ELI LILLY AND COMPANY et al v. ARCH INSURANCE COMPANY et al
ORDER granting #135 Westchester's MOTION to Dismiss - The Court concluded that there is no evidence that Defendant Westchester Surplus Lines Insurance Company has a duty to defend; and the Court lacks subject matter jurisdiction over Plaintiffs', Eli Lilly and Company and Eli Lilly Do Brasil LTDA, claim that this Defendant has a duty to indemnity them; therefore, Plaintiffs' claims against this Defendant are dismissed. Because the latter ruling does not constitute a decision on the merits, the dismissal is WITHOUT prejudice. Signed by Judge Larry J. McKinney on 3/18/2014. (JKS)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
ELI LILLY AND COMPANY, and
ELI LILLY DO BRASIL LTDA,
ARCH INSURANCE COMPANY, et al.,
ORDER ON DEFENDANT
WESTCHESTER SURPLUS LINES INSURANCE COMPANY’S
MOTION TO DISMISS
Defendant Westchester Surplus Lines Insurance Company (“WSLIC”) moves to
dismiss Plaintiffs Eli Lilly and Company’s and Eli Lilly Do Brasil LTDA’s (collectively,
“Lilly’s”), declaratory judgment claim against it pursuant to Rules 12(b)(1) and 12(b)(6)
of the Federal Rules of Civil Procedure (“Rules 12(b)(1) and 12(b)(6)”). Dkt. No. 135.
For the reasons stated herein, the Court GRANTS WSLIC’s motion.
I. BACKGROUND AND ARGUMENTS
In its complaint, Lilly seeks a declaration that WSLIC, among other insurance
companies, has a duty to defend and indemnify Lilly in lawsuits brought against Lilly in
Brazil. Dkt. No. 16-1, Compl. ¶¶ 8, 13, 17, 19, 21-28. WSLIC asserts that its policies
are excess policies and its liability to Lilly arises “’only when the primary insurer’s
coverage is exhausted.’” Dkt. No. 136, at 2-3 (quoting Cont’l Ins. Co. v. N. Ind. Pub.
Serv. Co., No. 2:05-cv-156, 2:05-cv-210, 2011 WL 1322530, at *5 (N.D. Ind. Apr. 5,
2011) (hereinafter, “NIPSCO”). WSLIC further asserts that its policies contain no duty
to defend. Id. at 2. Therefore, WSLIC argues that because there is no proof that the
coverage underlying WSLIC’s excess policies has been exhausted, Lilly’s indemnity
claim is not ripe, therefore the Court lacks subject matter jurisdiction and dismissal is
proper under Seventh Circuit precedent.
Id. at 3 & n.7 (citing Med. Assur. Co. v.
Hellman, 610 F.3d 371, 375 (7th Cir. 2010); Lear Corp. v. Johnson Elec. Holdings Ltd.,
353 F.3d 580, 583 (7th Cir. 2003); Westfield Ins. Co. v. Sentry Homes, Inc., No. 1:10-cv00331-JMS-DML, 2010 WL 3614287, at *3 (S.D. Ind. Sept. 8, 2010)).
Lilly argues that WSLIC’s motion has been made moot by the entry of a Case
Management Plan, to which WSLIC agreed, that stages discovery and the issues to be
decided. Dkt. No. 144, at 2. It further contends that the Court has subject matter over
Lilly’s claims because there is an actual controversy between Lilly and WSLIC based on
the number of claims that have been filed against Lilly, the stated value of those claims
and an insurer’s obligation to cooperate in settlement of the cases. Id. at 2-6 (citing,
inter alia, ACandS, Inc. v. Aetna Cas. & Sur. Co., 666 F.2s 819, 823 (3d Cir. 1981), aff’d
in part and rev’d in part on other grounds by 764 F.2d 968 (3d Cir. 1985)); Bankers
Trust Co. v. Old Republic Ins. Co., 959 F.2d 677, 680 (7th Cir. 1992); Metalworking
Lubricants Co. v. U.S. Fire Ins. Co., 460 F. Supp. 2d 897 (S.D. Ind. 2006)). Lilly also
asserts that it has stated a claim against WSLIC under Rule 8 because Lilly’s complaint
sufficiently alerts excess insurers to their potential liability, which is all that is necessary
to defeat a Rule 12(b)(6) motion. Id. (citing NIPSCO, 2011 WL 1322530, at *3-6).
Essentially the standard for deciding a motion to dismiss brought under Rule
12(b)(1) for lack of jurisdiction is the same as that for a motion under Rule 12(b)(6).
See Esekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995). Therefore, the Court must
accept as true all well-pleaded factual allegations in the Complaint, and draw
reasonable inferences in the favor of Lilly. Id. Documents central to the Complaint and
referred to in it may also be considered. Williamson v. Curran, 714 F.3d 432, (7th Cir.
2013) (citing Geinosky v. City of Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012) (further
Further, the Court “’may properly look beyond the jurisdictional
allegations of the complaint and view whatever evidence has been submitted on the
issue to determine whether in fact subject matter jurisdiction exists.’” Esekiel, 66 F.3d
at 897 (quoting Capitol Leasing Co. v. Fed. Deposit Ins. Corp., 999 F.2d 188, 191 (7th
Cir. 1993) (per curium) (further citations omitted)).
The Declaratory Judgment Act does not provide a basis for federal subject matter
jurisdiction; therefore, there must be an independent basis for jurisdiction, such as
diversity. See Geisha, LLC v. Tuccillo, 525 F. Supp. 2d 1002, 1009 (N.D. Ill. 2007)
(citing GNB Battery Techs., Inc. v. Gould, Inc., 65 F.3d 615, 619 (7th Cir. 1995) (citing
Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671 (1950))). That is the case
here: the insurers allege that the amount in controversy is greater than $75,000.00,
Dkt. No. 16, ¶ 8 (and Lilly has stated as much in its Response); and Lilly as well as the
insurers allege that the parties are diverse. Dkt. Nos. 16, ¶ 7; 16-1, Compl. ¶¶ 2-4.
Once an independent basis exists, however, “jurisdiction” under the Declaratory
Judgment Act requires that there is an “actual controversy,” which the Seventh Circuit
has described as “’a separate and distinct jurisdictional question of constitutional
dimension.’” GNB Battery, 65 F.3d at 620 (citations omitted). The Supreme Court has
stated that “”cases of actual controversy’ under the [Declaratory Judgment] Act refers to
the type of ‘Cases’ and ‘Controversies’ that are justiciable under Article III [of the U.S.
Constitution].” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 128, 126-27 (2007). The
MedImmune Court quoted the following standard: “’Basically, the question in each case
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.’” Id. at 127
(quoting Md. Casualty Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)). Ripeness
is encompassed by the concept of immediacy and “is predicated on the ‘central
perception . . . that courts should not render decisions absent a genuine need to resolve
a real dispute’ . . . and ‘[c]ases are unripe when the parties point only to hypothetical,
speculative, or illusory disputes as opposed to actual, concrete conflicts.’” Wis. Cent.,
Ltd. v. Shannon, 539 F.3d 751, 759 (7th Cir. 2008) (quoting 13A Charles Alan Wright,
Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3532.1, at 114
(2d ed. 1984) (further citation omitted)). The Court should consider “’the fitness of the
issues for judicial decision and the hardship to the parties of withholding court
Id. (quoting Metro. Milwaukee Ass’n of Commerce v. Milwaukee
County, 325 F.3d 879, 882 (7th Cir. 2003) (quoting Abbott Labs. v. Gardner, 387 U.S.
136, 149 (1967))). Even when these jurisdictional prerequisites are met, the Court may
decline to exercise jurisdiction over the claims pursuant to its discretionary authority
under the Declaratory Judgment Act. See Nationwide Ins. v. Zavalis, 52 F.3d 689, 692
(7th Cir. 1995).
The Court concludes that the issues related to Lilly’s policy from WSLIC are not
ripe and, therefore, should be dismissed without prejudice. First, Lilly’s argument that
WSLIC waived its argument regarding ripeness when it agreed to the Case
Management Plan is without merit. Subject matter jurisdiction cannot be waived and
the Court is obligated to ensure that it has jurisdiction before it proceeds. See Rodas v.
Seidlin, 656 F.3d 610, (7th Cir. 2011) (citing Union Pac. R.R. Co. v. Bhd. of Locomotive
Eng’rs & Trainmen Gen. Comm. of Adjustment, C. Region, 558 U.S. 67, 81 (2009);
Arbaugh v. Y&H Corp., 546 U.S. 500, 510 (2006)); see also Henderson ex re.
Henderson v. Shinseki, ___ U.S. ___, 131 S.Ct. 1197, 1202, 179 L.Ed.2d 159 (2011)
(stating that “federal courts have an independent obligation to ensure that they do not
exceed the scope of their jurisdiction”).
Second, in the Seventh Circuit the general rule is that a duty to indemnify is not
ripe until liability has been established. See Med. Assur., 610 F.3d at 375 (citing Lear,
353 F.3d at 583 (collecting cases)); see also Nationwide Ins., 52 F.3d at 693. This rule
is based on the fact that determination of an indemnity issue would necessarily require
resolution of factual issues in the underlying action. See Nationwide Ins., 52 F.3d at
693. In this case, there has been no determination on the merits of the underlying
claims and no resolution of the type of losses Lilly will incur. As such, there are open
questions as to indemnity. Further, there is no dispute that Lilly’s policies with WSLIC
are excess policies that will not be at issue unless and until the primary insurers’ liability
has been exhausted. See Allstate Ins. Co. v. Dana Corp., 759 N.E.2d 1049, (Ind. 2001)
(stating that the insured “must exhaust the underlying coverage application to the losses
supporting its excess coverage claim” before an excess insurer can be liable). Although
Lilly asserts that the claims against it total approximately $250 million and the WSLIC
policies have coverage of $100 million or more, Lilly is fighting the underlying claims
and there has been no determination of liability in any amount much less a
determination that Lilly’s other insurance policies will not cover it.
Lilly also argues that its claim against WSLIC is ripe because the damages at
issue are high and it is at a severe disadvantage because the lawsuits are pending in a
foreign country where the legal system is different from that in the United States. Dkt.
No. 144, at 5 (citing, Sentry Homes, 2010 WL 3614287, at *2-3 (referencing Westfield
Ins. co. v. Sheehan Constr. Co., 575 F. Supp. 2d 956, 960 (S.D. Ind. 2006), for the
proposition that this rule is abrogated in “rare circumstances” and listing factors). The
Court recognizes that there are exceptions to the general rule; however, Lilly has not
persuaded the Court that this is a rare circumstance. Other than the total amount of the
claims, which is high, there is no evidence that there is a high probability that Lilly will be
held liable for the total amount, that it could not pay the amount itself, or that its other
insurance will not cover the claims. In addition, there is no allegation here that WSLIC
is contractually obligated to participate in settlement discussions or otherwise defend
Lilly in the underlying litigation.1
Under these circumstances, the Court can only
There is a different standard for jurisdiction over a duty to defend, primarily because
such an issue is one of contract interpretation that does not depend upon resolution of
any facts or issues in the underlying action. See Nationwide Ins., 52 F.3d at 695;
Sheehan Constr. Co., 575 F. Supp. 2d at 959. Upon the challenge by WSLIC that there
is no duty to defend in the policies at issue, Lilly provided no evidence that such a duty
exists and, as a proponent of jurisdiction, it bore the burden of proof on that issue. See
Smart v. Local 702 Int’l Bhd. of Elec. Workers, Local 702, 562 F.3d 798, 802-03 (7th Cir.
2009). Therefore, the Court dismisses Lilly’s claim to the extent it can be read to allege
that WSLIC has a duty to defend it in the underlying suits.
conclude that there has been no “injury in fact” and the indemnity issue is not ripe,
which deprives the Court of jurisdiction.
For the reasons stated herein, the Court GRANTS Defendant Westchester
Surplus Lines Insurance Company’s Motion to Dismiss, Docket No. 135. The Court
concluded that there is no evidence that Defendant Westchester Surplus Lines
Insurance Company has a duty to defend; and the Court lacks subject matter
jurisdiction over Plaintiffs’, Eli Lilly and Company and Eli Lilly Do Brasil LTDA, claim that
this Defendant has a duty to indemnity them; therefore, Plaintiffs’ claims against this
Defendant are dismissed. Because the latter ruling does not constitute a decision on
the merits, the dismissal is without prejudice.
IT IS SO ORDERED this 18th day of March, 2014.
LARRY J. McKINNEY, JUDGE
United States District Court
Southern District of Indiana
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