Pennsylvania National Mutual Casualty Insurance Company v. King et al

Filing 35

ORDER granting #33 Motion for Default Judgment against Treasure Coast Contracting Services, LLC. Signed by Chief Judge William H. Steele on 5/15/2012. (tgw)

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

PENNSYLVANIA NATIONAL MUTUAL
CASUALTY INSURANCE COMPANY,
Plaintiff,
v.
CALVIN KING, et al.,
Defendants.

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CIVIL ACTION 11-0577-WS-C

ORDER
This matter comes before the Court on plaintiff’s Motion for Default Judgment (doc. 33)
as to defendant Treasure Coast Contracting Services, LLC. On April 13, 2012, the undersigned
entered an Order (doc. 34) that directed the other defendants to respond to the Motion on or
before April 27, 2012. No defendants having responded, they have waived the opportunity to be
heard on this Motion, which is now ripe for disposition.1
I.

Background.
Plaintiff, Pennsylvania National Mutual Insurance Company (“Penn National”), brought

this insurance declaratory judgment action against five named defendants, among them its named
insured, Treasure Coast Contracting Services, LLC (“Treasure Coast”).2 As to Treasure Coast,
1

The April 13 Order explained that “[i]t is at least foreseeable that entry of default
judgment against Treasure Coast on insurance coverage issues today could lead to incongruities
and inconsistencies if all or some remaining defendants prevail in this action.” (Doc. 34, at 2.)
Their silence on this issue – despite being ordered to respond – reflects that those defendants do
not share this concern, which the Court flagged preemptively on their behalf. Because they
elected not to provide input even when the April 13 Order directed them to do so, however, those
defendants will not be heard to complain at a later date should they find themselves dissatisfied
with, or adversely affected by, the ruling on this Motion for Default Judgment.
2

Federal jurisdiction was predicated on 28 U.S.C. § 1332, based on specific,
detailed allegations by Penn National showing that there is complete diversity of citizenship
between it and defendants, and that the amount in controversy exceeds $75,000, exclusive of
interest and costs.

this action centers on Penn National’s contention that it owes no duty to defend or indemnify
Treasure Coast in certain proceedings pending in Baldwin County Circuit Court (the
“Underlying Litigation”). In the Underlying Litigation, Calvin and Allie King filed suit against
Treasure Coast and several other entities, alleging that “the defendants trespassed on plaintiff’s
property when they buried a fiber optic cable outside of the County’s right-of-way.” (Doc. 1,
¶ 20.)
According to the well-pleaded allegations of the Complaint in the case at bar, the roots of
the Underlying Litigation extend back to February 2004, when Treasure Coast (along with
another entity called Two-Way Communications, Inc.) jointly submitted a bid to Baldwin
County (the “County”) for “a project involving the underground installation of approximately 39
miles of fiber optic cable.” (Doc. 1, ¶ 14.) Treasure Coast and Two-Way were awarded the bid
in March 2004, entered into a contract with the County at that time, and completed the project in
November 2005. (Id., ¶¶ 15, 18.) The Kings’ dissatisfaction stems from alleged misplacement
of the fiber optic cable by Treasure Coast and/or Two-Way. Penn National’s Complaint reflects
that, after the Kings’ allegations came to light, the County hired surveyors to investigate their
claims, and “determined that the cable was indeed outside of the right-of-way by approximately
18 inches likely because the surveying company hired by Treasure Coast had used outdated maps
drawn before the main road had been widened.” (Id., ¶ 19.) When the error was identified,
“Treasure Coast initially informed the County that it would remedy the misplaced cable at its
own cost but the remedial work was never performed.” (Id.) As a result, in the Underlying
Litigation, Treasure Coast is facing claims brought by the Kings for trespass, by Two-Way for
indemnity, and by the County for indemnity, breach of contract, negligence, specific
performance and fraud. (Id., ¶ 20.) The Kings are apparently proceeding not only on their own
behalf, but also as representatives for a class of all similarly situated landowners whose property
rights were purportedly infringed upon by Treasure Coast’s improper installation of fiber optic
cable outside the designated right-of-way.
To date, Penn National has been furnishing a defense to Treasure Coast in the Underlying
Litigation pursuant to a reservation of rights. (Id. ¶ 21.) Penn National’s request to intervene in
the Underlying Litigation was denied, so it brought this Complaint for Declaratory Judgment
against the Kings, Treasure Coast, Two-Way and the County. Penn National maintains that it
owes no duty to defend Treasure Coast under a commercial general liability insurance policy (the
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“Policy”) issued for the period of April 2003 to April 2004, for the following reasons: (i) the
Policy did not extend coverage to any joint venture such as that between Treasure Coast and
Two-Way; (ii) the Kings’ claims in the Underlying Litigation are not for “property damage” or
“bodily injury” as defined by the Policy, and therefore are not covered; (iii) the Kings’ claims are
excluded by virtue of various “your work” or “your product” exclusions to the Policy; (iv) the
Kings’ claims do not constitute an “occurrence” within the meaning of the Policy; and (v) claims
for breach of contract, breach of warranty, or for purely economic damages are not covered by
the terms and conditions of the Policy. (Id., ¶¶ 28-33.) On these and other theories, the
Complaint states that Penn National seeks a declaratory judgment that “all claims against
Treasure Coast do not come within the scope of coverage provided by the Policy or are excluded
from coverage” and that “Penn National has no duty to defend or indemnify Treasure Coast … in
the Underlying Litigation.” (Id. at 17.)
The court file reflects that Penn National perfected service of process on Treasure Coast
not once, but twice, during the last seven months. In particular, Penn National served process on
Treasure Coast, by and through its registered agent and sole member, William R. Jewett, Jr., via
certified mail on or about October 18, 2011 and by personal service on March 8, 2012. (Docs. 7,
33 Exh. 6.)3 Notwithstanding such valid service on a pair of occasions, Treasure Coast neither
appeared nor otherwise undertook any effort to defend against Penn National’s claims in this
action. On that basis, a Clerk’s Entry of Default (doc. 25) was entered against Treasure Coast on
February 3, 2012, pursuant to Rule 55(a), Fed.R.Civ.P. Thereafter, Penn National filed its
Motion for Default Judgment, with incorporated memorandum and supporting documentation.4
3

On both occasions, Penn National served Jewett at his place of incarceration, towit: the Federal Correctional Institution located in Yazoo City, Mississippi. On September 22,
2010, District Judge DuBose of this District Court sentenced Jewett to a term of imprisonment of
76 months after he entered guilty pleas to one count of possession of a firearm by a convicted
felon, in violation of 18 U.S.C. § 922(g)(1), and one count of failure to appear after pretrial
release, in violation of 18 U.S.C. § 3146. As to the latter charge, the record shows that Jewett
purchased a 49-foot sailboat and absconded while on pretrial release as to the firearm charge in
April 2009, such that he willfully failed to appear for jury selection and arraignment in August
2009. Jewett was ultimately arrested aboard the vessel in a marina in Belize City, Belize in
January 2010.
4

Certificates of Service confirm that Penn National mailed copies of both its
Application for Entry of Default (doc. 23) and its Motion for Default Judgment (doc. 33) to
(Continued)
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II.

Analysis.
In this Circuit, “there is a strong policy of determining cases on their merits and we

therefore view defaults with disfavor.” In re Worldwide Web Systems, Inc., 328 F.3d 1291, 1295
(11th Cir. 2003); see also Varnes v. Local 91, Glass Bottle Blowers Ass’n of U.S. and Canada,
674 F.2d 1365, 1369 (11th Cir. 1982) (“Since this case involves a default judgment there must be
strict compliance with the legal prerequisites establishing the court’s power to render the
judgment.”). Nonetheless, it is well established that a “district court has the authority to enter
default judgment for failure … to comply with its orders or rules of procedure.” Wahl v. McIver,
773 F.2d 1169, 1174 (11th Cir. 1985).
Where, as here, a defendant has failed to appear or otherwise acknowledge the pendency
of a lawsuit for more than six months after first being served, entry of default judgment is
appropriate. Indeed, Rule 55 itself provides for entry of default and default judgment where a
defendant “has failed to plead or otherwise defend.” Rule 55(a), Fed.R.Civ.P. In a variety of
contexts, courts have entered default judgments against defendants who have failed to appear and
defend in a timely manner following proper service of process.5 In short, “[w]hile modern courts
do not favor default judgments, they are certainly appropriate when the adversary process has
been halted because of an essentially unresponsive party.” Flynn v. Angelucci Bros. & Sons,

Treasure Coast by and through its sole member and registered agent, Jewett. As such, there can
be no doubt that Treasure Coast has received unequivocal, repeated notice of these ongoing
default proceedings. In light of that fact, the Court finds that no further notice or invitation to
Treasure Coast is warranted or required prior to entry of default judgment.
5

See, e.g., In re Knight, 833 F.2d 1515, 1516 (11th Cir. 1987) (“Where a party
offers no good reason for the late filing of its answer, entry of default judgment against that party
is appropriate.”); Matter of Dierschke, 975 F.2d 181, 184 (5th Cir. 1992) (“when the court finds
an intentional failure of responsive pleadings there need be no other finding” to justify default
judgment); PNCEF, LLC v. Hendricks Bldg. Supply LLC, 740 F. Supp.2d 1287, 1290 (S.D. Ala.
2010) (“Where, as here, a defendant has failed to appear or otherwise acknowledge the pendency
of a lawsuit for more than three months after being served, entry of default judgment is
appropriate.”); Kidd v. Andrews, 340 F. Supp.2d 333, 338 (W.D.N.Y. 2004) (entering default
judgment against defendant who failed to answer or move against complaint for nearly three
months); Viveros v. Nationwide Janitorial Ass'n, Inc., 200 F.R.D. 681, 684 (N.D. Ga. 2000)
(entering default judgment against counterclaim defendant who had failed to answer or otherwise
respond within time provided by Rule 12(a)(2)).

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Inc., 448 F. Supp.2d 193, 195 (D.D.C. 2006) (citation omitted). That is precisely what has
happened here. Despite being served with process back in October, Treasure Coast has declined
to appear or defend, and has effectively prevented this litigation from leaving the starting blocks,
at least as to Penn National’s claims against it.
The law is clear, however, that Treasure Coast’s failure to appear and the Clerk’s Entry
of Default do not automatically entitle Penn National to a default judgment. A default is not “an
absolute confession by the defendant of his liability and of the plaintiff’s right to recover,” but is
instead merely “an admission of the facts cited in the Complaint, which by themselves may or
may not be sufficient to establish a defendant’s liability.” Pitts ex rel. Pitts v. Seneca Sports,
Inc., 321 F. Supp.2d 1353, 1357 (S.D. Ga. 2004); see also Nishimatsu Const. Co. v. Houston
Nat’l Bank, 515 F.2d 1200, 1204 (5th Cir. 1975) (similar); Descent v. Kolitsidas, 396 F. Supp.2d
1315, 1316 (M.D. Fla. 2005) (“the defendants’ default notwithstanding, the plaintiff is entitled to
a default judgment only if the complaint states a claim for relief”). Stated differently, “a default
judgment cannot stand on a complaint that fails to state a claim.” Chudasama v. Mazda Motor
Corp., 123 F.3d 1353, 1370 n.41 (11th Cir. 1997); see also Eagle Hosp. Physicians, LLC v. SRG
Consulting, Inc., 561 F.3d 1298, 1307 (11th Cir. 2009) (“A default defendant may, on appeal,
challenge the sufficiency of the complaint, even if he may not challenge the sufficiency of the
proof.”).
In light of these principles, the Court has reviewed the Complaint, and is satisfied that
Penn National has established a viable claim to be relieved of the duty to defend Treasure Coast
in the Underlying Litigation. Several of the recited Policy provisions on which Penn National
relies would appear on their face -- when coupled with the factual allegations presented in the
Complaint which Treasure Coast has in no way controverted or contested -- to foreclose any
insurance coverage for Treasure Coast in the Underlying Litigation. As such, the Court finds
that Penn National is entitled to a default judgment on its claim seeking a declaration that it has
no duty to defend Treasure Coast in the Underlying Litigation. And the entry of default
judgment against Treasure Coast as to the duty to defend inexorably warrants entry of default
judgment against Treasure Coast as to the duty to indemnify. See Trailer Bridge, Inc. v. Illinois
Nat’l Ins. Co., 657 F.3d 1135, 1146 (11th Cir. 2011) (“[A] court’s determination that the insurer
has no duty to defend requires a finding that there is no duty to indemnify.”); Essex Ins. Co. v.
Foley, --- F. Supp.2d ----, 2011 WL 5155154, *4 (S.D. Ala. Oct. 31, 2011) (“[A]s recent
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Eleventh Circuit precedent confirms, a judicial determination of no duty to defend compels a
finding of no duty to indemnify.”).6 Thus, the entry of a default judgment in Penn National’s
favor as to its duty to defend Treasure Coast in the Underlying Litigation necessarily calls for
entry of default judgment in Penn National’s favor as to its narrower duty to indemnify Treasure
Coast in the Underlying Litigation.
III.

Conclusion.
For all of the foregoing reasons, Penn National’s Motion for Default Judgment (doc. 33)

is granted. In that regard, the Court will enter a separate default judgment against Treasure
Coast confirming that Penn National owes no duty to furnish a defense or to indemnify Treasure
Coast in the Underlying Litigation.
This action will proceed as between Penn National and the remaining defendants (Calvin
and Allie King, Two-Way Communications, Inc., and Baldwin County, Alabama), in accordance
with the applicable Rule 16(b) Scheduling Order.

DONE and ORDERED this 15th day of May, 2012.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

6

See also National Cas. Co. v. McFatridge, 604 F.3d 335, 338 (7th Cir. 2010) (“If
an insurer has no duty to defend, it has no duty to indemnify.”); Nationwide Mut. Ins. Co. v. CPB
Int'l, Inc., 562 F.3d 591, 595 n. 3 (3rd Cir. 2009) (“A finding that the duty to defend is not present
will preclude a duty to indemnify.”); Global Title, LLC v. St. Paul Fire & Marine Ins. Co., 788
F. Supp.2d 453, 458 (E.D. Va. 2011) (“If there is no duty to defend …, there can be no duty to
indemnify.”) (citation omitted); Nautilus Ins. Co. v. Structure Builders & Riggers Machinery
Moving Div., LLC, 784 F. Supp.2d 767, 771 (E.D. Ky. 2011) (“If there is no duty to defend, then
there is no duty to indemnify because the duty to defend is broader.”); Murphy v. Acceptance
Indem. Ins. Co., 788 F. Supp.2d 332 (D. Vt. 2011) (“[B]ecause the duty to defend is broader than
an insurer’s duty to indemnify, if a court determines that there is no duty to defend, the insurer
will not have a duty to indemnify.”) (citations omitted); Kenneth Cole Productions, Inc. v. MidContinent Cas. Co., 763 F. Supp.2d 1331, 1334 (S.D. Fla. 2010) (“the duty to indemnify is
narrower than the duty to defend and thus cannot exist if there is no duty to defend”) (citations
omitted).

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