Atain Specialty Insurance Company v. Kenneth Russell Roof Contracting, LLC

Filing 54

Order on Motion to Dismiss denying 22 Motion to Dismiss; denying 22 Motion to Stay. Signed by Judge Robert N. Scola, Jr on 5/26/2017. (lan)

United States District Court
for the
Southern District of Florida
Atain Specialty Insurance Company,
Plaintiff,
v.
Kenneth Russell Roof Contracting,
LLC, Defendant.

)
)
) Civil Action No. 16-23627-Civ-Scola
)
)

Order on Motion to Dismiss
The Defendant Palm Springs Investment Corporation asks this Court to
dismiss the Plaintiff Atain Specialty Insurance Company’s amended complaint,
or in the alternative to stay these proceedings during the pendency of the
underlying state-court action. (Mot., ECF No. 22). The Defendant Kenneth
Russell Roof Contracting (“KRR”) adopted Palm Springs’s motion. (ECF No. 26.)
Atain responded. (Resp., ECF No. 29.) The time for Palm Springs to reply has
passed. This matter is ripe for the Court’s decision. For the reasons set forth in
this Order, the Court denies the Motion (ECF No. 22).
1. Background
Atain’s complaint for declaratory judgment arises from a state lawsuit in
which Palm Springs filed a counterclaim against KRR, alleging claims to
recover damages for allegedly defective roofing work performed by KRR. (Am.
Compl. ¶ 1, ECF No. 13.) KRR held an insurance policy from Atain providing
commercial general liability coverage from June 28, 2015, to June 28, 2016.
(Id. ¶ 21; Id. Ex. 2 at 2.) KRR made a demand under that Policy seeking
coverage and defense of the counterclaims. (Am. Compl. ¶ 19.) Atain seeks a
declaration from this Court that the Policy does not afford coverage for Palm
Springs’s counterclaims and, therefore, Atain does not have a duty to defend or
indemnify KRR. (Am. Compl. at 12.)
2. Legal Standard
Because Palm Springs essentially asks this Court to decline or delay
exercising jurisdiction over Atain’s amended complaint, the Court will treat the
motion to dismiss as a motion under Federal Rule of Civil Procedure 12(b)(1).
Attacks on subject-matter jurisdiction under Rule 12(b)(1) come in two forms:
“facial attacks” and “factual attacks.” Lawrence v. Dunbar, 919 F.2d 1525,
1528-29 (11th Cir. 1990). Facial challenges to subject-matter jurisdiction are
based solely on the allegations in the complaint, which “are taken as true for

the purposes of the motion.” Id. at 1529; see also Carmichael v. Kellogg, Brown
& Root Servs., Inc., 572 F.3d 1271, 1279 (11th Cir. 2009).
Courts look at only the face of the complaint to “determine whether the
plaintiff has alleged a sufficient basis for subject matter jurisdiction.” Scelta v.
Delicatessen Support Servs., Inc., No. 98–2578–CIV–T–17B, 1999 WL 1053121,
at *4 (M.D. Fla. Oct. 7, 1999) (citations omitted). On a facial challenge, the
court may consider exhibits attached to the complaint. See Fed. R. Civ. P. 10(c)
(“A copy of a written instrument that is an exhibit to a pleading is a part of the
pleading for all purposes.”). “The complaint may be dismissed on a facial attack
only if it is clear that no relief could be granted under any set of facts that
could be proved consistent with the allegations.” Hames v. City of Miami, 479 F.
Supp. 2d 1276, 1283–84 (S.D. Fla. 2007) (Seitz, J., aff’d as modified sub nom.
Hames v. City of Miami, FL, 281 F. App’x 853 (11th Cir. 2008) (internal citation
and quotations omitted).
3. Analysis
The Defendants claim that Atain’s amended complaint is not ripe for
adjudication and actually seeks an advisory opinion because the state-court
proceedings have not concluded—in other words, because liability has not yet
been determined. (Mot. at 2–4.) Atain notes that the Court has the discretion to
declare Atain’s rights and duties under the Policy pursuant to 28 U.S.C.
§ 2201(a) and pursuant to Florida law. (Resp. at 3, ECF No. 29; Am. Compl.
¶ 1, ECF No. 13.) Specifically, Atain notes that the amended complaint asks
this Court to determine that it has no duty to defend as well as no duty to
indemnify KRR. (Id. at 12; Resp. at 2, ECF No. 29.)
Upon a request for a declaratory judgment, a federal court “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.” 28 U.S.C.
§ 2201(a). A declaratory judgment is not an advisory opinion. MedImmune, Inc.
v. Genentech, Inc., 549 U.S. 118, 126 (2007). Rather, a declaratory judgment
resolves an actual case or controversy, as contemplated in Article III of the
United States Constitution. Id. “[T]he proper test of when an action for
declaratory judgment presents a justiciable controversy 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.’”
Arkema, Inc. v. Honeywell, Int’l, Inc., No. 2012-1308, 2013 WL 425576, at *4
(Fed. Cir. Feb. 5, 2013) (quoting MedImmune, 549 U.S. at 127).
Here, Atain’s amended complaint clearly alleges an ongoing justiciable
controversy and an immediate need for a declaration of rights. (Am. Compl.

¶¶ 2, 9–20.) KRR has requested a defense in the underlying state-court action,
which Atain is providing in spite of asserting that no coverage exists under the
Policy with respect to the claims alleged against KRR. (Id. ¶¶ 19–20.) Atain
expressly reserved its right to deny coverage to KRR. (Id. at 20.) Under similar
situations, federal district courts in this Circuit routinely find the matter ripe
for decision and exercise jurisdiction. See, e.g., Accident Ins. Co. v. Greg
Kennedy Builder, Inc., 159 F. Supp. 3d 1285, 1293 (S.D. Ala. 2016) (“The
defendants have not explained (and the Court cannot) their odd position that
an insurer with the power and the desire to cease providing a defense fails to
present an actual controversy when it seeks a declaration that it owes no duty
to defend.”); Tower Ins. Co. of N.Y. v. Rainbow Granite & Marble, Inc., No. 1060052-CV, 2010 WL 1740700, at *2 (S.D. Fla. Apr. 29, 2010) (Cohn, J.) (“Thus,
there is no basis to dismiss the present Petition with regard to resolving the
duty to defend issue.”); Smithers Const., Inc. v. Bituminous Cas. Corp., 563 F.
Supp. 2d 1345, 1349 (S.D. Fla. 2008) (Moore, J.) (“[T]his Court will retain
jurisdiction over the duty to defend and indemnification issues.”); Atl. Cas. Ins.
Co. v. GMC Concrete Co., No. CIV.A. 07-0563WSB, 2007 WL 4335499, at *5
(S.D. Ala. Dec. 7, 2007) (“[T]here is unquestionably a ripe, live controversy on
th[e] issue. Indeed, courts have recognized a controversy exists regarding the
duty to defend when the insured seeks a defense from an insurance company,
but the insurance company denies that it is obligated.”).
The Defendants wrongly rely on Triple R Paving, Inc. v. Liberty Mut. Ins.
Co., 510 F. Supp. 2d 1090 (S.D. Fla. 2007) (Cohn, J.). There, the insurer
conceded that it had a duty to defend the defendants in the state-court action,
and disputed only whether it should bear the full cost of the defense. Id. at
1094. The court noted that the issue of apportionment of the cost of defense
“reveal[ed] the fundamental difficulty in applying this caselaw without the
underlying liabilities of the parties having been established.” Id. As such, it was
proper for the court in Triple R to stay any determination on the insurer’s duty
to indemnify until after the state court made a determination on liability. See
also Smithers Construction, 563 F.Supp.2d 1345, 1348 (S.D. Fla. 2008) (“[A]n
insurers[’] duty to indemnify is not ripe for adjudication until the insured is in
fact held liable in the underlying suit.”).
Here, a dispute exists over whether Atain has a duty to defend KRR in
the underlying state-court action. Thus, independent of Atain’s request for a
declaration as to its duty to indemnify, the request for a declaration on Atain’s
duty to defend provides appropriate grounds for this Court to exercise its
jurisdiction under 28 U.S.C. § 2201(a). However, the Court will not consider
the duty-to-indemnify issue until the earlier of (a) final disposition of the
underlying state-court action; or (b) a ruling on the duty to defend, at which

time the Court will entertain any motion that the parties may wish to file
concerning the duty to indemnify claims.
4. Conclusion
Accordingly, for the reasons explained above, the Court denies the
Defendants’ motion to dismiss (ECF No. 22). The Court orders the Defendants
to answer the amended complaint by June 9, 2017.
Done and Ordered in chambers, at Miami, Florida, on May 26, 2017.
________________________________
Robert N. Scola, Jr.
United States District Judge