Haman Inc v. Chubb Custom Insurance Company

Filing 22

MEMORANDUM OPINION - Chubb has not alleged an actual controversy to invoke the courts jurisdiction to entertain its claims for declaratory judgment, so the court will GRANT Hamans motion to dismiss Chubbs counterclaim and will dismiss the counterclaim without prejudice. Signed by Chief Judge Karon O Bowdre on 1/7/2019. (KEK)

FILED
2019 Jan-07 PM 03:00
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
HAMAN, INC.,
Plaintiff/Counterclaim
Defendant,
v.
CHUBB CUSTOM INSURANCE
COMPANY,
Defendant/Counterclaim
Plaintiff.

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CIVIL ACTION NO.
2:18-CV-01534-KOB

MEMORANDUM OPINION
This insurance dispute comes before the court on Plaintiff/Counterclaim
Defendant Haman, Inc.’s motion to dismiss Defendant/Counterclaim Plaintiff
Chubb Custom Insurance Company’s counterclaim. (Doc. 15). In its
counterclaim, Chubb seeks two declaratory judgments regarding appraisal of
Haman’s insurance claims. The court will GRANT the motion to dismiss because
Chubb has not alleged a justiciable controversy to invoke the court’s jurisdiction
over Chubb’s requests for a declaratory judgment.
I.

STANDARD OF REVIEW
A counterclaim must satisfy the same pleading requirements as a complaint,

so courts review a motion to dismiss a counterclaim under the same standard as a
motion to dismiss a complaint. Byrd v. Williams, 2016 WL 362404, at *1 n.2
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(N.D. Ala. Jan. 29, 2016).
Like a complaint, a counterclaim must contain “a short and plain statement
of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
If the counterclaim fails to meet this requirement, the plaintiff may move to
dismiss the counterclaim for “failure to state a claim upon which relief can be
granted.” Fed. R. Civ. P. 12(b)(6). The court will grant the motion to dismiss if
the well-pled factual allegations in the counterclaim, which the court accepts as
true, fail to state a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009).
Here, the motion to dismiss does not challenge the well-pled quality of
Chubb’s factual allegations. Instead, it asserts that the court cannot provide any
relief based on the facts in the counterclaim. For the following reasons, the court
agrees.
II.

BACKGROUND
Chubb issued a commercial property insurance policy that provided

coverage for damage to Haman’s motel. Haman first submitted a claim to Chubb
for fire damage to the motel on or about April 10, 2014. Haman and Chubb agreed
on the total amount of loss from the fire, and Chubb paid Haman that amount
under the policy. (Doc. 6 at ¶¶ 5–8) (citations refer to paragraph numbers in the
counterclaim section of Chubb’s responsive pleading, pages 30–40).
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Afterwards, Haman retained Charles Howarth to appraise the fire loss. Mr.
Howarth submitted a repair estimate for the fire loss in an amount much larger than
what Chubb paid for the fire loss. (Doc. 6 at ¶ 10).
Mr. Howarth, on behalf of Haman, demanded appraisal of the fire loss
pursuant to the appraisal provision of the insurance policy. The policy’s appraisal
provision provided that if the parties disagreed as to the amount of loss, either
party could make a demand to the other for an appraisal of the loss. Then, each
party would select a competent and impartial appraiser, the two appraisers would
select an umpire, the two appraisers would state separately the amount of loss, and
then if the appraisers failed to agree, they would submit their differences to the
umpire. (Doc. 6 at ¶ 24).
Chubb objected to Mr. Howarth serving as Haman’s appraiser because,
according to Chubb, Mr. Howarth “possesses a direct financial interest in the
outcome of the appraisal under the contingency fee agreement between his
company . . . and Haman, which sets [his] compensation as a fee based on a
percentage of the insurance funds recovered for the claim.” (Doc. 6 at ¶¶ 14, 26).
Haman also submitted a claim for windstorm damage to the motel’s roof and
interior on or about March 26, 2015. Haman claimed that the windstorm damaged
the interior of the motel because of water seepage. Chubb paid Haman only for the
damage to the roof; Chubb did not pay for the interior water damage because its
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expert determined that improper installation and deterioration, which are excluded
causes of loss under the insurance policy, damaged the interior. (Doc. 6 at ¶¶ 15–
16, 21).
Mr. Howarth demanded appraisal of the wind loss. Chubb objected to
appraisal because the policy did not cover the interior damages that Haman
supposedly wanted to appraise. Chubb then denied Haman’s claim for the interior
damages. (Doc. 6 at ¶¶ 21–23).
III.

ANALYSIS
Chubb’s counterclaim seeks two declaratory judgments. Chubb asks the

court to declare (1) that Haman’s appraiser is biased; and (2) that Haman is not
entitled to appraisal of its wind loss claim. But Chubb fails to allege a basis for the
court’s jurisdiction to entertain a declaratory judgment action.
The Declaratory Judgment Act grants federal courts the discretion to declare
the rights of parties in actual controversies. Wilton v. Seven Falls Co., 515 U.S.
277, 286 (1995). The Act provides that, “[i]n a case of actual controversy within
its jurisdiction, . . . any court of the United States, upon the filing of an appropriate
pleading, may declare the rights and other legal relations of any interested party
seeking such declaration . . . .” 28 U.S.C. § 2201(a) (emphasis added).
Because the Declaratory Judgment Act limits the court’s jurisdiction to
actual controversies, “[i]n all cases arising under the [Act], the threshold question
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is whether a justiciable controversy exists.” Atlanta Gas Light Co. v. Aetna Cas. &
Sur. Co., 68 F.3d 409, 414 (11th Cir. 1995). For a justiciable controversy to exist,
“the facts alleged, under all the circumstances, [must] show that there is a
substantial controversy, between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory judgment.”
Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). And the
party seeking a declaratory judgment “must show, at an ‘irreducible minimum,’
that at the time the complaint was filed, he has suffered some actual or threatened
injury resulting from the defendant’s conduct, that the injury fairly can be traced to
the challenged action, and that the injury is likely to be redressed by favorable
court disposition.” Atlanta Gas Light, 68 F.3d at 414 (quoting U.S. Fire Ins. Co. v.
Caulkins Indiantown Citrus Co., 931 F.2d 744, 747 (11th Cir. 1991)).
Here, both of Chubb’s requests for declaratory judgment fail to show any
actual or threatened injury, so Chubb has failed to satisfy the threshold requirement
of stating a justiciable controversy.
First, Chubb asks the court to declare that Mr. Howarth is a biased appraiser
because of his financial interest in the loss amount and compel a replacement
“competent and impartial” appraiser. (Doc. 6 at ¶¶ 29–30). But Chubb has not
alleged a real or threatened injury because of Mr. Howarth’s bias. The appraisal
provision of the insurance policy permits Chubb to defend itself against biased
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appraisals by appointing its own appraiser, and if the two appraisers disagree as to
the loss amount, an umpire shall decide the loss amount. And, at best, Chubb
seeks an advisory opinion from the court as to the credibility of Haman’s damages
assessment because of Mr. Howarth’s potential bias. So, as pled in the
counterclaim, Mr. Howarth’s alleged bias does not present an actual controversy.
Second, Chubb asks the court to declare that Haman is not entitled to
appraisal of its wind loss claim because Haman supposedly seeks appraisal of
losses not covered under the insurance policy. (Doc. 6 at ¶ 35). These allegations
do not state a justiciable controversy because Chubb has not alleged any real or
threatened injury—or any harm at all—from Haman’s demand for appraisal, even
if the loss is not covered. The appraisal provision in the insurance policy provides
that Chubb retains the right to deny Haman’s claim after the appraisal, so Chubb
does not risk reimbursing Haman for non-covered losses by allowing appraisal of
the wind loss claim. (See Doc. 6 at ¶ 24). And Chubb has not alleged that it would
suffer injury just by engaging in the appraisal process itself. So, as pled in the
counterclaim, Haman’s demand for appraisal does not present an actual
controversy. Theoretically, Chubb may be able to plead a basis for a declaratory
judgment action, but it has not done so.
IV.

CONCLUSION
Chubb has not alleged an actual controversy to invoke the court’s
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jurisdiction to entertain its claims for declaratory judgment, so the court will
GRANT Haman’s motion to dismiss Chubb’s counterclaim and will dismiss the
counterclaim without prejudice.
DONE and ORDERED this 7th day of January, 2019.
____________________________________
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT JUDGE

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