Safeco Insurance Company of Illinois v. Harleysville Insurance Company
Filing
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MEMORANDUM OPINION AND ORDER: it is ORDERED that Harleysville's 8 Motion toDismiss is DENIED. Signed by Honorable Judge William Keith Watkins on 1/7/2021. (bes, )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
SAFECO INSURANCE
COMPANY OF ILLINOIS,
Plaintiff,
v.
HARLEYSVILLE INSURANCE
COMPANY,
Defendant.
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CASE NO. 2:20-CV-633-WKW
[WO]
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
Before the court is Defendant Harleysville Insurance Company’s motion to
dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. #
8.) Plaintiff filed a response in opposition (Doc. # 12) to which Defendant filed a
reply brief. After careful consideration of the allegations, arguments of counsel, and
applicable law, the court finds that Harleysville Insurance Company’s Rule 12(b)(6)
motion is due to be denied.
II. JURISDICTION AND VENUE
In this removed action, subject matter jurisdiction is proper on the basis of
diversity jurisdiction. See 28 U.S.C. §§ 1332(a), 1441(a). Personal jurisdiction and
venue are not contested.
III. STANDARD OF REVIEW
When evaluating a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6), the court must take the facts alleged in the complaint as true and
construe them in the light most favorable to the plaintiff. Resnick v. AvMed, Inc.,
693 F.3d 1317, 1321–22 (11th Cir. 2012). To survive Rule 12(b)(6) scrutiny, “a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“[F]acial
plausibility” exists “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. (citing Twombly, 550 U.S. at 556).
Further, as a general rule, the scope of the court’s review “must be limited to
the four corners of the complaint.” Speaker v. U.S. Dep’t of Health & Human Servs.
Centers for Disease Control & Prevention, 623 F.3d 1371, 1379 (11th Cir. 2010).
A court may not consider extrinsic evidence unless its authenticity is undisputed and
the evidence is “central to the plaintiff’s claim.” Id. Otherwise, “[i]f matters outside
the pleadings are presented by the parties and considered by the district court, the
Rule 12(b)(6) motion must be converted into a Rule 56 summary judgment motion.”
Id. (citing Fed. R. Civ. P. 12(d)).
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IV. BACKGROUND
A.
The Allegations of the Operative Complaint
The underlying facts, as Plaintiff Safeco Insurance Company of Illinois
(“Safeco”) pleads them, are as follows: On September 20, 2018, Heidi Lee (“Lee”),
a partner at Jackson Thornton & Co., was involved in a motor vehicle accident
“during the scope of her employment.” (Doc. # 6, at 3 (Am. Compl.).) The vehicle
that Lee was driving was covered by her personal automobile insurance policy that
she obtained through Safeco (“the Safeco Policy”), which provided up to $500,000
in liability coverage. (Doc. # 6, at 3.) The Safeco Policy contained a subrogation
clause, which provided that, “[i]f [Safeco] makes a payment under [the Safeco
Policy] and the person for whom payment was made has a right to recover damages
from another person, entity, or organization[,] [Safeco] shall be subrogated to that
right.” (Doc. # 6, at 3.)
Lee’s vehicle also was insured under Jackson Thornton’s business automobile
coverage policy (“the Harleysville Policy”) because she was “conducting
employment-related business at the time of the accident.” (Doc. # 6, at 4.) This
policy, which was issued by Harleysville Insurance Company (“Harleysville”),
carried a liability limit of $1,000,000. (Doc. # 6, at 4.) The Harleysville Policy
covered “Non-Owned Autos” pursuant to a policy provision that defined “Covered
Autos” to include “[o]nly those ‘autos’ you do not own, lease, hire, rent or borrow
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that are used in connection with your business. This includes ‘autos’ owned by your
‘employees,’ [or] partners . . . while used in your business or personal affairs.” (Doc.
# 6, at 4.) At the time of the accident, Jackson Thornton did not own, nor was it
hiring, renting, or borrowing Lee’s vehicle, and Lee was using the automobile “in
connection with and in furtherance of Jackson Thornton & Co., P.C.’s business
affairs.” (Doc. # 6, at 3.)
Both the Safeco Policy and Harleysville Policy included “Other Insurance”
provisions. The Safeco Policy’s “Other Insurance” provision reads as follows:
If there is other applicable liability insurance available[,] any insurance
we provide shall be excess over any other applicable liability insurance.
If more than one policy applies on an excess basis, we will bear our
proportionate share with other collectible liability insurance.
(Doc. # 6, at 5.) The Harleysville Policy’s “Other Insurance” provision reads as
follows:
For any covered “auto” you own, this coverage provides primary
insurance. For any covered “auto” you don’t own, the insurance
provided by this coverage form is excess over any other collectible
insurance.
...
When this coverage form and any other coverage form or policy covers
the same basis, either excess or primary, we will pay only our share.
Our share is the proportion that the Limit of Insurance of our coverage
form bears to the total of the limits of all coverage forms and policies
covering on the same basis.
(Doc. # 6, at 5.)
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Safeco notified Harleysville of the accident and corresponding claim, but
Harleysville did not participate in any of the claim proceedings. (Doc. # 1-1, at 4.)
Safeco points to a coverage letter that Harleysville issued to Lee, acknowledging
that the Harleysville Policy provided coverage for the accident on an excess basis
over the Safeco Policy. (Doc. # 6, at 5.)
On August 29, 2019, Safeco entered into a “Settlement and Release”
agreement (“the Agreement”) with the motorcyclist who asserted claims against Lee
over the accident. The Agreement included a total release and discharge of all
liability for both Lee and Jackson Thornton for the sum of $200,000. (Doc. # 6, at
6.)
Safeco paid the $200,000 to the motorcyclist and sought proportional
contribution from Harleysville in the amount of $133,333.33 (two-thirds of the
$200,000), which Harleysville has refused to pay. (Doc. # 6, at 5–6.)
B.
Procedural History
On August 4, 2020, Safeco sued Harleysville in an Alabama state court,
seeking a declaratory judgment for equitable contribution and equitable and/or
contractual subrogation from Harleysville in the amount of $133,333.33. (Doc. # 11, at 4–7.) Harleysville removed the case to this court on diversity grounds on
August 28, 2020.
The original complaint alleged that Lee was an insured (rather than that her
vehicle was insured) under the Harleysville Policy. Harleysville maintained that Lee
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was not an “insured” pursuant to the Harleysville Policy, and counsel for
Harleysville advised counsel for Safeco of this fact. (Doc. # 8, at 2.) Accordingly,
Safeco amended its complaint to state that Lee was acting in the course of her
employment as opposed to classifying Lee herself as an “insured.” (Doc. # 6, at 3.)
Harleysville argues that this revision between the original complaint filed in an
Alabama state court (Doc. # 1-1) and the Amended Complaint filed in this court
(Doc. # 6) constitutes a concession by Safeco that Lee was not an “insured” covered
by the Harleysville Policy, and accordingly seeks to dismiss Safeco’s claims
pursuant to Rule 12(b)(6). (Doc. # 8, at 3.) Harleysville’s Motion to Dismiss (Doc.
# 8) appended emails between counsel, which Safeco points out raises Rule 56
summary judgment considerations. (Doc. # 12, at 5.)
V. DISCUSSION
For the following reasons, Harleysville’s Motion to Dismiss is due to be
denied. The ultimate issue is whether the Safeco and Harleysville Policies covered
the same “insurable interest, subject matter, and risk” as one another. Based on a
reading of the facts in the light most favorable to the nonmovant (Safeco) as they
relate to applicable caselaw, Safeco has pled sufficient factual matter to plausibly
show that the two policies did so; Safeco can therefore overcome a 12(b)(6) motion
to dismiss.
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This opinion will first discuss the Rule 56 considerations, and then proceed to
the merits of Harleysville’s motion.
A.
Conversion to a Rule 56 motion for summary judgment is not necessary.
The scope of a court’s review of a motion to dismiss pursuant to Rule 12(b)(6)
“must be limited to the four corners of the complaint.” Speaker, 623 F.3d at 1379.
A court may not consider extrinsic evidence unless its authenticity is undisputed and
the evidence is “central to the plaintiff’s claim.” Id. Otherwise, “[i]f matters outside
the pleadings are presented by the parties and considered by the district court, the
Rule 12(b)(6) motion must be converted to a Rule 56 summary judgment motion.”
Id. (citing Fed. R. Civ. P. 12(d)). A judge need not convert a motion to dismiss into
a motion for summary judgment as long as he or she does not consider matters
outside the pleadings. Harper v. Lawrence Cnty., Ala., 592 F.3d 1227, 1232 (11th
Cir. 2010). In other words, the court is free to ignore the extraneous material
altogether so that the motion is not converted into a Rule 56 motion for summary
judgment. Id.
Harleysville attached several supplemental documents to its Motion to
Dismiss, thereby introducing material outside the four corners of Safeco’s
complaint. (Docs. # 8-1, 8-2.) Because these documents are “matters outside the
pleadings,” this would ordinarily warrant conversion of the Motion to Dismiss into
a motion for summary judgment.
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However, after duly reviewing Harleysville’s Motion to Dismiss, the court
finds that the attached documents do not have significant enough bearing on Safeco’s
claims vis-à-vis the standards of Twombly and Iqbal to warrant consideration in
weighing the pending Motion to Dismiss. Therefore, pursuant to Harper, the court
exercises its discretion to ignore these extraneous materials altogether and to not
convert the motion into a Rule 56 motion for summary judgment.
B.
It is irrelevant that Lee was not an insured under the Harleysville Policy.
Harleysville argues that because Safeco amended its complaint to remove the
allegation that Harleysville owed coverage to Lee as an insured, instead basing its
claim on a theory of vicarious liability through Jackson Thornton, Safeco effectively
concedes that Lee was not an insured, and is therefore not entitled to equitable
contribution from Harleysville. (Doc. # 8, at 3.) However, pursuant to Alabama
law, whether Lee herself was insured by the Harleysville policy is not dispositive of
the issue of equitable contribution. The controlling issue is whether the parties’
insurance contracts covered the same insurable interest, subject matter, and risk.
Pursuant to Alabama law, one insurer is not entitled to equitable contribution
from another “merely upon showing that an insured is covered by two insurance
policies.” Pa. Nat’l Mut. Cas. Ins. Co. v. Progressive Direct Ins. Co., 2015 WL
5719178, at *9 (N.D. Ala. 2015). Instead, “the two policies must insure against the
same risk, but they must also provide coverage for the same insurable interest.”
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Employers’ Mut. Cas. Ins. Co. v. Hughes, 780 F. Supp. 2d 1204, 1208 (N.D. Ala.
2011). In other words, equitable contribution requires “the same insurable interest,
subject matter, and risk.” Pa. Nat’l, 2015 WL 5719178, at *9 (citing Nationwide
Mut. Ins. Co. v. Hall, 643 So. 2d 551, 561 (Ala. 1994)).
Harleysville points to two Alabama Supreme Court decisions—Nationwide
Mut. Ins. Co. v. Hall, 643 So. 2d 551, 553 (Ala. 1994) and United States Fire Ins.
Co. v. Hodges, 154 So. 2d 3 (Ala. 1963)—to support the notion that because Lee
was not a listed insured on the Harleysville Policy, Safeco is not entitled to relief.
In Hall, Nationwide Mutual Insurance Company insured the manager of a
building, who was an additional insured under a policy issued by Alfa Mutual
Insurance Company (“Alfa”) to Friedlander Realty, Inc., which owned the building
in question. 643 So. 2d at 553. After Nationwide defended and settled a claim
arising from a fire at the building, it sued Alfa to recover defense and indemnity
payments.
Id. at 554.
The court concluded that Nationwide was entitled to
contribution from Alfa because both the Nationwide and Alfa policies provided
primary insurance to Friedlander. Id. at 561.
Harleysville contrasts Hall with United States Fire Insurance Co. v. Hodges,
in which the Alabama Supreme Court suggested that equitable contribution and the
applicability of multiple insurance policies’ “other insurance” provisions apply only
if the policies in question cover the same insured(s). 154 So. 2d at 3. In Hodges,
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three insurance policies were involved, two of which contained provisions that the
court denominated “other insurance” clauses, but which were of the type frequently
referred to as “pro rata” clauses. Id. at 4. The trial court ignored the “pro rata”
clauses because the two policies did not cover the same interest, subject matter, risk,
and insured. Id. at 5. On appeal to the Alabama Supreme Court, United States Fire
contended that liability should be prorated between the policies at issue. Id. The
court affirmed, ignoring the “pro rata” clauses, saying:
It will be noted that each of the co-insurance provisions in the two
policies says that ‘if the Assured has other insurance’ and ‘if the insured
has other insurance.’ The ‘Assured’ in the boat policy was Auto
Electric, a corporation; the ‘insured’ in the homeowners policy was Ed
Hodges, his wife and their daughter. Certainly the insureds in both
policies were not the same.
Id. at 7. Harleysville argues that pursuant to Hodges, because Lee was not an insured
under the Harleysville Policy, Harleysville does not owe equitable contribution to
Safeco.
However, the Alabama Supreme Court expressly overruled Hodges’
suggestion that equitable contribution and the applicability of multiple insurance
policies’ “other insurance” provisions apply only if the policies in question cover the
same “insured(s).” State Farm Mut. Auto. Ins. Co. v. Auto-Owners Ins. Co., 252 So.
2d 631 (Ala. 1971). The court cited a number of other cases following Hodges where
the courts allocated liability among different insurers despite the policies at issue not
covering the same insureds, and concluded that this aspect of Hodges was incorrect
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and overruled it. Id. (“[W]e are now convinced that the Hodges [sic] holding with
which we are concerned here is too narrow and should not be followed. That holding
is hereby overruled.”). See also id. at 636 (citing, inter alia, Am. Mut. Liab. Ins. Co.
v. Milwaukee Ins. Co. of Milwaukee, 218 So. 2d 129 (1969) (ordering pro-rata
contribution of insurance coverage for automobile accident among different
insurers—one of whom provided garage liability coverage and the other
“comprehensive liability”—despite the fact that the policies covered different
insureds)).
The State Farm court also cited State Farm Mutual Auto Insurance Co. v.
General Mutual Insurance Co., 210 So. 2d 688 (Ala. 1968), in overturning Hodges.
State Farm, 252 So. 2d at 636. That case involved a dispute between two insurers
who offered liability coverage on a motor vehicle accident.
State Farm, the
appellant, covered the driver individually under a so-called “Operator’s” policy.
State Farm, 210 So. 2d at 690, 694. The other insurer, General, covered a family
poultry company that owned the driver’s vehicle under a commercial policy. Id. at
690. Even though these policies covered different named insureds, because each
policy provided liability coverage for the accident, the court applied each policy’s
“other insurance” clauses. Id. Concluding that each policy featured “excess” otherinsurance clauses, the court deemed them “mutually repugnant” or irreconcilable.
Id. at 694. Following this determination, the court applied the “Lamb-Weston” rule
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of apportioning loss between two concurrent insurers according to “the ratio which
the limits of the policies bear to the total coverage. . . .” Id. at 696 (quoting LambWeston, Inc. v. Oregon Auto. Ins. Co., 346 P.2d 643, 647 (Ore. 1959)).
In short, there is ample Alabama case law to rebut Harleysville’s argument
that it has no obligation due to Lee not being an insured under the Harleysville
Policy. The Alabama Supreme Court has expressly rejected the requirement that
corresponding insurance policies carrying “Other Insurance” clauses (such as the
Harleysville and Safeco Policies) must cover the same insureds. Alabama case law
merely requires such policies to cover the same interest, subject matter, and risk as
one another.
The question, then, is whether Safeco has pled sufficient factual matter to
sustain a plausible claim that the policies in question cover the same interest, subject
matter, and risk.
C.
The Safeco and Harleysville Policies cover the same insurable interest,
subject matter, and risk.
Safeco has pled sufficient factual matter to sustain a claim that the policies
in question cover the same interest, subject matter, and risk.
The facts of this case are nearly identical to those of Hall, on which
Harleysville relies in its Motion to Dismiss. Just as the Nationwide and Alfa policies
in Hall both insured Friedlander, both the Safeco and Harleysville Policies insured
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Lee’s vehicle. The Supreme Court of Alabama affirmed the trial court’s granting
Nationwide a judgment for “a pro rata contribution to the amount Nationwide paid
to settle the claims against [the insured].” Hall, 643 So. 2d at 562. This is what
Safeco seeks in the current case.
Hall does not dictate that contribution is only available where policies cover
the same insured; it states that when multiple insurers cover “the same insurable
interest, subject matter, and risk [at the same basis], they share liability in accordance
with the proportion that the limits of each policy bear to the total limit of insurance
applicable to the loss.” Id. at 561. As Safeco points out, the reason that the question
of whether the insurance policies in Hall covered the same insured arose was due to
the specific terms of the “Other Insurance” provisions at issue in that case. In Hall,
both Alfa’s and Nationwide’s “Other Insurance” provisions purported to apply only
in situations where other collectible insurance was “available to the insured.” See
id. at 558 (quoting Alfa’s “Other Insurance” provision); id. at 560–61 (quoting
Nationwide’s “Other Insurance” provisions).
In contrast, neither Safeco nor
Harleysville’s “Other Insurance” provisions limit their application or scope only to
outside insurance coverage or proceeds that are “available to the insured.”
Safeco directly insured Lee’s vehicle. As Safeco has alleged, the Harleysville
Policy covered “Non-Owned Autos” pursuant to a policy provision that defined
“Covered Autos” to include “[o]nly those ‘autos’ [Jackson Thornton] do[es] not
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own, lease, hire, rent or borrow that are used in connection with [Jackson
Thornton’s] business.
This includes ‘autos’ owned by [Jackson Thornton’s]
‘employees,’ [or] partners . . . while used in [Jackson Thornton’s] business or
personal affairs.” (Doc. # 1-1, at 2–3) (alterations added.) Because, as alleged, Lee
owned her vehicle and was acting within the scope of her employment for Jackson
Thornton at the time of the accident, her vehicle was a “Non-Owned Auto” covered
by the Harleysville Policy. Taken as true, these facts plausibly allege that both
Safeco and Harleysville insured Lee’s vehicle at the time of the accident, including
its liability insurance, making the two policies cover the same interest, subject
matter, and risk as one another.
For these reasons, Safeco has pled sufficient factual matter, taken as true, to
support its claims for equitable contribution and subrogation. Harleysville’s Motion
to Dismiss is therefore due to be denied.
VI. CONCLUSION
For the foregoing reasons, it is ORDERED that Harleysville’s Motion to
Dismiss (Doc. # 8) is DENIED.
DONE this 7th day of January, 2021.
/s/ W. Keith Watkins
UNITED STATES DISTRICT JUDGE
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