Wausau Underwriters Insurance Company v. Superior Linen Service, Inc. et al

Filing 32

OPINION AND ORDER by Chief Judge Gregory K Frizzell ; terminating party Great American Insurance Company, Robbie Burke (Special Administrator of the Estate of Douglas Ray Ramey) and Joann Crawford (Individually and as Surviving Spouse of Douglas Ramey, Deceased) ; denying 29 Motion for Judgment; granting 25 Motion to Dismiss (hbo, Dpty Clk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA

WAUSAU UNDERWRITERS INS. CO.,
Plaintiff,
v.
SUPERIOR LINEN SERVICE, INC.,
an Oklahoma corporation; JOANN
CRAWFORD, Individually and as
Surviving Spouse of Douglas Ramey,
Deceased; ROBBIE BURKE, Special
Administrator of the Estate of Douglas
Ray Ramey,
Defendants.
JOANN CRAWFORD, Individually and
as the Surviving Spouse of Douglas
Ramey, Deceased; and ROBBIE BURKE,
Special Administrator for the Estate of
Douglas Ramey, Deceased;
Third-Party Plaintiffs,
v.
GREAT AMERICAN INSURANCE CO.,
a foreign corporation,
Third-Party Defendant.

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Case No. 13-CV-196-GKF-TLW

OPINION AND ORDER
Before the court are the Motion to Dismiss [Dkt. #25] filed by Third-Party Defendant
Great American Insurance Co. (“Great American”) and the Motion for Judgment on the
Pleadings [Dkt. #29] filed by Third-Party Plaintiffs Joann Crawford and Robbie Burke.
I. Parties/Procedural Background
Plaintiff Wausau Underwriters Ins. Co. (“Wausau”) is the workers compensation
insurance carrier for defendant Superior Linen Service, Inc. (“Superior”). Great American
provides commercial umbrella liability insurance coverage for Superior.
On June 12, 2009, Douglas Ray Ramey, an employee of Express Personnel, was sent to
provide mechanical services at Superior. While working on a hydraulic lift, he was crushed to
death when the lift fell on him. Pursuant to the Oklahoma Workers Compensation Act, 85 Okla.
Stat. § 1 et seq., Express Personnel provided worker’s compensation death benefits to Ramey’s
estate.
On August 27, 2010, Joann Crawford, Ramey’s surviving spouse, sued Superior and
Advance Lifts, Inc., the manufacturer of the hydraulic lift, in Tulsa County, Oklahoma District
Court, Case No. CJ-2010-5450 (“State Court Case”). [Dkt. #2-2, State Court Case Petition].
Crawford asserted claims against Superior for negligence and premises liability, and an
alternative claim of employer liability under the Parret doctrine. [Id. at 3-4].
Wausau was notified of the State Court Case and agreed to provide Superior with a
defense pursuant to a reservation of rights. Subsequently, Wausau filed this action seeking a
judicial determination that the worker’s compensation policy (the “Policy”) does not obligate it
to continue to defend or to pay any judgment which may be rendered against Superior in the
State Court Case. It named Crawford and Burke as defendants because “they have a legal

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interest in whether the Policy obligates Wausau to indemnify Superior for any judgment
Crawford or Burke obtain against Superior in the State Court case, and because, if Crawford is
not joined as a defendant, any judgment in this action might not be binding upon her or the
Estate of Ramey.” [Dkt. #2, Complaint, ¶10.]. Wausau asks the court to enter judgment
declaring: (1) it is not obligated under the Policy to defend and indemnify Superior in the State
Court Case; (2) Ramey was not an employee of Superior; (3) even if he is deemed to have been
an employee of Superior, Part One of the Policy (Workers Compensation), does not apply to the
claims against Superior in the State Court case because Crawford and Burke are not seeking to
recover benefits from Superior pursuant to the Oklahoma Workers Compensation Act; and (4)
even if Ramey is deemed to have been an employee of Superior, Part Two of the Policy
(Employers Liability Insurance), does not apply to Crawford’s claim against Superior in the State
Court Case because it excludes bodily injury intentionally caused or aggravated by the employer.
[Id., ¶¶12-15].
Crawford and Burke filed an Answer [Dkt. #11] and a Third Party Complaint against
Great American. [Dkt. #12]. They allege that Great American issued Superior a commercial
umbrella liability policy, Number TUU-5-68-05-81 for the policy period January 1, 2009 to
January 1, 2010 (“Policy”), which obligates Great American to defend and indemnify Superior in
the State Court Case. [Id., ¶¶5, 9]. They claim they have a legal interest in whether the policy
obligates Great American to indemnify Superior for any judgment they may obtain against
Superior in the State Court Case. They also claim they are intended beneficiaries of the policy.
[Id., ¶10].
Great American moved to dismiss the Third Party Complaint. [Dkt. #25]. Crawford and
Burke objected to the motion [Dkt. #28] and filed a Motion for Judgment on the Pleadings [Dkt.

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#29] arguing that if the court dismisses their Third Party Complaint against Great American, it
must also dismiss Wausau’s complaint against them for failure to join an indispensable party in
violation of Fed. R. Civ. P. 19.
On September 18, 2013, Great American filed a declaratory judgment action in this court
against Superior, Burke and Crawford, seeking a determination of its rights and obligations with
respect to its policy. See Great Am. Ins. Co. v. Superior Linen Serv, et al., Case No. 4:13-CV616-GKF-PJC.
On October 14, 2013—the first day of trial of the State Court Case—the parties
announced the case had settled. See OCIS Case Summary, Crawford v. Superior Linen Servs., et
al., CJ-2010-5450, Oct. 14, 2013.
II. Discussion
A. Motion to Dismiss
In its Motion to Dismiss, Great American asserts: (1) Crawford and Burke lack standing
to sue Great American; (2) there is no “actual controversy” between third-party plaintiffs and
Great American; (3) no third-party claim has been stated against Great American; and (4) this
court does not have diversity jurisdiction over the third-party claim. Because the court concludes
dismissal is appropriate on the first two grounds, it does not address the remaining grounds urged
by Great American.
1. Standing
Great American contends the Third Party Complaint must be dismissed pursuant to
Federal Rule of Civil Procedure 12(b)(6) because Crawford and Burke have neither a contractual
nor a statutory relationship with Great American.

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As the court’s jurisdiction of this case is grounded in diversity, state law governs the
viability of the third party plaintiffs’ complaint. See Erie R.R. Co. v. Tompkins, 304 U.S. 64
(1938). In Knight ex rel. Ellis v. Miller, 195 P.3d 372 (Okla. 2008), the Oklahoma Supreme
Court held that third party claimants such as Crawford and Burke may not seek a declaration
regarding the coverage provided by a defendant’s liability policy.
In Knight, plaintiff, who was injured in an automobile accident, filed a personal injury
lawsuit against the other motorist and the motorist’s employer. Id. at 373. Thereafter, plaintiff
amended his petition to add a claim for declaratory judgment against the employer’s insurer,
Empire Fire & Marine Insurance Company (“Empire”). The insurer filed a motion to dismiss,
arguing plaintiff, who was not insured under the policy and had not yet obtained a judgment
against an Empire-insured, lacked standing to sue for declaration of coverage, and therefore there
was no requisite actual justiciable controversy between parties. The trial court granted the motion
and certified an interlocutory appeal. Quoting a decision by an Oklahoma Court of Appeals in
Equity Ins. Co. v. Garrett, 178 P.3d 201 (Okla. Civ. App. 2008), the Oklahoma Supreme Court
agreed that a 2004 amendment to Oklahoma’s Declaratory Judgment Act, 12 Okla. Stat. Supp.
2004 § 1651 et seq., permits a declaratory action to determine the rights and obligations of the
insured and the insurer under a liability policy or a policy of indemnity against liability. Id.
However, the court stated:
[I]t does not follow that a declaratory action involving the coverage of a liability
insurance policy, which is now permitted by § 1651, may be brought by one who
neither is a party to the contract nor has a presently enforceable interest in it.
Before there can be a case of actual justiciable controversy presented to the court,
there must be a party with standing to pursue the action so courts are asked to
determine legally protected interests which are concrete, and are not asked to
decide hypothetical or conjectural questions. Standing focuses on the party
seeking to get his complaint before the court and not on the issues tendered for
determination. In standing problems, the inquiry posed is whether the party
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invoking the court’s jurisdiction has a legally cognizable interest in the outcome
of the tendered controversy.
As Empire argues, and we agree, Knight is a stranger to the insurance contract
between Empire and Timeline and does not have a judgment against an Empireinsured. He is seeking a declaration that Empire is obligated to pay any judgment
he may recover against Timeline or its employee Miller, but there is no judgment
in existence and there may never be one. He has no legally cognizable or
protectable interest in the controversy and he will not have one unless and until he
should succeed in the negligence action, for it is only at that point that Empire
may have a legal obligation to pay. Knight’s interest is not real, but potential; it is
contingent on the future adjudication of the alleged torts.
Consequently, there is not presently an actual, justiciable controversy between
Knight and Empire about Empire’s obligation to pay based on an insurance
contract between Empire and Timeline Other courts have precluded declaratory
judgment actions under like circumstances and we find their reasoning
convincing.
Id. at 375 (citations, footnotes and internal quotations omitted).
Here, as in Knight, Crawford and Burke are strangers to the Great American policy. They
are not named insureds under the policy, nor do they have a judgment against the insured,
Superior. Instead, they are third-party claimants seeking to impose liability against Superior.1
Consistent with Knight, this court concludes the third party plaintiffs lack standing to seek a
declaration regarding the coverage of the Great American policy.
2. “Actual Controversy”
“[A] declaratory judgment suit must be ‘definite and concrete, touching the legal
relations of parties having adverse legal interests,’ must be ‘real and substantial’ and ‘admit of
specific relief through a decree of a conclusive character, as distinguished from an opinion
advising what the law would be upon a hypothetical state of facts.’” Surefoot LC v. Sure Foot

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The court is not convinced the reported settlement of the State Court Case would serve to confer to standing on
Crawford and Burke. See Colony Ins. Co. v. Burke, 698 F.3d 1222, 1234 (10th Cir. 2012) (holding that child who
died in foster care in Oklahoma had neither a contractual nor statutory relationship with foster parent’s liability
insurer; therefore, executor of the estate, who obtained wrongful death judgment against foster parent, was “a
stranger to the contract and . . . only a third-party claimant”).

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Corp., 531 F.3d 1236, 1244 (10th Cir. 2008). A district court can grant declaratory relief only if
there is an “actual controversy” within its jurisdiction. 28 U.S.C. § 2201. See Laguna Publ’g..
Co. v. Employers Reinsurance Corp., 617 F. Supp. 271, 273 (C.D. Cal. 1985). “[T]he question of
ripeness turns on ‘the fitness of the issues for judicial decision’ and ‘the hardship to the parties of
withholding court consideration.’” Id. (quoting Pac. Gas & Elec. Co. v. State Energy Res.
Conservation and Dev. Comm’n, 461 U.S. 190, 201 (1983)).
In Laguna, the court concluded there was no actual controversy between a third-party
claimant and a tort defendant’s excess liability insurer because, until issues related to liability
under the primary policy were resolved, the court could not be certain a controversy concerning
the excess policy would arise. 617 F.Supp. at 273. In Knight, the Oklahoma Supreme Court
found there was no actual, justiciable controversy between a motorist injured in an auto accident
and the other motorist’s insurer. 195 P.3d at 375.
In like manner, this court concludes that because Crawford and Burke are, at this point,
merely third-party claimants seeking judgment against a tort defendant’s liability insurer, their
third-party complaint fails to state an actual, justiciable controversy.
B. Motion for Judgment on the Pleadings2
In their Motion for Judgment on the Pleadings [Dkt. #29], Crawford and Burke assert that
if the court finds they do not have standing to bring Great American into this litigation and
dismisses their Third Party Complaint, then Wausau’s Complaint should be dismissed as well for
failure to join an indispensable party in violation of Fed. R. Civ. P. 19. Wausau filed no
response to the motion, but Great American objected, arguing it is neither an indispensable nor a
necessary party to the action. [Dkt. #31].

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Crawford and Burke adopt their Response to Wausau’s Motion to Dismiss [Dkt. # 28] in support of their Motion
for Judgment on the Pleadings. [Dkt. #29 at 2].

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Rule 19 provides, in pertinent part:
(a) Persons Required to Be Joined if Feasible.
(1) Required Party. A person who is subject to service of process and
whose joinder will not deprive the court of subject matter jurisdiction must
be joined as a party if:
(A) in that person’s absence, the court cannot accord complete
relief among existing parties; or
(B) that person claims an interest relating to the subject of the
action and is so situated that disposing of the action in the
person’s absence may:
(i) as a practical matter, impair or impede the person’s
ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent
obligations because of that interest.
Fed. R. Civ. P. 19(a)(1)(A) and (B) (emphasis added).
In Gen. Refractories Co. v. First State Ins. Co., 500 F.3d 306 (3rd Cir. 2007), the court
reversed the district court’s dismissal of a declaratory judgment action for failure to join
additional excess and umbrella insurers as parties and held that the additional insurers were
neither necessary nor indispensable under Rule 19. In so ruling, the court stated:
Under Rule 19(1)(a) we ask whether complete relief may be accorded to those
persons named as parties to the action in the absence of any unjoined parties. As
should be apparent, we necessarily limit our Rule 19(a)(1) inquiry to whether the
district court can grant complete relief to persons already named as parties to the
action; what effect a decision may have on absent parties is immaterial.
Id. at 313 (emphasis in original) (citations omitted).
Great American’s absence will not prevent the court from according complete relief
among the existing parties with respect to the Wausau policy—Wausau, Superior, Burke and
Crawford. The court need not address the coverage of the Great American Policy in order to
determine the rights and obligations of Wausau with respect to the claims Crawford and Burke
have asserted against Superior in the state court action. Thus, Rule 19(a)(1)(A) is inapplicable.

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Nor does Great American claim any interest in the “subject matter of the action”—i.e.,
Wausau’s rights and obligations under the worker’s compensation policy with respect to the state
tort action. The Great American policy provides “umbrella” liability coverage; it is not a
“follow-form” excess liability policy. As a result, any decisions in this case about the rights and
obligations of Wausau under its insurance policy with the insured will not control the rights and
obligations of Great American under its insurance policy with the insured. Therefore, Rule
19(a)(1)(B) is inapplicable.
Crawford and Burke assert that Great American is a required party because, in its
absence, “significant coverage issues will be left unresolved, precipitating additional litigation,”
and “[i]f Wausau is granted the relief it is seeking, that it does not owe any coverage obligation
to Superior Linen, Great American will have to immediately retain counsel to represent Superior
Linen in the state court action, on the eve of trial, and will be the sole obligor for damages
awarded in the state court venue.” [Dkt. #28 at 6-7]. However, since both insurers’ declaratory
judgment actions are before this court, the “additional litigation” concern is negligible, and the
reported settlement of the state court case on October 14, 2013, extinguishes the possibility that
Great American would be required to undertake a last-minute defense of the case.
III. Conclusion
For the reasons set forth above, Great American’s Motion to Dismiss the Third-Party
Complaint [Dkt. #25] is granted and Crawford’s and Burke’s Motion for Judgment on the
Pleadings [Dkt. #29] is denied.
ENTERED this 24th day of October, 2013.

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