Acuity, A Mutual Insurance Company v. Jeff Bretsnyder et al

Filing 21

MEMORANDUM AND ORDER denying 10 Motion to Dismiss or Stay filed by defendant Jeff Bretsnyder; and denying 11 Motion to Dismiss filed by defendants Jennifer and Dan Goodrum. Signed by District Judge John W. Lungstrum on 12/3/2013. (ses)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

ACUITY, A MUTUAL INSURANCE
COMPANY,

)
)
)
Plaintiff,
)
)
v.
)
)
JEFF BRETSNYDER, d/b/a HARDWOOD
)
FLOOR REFINISHING COMPANY;
)
JENNIFER GOODMAN; and
)
DAN GOODMAN,
)
)
Defendants.
)
)
_______________________________________)

Case No. 13-2353-JWL

MEMORANDUM AND ORDER
This matter comes before the Court on the motion to dismiss or stay filed by
defendant Jeff Bretsnyder (Doc. # 10), and the motion to dismiss filed by defendants
Jennifer and Dan Goodman (Doc. # 11). For the reasons set forth below, the Court
denies both motions.

I.

The Allegations in the Complaint

Plaintiff Acuity, A Mutual Insurance Company (“Acuity”) has brought the present
declaratory judgment action against defendants Jeff Bretsnyder, Jennifer Goodman, and
Dan Goodman. Acuity alleges that it issued an insurance policy to Mr. Bretsnyder, who
seeks coverage under the policy relating to a lawsuit filed against him in Kansas state

court by Jennifer and Dan Goodman.
According to the state court petition, which Acuity has incorporated by reference
into its complaint, the Goodmans allege that they engaged Mr. Bretsnyder to do floor
refinishing work at their home; that on August 30, 2012, while taking a “smoke break”,
Mr. Bretsnyder disposed of a cigarette in the area of the Goodmans’ porch; that a short
time later, a fire ignited while Mr. Bretsnyder was visiting a convenience store; and that
the fire was caused by the cigarette and Mr. Bretsnyder’s careless smoking. The
Goodmans have asserted a claim of negligence against Mr. Bretsnyder, and they seek
damages in excess of $400,000 relating to the fire.
In its complaint in this Court, Acuity alleges that, according to the policy (which
it attached and incorporated by reference into the complaint), it provided liability
coverage to Mr. Bretsnyder as an individual for “conduct of a business” owned by Mr.
Bretsnyder, namely, Hardwood Floor Refinishing Co., a business with the classification
description of “carpentry-interior”. Acuity further alleges that Mr. Bretsnyder’s actions
in allegedly causing the fire at the Goodmans were not covered under the policy because
he was not acting with respect to the conduct of the covered business, for three specific
reasons: (a) his actions in taking a smoking break and traveling to a convenience store
were not related to his business; (b) he was not performing hardwood floor or carpentry
work, but was instead performing epoxy chip work; and (c) he was not conducting the
business because he was performing the work for no compensation as a family favor for
the Goodmans, his sister and brother-in-law. Acuity thus seeks a declaratory judgment
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to the effect that the Goodmans’ claim against Mr. Bretsnyder is not covered under the
policy and that Acuity has no obligation to defend or to indemnify Mr. Bretsnyder for
that claim.

II.

Defendant Bretsnyder’s Motion to Dismiss or Stay (Doc. # 10)

Mr. Bretsnyder moves for dismissal of Acuity’s complaint or, alternatively, for
a stay pending the outcome of the Goodmans’ state-court action against him. The Court
addresses his arguments in turn.
A.

Mr. Bretsnyder first seeks dismissal for failure to state a claim.1 The Court

will dismiss a cause of action for failure to state a claim only when the factual allegations
fail to “state a claim to relief that is plausible on its face,” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007), or when an issue of law is dispositive, see Neitzke
v. Williams, 490 U.S. 319, 326 (1989). The complaint need not contain detailed factual
allegations, but a plaintiff’s obligation to provide the grounds of entitlement to relief
requires more than labels and conclusions; a formulaic recitation of the elements of a
cause of action will not do. See Bell Atlantic, 550 U.S. at 555. The Court must accept
the facts alleged in the complaint as true, even if doubtful in fact, see id., and view all
reasonable inferences from those facts in favor of the plaintiff, see Tal v. Hogan, 453

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Mr. Bretsnyder asserts this argument pursuant to K.S.A. § 60-212(b)(6), but
Kansas’s Rules of Civil Procedure do not apply in this Court. The Court therefore
considers this argument pursuant to Fed. R. Civ. P. 12(b)(6).
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F.3d 1244, 1252 (10th Cir. 2006). Viewed as such, the “[f]actual allegations must be
enough to raise a right to relief above the speculative level.” Bell Atlantic, 550 U.S. at
555. The issue in resolving a motion such as this is “not whether [the] plaintiff will
ultimately prevail, but whether the claimant is entitled to offer evidence to support the
claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quoting Scheuer v.
Rhodes, 416 U.S. 232, 236 (1974)).
In support of this argument, Mr. Bretsnyder states only that his actions were
covered by the insurance policy and that Acuity’s allegations are insufficient as a matter
of law to state a claim. He has not elaborated on that argument, however, or cited
authority, or even attempted to address the particular reasons given by Acuity in the
complaint supporting its assertion of non-coverage. Nor has Mr. Bretsnyder explained
how Acuity’s allegations are insufficient. Accordingly, the Court rejects this basis for
dismissal.
B.

Mr. Bretsnyder argues that the Court should exercise its discretion to

decline to entertain this declaratory judgment action. The Tenth Circuit has set forth the
following factors that the trial court should consider in deciding whether to hear a
declaratory judgment action:
[1] whether a declaratory action would settle the controversy; [2] whether
it would serve a useful purpose in clarifying the legal relations at issue; [3]
whether the declaratory remedy is being used merely for procedural
fencing or to provide an arena for a race to res judicata; [4] whether use
of a declaratory action would increase friction between our federal and
state courts and improperly encroach upon state jurisdiction; and [5]
whether there is an alternative remedy which is better or more effective.
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See State Farm Fire & Cas. Co. v. Mhoon, 31 F.3d 979, 983 (10th Cir. 1994) (brackets
in original, internal quotations omitted).
Mr. Bretsnyder argues that this action would not settle the controversy or clarify
the contractual relations of the parties (the first two Mhoon factors), but he does not
explain those conclusory assertions. He also argues that the ongoing state-court action
is “better situated to determine the insurer’s coverage obligations,” that this action raises
issues of Kansas law that “can be fully and more economically resolved” in the statecourt action, and that Acuity would suffer no prejudice from a dismissal because an
action is already pending in state court.2
The Court rejects this argument. Most significantly, the Goodmans’ state-court
petition did not include Acuity as a party, and Mr. Bretsnyder has not shown that Acuity
has been made a party to that suit or otherwise explained how the coverage issue would
or could arise in the state-court action. Thus, this case does not present a situation in
which the same issue is being litigated in multiple courts.3 For that reason, the final three

2

Mr. Bretsnyder also argues that jurisdiction and venue are not proper in this
Court based on these arguments, but he has not explained why such facts, even if true,
would deprive the Court of its ability to hear this action. Mr. Bretsnyder has not
disputed Acuity’s allegation that he has sought coverage under the policy; therefore, a
case or controversy exists, and the Court may hear the action. The Court therefore
rejects the lack of jurisdiction or venue as a basis for dismissal.
3

Mid-Continent Casualty Co. v. Village at Deer Creek Homeowners Ass’n, Inc.,
685 F.3d 977 (10th Cir. 2012), cited by Mr. Bretsnyder, in which the Tenth Circuit
upheld the district court’s discretionary decision to decline to hear a declaratory
judgment action, is distinguishable on that basis.
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Mhoon factors do not weigh in favor of dismissal. Moreover, this case would resolve
the issue of Acuity’s duties to Mr. Bretsnyder under its policy and thus would settle any
controversy between those parties relating to coverage. Finally, in light of the pending
state-court action, the requested declaration would be useful in clarifying the legal
relations between Acuity and Mr. Bretsnyder, particular with respect to Acuity’s duty
to defend Mr. Bretsnyder in the state-court action. For these reasons and based on a
consideration of the applicable Mhoon factors, the Court will not decline to hear this
declaratory judgment action.
C.

In the alternative, Mr. Bretsnyder requests a stay of this action pending the

outcome of the state-court action, but he has not explained why a stay is warranted.
Accordingly, the Court also rejects the stay request, and Mr. Bretsnyder’s motion is
denied in its entirety.

III.

Goodman Defendants’ Motion to Dismiss (Doc. # 11)

Defendants Jennifer and Dan Goodman move to dismiss Acuity’s complaint for
failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), based on their argument that
Acuity has not alleged facts that state a plausible claim under Kansas law that it has no
duty to defend or to indemnify Mr. Bretsnyder under the insurance policy. The Court
rejects this argument.
First, the Court concludes that Acuity has pleaded sufficient facts to support its
claim. Contrary to the Goodmans’ suggestion, the complaint is not based solely on
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conclusory statements of non-coverage. Rather, Acuity has set forth the applicable
policy language and alleged three specific, fact-based reasons why Mr. Bretsnyder is not
a covered insured for purposes of the Goodmans’ claim against him. Thus, Acuity’s
complaint contains sufficient allegations of fact.
Second, the Goodmans have not explained why Acuity’s claim fails as a matter
of law. The Goodmans state that Acuity has admitted in its complaint that its policy
covered carpentry work by Mr. Bretsnyder, and they argue that there is coverage here
because they have alleged in their state court petition that Mr. Bretsnyder was
performing floor refinishing work, which would fall with the meaning of “carpentry” as
a matter of law. Acuity has alleged in its complaint, however, that Mr. Bretsnyder was
not performing carpentry work prior to the fire because he was performing epoxy chip
work. That allegation must be accepted as true at this stage, and the Goodmans have not
offered any argument why epoxy chip work would fall within the scope of the policy.
Moreover, Acuity has alleged two other reasons for non-coverage here. Acuity
addresses those reasons as follows:
Contrary to Acuity’s self-serving conclusions (which the Court
should disregard), doing business with a family member does not preclude
coverage and neither does smoking a cigarette. It cannot be seriously
contested that a worker negligently smoking on a job site (regardless of a
familial relationship between the worker and the customer) is a covered
loss under this business liability insurance policy.
As noted above, Acuity has not merely relied on conclusory allegations, but has alleged
specific facts supporting its claim of non-coverage on multiple bases. Moreover, in

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arguing for coverage as a matter of law, the Goodmans have not addressed the particular
language of the policy, offered any legal analysis, or cited to any authority, controlling
or otherwise, and the Court is not prepared merely to accept their unsupported
pronouncement that coverage must exist under the facts as alleged in the complaint. The
Goodmans must do more to show to that Acuity cannot prevail as a matter of law at this
stage.
Finally, the Goodmans cite Kansas law to the effect that insurance policy
exclusions must be clear to be given effect. Acuity has not relied on an exclusion here,
however, as it claims that Mr. Bretsnyder is not a covered insured under the policy for
purpose of the Goodmans’ claim against him. The Goodmans have not explained why
any particular term of the policy is ambiguous or unclear.
Accordingly, the Court denies the Goodmans’ motion to dismiss.4

IT IS THEREFORE ORDERED BY THE COURT THAT the motion to dismiss
or stay filed by defendant Jeff Bretsnyder (Doc. # 10) is hereby denied.

IT IS FURTHER ORDERED BY THE COURT THAT the motion to dismiss
filed by defendants Jennifer and Dan Goodman (Doc. # 11) is hereby denied.

4

In light of this ruling, the Court need not address Acuity’s argument that the
Goodmans do not have standing to assert arguments relating to Acuity’s duty to defend
Mr. Bretsnyder.
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IT IS SO ORDERED.

Dated this 3rd day of December, 2013, in Kansas City, Kansas.

w/ John W. Lungstrum
John W. Lungstrum
United States District Judge

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