Miller et al v. Security Life of Denver Insurance Company et al

Filing 48

ORDER by Judge Hamilton granting 38 Motion to Dismiss (pjhlc1, COURT STAFF) (Filed on 12/14/2011)

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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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DARIUS MILLER, et al.,
Plaintiffs,

No. C 11-1175 PJH

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For the Northern District of California

United States District Court

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v.
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SECURITY LIFE OF DENVER
INSURANCE COMPANY, et al.,

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ORDER GRANTING MOTION TO
DISMISS AMENDED THIRD-PARTY
COMPLAINT

Defendants.
_______________________________/

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The motion of third-party defendant AVIVA American Investors Life Insurance

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Company, Inc. (“AVIVA”) to dismiss the amended third-party complaint filed by defendants

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and third-party plaintiffs Security Life of Denver Insurance Company (“Security Life”) and

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ING America Equities, Inc. (“ING America”) came on for hearing before this court on

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December 14, 2011. AVIVA appeared by its cousel Jeffrey Grantham, J. Ethan McDaniel,

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and Duncan MacDonald; Security Life and ING America appeared by their counsel David

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Noonan; and plaintiffs appeared by their counsel Brian Villarreal. Having read the parties’

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papers and carefully considered their arguments and the relevant legal authority, and good

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cause appearing, the court hereby GRANTS the motion as follows for the reasons stated at

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the hearing.

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Security Life and ING America allege two causes of action in the amended third-

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party complaint – a claim of equitable indemnity and a claim of contribution. Under Federal

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Rule of Civil Procedure 14(a), a third-party claim may be asserted only where a third-party

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defendant's liability to the third-party plaintiff is dependent on the outcome of the main claim

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and is secondary or derivative thereto. Stewart v. American International Oil & Gas Co.,

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845 F.2d 196, 199 (9th Cir. 1988). A third-party claim cannot simply be an independent or

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related claim but must be based upon the plaintiff's claim against the defendant. Id. at

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200.

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AVIVA argues that the contribution and indemnity claims alleged in the amended

judgment that has been entered against Security Life and ING America and paid by them.

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However, several United States Circuit Courts of Appeal, including the Ninth Circuit, have

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held that Rule 14(a) permits a defendant to pursue contribution and indemnity claims even

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For the Northern District of California

third-party complaint fail because they are based only on possible future events, not on any

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United States District Court

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though the defendant's claim is purely inchoate – i.e., has not yet accrued under the

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governing substantive law – so long as the third-party defendant may become liable for all

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or part of the plaintiff's judgment. See Andrulonis v. United States, 26 F.3d 1224, 1233 (2d

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Cir. 1994); Green v. U.S. Dep't of Labor, 775 F.2d 964, 971 n.7 (8th Cir. 1985); Williams v.

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Ford Motor Credit Co., 627 F.2d 158, 160 (8th Cir. 1980); St. Paul Fire & Marine Ins Co v.

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U.S. Lines Co., 258 F.2d 374, 376 (2d Cir. 1958); Mid-States Ins. Co. v. American Fid. &

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Cas. Co., 234 F.2d 721, 731-32 (9th Cir. 1956); Glens Falls Indem. Co. v. Atlantic Bldg.

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Corp., 199 F.2d 60, 63 (4th Cir. 1952).

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As a result, several district courts have ruled that it is not improper under Rule 14(a)

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for a defendant to bring a third-party claim for contribution and/or indemnity where the

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underlying claim is not yet ripe for adjudication. See, e.g., Hecht v. Summerlin Life &

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Health Ins. Co., 536 F.Supp. 2d 1236, 1240-42 (D.Nev. 2008) (third-party claims for

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contribution and indemnification brought by ERISA insurer against employer’s agent were

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ripe for adjudication, notwithstanding that the claims were inchoate because insurer had yet

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to be found liable to former ERISA participant on main claim, given the interest in resolving

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all claims in single litigation).

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The claims asserted by Security Life and ING America do fail, however, because
California law does not permit apportionment of damages for breach of contract, unless the
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parties have expressly contracted with respect to duty to indemnify. See Stop Loss Ins.

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Brokers, Inc. v. Brown & Toland Med. Group, 143 Cal. App. 4th 1036, 1040-42 & n.2

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(2006). In addition, a claim for contribution arises only where a “money judgment has been

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rendered jointly against two or more defendants in a tort action.” Cal. Civ. Code § 875(a);

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see also id. § 875(c).

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As the sole cause of action asserted in the underlying complaint is a claim for breach

AVIVA. See Smith v. Parks Manor, 197 Cal. App. 3d 872, 878-79 (1987) (claim for

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indemnification or contribution accrues when “the indemnity or party seeking contribution

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suffers a loss through payment of a judgment debt (or settlement) or through payment of

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For the Northern District of California

of contract, the claims for contribution and equitable indemnity fail to state a claim against

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United States District Court

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more than his fair share of damages”).

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The dismissal is WITH LEAVE TO AMEND, as stated at the hearing. Security Life

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and ING American shall file the second amended third-party complaint no later than

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January 4, 2011, and AVIVA shall file its response no later than 21 days after the second

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amended third-party complaint is filed.

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IT IS SO ORDERED.

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Dated: December 14, 2011
______________________________
PHYLLIS J. HAMILTON
United States District Judge

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