Pennsylvania National Mutual Casualty Insurance Company v. Baldone Family Denistry PC et al

Filing 33

MEMORANDUM OF DECISION. Signed by Judge James H Hancock on 3/12/2014. (JLC)

FILED
2014 Mar-12 AM 09:00
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION

PENNSYLVANIA NATIONAL
)
MUTUAL CASUALTY INSURANCE
COMPANY,
)
PLAINTIFF,

)

VS.

)

2:13-cv-2338-JHH

BALDONE FAMILY DENTISTRY, )
P.C.; DR. CHARLES BALDONE;
B&H CONTRACTING, INC.;
)
BROOKWOOD HEALTH
SERVICES, INC.; BORDEN &
)
BREWSTER CONTRACTORS, INC.;
ROBINS & MORTON, LLC; and
)
UNITED FIRE & CASUALTY
COMPANY,
)
DEFENDANTS.

)

MEMORANDUM OF DECISION
The court has before it the January 27, 2014 Motion (Doc. #14) to Dismiss Or,
In the Alternative, Motion to Stay filed by Defendant B&H Contracting, Inc.
(“B&H”). B&H simultaneously filed a brief and evidence (Doc. #15) in support of
its Motion.

On February 5, 2014, Defendant Brookwood Health Services, Inc.

(“Brookwood”) joined “in each ground, phrase and aspect of the memorandum of law
[Doc 15] submitted by B&H Contracting in Support of its Motion to Dismiss [Doc

14].” (Doc. # 18). Additionally, on February 10, 2014, Defendants Baldone Family
Dentistry, P.C. and Dr. Charles Baldone filed a Motion (Doc. # 26) to Dismiss Or, In
the Alternative, Motion To Stay, and adopted and incorporated all arguments made
by B&H in its memorandum in support of its Motion. Both Motions (Docs. # 14 &
26) are now under submission, without oral argument, and are due to be granted in
full for the following reasons.1
I. Background
On December 30, 2013, Plaintiff Pennsylvania National Mutual Casualty
Insurance Company (“Penn National”) commenced this action against Defendants
B&H, Baldone Family Dentistry, P.C., Dr. Charles Baldone (“Baldone”), Brookwood,
Borden & Brewster Contractors, Inc. (“Borden”), Robins & Morton, LLC (“Robins”)
and United Fire & Casualty Company (“United”).2 (See Doc. #1.) Penn National
seeks a declaratory judgment to determine its duties to defend and indemnify B&H,
Brookwood, Robins and/or Borden for claims made against them in an underlying

1

Joining late to the game – after these two Motions (Docs. # 14 & 26) were under
submission – Defendant Borden & Brewster Contractors, Inc. filed a Motion (Doc. #30) to
Dismiss or in the Alternative Motion to Stay. That Motion incorporated B&H’s Motion and
memorandum in support. Similarly, on March 5, 2014, Robins & Morton Group filed a Motion
(Doc. # 32) to Dismiss or in the Alternative Motion to Stay, incorporating the same. As such,
Boden’s and Robins & Morton’s Motions (Doc. #30 & 32) are also due to be granted for the
reasons stated herein.
2

The court notes that United has not been served with a copy of the Summons and
Complaint. (See doc. # 7.)

2

lawsuit, Baldone Family Dentistry P.C. and Dr. Charles Baldone v. B&H
Contracting, Inc., at al., Civil Action No. CV-2012-902634 (“the underlying lawsuit”
or “state court action”), which is currently pending in the Circuit Court of Jefferson
County, Alabama.3
The state court action arose from an incident that occurred during construction
to expand Brookwood’s medical center campus, which neighbors the Baldone dental
facility. (Doc. #1-1.)

In the underlying lawsuit, Baldone alleges that sewer lines

backed up and flooded Baldone’s dental facility in October 2010 as a result of a
construction error on the part of Robins, Borden and B&H.4 (Id. ¶¶ 11-14.) Baldone
contends that due to the flooding, it had to close its dental facility for seven months
for cleaning and rebuilding, thereby incurring renovation costs as well as revenue
losses and damage to its reputation. (Id. ¶¶ 14-20.)
Less than three months after the underlying complaint was filed, Baldone’s
insurer, ProAssurance Indemnity Company, Inc. (“ProAssurance”), intervened in the
underlying lawsuit to recover from Robins, Borden, and B&H the amount of
$300,235.89 in insurance benefits it paid to Baldone. (Exh. A. to Doc. #15.) A few
3

B&H and Borden notified Penn National of the incident which led to the underlying suit
when it occurred in October 2010. Penn National has defended B&H and Borden in the
underlying state court action since its inception and continues to do so to date.
4

Brookwood hired Robins as its general contractor for the construction project, who in
turn hired Borden as a subcontractor, who then hired B&H as a subcontractor.

3

days later, Penn National moved to intervene in the underlying lawsuit as well, but
for the limited purpose of participating in discovery and submitted special verdict
forms or special interrogatories to the jury. (Exh. B to Doc. #15.) Penn National did
not seek a full intervention to determine its defense and indemnity obligations, but
instead “reserve[d] the right . . . to amend [its] Complaint in Intervention to seek a
declaration of its rights, duties, and obligations” under the policy. (Id. at 31 ¶ 7.)
Borden and B&H objected to Penn National’s limited motion to intervene,
arguing that Borden and B&H would be prejudiced because Penn National sought to
have its obligations under the policy determined in conjunction with Baldone’s
liability claims.5 (Exh. C to Doc. #15.) Baldone also objected to Penn National’s
limited intervention, arguing that if Penn National were allowed to intervene, it
should intervene as a full participating party to the action. (Exh. D. to Doc. # 15.)
The state court indicated from the bench that it would deny the motion to intervene,
but no order ruling on the motion has been entered to date.
Although pending for over eighteen months, the claims in state court action
continue to change and evolve. On January 24, 2014, Baldone filed its First
Amended Complaint (Exh. a to Doc. #27), which, among other things, added claims

5

Instead, Borden and B&H argued that Penn National’s coverage issued should be
adjudicated after a factual determination as to the nature of the property damage to the dental
facility which will resolve Baldone’s liability claims.

4

of “negligent hiring and supervision and negligent coordination of subcontractors”
as well as “third party beneficiary of contract.” (Id.) Baldone contends that “Robins
and Borden failed to ensure that defendant B&H had adequate insurance to protect
. . . Baldone . . . from injuries and damages arising out of B&H’s negligent
performance.” (Id. ¶ 35.) Baldone also alleges that the contracts between Robins and
Borden and between Borden and B&H “required . . . for defendants to have adequate
insurance coverage in place in case the work was not performed in a safe and
competent manner.” (Id. ¶ 40.)
II. Discussion
The Declaratory Judgment Act “confer[s] on federal courts unique and
substantial discretion in deciding whether to declare the rights of litigants.” Wilton
v. Seven Falls Co., 515 U.S. 277, 286 (1995). Indeed, the Supreme Court has
“repeatedly characterized the Declaratory Judgment Act as an enabling Act, which
confers a discretion on the courts rather than an absolute right upon the litigant.” Id.
at 287 (citations omitted). As the Eleventh Circuit has observed, the Act “only gives
the federal courts competence to make a declaration of rights; it does not impose a
duty to do so.” Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th
Cir. 2005). A district court has discretion to “decline to entertain a declaratory
judgment action on the merits when a pending proceeding in another court will fully
5

resolve the controversy between the parties.” Ven-Fuel, Inc. v. Department of the
Treasury, 673 F.2d 1194, 1195 (11th Cir. 1982). District courts must balance the
interests of federalism, comity, and efficiency in determining whether to hear a
declaratory judgment action when confronted with a parallel state action.6 Ameritas
Variable Life Ins. Co., 411 F.3d at 1330-31.
Penn National’s Complaint seeks a declaration both as to its duty to defend
B&H, Borden, Robins and/or Brookwood in the underlying lawsuit and as to its duty
to indemnify. (See Compl.) Throughout its opposition to the Motions to Dismiss,
Penn National concentrates only on the duty to defend issue and seems to concede the
fact that “an insurer’s duty to indemnify is not ripe for adjudication in a declaratory
judgment action until the insured is in fact held liable in the underlying suit.”
Assurance Co. of America v. Legendary Home Builders, Inc., 305 F. Supp.2d 1266,
1270 (S.D. Ala. 2003) (citations omitted). Thus, it is undisputed that the duty to

6

To assist district courts in this endeavor, the Eleventh Circuit listed a non-exhaustive set
of “guideposts” to be considered, including: (i) the state’s interest in deciding the matter; (ii)
whether a judgment in the federal action would completely resolve the controversy; (iii) whether
the declaratory judgment action would clarify the parties’ legal relations; (iv) whether the federal
action amounts to procedural fencing; (v) whether a ruling in the federal action would increase
friction between federal and state courts or otherwise encroach on state proceedings; (vi) whether
a superior alternative remedy exists; (vii) whether underlying facts are important to informed
resolution of the matter; (viii) whether the state court is better situated than the federal court to
evaluate those facts; and (ix) the nexus (if any) between the underlying issues and state
law/policy, and whether federal common or statutory law requires resolution of the declaratory
action. Ameritas Variable Life Ins. Co., 411 F.3d at 1331.

6

indemnify is not ripe. Therefore, the court must move to the heart of the matter - the
duty to defend.
After consideration of the facts before the court, the court declines to exercise
its discretionary jurisdiction over this declaratory judgment action and concludes that
the duty to defend is not ripe for adjudication for the simple fact that a determination
of Penn National’s duty to defend is not possible without resolution of the underlying
facts in the underlying state court case. This case is not one where the insurer’s duty
to defend is based strictly on the underlying complaint and the policy at issue.
Instead, Baldone is seeking damages resulting from sewage flooding of its
dental facility. The underlying action in state court will necessarily consider a great
deal of evidence and make specific factual determinations as to the nature of the
property damage. A determination of Penn National’s duty to defend is premature
until the nature of these damages to Baldone’s dental facility are determined.
Additionally, the newly asserted claims in Baldone’s Amended Complaint require a
determination of Penn National’s duty to defend and indemnify.7
Penn National is essentially asking the court to adjudicate its coverage issues

7

The court acknowledges the fact that Penn National is not a party in the state court
action and that Borden, B&H and Baldone objected to its limited intervention. However, it
seems clear from the briefs before the court that a full intervention would not be objected to by
the parties, but instead, is highly appropriate in light of the Amended Complaint.

7

separately from the underlying factual evidence in the state court action. The court
refuses to engage in such piecemeal litigation as it will “increase the friction between
out federal and state courts and improperly encroach on state jurisdiction.” Ameritas,
411 F.3d at 1331.

As such, the court declines to exercise its discretionary

jurisdiction over this case. Plaintiff’s complaint will be dismissed, without prejudice,
in a separate order.
DONE this the

12th

day of March, 2014.

SENIOR UNITED STATES DISTRICT JUDGE

8