Boy Scouts of America v. National Union Fire Insurance Company of Pittsburgh PA

Filing 25

Memorandum Opinion and Order Grants 10 Motion to Dismiss filed by National Union Fire Insurance Company of Pittsburgh PA. The Court finds the portion of BSAs declaratory judgment claims regarding National's duty to defend and duty to indemnify in Potential Lawsuits to be nonjusticiable. That portion is thus DISMISSED without prejudice. (Ordered by Judge Jane J Boyle on 2/8/2016) (ndt)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
BOY SCOUTS OF AMERICA,
Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA,
Defendant.

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CIVIL ACTION NO. 3:15-CV-2420-B

MEMORANDUM OPINION AND ORDER
Before the Court is Defendant National Union Fire Insurance Company of Pittsburgh, PA’s
(National) Motion for Partial Dismissal under Federal Rule of Civil Procedure 12(b)(1) (Doc. 10)
[hereinafter Defendant’s Motion]. At issue is whether Plaintiff Boy Scouts of America (BSA) may
obtain a declaratory judgment obligating National to pay future defense costs and indemnity
payments for currently unfiled potential future lawsuits. Finding no actual controversy under
28 U.S.C. § 2201, the Court GRANTS Defendant’s Motion.
I.
BACKGROUND1
This is an insurance policy case. Between 1975 and 1978, National issued BSA sixteen excess
liability insurance policies, also known as umbrella policies. Doc. 1, Pl.’s Orig. Compl. ¶¶ 1, 6. These
umbrella policies provide coverage for claims that exceed the limits of BSA’s primary insurance

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Background facts are taken from Plaintiff’s Original Complaint (Doc. 1), accepted as true, and
viewed in the light most favorable to the non-movant (BSA). See Menchaca v. Chrysler Credit Corp., 613 F.2d
507, 511 (5th Cir. 1980).

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policy. In pertinent part, they provide coverage for excess legal defense costs and indemnification
payments. See id. ¶ 16.
The relevant claims in this case arose from conduct occurring between 1975 and 1980 and
involve accusations of bodily injury stemming from alleged sexual abuse by individuals connected to
BSA. The claims fall into two categories: Actual Lawsuits and Potential Lawsuits. Actual Lawsuits
include ongoing or concluded litigation where BSA is named as a defendant. Potential Lawsuits
include pre-lawsuit claims that have not developed into actual litigation.
From the Actual Lawsuits, BSA maintains it has and will continue to incur defense costs, and
may incur settlement or judgment costs that require indemnification. Id. ¶ 18. BSA maintains that
the same may be true of the Potential Lawsuits. Id. ¶¶ 19–20. Despite this, National has “refused to
participate in the defense or settlement of any of [Actual] Lawsuits,” and will likely refuse to
participate in the Potential Lawsuits that develop into actual litigation. See id. ¶ 15. For this reason,
BSA now seeks a declaratory judgment to determine its rights and National’s duties regarding the
Actual and Potential Lawsuits, particularly: (1) “National Union’s obligation to reimburse defense
costs expended and settlement payments made by BSA in settlement of the [Actual] Lawsuits”; and
(2) “National Union’s obligation to pay future defense costs and indemnity payments for Potential
Future Lawsuits that implicate one or more of the National Union Policies.” Id. ¶ 26.
National moves to dismiss part of BSA’s declaratory judgment claims. Specifically, it moves
to have the portion seeking a declaration with respect to the Potential Lawsuits dismissed as not yet
ripe. Doc. 11, Def.’s Br. in Supp. 1, 3. BSA disagrees, responding that it “simply wants to resolve,
once and for all, the existence of the [umbrella] policies and the rights and obligations of [National]
as the insurer and BSA as the insured,” not to resolve whether the umbrella policies cover the
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Potential Lawsuits. Doc. 17, Pl.’s Resp. 4. Defendant’s Motion is now ready for review.
II.
LEGAL STANDARD
Where a court lacks the statutory power to adjudicate a case, it must dismiss for lack of
subject matter jurisdiction under Rule 12(b)(1). Home Builders Ass’n of Miss., Inc. v. City of Madison,
143 F.3d 1006, 1010 (5th Cir. 1998). The Declaratory Judgment Act provides that, “[i]n a case of
actual controversy within its jurisdiction . . . any Court of the United States . . . 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). Declaratory judgment is available only in
circumstances where an “actual controversy” exists. Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891,
896 (5th Cir. 2000). That is, it is available only when the declaratory judgment action is ripe. Id. If
the action is not ripe, it is not justiciable and must be dismissed. See id.
III.
ANALYSIS
Before addressing the merits, the Court must clarify the issue before it. National specifically
moves to dismiss the portion of BSA’s declaratory judgment claim that would establish National’s
“obligation to pay future defense costs and indemnity payments for Potential Future Lawsuits that
implicate one or more of the [umbrella] Policies.” Doc. 11, Def.’s Br. in Supp. 5. Put simply, National
challenges any duty to defend or indemnify in the Potential Lawsuits.
In response, BSA makes clear that it “is not asking for a determination of how the policy
terms will apply to the Potential Future Suits, because that would require the court to consider a
hypothetical set of facts.” Doc. 17, Pl.’s Resp. 4–5. Instead, BSA frames its complaint as a request
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to establish the existence of the umbrella policies, BSA’s rights, and National’s obligations. Id. at 5.
Essentially, BSA wants the Court to determine the existence and terms of the umbrella policies, and
then declare that they apply to any Potential Lawsuits. See id. at 2.
BSA’s argument does not address National’s motion for partial dismissal. National requests
dismissal on a narrow portion of BSA’s claims. BSA counters by mounting a broad defense of the
availability of declaratory judgment as to whether the umbrella policies exist, and if so, the nature
of their terms. The Court assumes without deciding these claims are ripe, at least with respect to the
Actual Lawsuits, because they can be decided as part of BSA’s unchallenged breach of contract
claims. But this does not address the substance of Defendant’s Motion.
The correct issue is as National has presented it—whether the following question is ripe: does
National have a duty to defend or a duty to indemnify BSA for the Potential Lawsuits.
A.

Duty to Defend
A complaint seeking a declaration of an insurer’s duty to defend presents an actual

controversy when the insured faces a pending lawsuit. See Northfield Ins. Co. v. Women & Children's
Res. Ctr., Inc., 116 F.3d 476, 1997 WL 255661, at *1 (5th Cir. 1997) (per curiam) (unpublished) (“A
complaint requesting a declaration of an insurer’s duty to defend a pending liability lawsuit presents
a justiciable controversy.” (citing Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273–74
(1941))). But such a complaint does not present an actual controversy when the insured faces an
unfiled theoretical suit. See, e.g., Am. Const. Benefits Group, LLC v. Zurich Am. Ins. Co.,
3:12-CV-2726, 2014 WL 144974, at *3 (N.D. Tex. Jan. 15, 2014) (“[W]ithout an underlying
lawsuit, there is no third-party pleading on which the court can predicate its judgment.”); Georgia
Am. Ins. Co. v. Johnson, 712 F. Supp. 530, 532 (S.D. Miss. 1989) (“It is only conjecture as to whether
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any suit will be filed and such renders this cause of action premature.”). This is because “the duty to
defend is based upon the allegations in the pleadings.” Columbia Cas. Co. v. Georgia & Florida
RailNet, Inc., 542 F.3d 106, 111 (5th Cir. 2008).
Texas follows the “eight corners” or “complaint allegation” rule to determine whether an
insurer has a duty to defend. St. Paul Fire & Marine Ins. Co. v. Green Tree Fin. Corp.–Texas, 249 F.3d
389, 391 (5th Cir. 2001). Under the eight corners rule, courts consider two documents to determine
an insurer’s duty to defend: (1) the insurance policy and (2) the third-party plaintiff’s pleadings in
the underlying litigation. ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d 832, 840
(5th Cir. 2012). “If the underlying pleadings allege facts that may fall within the scope of coverage,
the insurer has a duty to defend; if the pleading only alleges facts excluded by the policy, there is no
duty to defend.” Id. Thus, without pleadings, the Court cannot determine whether an insurer has
a duty to defend. See Columbia Cas. Co., 542 F.3d at 111.
B.

Duty to Indemnify
A complaint seeking a declaration of an insurer’s duty to indemnify may present an actual

controversy only “after the underlying suit has been resolved.” Id. (citing Collier v. Allstate County
Mut. Ins. Co., 64 S.W.3d 54, 62 (Tex. App.—Fort Worth 2001, no pet.)). This is because “the duty
to indemnify only arises after an insured has been adjudicated, whether by judgment or settlement,
to be legally responsible for damages in a lawsuit.” Id. Thus, without an adjudicated dispute, the
Court cannot determine whether an insurer has a duty to indemnify. See id.
C.

Instant Case
When deciding ripeness, “[t]he key considerations are [1] the fitness of the issues for judicial

decision and [2] the hardship to the parties of withholding court consideration.” Choice Inc. of Tex.
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v. Greenstein, 691 F.3d 710, 715 (5th Cir. 2012) (quoting New Orleans Pub. Serv., Inc. v. Council of
New Orleans, 833 F.2d 583, 586 (5th Cir. 1987)). Here, BSA concedes that it has received pre-suit
claims that have not evolved into actual litigation. Doc. 17, Pl.’s Resp. 4. Thus, for these Potential
Lawsuits, any determination of National’s duty to defend is premature because it is undetermined
whether any suit will be filed. See Georgia Am. Ins. Co., 712 F. Supp. at 532. Any determination of
National’s duty to indemnify is also premature because no Potential Lawsuit has reached judgment
or settlement. See Columbia Cas. Co., 542 F.3d at 111. Accordingly, neither determination presents
an actual controversy. Therefore, neither is ripe for consideration, and it would not be fit for the
court to issue a decision on either. Additionally, withholding court consideration would not inflict
unnecessary hardship on the parties. The Court sees no harm in forgoing consideration at this time.
Questions of policy coverage regarding the Potential Lawsuits have not yet arisen, and BSA will
suffer no unnecessary hardship as it appears to request declaratory relief that falls outside the scope
of Defendant’s Motion.
IV.
CONCLUSION
For these reasons, Defendant’s Motion for Partial Dismissal under Federal Rule of Civil
Procedure 12(b)(1) (Doc. 10) is GRANTED. The Court finds the portion of BSA’s declaratory
judgment claims regarding National’s duty to defend and duty to indemnify in Potential Lawsuits to
be nonjusticiable. That portion is thus DISMISSED without prejudice.

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SO ORDERED.
Dated: February 8, 2016.
_________________________________
JANE J. BOYLE
UNITED STATES DISTRICT JUDGE

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