Pennsylvania Lumbermens Mutual Insurance Company v. D.R. Horton, Inc.-Birmingham et al

Filing 130

Order granting 107 MOTION to Dismiss filed by Assurance Company of America. Plaintiff's claims for declaratory judgment against Assurance are dismissed without prejudice. The Clerk is directed to terminate Assurance as a defendant. Signed by Chief Judge William H. Steele on 1/5/2016. (tgw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
PENNSYLVANIA LUMBERMENS
MUTUAL INSURANCE COMPANY,
Plaintiff,
v.
D.R. HORTON, INC. – BIRMINGHAM,
et al.,
Defendants.

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CIVIL ACTION 15-0071-WS-B

ORDER
This matter comes before the Court on defendant Assurance Company of America’s
Motion to Dismiss (doc. 107). The Motion has been briefed and is now ripe for disposition.
I.

Relevant Background.
Plaintiff, Pennsylvania Lumbermens Insurance Company (“PLM”), brought this

insurance declaratory judgment action against D.R. Horton, Inc. – Birmingham (“D.R. Horton”);
Chris Saddler, Administrator of the Estate of Roberto Campus Leco, deceased; and five other
insurance companies, one of which is Assurance Company of America (“Assurance”).
According to PLM’s Second Amended Complaint (doc. 59), this insurance coverage
dispute has its origins in an underlying action styled Chris Saddler, et al. v. Mega Construction
Co., Inc., et al., pending in the Circuit Court of Baldwin County, Alabama (the “Saddler
Action”). The Saddler Action arose from the death of Roberto Campos Leco, who apparently
was working for Olmedo Construction Company (“Olmedo”) when a truss system collapsed at a
residential construction site in Daphne, Alabama, on May 16, 2013. (Doc. 107, Exh. 2, ¶¶ 1213.) The Saddler Action plaintiffs brought claims against Olmedo, Bethel Engineering, Inc.
(“Bethel Engineering”) and various other contractors and subcontractors on the ill-fated
construction project. In particular, Saddler (as administrator of Leco’s estate) sued Olmedo for
worker’s compensation indemnity benefits and sued D.R. Horton (alleged to be the owner of the
house and the general contractor for the project) on theories of negligent or wanton failure to

provide a safe work environment for Olmedo employees, as well as negligent or wanton hiring of
unqualified contractors to perform framing and supervisory services on the project. (Id., ¶¶ 1117, 39-53.) The Saddler Action also included a negligence claim alleging that Bethel
Engineering had supplied incomplete and inadequate house and truss system drawings for the
project in question, in that such drawings (i) lacked a temporary or installation bracing plan, and
(ii) were not in Spanish. (Id., ¶¶ 60-63.) On March 24, 2015, Circuit Judge Robert Wilters
granted Bethel Engineering’s motion for summary judgment and dismissed all claims against
that defendant with prejudice. (Doc. 107, Exh. 4.) Certain portions of the Saddler Action
remain ongoing in Baldwin County Circuit Court at this time.
The relationship between the Saddler Action and Assurance’s Motion to Dismiss in this
declaratory judgment action is as follows: At the time of Leco’s workplace accident, PLM had in
force a commercial general liability insurance policy issued to Mobile Lumber & Building
Materials, Inc., which was one of the contractors on the project and a named defendant in the
Saddler Action. (Doc. 59, ¶ 10.) After summary judgment was entered in Mobile Lumber’s
favor, PLM commenced this action seeking a declaration that it owes no insurance coverage
(indemnity or defense obligations) to D.R. Horton in the Saddler Action as an “additional
insured” under the subject policy. (Id., ¶ 13.) Indeed, the operative pleading in this case
specifically alleges that “D.R. Horton has demanded insurance coverage from PLM as an
additional insured under the PLM policy issued to Mobile Lumber for any claims, fines or
penalties and/or judgments against D.R. Horton in the” Saddler Action. (Id., ¶¶ 13(d), 15.) In
this action, PLM seeks a judicial declaration as to “whether PLM is obligated to provide a
defense or indemnity to D.R. Horton in the” Saddler Action. (Id., ¶ 17.)
In addition to seeking judicial declaration of its coverage obligations (if any) to D.R.
Horton in the Saddler Action, PLM later joined several other insurers as defendants in this action
via a series of amended complaints.1 Among those newly added insurer defendants is Assurance,
1

The insurer defendants (or, at least, most of them) were first joined in this case via
an Amended Complaint (doc. 45) filed on August 31, 2015. Prior to that date, this case was a
straightforward declaratory judgment action between an insurer (PLM) and its putative insured
(D.R. Horton) over coverage responsibilities in an underlying wrongful death suit. The
subsequent joinder of the other insurance company defendants at the end of August ratcheted up
the complexity of these proceedings, leading directly to the pending Motion to Dismiss.

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who was joined in this action via PLM’s Second Amended Complaint filed on September 21,
2015. (See doc. 59.) PLM’s pleading indicates that “[i]t is believed” Assurance issued an
insurance policy to Bethel Engineering “with D.R. Horton named as an additional insured.” (Id.,
¶ 4.) On that basis, PLM requests in its pleading that, if PLM is found to owe coverage
obligations to D.R. Horton in the Saddler Action, “the court specifically declare what excess or
pro rata share of the defense and litigation expenses PLM, … Assurance …,” and the other
insurer defendants “are obligated to pay.” (Id., at 26.) In other words, PLM has initiated this
declaratory judgment action against D.R. Horton seeking a ruling that it has no duty to defend or
indemnify D.R. Horton in the Saddler Action. If, and only if, a declaration adverse to PLM is
issued on the coverage question, then PLM wants this Court to declare how the defense and
litigation expenses in the Saddler Action are to be divided up between and among PLM,
Assurance, and a stable of other insurer defendants (including Southern Owners Insurance
Company, Essex Insurance Company, and AIG Specialty Insurance Company). (Id.; see also
doc. 73.) In support of its desired apportionment of such insurance obligations, PLM includes in
its Second Amended Complaint a conclusory allegation that “PLM contends that … Assurance
Company of America … [has] a duty to insure and indemnify D.R. Horton, and PLM’s policy is
in excess to these other carriers.” (Doc. 59, ¶ 16.)
Faced with this unorthodox procedural posture, Assurance filed a Motion to Dismiss, in
which it argued that (i) PLM’s Second Amended Complaint fails to establish an actual
controversy between PLM and Assurance, inasmuch as it is couched in conclusory allegations
unsupported by facts; and (ii) Assurance’s policy unambiguously excludes coverage for D.R.
Horton, in any event. (Doc. 107, at 8-10.) PLM opposes the Motion.
II.

Analysis.
As noted, Assurance seeks dismissal of PLM’s claims against it pursuant to Rule

12(b)(6), Fed.R.Civ.P., for failure to state a claim upon which relief can be granted. Among
Assurance’s arguments for dismissal are that “PLM uses a conclusory allegation” as the sole
basis of its claim against Assurance (doc. 107, at 8), and that “there is no legal relationship”
between them (doc. 118, at 2.) After careful review of the briefs on the Motion to Dismiss, the
Court concludes that dismissal is warranted for two distinct and independent reasons.

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A.

Twombly Pleading Defect.

As an initial matter, PLM’s Second Amended Complaint fails to comport with minimum
pleading requirements as to the claims against Assurance. To withstand Rule 12(b)(6) scrutiny
and satisfy Rule 8(a), a plaintiff must plead “enough facts to state a claim to relief that is
plausible on its face,” so as to “nudge[] [its] claims across the line from conceivable to
plausible.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929
(2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted).
“This necessarily requires that a plaintiff include factual allegations for each essential element of
his or her claim.” GeorgiaCarry.Org, Inc. v. Georgia, 687 F.3d 1244, 1254 (11th Cir. 2012).
Thus, minimum pleading standards “require[] more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. As the
Eleventh Circuit has explained, Twombly / Iqbal principles require that a complaint’s allegations
be “enough to raise a right to relief above the speculative level.” Speaker v. U.S. Dep’t of Health
and Human Services Centers for Disease Control and Prevention, 623 F.3d 1371, 1380 (11th Cir.
2010) (citations omitted). “To survive a Rule 12(b)(6) motion to dismiss, the complaint does not
need detailed factual allegations … but must give the defendant fair notice of what the plaintiff’s
claim is and the grounds upon which it rests.” Randall v. Scott, 610 F.3d 701, 705 (11th Cir.
2010) (citations and internal quotation marks omitted).
Under any reasonable application of these principles, PLM has not satisfied baseline
pleading requirements with respect to defendant Assurance. The sum total of the Second
Amended Complaint’s factual allegations concerning Assurance is as follows: (i) Assurance is
“believed” to have issued an insurance policy to Bethel Engineering, as to which D.R. Horton is
an additional insured (doc. 59, ¶ 4); (ii) if PLM is deemed to owe a duty to defend or indemnify
D.R. Horton, then PLM asks the Court to declare “what excess or pro rata share of the defense
and litigation expenses” Assurance must pay (id. at 23); and (iii) “PLM contends that …
Assurance … [has] a duty to insure and indemnify D.R. Horton, and PLM’s policy is in excess”
to that of Assurance (id., ¶ 16). As framed by this universe of allegations, PLM’s pleading
against Assurance is a conclusory claim that flunks Twombly / Iqbal review. PLM has pleaded
no facts that might reveal a plausible claim for relief against Assurance. From reviewing the

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Second Amended Complaint, it is impossible to discern why PLM “contends” that Assurance
owes coverage to D.R. Horton in the Saddler Action, much less why PLM “contends” that its
own policy is excess to Assurance’s, or what (if any) facts or policy provisions PLM might be
relying on as grounds for those unvarnished “contentions.” Plaintiff has furnished nothing more
than a blanket statement that this is so.
Rule 8(a), as construed by the Supreme Court in Twombly and Iqbal, requires much more
in a pleading than a bald, conclusory claim that “I am entitled to relief because I say so,” which
is effectively all that PLM has pleaded here. As such, the Second Amended Complaint is
deficiently pleaded against Assurance as a matter of law, and the Motion to Dismiss is properly
granted on Twombly / Iqbal grounds.
B.

Discretion Not to Hear Declaratory Judgment Action.

Plaintiff’s Second Amended Complaint also suffers from a more fundamental defect,
insofar as it relates to PLM’s claims against Assurance. This action is brought under the
Declaratory Judgment Act, 28 U.S.C. § 2201, which authorizes – but does not require – federal
courts to declare the rights and legal relations of interested parties. See Ameritas Variable Life
Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th Cir. 2005) (Declaratory Judgment Act “only gives
the federal courts competence to make a declaration of rights; it does not impose a duty to do
so”). Indeed, the Act is properly “understood to confer 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, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). 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). The
proper exercise of such discretion is achieved on a case-by-case basis, turning on “considerations
of practicality and wise judicial administration.” Id. at 288; see also Aetna Ins. Co. v.
Transamerica Ins. Co., 262 F. Supp. 731, 732 (E.D. Tenn. 1967) (“The determinative factor is
whether the declaratory action will probably result in a just and more expeditious and
economical determination of the entire controversy.”).
Upon careful consideration, the Court exercises this discretion not to declare the rights
and legal relations as between PLM and Assurance for “what excess or pro rata share of the
defense and litigation expenses” each might bear in the Saddler Action. Here is why: The crux
of PLM’s claim against Assurance is a request for judicial declaration apportioning coverage

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obligations between these insurers relating to D.R. Horton’s liability in the Saddler Action. To
date, however, there has been no finding of liability for D.R. Horton, and certainly no judgment
entered against D.R. Horton, in the Saddler Action. Nor has there been a finding that PLM owes
any coverage to D.R. Horton. The apportionment issues that plaintiff is asking this Court to
referee as between PLM and Assurance will never materialize unless and until (i) PLM is found
to owe coverage to D.R. Horton in the Saddler Action (which PLM steadfastly denies), and (ii)
D.R. Horton is held liable in the Saddler Action. Neither of these events has occurred, and it is
entirely possible that neither might ever occur. Thus, it strikes the Court as profoundly
inefficient, unhelpful and ill-advised to expend litigant and judicial resources on a declaratory
judgment action aimed at determining how insurance contributions should be apportioned as
between PLM and Assurance if D.R. Horton is someday hit with an adverse judgment in the
Saddler Action and if PLM is found to owe insurance coverage to D.R. Horton. At the moment,
the question that PLM is asking this Court to adjudicate as to Assurance is merely theoretical,
academic and conjectural, based on contingencies that have not happened and might never come
to pass.2
2

While the foregoing discussion addresses apportionment of insurance
indemnification obligations to D.R. Horton in the Saddler Action, the same reasoning holds true
with respect to the duty to defend. The Second Amended Complaint is devoid of any allegation
that PLM is presently furnishing a defense to D.R. Horton in the Saddler Action. To the
contrary, D.R. Horton pleads in its Counterclaim that PLM “has not replied to Horton’s request
or otherwise provided it with a defense to the underlying action.” (Doc. 82, ¶ 20.) PLM does
not appear to dispute the assertion that it has not, in fact, furnished a defense to D.R. Horton. For
now, then, PLM is neither providing a defense to D.R. Horton nor paying its defense bills;
therefore, PLM’s demand that this Court declare whether other insurers would have to share in
those defense costs if PLM is ultimately ordered to defend D.R. Horton is purely academic at this
time, based on a set of hypotheticals that may or may not ever take place. To the extent that
PLM is asking the Court to declare the apportionment of defense costs that should be borne
among it, Assurance and other insurers, such a declaration is theoretical unless and until (i) PLM
is found to owe defense obligations to D.R. Horton in the first place (which PLM has denied),
and (ii) PLM disagrees with other insurers as to the appropriate apportionment of defense costs
at that time (which the Second Amended Complaint does not allege ever to have happened, as
there is no allegation that PLM has conferred with other insurers over defense cost
apportionment at all). Stated differently, it is an open question at this time whether PLM owes a
duty to defend D.R. Horton at all in the Saddler Action. Entertaining full-fledged, resourceintensive, multilateral litigation as to whether some other insurer would be required to share the
burden of those defense costs with PLM, and if so how much, if indeed PLM is someday found
to have such a duty to defend would be grossly inefficient and wasteful because, as of right now,
(Continued)
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Courts have steadfastly resisted attempts by litigants to entangle them in such theoretical,
conjectural matters under the Declaratory Judgment Act. For example, in American Fidelity &
Cas. Co. v. Pennsylvania Threshermen & Farmers’ Mut. Cas. Ins. Co., 280 F.2d 453 (5th Cir.
1960), the plaintiff insurer sued a defendant insurer seeking a declaratory judgment that the
defendant would be responsible for providing coverage to an additional insured under both
policies (without pro rata apportionment) if that insured were ultimately held liable in an
underlying damages suit. The former Fifth Circuit opined that questions such as the insurers’
respective liabilities to the insured (i.e., “whether Pennsylvania has primary and American
excess coverage, whether both are liable pro rata, or at all,” and so on) were merely “academic”
problems and that “it is not the function of a United States District Court to sit in judgment on
these nice and intriguing questions which today may readily be imagined, but may never in fact
come to pass.” Id. at 461. On that basis, the American Fidelity court affirmed the dismissal of
the complaint without prejudice because “the asserted controversy may never be, but when it is
or what it is when it is, a proper court can then resolve those tangible controversies as the case
might require. The District Court was careful to make his dismissal without prejudice to those
further rights, and it was well within its considered judicial discretion to decline to express legal
opinions on academic theoreticals which might never come to pass.” Id. The American Fidelity
holding was “predicated on the traditional discretion of federal courts exercising jurisdiction over
declaratory judgment actions.” Edwards v. Sharkey, 747 F.2d 684, 686 (11th Cir. 1984). The
lesson from American Fidelity is that courts are “cautioned against the exercise of jurisdiction in
suits for declaratory judgment when the question of the apportionment of insurance coverage
may never arise due to the lack of a judgment establishing the liability of the insured.” Id.3

the question of apportionment of defense costs among insurers other than PLM is of no more
than speculative, academic interest.
3

Other courts have reached similar conclusions. See, e.g., Century Indem. Co. v.
McGillacuty’s, Inc., 820 F.2d 269, 270 (8th Cir. 1987) (“When an insured’s liability has not yet
been determined, a court should refrain from deciding which insurance company is liable for
coverage, especially when … they are arguing about which is the primary carrier and which is
the excess carrier.”); Travelers Indem. Co. v. Standard Acc. Ins. Co., 329 F.2d 329, 332 (7th Cir.
1964) (where one insurer sought declaration that another insurer was obligated to pay all sums
that might be awarded against insured in personal injury action, opining that issue “is purely
speculative and therefore not proper for decision in this declaratory judgment action”);
(Continued)
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Cutting through all the rhetoric from all the caselaw, the fundamental point is
straightforward. PLM has sued Assurance seeking a declaration that, if PLM is found to owe
coverage obligations to D.R. Horton in the Saddler Action, and if D.R. Horton is found liable in
the Saddler Action, Assurance is responsible for paying those obligations first. Such a dispute
may satisfy the “case or controversy” requirements of the Article III, Section 2 of the U.S.
Constitution and the Declaratory Judgment Act,4 but it is not the kind of case or controversy that

Nationwide Mut. Ins. Co. v. Fidelity & Cas. Co. of N.Y., 286 F.2d 91, 92 (3rd Cir. 1961) (“But the
trial judge was right in refusing to settle all the relations of the insurers among themselves. …
Each of these companies has insured some one or more of the persons involved in this Butler
County litigation. How that litigation will come out nobody knows at this time. … [A]t this time
nobody is under any liability to pay. Federal courts are not authorized to give advisory opinions
and if we told the insurance companies their respective rights and duties against each other we
certainly would be giving an advisory opinion.”) (footnotes omitted); Employers Mut. Cas. Co. v.
All Seasons Window & Door Mfg., Inc., 387 F. Supp.2d 1205, 1211-12 (S.D. Ala. 2005)
(following American Fidelity and observing that “any number of eventualities could prevent
problems now academic from becoming actual,” such as “the insured might never suffer an
adverse verdict” or “the underlying action might narrow or even eliminate any coverage
question” based on the nature of the verdict) (citations and internal marks omitted); Companion
Assurance Co. v. Alliance Assurance Co., 585 F. Supp. 1382, 1385 (D.V.I. 1984) (dismissing
declaratory judgment action between insurers where “liability has not been established and a
ruling as to the priorities of coverage of the other insurance carriers would amount to an advisory
opinion”); Government Emp. Ins. Co. v. Keystone Ins. Co., 408 F. Supp. 1185, 1188 (E.D. Penn.
1975) (dismissing declaratory judgment action between two insurers as to whose coverage was
primary, reasoning that in the event liability was found in underlying proceedings, “GEICO may
at that time seek a judicial determination of its claim that Keystone has the primary liability.
This is not only the law of this Circuit but appears to be the preferable practice.”); Aetna, 262 F.
Supp. at 733 (“The federal courts have often held that actions for declaratory judgment under the
Federal Declaratory Judgment Act should not be entertained where the rights of several insurers
are in issue until there has been a judgment against the insured.”); Erie Indem. Co. v. Acuity, a
Mut. Ins. Co., 2006 WL 2048310, *3-4 (N.D. Ga. July 19, 2006) (“[T]he issue presented in this
declaratory judgment action involves a determination of primary versus secondary insurance
coverage. … The issue of liability … has not been resolved in the state court action. Thus,
insurance coverage, primary or otherwise, has yet to, and may never, become relevant. Yielding
to considerations of judicial economy, the Court declines to rule on the coverage issue while the
underlying liability action is still pending.”).
4

“Congress limited federal jurisdiction under the Declaratory Judgment Act to
actual controversies, in statutory recognition of the fact that federal judicial power under Article
III, Section 2 of the United States Constitution extends only to concrete ‘cases or controversies.’”
Atlanta Gas Light Co. v. Aetna Cas. and Sur. Co., 68 F.3d 409, 414 (11th Cir. 1995) (citation
omitted).

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federal courts should exercise their discretion under the Act to hear. See, e.g., Aetna, 262 F.
Supp. at 732 (“An academic or theoretical declaration by this Court concerning future
controversies that may never arise is not contemplated by the Declaratory Judgment Act.”)
(citation omitted). If no adverse judgment were ultimately entered against D.R. Horton in the
Saddler Action, then this declaratory judgment action as to which insurer(s) should pay that
judgment and in what shares would be a waste of time. Similarly, if this Court were to find that
PLM owes no indemnity obligation to D.R. Horton in the Saddler Action, then protracted, hardfought litigation over PLM’s claims that Assurance must shoulder all or part of PLM’s indemnity
burden would be unhelpful and unnecessary.5
In short, it is the undersigned’s opinion that PLM’s declaratory judgment action against
Assurance will not probably result in a just and more expeditious and economical determination
of the entire controversy, and that considerations of practicality and wise judicial administration
favor not deciding those claims at this time. Under these circumstances, the Court exercises its
discretion under the Declaratory Judgment Act not to declare the rights of PLM and Assurance
as to their respective shares or apportionment of any defense or indemnity obligations that PLM
might be found to owe D.R. Horton for any liability that it might ultimately incur in the
underlying wrongful death action in state court.
III.

Conclusion.
For all of the foregoing reasons, it is ordered as follows:
1.

Assurance Company of America’s Motion to Dismiss (doc. 107) is granted;

2.

In exercise of the undersigned’s discretion pursuant to 28 U.S.C. § 2201 and
given the Twombly pleading defect in the Second Amended Complaint, plaintiff’s

5

The same is true on the duty to defend issue. If PLM is held in this case not to
owe a duty to defend D.R. Horton in the Saddler Action, then PLM’s litigation with Assurance
over how those defense costs should be apportioned between them would be of no consequence.
The analysis might differ if PLM were paying D.R. Horton’s defense costs at this time and
wanted a declaration that Assurance was responsible for reimbursing all or part of those costs;
however, that is not the operative scenario. The Court’s understanding is that PLM is presently
not furnishing a defense to D.R. Horton, and that D.R. Horton has demanded a defense from
multiple other insurance carriers, in addition to PLM; however, PLM seeks a declaratory
judgment that Assurance should be required to pay all or part of those defense costs if PLM is
someday found to owe D.R. Horton a duty to defend (and if such defense costs have not been
borne by some other insurer in the meanwhile).

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claims for declaratory judgment against Assurance are dismissed without
prejudice, provided that nothing herein precludes or limits plaintiff’s ability to
renew such claims at an appropriate time if and when the underlying issues have
advanced to a point where a declaratory judgment as to apportionment of
insurance contributions between PLM and Assurance would be of more than
academic or theoretical interest; and
3.

The Clerk of Court is directed to terminate Assurance Company of America as a
defendant in this action.

DONE and ORDERED this 5th day of January, 2016.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

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