General Insurance Company of America v. The Walter E. Campbell Company, Inc. et al

Filing 131

MEMORANDUM. Signed by Judge William M Nickerson on 6/11/2013. (aos, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
GENERAL INSURANCE COMPANY OF
AMERICA

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v.
* Case No. WMN-12-3307
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THE WALTER E. CAMPBELL COMPANY, *
INC. et al.
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MEMORANDUM
This insurance coverage dispute arises from the Walter E.
Campbell Company’s (WECCO) substantial involvement in asbestos
personal-injury litigation.

Before the Court is (1) a motion to

dismiss the complaint or, in the alternative a motion abstain
from exercising jurisdiction under the Declaratory Judgment Act
or pursuant to Colorado River Water Conservation District v.
United States, 424 U.S. 800 (1976), and (2) a motion to dismiss
cross-claims.

ECF Nos. 40 & 104.

Both motions were filed by

WECCO, which is presently a defendant, and both are fully
briefed.
Upon consideration of the papers, facts, and applicable
law, the Court determines that (1) no hearing is necessary,
Local Rule. 105.6, and (2) both motions will be denied in part.
I.

FACTUAL AND PROCEDURAL BACKGROUND
WECCO is a Maryland corporation with its principal place of

business in Highland, Maryland.

For several decades, WECCO

engaged in the business of handling, installing, disturbing,
removing and selling asbestos-containing insulation materials.
Between 1963 and 1985, WECCO purchased numerous primary and
excess liability insurance policies from multiple insurers.
Since the 1990s WECCO has routinely been named in personalinjury asbestos lawsuits.

As a result, WECCO has had to seek

coverage from its insurers.

Hundreds of claims have been

resolved for a combined value stretching in to the tens of
millions of dollars.

Still, hundreds of additional cases remain

pending.
WECCO and its insurers dispute the policy provision under
which these claims fall.

WECCO asserts that they come under the

general liability provisions of the policies which are subject
to per occurrence limits, but the number of occurrences is not
limited.

The insurers, on the other hand, have taken the

position that the claims come under the “products hazard” or
“completed operations hazard” portions of the policies which are
subject to aggregate limits of liability.
The Complaint in this case, ECF No. 1, was filed by General
Insurance Company of America, Inc. (General), one of WECCO’s
insurers, and invokes this Court’s diversity jurisdiction
pursuant to 28 U.S.C. § 1332.

In addition to WECCO, General

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named as Defendants, WECCO’s other solvent insurers.1

It also

named, as a Defendant, the Maryland Property & Casualty
Insurance Guaranty Corporation (PCIGC).

PCIGC is a non-profit

corporation created by the Maryland General Assembly which
stands in the shoes of insolvent insurers to pay claims for
which those insurers would have been liable, subject to the
applicable policy limits and other restrictions imposed by the
statutory scheme.

After filing its own motion to dismiss, ECF

No. 19, but before it was fully briefed, PCIGC was voluntarily
dismissed by General.

ECF No. 83.

General seeks two forms of

relief, (1) declaratory judgments, and (2) contribution from
three of WECCO’s other insurers that General alleges have not
paid anything on WECCO’s asbestos-related claims.
II.

DISCUSSION
A. Motion to Dismiss the Complaint, ECF No. 40.
1. The Court Has Subject Matter Jurisdiction
WECCO’s motion to dismiss the Complaint is premised on an

argument that this Court lacks subject matter jurisdiction.

1

It

Those other insurers include The Continental Insurance Company,
National Indemnity Company, Federal Insurance Company, United
States Fire Insurance Company, The Hartford Financial Services
Group, Inc., St. Paul Fire & Marine Insurance Company, and
Pennsylvania Manufacturers Association Insurance Company. Some
of these parties have filed motions to join the oppositions
filed to these motions. See ECF Nos. 119 (by Pennsylvania
Manufacturers Association Insurance Company), 128 (by United
States Fire Insurance Company), 129 (by Federal Insurance
Company). The Court will grant the motions for joinder.
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is an argument that WECCO makes in two steps.

First, WECCO

asserts that the parties to this action should be realigned such
that WECCO should be identified as the plaintiff and General as
a defendant along with WECCO’s other insurers.

Second, WECCO

argues that PCIGC is a necessary and indispensable party under
Fed. R. Civ. P. 19 and, once it is joined in this action,
diversity is destroyed because both WECCO and PCIGC are Maryland
corporations.

Because WECCO’s argument fails at both steps, the

Court will deny WECCO’s motion to dismiss for lack of subject
matter jurisdiction.
The starting point on the question of realignment is
Indianapolis v. Chase National Bank of City of New York, 314
U.S. 63 (1941).

See also 13E Charles Alan Wright & Arthur

Miller & Edward H Cooper, Federal Practice and Procedure § 3607
(3d ed. 2009).

There, the Supreme Court held that “to sustain

diversity jurisdiction there must exist an ‘actual,’
‘substantial,’ controversy between citizens of different states,
all of whom on one side of the controversy are citizens of
different states from all parties on the other side.”
Indianapolis, 314 U.S. at 69 (internal citations omitted).

In

matters where diversity jurisdiction has been invoked, it is the
court’s obligation “to look beyond the pleadings and arrange the
parties according to their sides in the dispute.”
quotations omitted).

Id. (internal

“Whether the necessary ‘collision of

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interest’ exists . . . must be ascertained from the ‘principal
purpose of the suit,’ and the ‘primary and controlling matter in
dispute.’”

Id. (internal citations omitted).

Relying on Indianapolis and applying what has been dubbed
the “principal purpose test,” this Court, in U.S. Fidelity &
Guaranty Company v. A & S Manufacturing Company, Inc., 839 F.
Supp. 347 (D. Md. 1993) (Fidelity I) (Hargrove, J.), realigned
the parties where an insurer brought suit against its insured
and the insured’s other insurers for a declaratory judgment
after the other insurers refused to indemnify the insured.
Through cross-claims and counterclaims the insurers disputed the
proper allocation of costs among themselves.

The Court,

however, determined that those disputes were “merely ancillary
to the central issue of the duty to indemnify.”

Id. at 351.

That decision was affirmed by the Fourth Circuit which held that
“[t]he dispute among the insurers is secondary to whether the
insurers are liable to [the insured] and is hypothetical until
the insurers’ liability is determined.

The potentially

substantial, though not principal, controversies that [the
plaintiff] raises are subsumed in the primary issue of the
insurers’ liability to [the insured].”

U.S. Fidelity & Guar.

Co. v. A & S Manufacturing Co., Inc., 48 F.3d 131, 134 (4th Cir.
1995) (Fidelity II).

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The proper alignment of the parties is determined by a
review of the pleadings and the nature of the controversy.
Here, realignment is not warranted.

Id.

The Complaint reveals that

General’s claim for contribution is not contingent on the
outcome of its request for declaratory judgments.

In contrast

to Fidelity I and Fidelity II, and cases from other courts where
the parties have been realigned, the Complaint here presents two
distinct, but balanced, claims.

See U.S. Fidelity & Guar. Co.

v. Thomas Solvent Co., 955 F.2d 1085, 1090-91 (6th Cir. 1992)
(“if the insurers are held not to owe a duty to indemnify any of
the Thomas Parties, then the issue of contribution is moot”).
The Court cannot say, therefore, that one is primary and the
other is secondary.2

2

It is also worth noting that a number of the Defendant Insurers
have asserted counterclaims against General and cross-claims
against one another. See ECF Nos. 32, 39, 98. Although the
Second Circuit does not employ the primary purpose test, the
Court finds its opinion in Maryland Casualty Co. v. W.R. Grace &
Co., 23 F.3d 617 (2d Cir. 1993), to be helpful. There the court
noted that similar animosity among the insurers would counsel
against realignment under the primary purpose test because
“[r]ealignment hinges on those issues that divide the parties,
not on those on which they agree.” Id.; see also Am. Motorists
Ins. Co. v. Trane Co., 657 F.2d 146, 151 (7th Cir. 1981) (citing
C. Y. Thomason v. Lumberman’s Mut. Cas. Co., 183 F.2d 729 (4th
Cir. 1950)).

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Although WECCO’s Motion to Dismiss is defeated by the
Court’s decision not to realign the parties, it is also
necessary to consider whether PCIGC is a party that must be
joined.

Fed. R. Civ. P. 19 sets forth a two-step inquiry which

examines, under Rule 19(a), whether the party is necessary and,
if so, whether it is indispensable pursuant to Rule 19(b).

Am.

Gen. Life & Acc. Ins. Co. v. Wood, 429 F.3d 83, 92 (4th Cir.
2005); see also Schlumberger Indus. v. Nat’l Sur. Corp., 36 F.3d
1274, 1285-86 (4th Cir. 1994) (“Only necessary persons can be
indispensable, but not all necessary persons are
indispensable.”).

The decision to join or not join a party is

committed to the discretion of the court, and it is the party
seeking joinder – here, WECCO - that has the burden of
establishing that the party sought to be joined “is needed for a
just adjudication.”

Wood, 429 F.3d at 92 (quoting 7 Charles

Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice
and Procedure § 1609 (3d ed. 2001)).
WECCO has not met its burden of establishing that PCIGC is
a necessary and indispensable party.

It relies on Schlumberger,

another insurance dispute, where the district court denied the
insured’s motion to dismiss.

Similar to WECCO’s motion here,

the insured’s motion in Schlumberger was premised on its
argument that certain of its insurers were required to be joined
as necessary and indispensable parties, but that joining those

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insurers would destroy complete diversity.

36 F.3d at 1285.

The Fourth Circuit reversed the district court reasoning that
there is a practical possibility for prejudice to [the
insured] that is not present in cases where the
insurers cover the same liability for the same time
period: [the insured] could be ‘whipsawed’ . . . and
wind up with less than full coverage even though it
was legally entitled to full coverage.
Id. at 1286.

The Fourth Circuit saw the potential for “whipsaw”

in three required inquiries in the coverage dispute: (1)
whether, as a matter of law, the insurance policies provided
coverage for the alleged expenses, (2) assuming coverage was
provided what, as a matter of law, was the “trigger” for that
coverage to attach, and (3) when, as a matter of fact, did the
trigger occur.

Id.

In light of the prejudice resulting from

the potential for whipsaw, the court concluded that complete
relief could not be adjudicated in the absence of some of the
insurers.

Id. at 1287.

WECCO suggests that the court’s holding

in Schlumberger is determinative of its motion here.
WECCO is incorrect, however.

PCIGC, unlike the parties

that the insured sought to join in Schlumberger, is not simply
another insurer.

Rather, PCIGC is a guarantor and a creature of

statute, and its ability to pay claims, as well as the amount it
can pay on covered claims, is limited by those provisions.3

3

See

Indeed, the contingencies imposed on PCIGC’s obligation to pay
claims were precisely the basis for PCIGC’s own motion to
dismiss prior to its voluntary dismissal by General. See ECF
8

Md. Code Ann., Ins. § 9-301 et seq.; see also Igwilo v. Prop. &
Cas. Ins. Guar. Corp., 750 A.2d 646, 650 (Md. Ct. Spec. App.
2000).

These limitations are simply too much to be, as WECCO

claims, “a distinction without a difference.”

ECF No. 109 at 6.

Instead, the additional layer of limitations imposed on PCIGC’s
payment obligations creates a distinction that is great enough
to limit the potential for whipsaw in this case.
have found as much as well.

Other courts

For example, in UTI Corp. v.

Fireman’s Fund Insurance, Co., 896 F. Supp. 389 (D.N.J. 1995),
the court held that the Pennsylvania Insurance Guaranty
Association (PIGA), an entity analogous to PCIGC in the present
case, was not a necessary party.

Indeed, the court found that

limitations on PIGA’s coverage obligations minimized the
potential for prejudice to the parties already in the case.

Id.

at 395 (explaining limitations imposed by PIGA’s governing
statute including exhaustion of available coverage, and nonduplication of recovery).4

As the court in Schlumberger noted,

No. 19. WECCO suggests that General’s naming PCIGC as a
defendant in its Complaint reveals a belief that PCIGC had
potential liability in this action. ECF No. 109 at 7. But,
whether General believed PCIGC was liable to it has no bearing
on WECCO’s argument claiming that it, not General, will be
prejudiced if PCIGC is not joined.
4

WECCO argues that, at this stage of the litigation, it would be
improper for the Court to engage in a “rigorous examination of
the statutory requirements” at play and, in any event, General
has not shown that WECCO has not satisfied those requirements.
ECF No. 109 at 8. This argument, however, turns the parties’
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determinations of whether a party is necessary and indispensable
require the court to “consider the practical potential for
prejudice in the context of the particular factual setting
presented by the case at bar.”

32 F.3d at 1286.

In this

context, the Court finds only a very limited potential for
prejudice to WECCO and, as a result, determines that PCIGC is
not a necessary party to this action.5
2. The Court Will Reserve on the Issue of Abstention
In the alternative, WECCO asks the Court to abstain from
exercising jurisdiction either under the Declaratory Judgment
Act or under the doctrine articulated in Colorado River, supra
at 1, pending the resolution of the motion for remand in a
parallel case filed by WECCO which is now before the United
States District Court for the District of Columbia.
1 at 7-14.

ECF No. 40-

General responds by arguing that the Court should

burdens on their head and does not accurately reflect the nature
of the inquiry required. As noted above, supra at 7, it is
WECCO as the party seeking joinder, who must establish that
PCIGC’s presence is required for a just adjudication, and this
inquiry necessarily includes some showing that the statutory
requirements are met. WECCO has not yet satisfied that burden.
5

Throughout the briefing on the two pending motions there has
been some mention of WECCO’s ability to protect its interests by
impleading PCIGC. WECCO has taken the position, however, that
impleading PCIGC would be improper under the terms of Fed. R.
Civ. P. 14(a). ECF No. 130 at 7-8. The Court will not
speculate as to the viability of claims which are not presently
before it, but it suffices to say that Rule 14 or Rule 13(h) in
combination with Rule 20, provide WECCO at least a colorable
means of seeking relief from PCIGC.
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exercise jurisdiction under the first-to-file rule because the
two cases involve the same parties and the same issues, but this
case was filed two months before WECCO filed its case in the
District of Columbia.

“The first-to-file rule refers to the

doctrine that when the same party or parties have filed similar
litigation in separate federal fora, the matter that was filed
first should proceed, and the later-filed action should be
stayed, transferred, or enjoined.”

Butler v. DirectSat USA,

LLC, 800 F. Supp. 2d 662, 665 (D. Md. 2011).
to be disregarded lightly.

This rule is not

Neuralstem, Inc. v. StemCells, Inc.,

573 F. Supp. 2d 888, 900 (D. Md. 2008).

WECCO does not respond

to General’s argument directly, but in its briefing on its
motion to dismiss cross-claims asks that the Court refrain from
ruling on this issue (and the abstention issues in general)
until the motion for remand currently pending before the
District of Columbia court is resolved.

ECF No. 130 at 10.

Because whether that case is proceeding in federal court or in
state court impacts the Court’s analysis of the first-to-file
and abstention issues, the Court will reserve on those issues
until the District of Columbia court rules on WECCO’s pending
motion for remand.

WECCO will be ordered to notify the Court of

such a ruling by the District of Columbia court.

In the

meantime, the stay of discovery and further motions practice
presently in place, see ECF No. 127, will continue.

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B. Motion to Dismiss Cross Claims
WECCO has also moved to dismiss cross-claims filed against
it by its co-defendants.

ECF No. 104.

Its motion, as well as

the opposition filed by Defendant St. Paul Fire and Marine
Insurance Company, ECF No. 118, advance the same arguments
already addressed above.

Therefore, the Court will deny WECCO’s

motion to the extent it seeks dismissal of the cross-claims and
will reserve on WECCO’s request that the Court abstain from
exercising jurisdiction.
III. CONCLUSION
For the foregoing reasons WECCO’s Motion to Dismiss and
Motion to Dismiss Cross-Claims will be denied, in part.

A

separate Order will issue.

______________/s/__________________
William M. Nickerson
Senior United States District Judge
June 11, 2013

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