Cameron et al v. Scottsdale Insurance Company

Filing 18

ORDER DENYING MOTION TO DISMISS denying 7 Motion to Dismiss for Failure to State a Claim. Signed by Judge Marcia G. Cooke on 12/21/2016. (tm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 1:16-cv-21704-COOKE/TORRES
KEN CAMERON and MICHELLE CAMERON,
Petitioners,
v.
SCOTTSDALE INSURANCE COMPANY,
Respondent.
_______________________________________/
ORDER DENYING MOTION TO DISMISS
The parties in this action dispute certain insurance policy language related to water
damage coverage. Petitioners Ken and Michelle Cameron (“Petitioners”) filed a Petition for
Declaratory Relief in state court seeking a judicial declaration of their rights under an
insurance policy issued by Respondent Scottsdale Insurance Company (“Respondent” or
“Scottsdale”). Respondent removed the action to federal court based on diversity
jurisdiction. See 28 U.S.C. § 1332.
Before me is Respondent’s Motion to Dismiss Petitioners’ Petition for Declaratory
Relief (“Motion”) (ECF No. 7). I have reviewed the parties’ arguments, the record, and the
relevant legal authorities. For the reasons set out below, I deny Respondent’s Motion.
I. BACKGROUND
At the start of 2016, a drain collapsed in the internal plumbing system of Petitioner’s
house and caused water damage to the property. Pet. for Decl. Relief ¶¶ 7, 15, ECF No. 1.
Respondent and Petitioners had previously entered into a commercial property insurance
contract that was in effect at the time of the incident. Id. ¶¶ 4, 7. After Petitioners reported
the incident, Respondent refused to cover the loss based on the policy language and after it
investigated the damaged property (“Denial Letter”). Id. ¶¶ 9-11.
Petitioners argue the policy excludes coverage only when the damage is caused by
water originating from a drain outside the insured property’s plumbing system. Respondent
contends the insurance policy excludes coverage for damage caused by water originating

1

from a drain both on and off the insured property. Id. ¶¶ 13 – 15. The relevant policy
language states the following:
B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the
following. Such loss or damage is excluded regardless of any other cause or event
that contributes concurrently or in any sequence to the loss . . . .
g. Water
(3) Water that backs up or overflows or is otherwise discharged from a sewer, drain,
sump, sump pump or related equipment.
ECF No. 9 ¶ 11, n. 1.
Petitioners believe the insurance policy language is ambiguous and that declaratory
relief is warranted. Respondent disagrees and asserts that there is no ambiguity in the policy
language. Petitioners filed their Petition under Florida’s Declaratory Judgment Act, Fla.
Stat. § 86.011, in state court. Respondent then removed the action in May 2016, and now
moves to dismiss the Petition under Federal Rule of Civil Procedure 12(b)(6).
II. LEGAL STANDARD
A pleading must contain "a short and plain statement of the claim showing that the
pleader is entitled to relief" in order to "give the defendant fair notice of what the . . . .claim
is and the grounds upon which it rests," ADA v. Cigna Corp., 605 F.3d 1283, 1288 (11th Cir.
2010) (quoting Fed. R. Civ. P. 8(a)(2)). To survive a motion to dismiss for failure to state a
claim, see Fed. R. Civ. P. 12(b)(6), a complaint must contain sufficient factual allegations to
state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009);
Ray v. Spirit Airlines, Inc., 767 F.3d 1220, 1223 (11th Cir. 2014). The court must accept such
allegations as true and construe them in the light most favorable to the non-moving party.
Watts v. Florida Int'l Univ., 495 F.3d 1289, 1295 (11th Cir. 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.” Iqbal, 556 U.S.
at 678. A complaint’s factual allegations must be enough to raise a right to relief above
speculative level. Id. Detailed factual allegations are not required, but a pleading “that offers
‘labels and conclusions’ or a ‘formulaic recitation of the elements of a cause of action will
not do.’ ” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

2

III. DISCUSSION
At bottom, Petitioners have stated a viable claim and this litigation should proceed.
A. Extrinsic evidence
As a threshold matter, Petitioners argue that Respondent introduced impermissible
extrinsic evidence for consideration when Respondent attached the insurance policy and the
Denial Letter at issue to its Motion to Dismiss, neither of which had been attached to the
original Petition.
Ordinarily, a court may not consider anything beyond the face of the complaint and
documents attached thereto when analyzing a motion to dismiss. Brooks v. Blue Cross & Blue
Shield of Fla., Inc., 116 F.3d 1364, 1368 (11th Cir. 1997); see also Fed. R. Civ. P. 10(c). But in
cases where a plaintiff refers to a document in its complaint, that document is central to its
claim and its contents are unquestioned, and the defendant attaches the document to its
motion to dismiss, the court may consider such document. Fin. Sec. Assur., Inc. v. Stephens,
Inc., 500 F.3d 1276, 1284 (11th Cir. 2007).
Here, both the insurance policy and the Denial Letter are central to Petitioners’
claims for declaratory relief. Petitioners themselves refer to the policy and the Denial Letter
several times in their Petition. See e.g., Pet. for Decl. Relief ¶¶ 1, 4 – 7, 11 – 15. Further, the
parties do not dispute the content of the documents; they dispute the interpretation of
certain policy language. Therefore, I find that it is proper for me to consider the documents.
B. Declaratory Relief
Respondent first asserts that Petitioners have not pled sufficient facts to show the
required elements for a cause of action for declaratory relief. Respondent further declares
that there is no reasonable basis to continue this action as it would result in a waste of
judicial resources.
Under the federal Declaratory Judgment Act, federal courts have the authority to
declare the rights and other legal relations of any interested party in a case of actual
controversy, regardless of whether further relief is or could be sought. 28 U.S.C. § 2201; see
also Skelly Oil Co. et al. v. Phillips Petroleum Co., 339 U.S. 667, 671 (1950). For a justiciable
controversy under the Declaratory Judgment Act to exist, the alleged facts 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.” Hendrix v. Poonai,

3

662 F.2d 719, 721 (11th Cir. 1981) (quoting Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S.
270, 273 (1941)). The Declaratory Judgment Act is “liberally construed to accomplish its
purpose of providing a speedy and inexpensive method of adjudicating legal disputes.”
Sherwood Med. Indus., Inc. v. Deknatel, Inc., 512 F.2d 724, 729 (8th Cir. 1975).
In this case, the parties offer differing interpretations of certain policy language,
which form the basis for Respondent’s refusal to cover damages. Because of Respondent’s
refusal to pay, Petitioners have no financial means to repair the damaged property and
continue their rental business. The parties, thus, have adverse legal interests, and I find that
there is a sufficiently substantial and immediate controversy relating to the policy language.
In addition, I disagree with Respondent’s argument that pursuit of declaratory action would
squander judicial resources. On the contrary, early resolution of the disputed policy
language would clarify the parties’ positions, and is more likely to lead to a resolution.
Therefore, I find that declaratory relief is an appropriate vehicle in this case.
C. Failure to State a Claim
Respondent also argues that the clear and unambiguous policy language, the Denial
Letter, and the results of Respondent’s investigation show that the policy does not cover the
alleged damages. Accordingly, Respondent seeks dismissal of Petitioners’ claims.
Petitioners retort that there is ambiguity over the meaning of the policy language.
They believe the policy covers damage caused by water that overflows due to a broken
drain, so long as the drain is a component of the plumbing system of and within the insured
property. Respondent believes that the policy does not cover any such damage, regardless of
where the broken drain was located, be it inside or outside the insured property. Id.
An insurance contract is ambiguous if it is susceptible to two or more reasonable
interpretations. Dahl-Eimers v. Mut. of Omaha Life Ins. Co., 986 F.2d 1379, 1381 (11th Cir.
1993). An ambiguity is evidenced when one interpretation of the same provision results in
coverage and another in exclusion, particularly when a term is not explicitly defined or
clarified by the policy. Id.
Viewing the facts in favor of the Petitioners at this stage of the litigation, I find that
the language is susceptible to more than one reasonable interpretation. The relevant policy
language does not explicitly comment on the origin of a water overflow, which creates the

4

ambiguity present here. Accordingly, I find Petitioners have pled sufficient facts to state a
claim for relief that is plausible on its face.
D. Failure to State a Cause of Action under Fla. R. Civ. P. 1.140(b)(6)
Finally, Respondent asserts a failure to plead sufficient, ultimate facts under Florida
Rule of Civil Procedure 1.140(b)(6). Later in the briefing for this motion, however,
Respondent concedes that the Federal Rules of Civil Procedure and the federal Declaratory
Judgment Act apply because this case is brought under diversity jurisdiction. See McMahan
v. Toto, 256 F. 3d 1120, 1131 (11th Cir. 2001) (holding that where a federal court has
diversity subject matter jurisdiction, the court shall apply procedural federal law and
substantive state law); Berkower v. USAA Cas. Ins. Co., No. 15-23947-CIV, 2016 U.S. Dist.
LEXIS 118223, at *6 (S.D. Fla. Sep. 1, 2016) (stating that Florida’s Declaratory Judgment
Act and federal Declaratory Judgment Act are procedural statutes and do not confer any
substantive rights). Hence, this argument is now moot.
IV. CONCLUSION
Accordingly, it is ORDERED and ADJUDGED that Respondent’s Motion to
Dismiss Petitioners’ Petition for Declaratory Relief (ECF No. 7) is DENIED.
DONE and ORDERED in chambers at Miami, Florida, this 21st day of December
2016.

Copies furnished to:
Edwin G. Torres, U.S. Magistrate Judge
Counsel of record

5