Catlin Syndicated Limited v. Ramuji, LLC et al

Filing 111

MEMORANDUM OPINION AND ORDER GRANTING IN PART and DENYING IN PART 100 MOTION to Dismiss as set out herein, The Jones/Pair 102 MOTION to Dismiss is GRANTED. The Jones/Pair 102 Motion To Dismiss for failure to state a justiciable controversy is TERMED as MOOT. Great American's Complaint against them is DISMISSED WITHOUT PREJUDICE. Signed by Judge Virginia Emerson Hopkins on 10/4/2017. (JLC)

FILED
2017 Oct-04 AM 11:50
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
MIDDLE DIVISION
CATLIN SYNDICATE LIMITED,

)
)
Plaintiff,
)
)
v.
)
)
RAMUJI, LLC d/b/a BUDGET INN and
PEOPLES INDEPENDENT BANK,
)
)
Defendants.
)
_______________________________
)
)
RAMUJI, LLC, PEOPLE’S
INDEPENDENT BANK,
)
)
Counterclaim/Third Party Plaintiffs, )
)
GREAT AMERICAN ASSURANCE
)
COMPANY
)
Third-Party Plaintiff Intervenor,
)
)
v.
)
)
RANDY JONES & ASSOCIATES, INC.,
JON PAIR, CERTAIN UNDERWRITERS )
AT LLOYD’S, LONDON SUBSCRIBING )
SEVERALLY TO POLICY NO. ULL
)
20018, named as “SYNDICATE 1414 AT
)
LLOYD’S (ASCOT UNDERWRITING
)
LIMITED), SYNDICATE 5820 AT
)
LLOYD’S (ANV SYNDICATES
)
LIMITED), SYNDICATE 727 AT
LLOYD’S (S.A. MEACOCH & COMPANY )
LIMITED), and SYNDICATE 1861 at
)
LLOYD’s (ANV SYNDICATED
)
LIMITED),
)
)
Third-Party Defendants.

Case No.: 4:16-CV-1331-VEH

MEMORANDUM OPINION AND ORDER
I.

INTRODUCTION AND PROCEDURAL HISTORY
Great American Insurance Company (“Great American”) filed a complaint for

declaratory judgment (the “Complaint”) on July 12, 2017. In the Complaint, Great
American requests certain declaratory relief such as “an order from the Court
declaring that Lloyd’s is required to cover People’s claim” (doc. 93 at 9-10), “an
order from the Court declaring Great American’s rights and obligations under the
Great American Policy as to Peoples” (doc. 93 at 10), and other alternative relief
(doc. 93 at 10).
Subsequently, Certain Underwriters at Lloyd’s Subscribing Severally to Policy
No. ULL20018 (the “Underwriters”) filed a Motion To Dismiss (the “Underwriters
Motion) on July 31, 2017. (Doc. 100). After that, Randy Jones & Associates (“Jones”)
and Jon Pair (“Pair”) filed a Motion To Dismiss (the “Jones/Pair Motion”) on August
3, 2017. (Doc. 102). Great American responded to the Underwriters’ Motion on
August 14, 2017. (Doc. 103). Great American responded to the Jones/Pair Motion on
August 17, 2017. (Doc. 104).
The Motions have substantial overlap in arguments, and the Court will address
both Motions together. Both Motions are ripe for this Court’s disposition.

2

II.

RELEVANT BACKGROUND
“Great American issued the Great American Policy to Peoples [Independent

Bank].” (Doc. 93 at 6) (Peoples Independent Bank will be referred to as “PIB”). PIB
had a mortgage on Ramuji’s motel in Boaz, Alabama. (Doc. 46 at 3); see also (Doc.
93 at 6). Great American alleges that PIB’s mortgage to Ramuji required Ramuji to
have an insurance policy on which PIB was a named insured. (Doc. 93 at 6). Great
American further alleges that Ramuji obtained that policy and named PIB “as a
‘mortgagee with ‘additional interest’ on the Lloyd’s Policy from as early as August
8, 2014, through the date of the April 2, 2016 fire loss at the Insured Property.” (Doc.
93 at 6) (citing Doc. 12, ¶ 3, Exs. 2, 3). Great American claims that Jones and Pair
acted for Lloyd’s and gave information to PIB that “People’s was a named mortgagee
on the Lloyd’s policy.” (Doc. 93 at 6).
Ramuji’s motel burned down on April 2, 2016. (Doc. 93 at 7). “On August 16,
2016, Lloyd’s informed [Ramuji] that it was denying coverage for the loss.” (Doc. 93
at 7). Afterwards, PIB filed a claim to recover on the Great American policy relative
to the loss. (Doc. 93 at 7).1 That policy states:
In return for payment of all premium due and your compliance with all
applicable provisions of this policy, we will insure you against direct
1

“In response to Peoples’ claim on the Great American Policy, Great American issued a
reservation of rights letter conveying its decision that coverage under the Great American policy
would exist only if Peoples’ interest is not covered by the Lloyd’s policy.” (Doc. 93 at 8).
3

loss or damage to property in which you have:
a.
a mortgagee interest, and acceptable hazard insurance has
been cancelled or has not been received from the mortgagor
(Doc. 93-1 at 3). The policy also states regarding additional hazard insurance:
If the property is covered by the debtor’s acceptable hazard
insurance, this insurance shall not apply and shall not contribute to the
payment of any loss. If the property is covered by another insurance
other than the debtor’s acceptable hazard insurance, our coverage
shall be excess of the amount due from that other insurance. In the
event that your ownership or mortgagee interest in the property or the
replacement cost of the property is greater than our Limit of Liability,
any purchase by you of specific excess insurance from another insurer
shall not be considered other insurance.
(Doc. 93-1 at 12). Great American also claims its policy allows it to become a
subrogee if it makes payment to PIB. (Doc. 93 at 8).
In its Complaint, Great American asks for the following:
26. These facts create a justiciable controversy over whether Lloyd’s is
contractually liable to Peoples, which in turn will determine whether
Great American is or is not liable to Peoples. In order to clarify and
settle the legal relations, obligations, and rights existing between Great
American and Peoples, between Peoples and Lloyd’s, and between
Peoples and Great American and Lloyd’s, Jon Pair, and Randy Jones,
Great American requests an order from the Court declaring that Lloyd’s
is required to cover Peoples’ claim, as Peoples is a protected mortgagee
on the Lloyd’s Policy, relative to the April 2, 2016 loss to the Insured
Property, irrespective of whether the Mortgagor’s claim is covered by
the Policy or whether any acts or omissions of the Mortgagor void some
or all of the coverage under the Lloyd’s Policy as to the Mortgagor.
27. Great American further requests an order from the Court declaring
Great American’s rights and obligations under the Great American
Policy as to Peoples. Specifically, Great American requests that the
4

Court declare that, by the terms of the Great American Policy, Great
American is not obligated to cover Peoples claim relative to the April 2,
2016 fire loss because the Lloyd’s Policy covers Peoples’ claim under
that policy.
(Doc. 93 at 9-10). Alternatively, Great American asks for the following:
28. In the alternative, Great American requests that the Court declare
that Lloyd’s is contractually bound by and otherwise estopped from
denying Peoples’ claim under the Lloyd’s Policy based on the acts and
omissions of its agents, Randy Jones and Jon Pair, in failing to secure
coverage for Peoples under the Lloyd’s Policy and due to the
misrepresentations of Randy Jones and Jon Pair as agents of Lloyd’s
relative to the Lloyd’s Policy.
29. In the alternative, Great American requests that the Court declare
that Lloyd’s, Randy Jones, and Jon Pair are liable to Peoples and Great
American (as subrogee to Peoples) based on their acts and omissions in
failing to secure coverage for Peoples under the Lloyd’s Policy and for
the misrepresentations of Randy Jones and Jon Pair relative to the
Lloyd’s Policy.
(Doc. 93 at 10).
II.

STANDARDS
A.

Federal Rule of Civil Procedure 12(b)(6)

A Rule 12(b)(6) motion attacks the legal sufficiency of the complaint. See FED.
R. CIV. P. 12(b)(6) (“[A] party may assert the following defenses by motion: (6)
failure to state a claim upon which relief can be granted[.]”). The Federal Rules of
Civil Procedure require only that the complaint provide “‘a short and plain statement
of the claim’ that will give the defendant fair notice of what the plaintiff’s claim is

5

and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99,
103, 2 L. Ed. 2d 80 (1957) (footnote omitted) (quoting FED. R. CIV. P. 8(a)(2)),
abrogated by Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955,
1965, 167 L. Ed. 2d 929 (2007); see also FED. R. CIV. P. 8(a) (setting forth general
pleading requirements for a complaint including providing “a short and plain
statement of the claim showing that the pleader is entitled to relief”).
While a plaintiff must provide the grounds of his entitlement to relief, Rule 8
does not mandate the inclusion of “detailed factual allegations” within a complaint.
Twombly, 550 U.S. at 555, 127 S. Ct. at 1964 (quoting Conley, 355 U.S. at 47, 78 S.
Ct. at 103). However, at the same time, “it demands more than an unadorned, thedefendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678,
129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). “[O]nce a claim has been stated
adequately, it may be supported by showing any set of facts consistent with the
allegations in the complaint.” Twombly, 550 U.S. at 563, 127 S. Ct. at 1969.
“[A] court considering a motion to dismiss can choose to begin by identifying
pleadings that, because they are no more than conclusions, are not entitled to the
assumption of truth.” Iqbal, 556 U.S. at 679, 129 S. Ct. at 1950. “While legal
conclusions can provide the framework of a complaint, they must be supported by
factual allegations.” Id. “When there are well-pleaded factual allegations, a court

6

should assume their veracity and then determine whether they plausibly give rise to
an entitlement to relief.” Id. (emphasis added). “Under Twombly’s construction of
Rule 8 . . . [a plaintiff’s] complaint [must] ‘nudge[] [any] claims’ . . . ‘across the line
from conceivable to plausible.’ Ibid.” Iqbal, 556 U.S. at 680, 129 S. Ct. at 1950-51.
A claim is plausible on its face “when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S. Ct. at 1949. “The plausibility
standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer
possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at
556, 127 S. Ct. at 1965).
B.

Standing

“[T]he core component of standing is an essential and unchanging part of the
case-or-controversy requirement of Article III.” Lujan v. Defenders of Wildlife, 504
U.S. 555, 560 (1992). The Constitution has three requirements for standing:
First, the plaintiff must have suffered an “injury in fact”—an invasion
of a legally protected interest which is (a) concrete and particularized .
. . and (b) “actual or imminent, not ‘conjectural’ or ‘hypothetical,’ ” . .
. Second, there must be a causal connection between the injury and the
conduct complained of—the injury has to be “fairly ... trace[able] to the
challenged action of the defendant, and not ... th[e] result [of] the
independent action of some third party not before the court.”. . . Third,
it must be “likely,” as opposed to merely “speculative,” that the injury
will be “redressed by a favorable decision.”

7

Id. at 560-61 (internal citations omitted) (emphasis added). “The party invoking
federal jurisdiction bears the burden of establishing these three elements.” Id. at 561
(citing another source). “At the pleading stage, general factual allegations of injury
resulting from the defendant’s conduct may suffice, for on a motion to dismiss we
‘presum[e] that general allegations embrace those specific facts that are necessary to
support the claim.” Id.
The Declaratory Judgment Act states as follows:
(a) In 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, whether or not further relief is or could be
sought. Any such declaration shall have the force and effect of a final
judgment or decree and shall be reviewable as such.
28 U.S.C. § 2201(a). “The main purpose of a declaratory judgment action is to have
coverage issues decided in advance.” American Bankers Ins. Co. of Florida v.
Mitchell, 2008 WL 2634368 at *2 (S.D. Ala. July 3, 2008).2 The Eleventh Circuit, in

2

The American Bankers Ins. Co. court also cited the following cases:

See Horace Mann Ins. Co. v. Johnson By and Through Johnson, 953 F.2d 575,
579 (10th Cir.1991) (“We have expressly recognized that one of the primary
functions of the [Federal Declaratory Judgment] Act is to provide the insuror
[sic]” a forum “to have their liability declared.” citation omitted); A C and S, Inc.
[sic] v. Aetna Cas. & Surety Co., 666 F.2d 819, 823 (3d Cir.1981) (“The
respective interests and obligations of insured and insurers, when disputed, require
determination much in advance of judgment since they will designate the bearer of
ultimate liability in the underlying cases and hence the bearer of the onus and risks
of settlement.”); National Union Fire Ins. Co. of Pittsburgh, Pa. v. Midland
Bancor, Inc., 854 F.Supp. 782, 789 (D.Kan.1994) (“It is unrealistic to require an
8

Emory v. Peeler, spoke to the issue of declaratory judgments and the “actual
controversy” requirement:
[A] declaratory judgment may only be issued in the case of an “actual
controversy.” That is, under the facts alleged, there must be a substantial
continuing controversy between parties having adverse legal interests.
Lake Carriers' Association v. MacMullan, 406 U.S. 498, 506, 92 S.Ct.
1749, 1755, 32 L.Ed.2d 257 (1972); Golden v. Zwickler, 394 U.S. 103,
108, 89 S.Ct. 956, 959–60, 22 L.Ed.2d 113 (1969); Sullivan v. Division
of Elections, 718 F.2d 363, 365 (11th Cir.1983). The plaintiff must
allege facts from which the continuation of the dispute may be
reasonably inferred. Ciudadanos Unidos de San Juan v. Hidalgo County
Grand Jury Commissioners, 622 F.2d 807, 821–22 (5th Cir.1980), cert.
denied, 450 U.S. 946, 101 S.Ct. 1479, 67 L.Ed.2d 613 (1981).
Additionally, the continuing controversy may not be conjectural,
hypothetical, or contingent; it must be real and immediate, and create a
definite, rather than speculative threat of future injury. City of Los
Angeles v. Lyons, 461 U.S. 95, 103 S.Ct. 1660, 1666, 75 L.Ed.2d 675
(1983); Golden v. Zwickler, 394 U.S. at 108, 89 S.Ct. at 959–60; Wolfer
v. Thaler, 525 F.2d 977, 979 (5th Cir.), cert. denied, 425 U.S. 975, 96
S.Ct. 2176, 48 L.Ed.2d 800 (1976). The remote possibility that a future
injury may happen is not sufficient to satisfy the “actual controversy”
requirement for declaratory judgments. See City of Los Angeles v. Lyons,
461 U.S. at 103, 103 S.Ct. at 1666 (1983).
Emory v. Peeler, 756 F.2d 1547, 1552 (11th Cir. 1985) (internal footnotes
omitted).The Fifth Circuit stated:
‘Where there is an actual controversy over contingent rights, a
declaratory judgment may nevertheless be granted.’ American

insurance company to await ... judgment before allowing it to determine its
obligations”).
Am. Bankers Ins. Co. of Florida, 2008 WL 2634368, at *2.
9

Machine & Metals v. De Bothezat Impeller Co., 2 Cir. 1948, 166 F.2d
535, 536. Since there can be no doubt that an actual controversy
exists between Jernigan and Seguros, the mere prospectivity of future
payments should not be allowed to inhibit a sensible and practical
form of judicial relief.
...
The declaratory judgment is an effective tool in judicial
administration.
Seguros Tepeyac, S.A. v. Compania Mexicana de Seguros Generales v. Jernigan,
410 F.2d 718, 729 (5th Cir. 1969) (italics added).3
C.

Ripeness

The Supreme Court stated the following regarding declaratory judgments
and ripeness:
The difference between an abstract question and a ‘controversy’
contemplated by the Declaratory Judgment Act is necessarily one of
degree, and it would be difficult, if it would be possible, to fashion a
precise test for determining in every case whether there is such a
controversy. Basically, the question in each case is whether the facts
alleged, under all the circumstances, 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). “Ordinarily,
a controversy is not sufficiently immediate or real where the parties' dispute is

3

In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the
Eleventh Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed
down prior to 1981.
10

only hypothetical and not yet ripe, has been rendered moot, or where the court's
resolution of the matter would be purely academic.” Mt. Hawley Insurance Co. v.
Tactic Security Enforcement, Inc., 2017 WL 2172187, at *2 (M.D. Fla. May 17,
2017) (citing another source).
“[A] court should permit a claim for declaratory judgment to proceed where
declaratory relief would (1) “serve a useful purpose in clarifying and settling the legal
relations in issue,” and (2) “terminate and afford relief from the uncertainty,
insecurity, and controversy giving rise to the proceeding.” Id. at *2 (quoting another
source).
IV.

ANALYSIS
A.

Whether Great American has standing to assert a declaratory
judgment against the Underwriters

The Underwriters argue that because “Great American has not alleged that it
is a party to or an intended third-party beneficiary of Underwriters’ Policy,” Great
American lacks standing to sue. (Doc. 100 at 4). In support, the Underwriters cite to
two federal district courts, one in New Jersey and the other in the District of
Columbia. (Doc. 100 at 3-4).4 They argue that the “Court should dismiss . . . [the]
declaratory judgment count concerning the Underwriter’s Policy under Federal Rule

4

In the New Jersey case, the court quoted from United States Supreme Court precedent.
(Doc. 100 at 3).
11

of Civil Procedure 12(b)(1).” (Doc. 100 at 4) (underlining in original).
In response, Great American points to the Provident Life case. See (Doc. 103
at 3) (relying on Provident Life & Acc. Ins. Co. v. Transamerica-Occidental Life Ins.
Co., 850 F.2d 1489 (11th Cir. 1988)). Great American relies on the following passage
from Provident Life:
As in the instant case, no legal relationship existed between the insurers.
Had the insurers jointed [sic] the insured in their action, a definite and
substantial controversy would exist, as the declaratory judgment action
would be to establish the rights and obligations between the insurers and
the insured as evidenced in the insurance contract. Similarly, had the
insurers reserved their rights against each other, and then defended and
indemnified the insured, the insurers could then bring a declaratory
judgment action to determine which insurer was liable. Such action
would be based on the reservation of rights agreement.
Provident Life, 850 F.2d at 1493; see (doc. 103 at 3).
Great American further quotes from the Provident Life case. (Doc. 103 at 3-4).
Their brief states:
Contrary to Underwriters’ contention, “‘this action is not one to enforce
a contract [between Great American and Underwriters] but rather seeks
a declaration of the relative rights and duties’” of Underwriters and
Great American with respect to a common insured, PIB. See Provident
Life, 850 F.2d at 1492 (quoting United Servs. Auto. Ass’n v.
Royal-Globe Ins. Co., 511 F.2d 1094, 1096 (10th Cir. 1975)). As such,
the “‘subject matter of this suit … is definite and substantial[,]’” and
“‘[e]ach party has a stake in the outcome, and their interests are
adverse.” Id. (quoting United Sers. Auto. Ass’n, 511 F.2d at 1096).
(Doc. 103 at 3-4). Although Provident Life disagreed with United Service’s

12

conclusion, the Eleventh Circuit expressly stated that it would have agreed if the
insured had been a party in the case before it. Provident Life, 850 F.2d at 1492-93.
Great American characterizes the suit a bit differently than Underwriters. (Doc.
103 at 3). Instead of focusing on the relationship between Great American and the
Underwriter’s policy, Great American re-directs the Court’s attention to the “‘relative
rights and duties’ of Underwriters and Great American with respect to a common
insured, PIB.” (Doc. 103 at 3) (quoting another source). Great American further
claims that “if Underwriters succeeds on its claim that PIB is not due coverage under
the Underwriters’ policy, then Great American intends to cover PIB under the Great
American policy, subject to and without waiving the conditions of the Great
American policy.” (Doc. 103 at 4). Great American further argues that “if
Underwriters’ position were correct, and Great American had to litigate the question
of PIB’s coverage under the Underwriters’ policy in a separate action against PIB
only, PIB would be subject to a risk of inconsistent adjudications of whether it has
‘other coverage’ under the Underwriters’ policy.” (Doc. 103 at 4).
On balance, and persuaded by the guidance of Provident Life, the Court finds
that Great American has the better argument. The basis of the present action is to
determine the rights and obligations of various insurers to a common insured. See
(doc. 93 at 9-10). The presence of all the insurance companies and the insured creates

13

an actual controversy.5 The Declaratory Judgment Act serves to declare the “rights
and other legal relations of any interested party” in an “actual controversy.” See 28
U.S.C. § 2201(a). Adjudicating these actions together best accomplishes that goal
and avoids what Great American terms “inconsistent adjudications.” See (doc. 103
at 4). For the aforementioned reasons, the Underwriters’ Motion To Dismiss Great
American’s Complaint based on standing is hereby DENIED.
B.

Whether Great American has standing to assert a declaratory
judgment against Jones and Pair

Jones and Pair argue that “[s]ubrogation is not appropriate under the current
circumstances, since Great American has not made any payments to PIB, and
therefore has no present interest to be subrogated to.” (Doc. 102 at 2). In support,
Jones and Pair cite to two Supreme Court of Alabama cases describing the general
law of subrogation. (See doc. 102 at 2-3).
In response, Great American admits that “generally ‘an insurance company
acquires no subrogation interest in the claim of an insured until payment to the
insured is made.’” (Doc. 104 at 4) (quoting Allendale Mut. Ins. Co. v. Kaiser
Engineers, 804 F.2d 592, 593-94 (10th Cir. 1986). However, Great American points
out that “the interest required to sue for damages as subrogee is not the same as the

5

The Court notes that while PIB is not named in the Great American complaint, it is a
part of the larger action.
14

‘actual controversy’ requirement of the Declaratory Judgment Act, 28 U.S.C. § 2201.”
(Doc. 104 at 4) (citing Allendale Mut. Ins. Co., 804 F.2d at 593-94).6,7 Great
American posits that “[b]ut for the availability of a declaratory judgment action in
circumstances like these, piecemeal and potentially inconsistent adjudication of the

6

At the time this opinion was written, the only other circuit to cite Allendale was the
Ninth Circuit. See Eureka Federal Sav. & Loan Ass’n v. American Cas. Co. of Reading, Pa., 873
F.2d 229, 232 (9th Cir. 1989).
7

The facts of the Allendale case are different from the present case:

The plaintiff, Allendale Mutual Insurance Company, had insured United Nuclear
Corporation's uranium mill in New Mexico. An earthen dam for the mill's tailing
pond, built by defendants Kaiser Engineers and Sergent Hauskins & Beckwith, failed,
causing huge losses. United Nuclear sought recovery for the loss from Allendale
under the policy. Allendale denied that its policy provided coverage for this type of
accident. United Nuclear then sued Allendale over the coverage in New Mexico state
court and was awarded more than $24 million compensatory damages. While an
appeal of the award was pending in the New Mexico Supreme Court, Allendale filed
this diversity action in federal district court in New Mexico against defendants,
seeking a declaratory judgment that, if held liable to United Nuclear, it would be
entitled to judgment against defendants as subrogee of United Nuclear's claims.
Allendale commenced this declaratory judgment action because it feared the
four-year New Mexico statute of limitations would expire on its subrogation claim
before the New Mexico Supreme Court rendered its decision on the appeal.
Allendale Mut. Ins. Co., 804 F.2d 592, 593 (10th Cir. 1986). Notably, there was a “legal
judgment binding upon [the insurer].” Id. at 595. Great American did not plead that there was
any sort of legal judgment binding on it to pay PIB. See (doc. 93 at 6-8). Great American pled
that they would cover PIB if Lloyd’s did not:
22. In response to Peoples’ claim on the Great American Policy, Great American
issued a reservation of rights letter conveying its decision that coverage under the
Great American policy would exist only if Peoples’ interest is not covered by the
Lloyd’s policy.
(Doc. 93 at 8). The fact still remains that Great American has not pled it paid anything to PIB.
See (Doc 93 at 6-8).
15

same issues in multiple actions, each involving some but not all of the parties, would
be the only resort.” (Doc. 104 at 5). Great American further states:
Likewise, if the Underwriters succeed on their claim that PIB and
Ramuji are not due coverage under the Underwriter’s policy, then Great
American intends to cover PIB under the Great American policy, subject
to and without waving the terms and conditions of the Great American
policy and Great American’s subrogation rights. (See Doc. 93, ¶ 21). In
such instance, Great American has a right to pursue the Agent
Defendants as a subrogee of PIB.
(Doc. 104 at 5).
Also, Great American argues that they were “allowed to intervene” and “the
‘circumstances reveal a need for present adjudication.’” (Doc. 104 at 6). The Court
permitted Great American’s intervention on June 28, 2017. (Doc. 87 at 3). The
Motion To Intervene was unopposed. (Doc. 29 at 2) (“Great American has now
conferred with attorneys for all of the Parties, and those attorneys have indicated that
they do not opposed Great American’s Motion to Intervene.”).8,9 In its Motion To
Intervene, Great American argued:
Great American is entitled to intervene as a matter of right under Rule
24(a) because it has moved in a timely manner to protect an interest that
could be impaired absent its intervention and that cannot be represented
adequately by the existing parties.
8

Great American filed the unopposed Motion to Intervene on November 7, 2016. (Doc.

29).
9

It is not entirely clear that Great American obtained the consent from Jones’s counsel
because, at that time, there was “no proof of service for Randy Jones.” See (doc. 29 at 9).
However, Jon Pair had been served. See (doc. 29 at 9); (doc. 18).
16

(Doc. 29 at 7). Also in the Motion To Intervene, Great American stated that it wanted
declaratory relief and that it was a “contingent subrogee.” (Doc. 29 at 11).
Finally, Great American asks that, if the Court rules for Jones and Pair, the
Court stay, not dismiss, the action. (Doc. 104 at 7).
Under Alabama law, there are two categories of subrogation. See International
Underwriters/Brokers, Inc. v. Liao, 548 So.2d 163, 165 (Ala. 1989) (“We recognize
two distinct types of subrogation-“ ‘[l]egal subrogation’, arising by operation of law
where a surety having a legal liability pays a claim primarily owing by his principal,
and ‘[c]onventional subrogation’, grounded upon a lawful contract between the
parties.”) (quoting another source). “‘[T]he general rule is that subrogation, whether
arising from equity or contract, will be denied prior to full recovery. That is, absent
express contract terms to the contrary, subrogation will not be allowed where the
insured's total recovery is less than the insured's actual loss.’” Id. (quoting another
source) (emphasis omitted).
Further, unless the contract says differently, equitable subrogation principles
control. Id. (“‘Since subrogation is an offspring of equity, equitable principles apply,
even when the subrogation is based on contract, except as modified by specific
provisions in the contract.’”) (emphasis omitted) (quoting another source). This
means that the default rule is that “‘the insured is entitled to be made whole before

17

the insurer may recover any portion of the recovery from the tortfeasor.’” Id. (quoting
another source) (emphasis omitted).
In this case, the Court finds that Great American failed to plead a right to
equitable subrogation against Jones and Pair because they failed to plead that they
paid PIB (the insured) anything. See (doc. 93 at 6-8). After reviewing the policy, the
Court finds no language inconsistent with equitable subrogation principles. See (doc.
93-1 at 11).10 For the aforementioned reasons, the Jones and Pair Motion To Dismiss
Great American’s Complaint based on standing is hereby GRANTED.
C.

Whether Great American’s subrogation claim against Jones and Pair
creates a justiciable controversy

Jones and Pair contend that:
As with the Third-Party Plaintiffs’ claims, Great American claims
coverage against these Defendants are contingent on a finding of
nocoverage under the Lloyds/Catlin policy issued to Ramuji by the
Plaintiff. In the speculative event that coverage is not afforded
thereunder, Great American then seeks the alternative declaration
(which, as described above, is inappropriate given their lack of payment
to PIB).
10

The policy states the following regarding subrogation:

H. Subrogation - You may waive in writing before a loss all rights of recovery
against any person. If not waived, we may require an assignment of rights of
recovery for a loss to the extent that payment is made by us. If an assignment is
sought, you shall sign and deliver all related papers and cooperate with us in any
reasonable manner.
(Doc. 93-1 at 11).
18

(Doc. 102 at 3). Instead of further explaining this argument as it applies to Great
American, Jones and Pair refer the Court to another document (doc. 95). (Doc. 102
at 3-4). Document 95 is a motion to dismiss that makes arguments on why Ramuji’s
and PIB’s third-party complaints should be dismissed. (Doc. 95 at 1-2).11 However,
the Court distills that Jones and Pair are making two arguments that could be
applicable here. The first argument is that the Complaint is “not fit for judicial
decision.” (Doc. 95 at 8). The second argument is that “there is no indication that
dismissing this action without prejudice results in hardship.” (Doc. 95 at 10). In
addition, Jones and Pair argue that "forcing the Agency Defendants to participate in
burdensome, multi-party litigation that the very parties suing them claim should be
decided in such a manner that their Third-Party Complaints would be rendered moot
has very real, immediate, and significant financial consequences for the Agency
Defendants." (Doc. 95 at 10).
Great American responds by claiming that its claims against Jones and Pair are
alternative pleadings that come into effect if the Underwriter’s policy does not cover
PIB. See (Doc. 104 at 6). Great American states that if “PIB is not covered, Great
American will pay PIB, subject to and without waiving the terms and conditions of

11

The Court reviewed that motion to dismiss but is left to guess how this analysis
further’s Jones’s and Pair’s argument that Great American’s declaratory action fails to create a
justiciable controversy.
19

the Great American policy and Great American’s subrogation rights, and, Great
American will be subrogated to the claims of PIB against the Agents.” (Doc. 104 at
6-7).
The Court does not have to resolve the issue of a justiciable controversy
because it already ruled for Jones and Pair on standing. For this reason, the Court
TERMS as MOOT the Jones/Pair motion to the extent it is based on this alternative
argument.
D.

Whether Great American stated a claim upon which relief can be granted
under Federal Rule of Civil Procedure 12(b)(6)

Citing the statutory language from the Declaratory Judgment Act, the
Underwriters argue that “Great American has failed to allege any facts to show that
it is an ‘interested party’ to the Underwriters Policy, or that there is an ‘actual
controversy’ between Underwriters and Great American as to that insurance policy.”
(Doc. 100 at 4). In response, Great American relies heavily on a case from the Tenth
Circuit. (Doc. 103 at 4-5). The relevant portion of that case is as follows:
This Court, at the outset, had some doubt as to whether the conflicting
claims of the two insurance carriers could be resolved in a declaratory
judgment action since there was no privity between them and the
obligation of each was to their common insured and not to the other. We
are now persuaded that the issue is justiciable, and that the conflicting
claims present an actual controversy which can be determined by a
declaratory judgment.
Industrial Underwriters Ins. Co. v. P&A Constr. Co., 382 F.2d 313, 315 (10th Cir.
20

1967). In this case, the common insured, PIB is a party to the action:
13. Great American issued the Great American Policy to [PIB], as
named insured, regarding [PIB’s] interest in a mortgage it issued to the
Mortgagor relative to the Mortgagor’s ownership interest in the Insured
Property. A true and correct copy of the Great American Policy is
attached hereto as Exhibit “1”. Peoples’ mortgage documents required
the Mortgagor to secure an appropriate hazard insurance policy covering
the Insured Property and to ensure that [PIB] was added as a mortgagee
to that policy. [Doc. 12, ¶ 3; Doc. 14].
14. Upon information and belief, the Mortgagor maintained such
insurance, and [PIB] was identified as a “mortgagee” with “additional
interest” on the Lloyd’s Policy, from as early as August 8, 2014, through
the date of the April 2, 2016 fire loss at the Insured Property. [Doc. 12,
¶ 3, Exs. 2, 3].
15. In particular, information supplied to [PIB] by Randy Jones and Jon
Pair, as agents acting on behalf of Lloyd’s, shows that [PIB] was a
named mortgagee on the Lloyd’s Policy and that Lloyd’s is wrongfully
denying [PIB] coverage. Id.
(Doc. 93 at 6-7). Further, Great American pled that there was a loss to the insured
property. (Doc. 93 at 7) (“16. The Insured Property suffered a loss due to fire on or
about April 2, 2016.”). Great American pled that, after the fire, Lloyd’s denied
coverage, and [PIB] made a claim to Great American. (Doc. 93 at 7). According to
the Complaint, the Great American policy nonetheless does not go into effect if the
loss is “covered by ‘acceptable hazard insurance.’” See (doc. 93 at 7); see also (doc.
93-1 at 3); (doc. 93-1 at 11-12).
Great American also claimed a right to subrogation in its declaratory judgment:

21

21. The Great American Policy also allows Great American to require
that Peoples assign to Great American Peoples’ rights of recovery for a
loss, if Great American makes payment to Peoples for such loss. Under
those circumstances, Great American becomes a subrogee of Peoples
with all attendant rights to step into Peoples’ shoes to the extent of its
payment and pursue claims which Peoples could otherwise pursue, such
as those relative to the Lloyd’s Policy, the April 2, 2016 incident, and
the acts and omissions of Randy Jones and Jon Pair.
(Doc. 93 at 8).12 To the extent that Great American attempts to claim a right of
subrogation against the Underwriters, the Court notes the subrogation deficiencies
detailed above in sub-section B. Great American did not plead that they have paid
their insured anything. See generally (doc. 93).
Other than the subrogation issue, the Court finds that Great American’s
pleading meets at least the minimum requirements under Rule 8, Rule 12(b)(6), and
Supreme Court precedent. Further, the common insured, PIB, is a party to the larger
action before the Court, making this situation different from that in Provident Life.13
12

The Great American policy states:

H. Subrogation - You may waive in writing before a loss all rights of recovery
against any person. If not waived, we may require an assignment of rights of
recovery for a loss to the extent that payment is made by us. If an assignment is
sought, you shall sign and deliver all related papers and cooperate with us in any
reasonable manner.
(Doc. 93-1 at 11).
13

The court in Provident Life identified two “defects” in that case:

First, there is a defect in the parties to this action. Instead of bringing an action to
determine the rights and obligations between the insurance company and the
insured, Provident brought a declaratory judgment action against Transamerica,
22

Contrary to the Underwriter’s contentions (doc. 100 at 4), Great American’s
pleadings show the existence of a real controversy between Great American, the
Underwriters, and PIB. (Doc. 93 at 8-10). The existence of all three parties, and the
disputes over coverage, leads to a claim the Court can adjudicate.
For the aforementioned reasons, the Underwriters’ Motion To Dismiss for
failure to state a claim is hereby DENIED in part and GRANTED in part.
Specifically, it is GRANTED only to the extent that Great American asserts a
subrogation claim.

the other insurance company. The controversy over whether Transamerica
wrongly paid benefits to Wall is not between Transamerica and Provident, but
between Transamerica and Wall. Consequently, Transamerica's failure to name
Wall (or Wall's estate) in this action leaves no case or controversy on which to
base jurisdiction. See Travelers Indemnity Co. v. Standard Accident Insurance
Co. 329 F.2d 329, 330 (7th Cir.1964) (action between two insurers to establish
liability not “substantial controversy between parties having adverse legal
interest”).
Second, the court lacks jurisdiction in this action because there is no legal
relationship between the parties on which to base liability. In oral argument, Judge
Vance asked the telling question “If you were pleading this case under common
law pleading what label would you put on your cause of action?” Neither party
presented a satisfactory answer at oral argument or in their supplemental briefs.
While there is a legal relationship between Provident and Wall and between
Transamerica and Wall, there is no legal relationship between the two insurers.
Consequently, there is no basis on which to rule either party liable to the other.
Provident Life, 850 F.2d at 1491 (internal footnotes omitted).
23

V.

CONCLUSION
For the foregoing reasons, the Court ORDERS the following:
•

The Underwriters’ Motion To Dismiss on standing is DENIED.

•

The Jones/Pair Motion To Dismiss on standing is GRANTED. Great
American’s Complaint against them is DISMISSED without prejudice.

•

The Jones/Pair Motion To Dismiss for failure to state a justiciable
controversy is TERMED as MOOT.

•

The Underwriters’ Motion To Dismiss for failure to state a claim is
GRANTED in part and DENIED in part. To the extent that the Great
American Complaint attempts to claim a right to subrogation against the
Underwriters, without having paid their insured, that claim is
DISMISSED without prejudice.

DONE and ORDERED this the 4th day of October, 2017.

VIRGINIA EMERSON HOPKINS
United States District Judge

24