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Acuity, A Mutual Insurance Co. v. Bretsnyder

United States District Court, Tenth Circuit

December 3, 2013



JOHN W. LUNGSTRUM, District Judge.

This matter comes before the Court on the motion to dismiss or stay filed by defendant Jeff Bretsnyder (Doc. # 10), and the motion to dismiss filed by defendants Jennifer and Dan Goodman (Doc. # 11). For the reasons set forth below, the Court denies both motions.

I. The Allegations in the Complaint

Plaintiff Acuity, A Mutual Insurance Company ("Acuity") has brought the present declaratory judgment action against defendants Jeff Bretsnyder, Jennifer Goodman, and Dan Goodman. Acuity alleges that it issued an insurance policy to Mr. Bretsnyder, who seeks coverage under the policy relating to a lawsuit filed against him in Kansas state court by Jennifer and Dan Goodman.

According to the state court petition, which Acuity has incorporated by reference into its complaint, the Goodmans allege that they engaged Mr. Bretsnyder to do floor refinishing work at their home; that on August 30, 2012, while taking a "smoke break", Mr. Bretsnyder disposed of a cigarette in the area of the Goodmans' porch; that a short time later, a fire ignited while Mr. Bretsnyder was visiting a convenience store; and that the fire was caused by the cigarette and Mr. Bretsnyder's careless smoking. The Goodmans have asserted a claim of negligence against Mr. Bretsnyder, and they seek damages in excess of $400, 000 relating to the fire.

In its complaint in this Court, Acuity alleges that, according to the policy (which it attached and incorporated by reference into the complaint), it provided liability coverage to Mr. Bretsnyder as an individual for "conduct of a business" owned by Mr. Bretsnyder, namely, Hardwood Floor Refinishing Co., a business with the classification description of "carpentry-interior". Acuity further alleges that Mr. Bretsnyder's actions in allegedly causing the fire at the Goodmans were not covered under the policy because he was not acting with respect to the conduct of the covered business, for three specific reasons: (a) his actions in taking a smoking break and traveling to a convenience store were not related to his business; (b) he was not performing hardwood floor or carpentry work, but was instead performing epoxy chip work; and (c) he was not conducting the business because he was performing the work for no compensation as a family favor for the Goodmans, his sister and brother-in-law. Acuity thus seeks a declaratory judgment to the effect that the Goodmans' claim against Mr. Bretsnyder is not covered under the policy and that Acuity has no obligation to defend or to indemnify Mr. Bretsnyder for that claim.

II. Defendant Bretsnyder's Motion to Dismiss or Stay (Doc. # 10)

Mr. Bretsnyder moves for dismissal of Acuity's complaint or, alternatively, for a stay pending the outcome of the Goodmans' state-court action against him. The Court addresses his arguments in turn.

A. Mr. Bretsnyder first seeks dismissal for failure to state a claim.[1] The Court will dismiss a cause of action for failure to state a claim only when the factual allegations fail to "state a claim to relief that is plausible on its face, " Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), or when an issue of law is dispositive, see Neitzke v. Williams, 490 U.S. 319, 326 (1989). The complaint need not contain detailed factual allegations, but a plaintiff's obligation to provide the grounds of entitlement to relief requires more than labels and conclusions; a formulaic recitation of the elements of a cause of action will not do. See Bell Atlantic, 550 U.S. at 555. The Court must accept the facts alleged in the complaint as true, even if doubtful in fact, see id., and view all reasonable inferences from those facts in favor of the plaintiff, see Tal v. Hogan, 453 F.3d 1244, 1252 (10th Cir. 2006). Viewed as such, the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic, 550 U.S. at 555. The issue in resolving a motion such as this is "not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

In support of this argument, Mr. Bretsnyder states only that his actions were covered by the insurance policy and that Acuity's allegations are insufficient as a matter of law to state a claim. He has not elaborated on that argument, however, or cited authority, or even attempted to address the particular reasons given by Acuity in the complaint supporting its assertion of non-coverage. Nor has Mr. Bretsnyder explained how Acuity's allegations are insufficient. Accordingly, the Court rejects this basis for dismissal.

B. Mr. Bretsnyder argues that the Court should exercise its discretion to decline to entertain this declaratory judgment action. The Tenth Circuit has set forth the following factors that the trial court should consider in deciding whether to hear a declaratory judgment action:

[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 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 there is an alternative remedy which is better or more effective.

See State Farm Fire & Cas. Co. v. Mhoon, 31 F.3d 979, 983 (10th Cir. 1994) (brackets in original, internal quotations omitted).

Mr. Bretsnyder argues that this action would not settle the controversy or clarify the contractual relations of the parties (the first two Mhoon factors), but he does not explain those conclusory assertions. He also argues that the ongoing state-court action is "better situated to determine the insurer's coverage obligations, " that this action raises issues of Kansas law that "can be fully and more economically resolved" in the state-court ...

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