. The legal consequences flow from the facts and it is the province of the courts to ascertain and find the facts in order to determine the legal consequences. That is everyday practice." Aetna Life Ins. Co. of Hartford, Conn. v. Haworth , 300 U.S. 227, 242 (1937). Defendant also contends that this action will not resolve his claims against plaintiff's agents for failing to include coverage for certain damaged property in the policy. As discussed in more detail below, defendant does not identify who these "agents" or "intermediar[ies]" might ...


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