Progressive Northern Insurance Company v. RA Transport, LLC et al

Filing 16

MEMORANDUM OPINION. Signed by District Judge Henry E. Hudson on 11/14/2017. (walk, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division

PROGRESSIVE NORTHERN

INSURANCE, COMPANY,
Plaintiff,
Civil Action No. 3:17CV623-HEH

V.

RA TRANSPORT, LLC, et al..
Defendants.

MEMORANDUM OPINION

THIS MATTER is before the Court on its own initiative. Plaintiff Progressive

Northern Insurance, Company ("Plaintiff) filed a Complaint (ECF No. 1) on September 14,
2017, seeking a declaratoryjudgment that it has no obligation to provide insurance coverage
to Defendant Milton Aleman and/ or Defendant RA Transport.

After reviewing the Complaint, the Court had concerns that a facial reading of the

Complaint may not support subject matter jurisdiction and ordered supplemental briefing
from Plaintiff on that issue. (ECF No. 11.) On November 3,2017, Plaintiff filed a

Memorandum Regarding Subject Matter Jurisdiction ("Memorandum") that purports to

address the concerns identified by the Court. (ECF No. 12.) The Memorandum requested
that, in the event that subject matter jurisdiction is found to be lacking, the Court grant
Plaintiff leave to file an amended complaint.

On November 13, 2017, Plaintiff filed a Motion to Withdraw Request for Entry of
Default as to GEICO Insurance Company (ECF No. 13) and a Motion to Amend/ Correct

Named Defendant (ECF No. 14), both stemming from Plaintiff incorrectly naming GEICO
Insurance Company rather than GEICO Indemnity Company in its Complaint.
For the reasons stated herein, the Court finds that it lacks subject-matter jurisdiction

and must dismiss Plaintiffs Complaint without prejudice.' The Court will grant Plaintiffs
request for leave to file amended complaint. Additionally, the Court will grant Plaintiff s two
pending motions.
I.

BACKGROUND

Plaintiff issued a Commercial Auto Insurance Policy ("Policy"), effective February 15,

2016 to February 15, 2017, to Defendant RA Transport LLC, which provided both bodily
injury and property damage liability coverage. (Compl. ^ 16.) The Policy provides: "We
will pay all sums an "insured" must legally pay as damages because of "bodily injury" or

"property damage" to which this insurance applies, caused by an "accident" and resulting
from the ownership, maintenance or use of a covered "auto." {Id. H18.) Further, the Policy
states:

"We will have no duty to provide coverage underthis policy unless there has been full
compliance with the following duties ... you and any other involved "insured" must.
.. [cjooperate with us in the investigation, settlement or defense of the claim or "suit."
The "insured" will be deemed not to have cooperated with us only if his or her failure
or refiisal to do so harms our defense of an action for damages
m

On May 12, 2016, Defendant William Seifert ("Seifert") was injured when his
motorcycle collided with a 2015 Volvo Tractor driven by Defendant Milton Aleman (the
"Accident"). {Id. f 12.) The Police Report for the Accident identifies the 2015 Volvo

' Plaintiffs Memorandum includes information not provided in the Complaint. TheCourt's analysis is constrained to the
four comers of the Complaint.

Tractor as being owned by Defendant GB & Sons Logistics, LLC, and suggests that
Defendant Milton Aleman was without the right of way at the time of the Accident. {Id. ^[1

12, 14.) No lawsuit has been filed by Defendant Seifert in connection with the Accident. {Id.
115.)

On May 15, 2016, Plaintiff received notice of the Accident. {Id. H19.) Subsequently,
Plaintiff began an investigation to determine whether Defendant Milton Aleman, Defendant

RA Transport LLC, Defendant Ramon Aleman, Defendant Grover Molina ("Molina"), and/
or Defendant GB & Sons LLC qualify as an "insured" within the definition provide by the
Policy. {Id H20.)

As part of this investigation. Plaintiffsought to question Defendant Ramon Aleman, as
the representative of Defendant RA Transport LLC, Defendant Milton Aleman, and
Defendant Molina, as the representative of DefendantGB & Sons LLC, under oath. {Id. ^
21.) Despite utilizing a private investigator. Plaintiff has not been able to locate Defendant
Ramon Aleman or Defendant Milton Aleman. {Id. f 22.) While Defendant Molina did

appear for questioning, he has not provided documents that Plaintiffrequested, which
Defendant Molina claimed existed during his questioning. {Id.)

Plaintiff seeks a declaratory judgment that it has no duty to provide insurance coverage

to Defendant RA Transport and/ or Defendant Milton Aleman because of the failure to

cooperate with Plaintiffs investigation. {Id.

25-26.) The Complaint does not identify that

an insurance claim or lawsuit has been filed, outside of the present action, in relation to the
Accident.

II.

DISCUSSION

The Declaratory Judgment Act authorizesjurisdiction only if the Article III case-or-

controversy requirement is satisfied. 28 U.S.C. § 2201(a); Volvo Constr. Equip. N. Am., Inc. v.

CLMEquip. Co., 386 F.3d 581, 593-94 (4th Cir. 2004); see Medtronic, Inc. v. MirowskiFamily
Ventures, LLC. 134 S. Ct. 843, 848 (2014). Unlike some other jurisdictional grants, which

may be mandatory, "[a] federal court has the discretion to entertain a declaratory judgment action
when it finds that the declaratory relief sought (i) will serve a useful purpose in clarifying and

settling the legal relations in issue; and (ii) will terminate and afford relief from the uncertainty,

insecurity, and controversy giving rise to the proceeding." Cont'l Cas. Co. v. Fuscardo, 35 F.3d
963, 965 (4th Cir. 1994) (citation and internal quotation marks omitted). Although discretionary,
"a districtcourt must have 'good reason' for declining to exercise its declaratory judgment

jurisdiction." Volvo Constr. Equip. N. Am., Inc., 386F.3d at 594 (quoting Cont'l Cas. Co., 35
F.3d at 965).

The Supreme Court has stated that the case-or-controversy requirement is met where "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," Medlmmune, 549 U.S. at 127 (citation omitted). The dispute must
be "definite and concrete, touching the legal relations of parties having adverse legal interests."

Id. Moreover, the dispute must be "real and substantial," such that a court may provide "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." Id. (citations and internal quotation marks
omitted).

Courts have long struggled to identify the exact point at which the case-or-controversy

requirement is met in a declaratory judgment action to determine coverage liability under an
insurance contract. Neither the Fourth Circuit nor the United States Supreme Court has

provided a precise answer to this question. It is clear that a case or controversy exists in a
declaratory judgment action to determine coverage liability by an insurer when a lawsuit has
been filed by a third-party claimant against the insured. However, it is less clear what is

required in the absence of such an underlying lawsuit. Courts in this District have found that
a case or controversy exists when a claim has been filed against the insurance policy at issue.
Standard Fire Ins. Co. v. Armstrongs Civil Action No. 3:12CV181-HEH, 2012 U.S. Dist.

LEXIS 122402, at *6 (E.D. Va. Aug. 28, 2012); Firemen's Ins. Co. v. Kline & Son Cement

Repair, Inc., 474 F. Supp. 2d 779, 786 (E.D. Va. 2007). Additionally, some courts have
found the case-or-controversy requirement is satisfied when a lawsuit is imminent, a

disagreement over coverage exists, or a demand to indemnify has been made. Md. Cas. Co.
V. Shamblen, No. 2:13-cv-05395, 2014 U.S. Dist. LEXIS 40913, at *1415 (S.D. W. Va. Mar.
27, 2014).

The facts alleged in the Complaint do not present the Court with a justiciable case or

controversy. At the outset, Plaintiffspecifically states that a lawsuit stemming from the
Accident has not yet been filed. Absent from the Complaint is any mention of a claim made

against the underlying policy, a demand made for indemnity or a lawsuit thatwill be filed
imminently. Further, even if the Court agreed that a coverage dispute without a claim or
complaint was sufficientto establish a case or controversy, it is unclear from the face of the
Complaint whether such a dispute exists. While Plaintiff clearly believes that it does not owe

coverage in this case, nothing in the Complaint provides an indication that any defendant will
seek coverage under the policy.

Excluding the investigation Plaintiff started on its own initiative, the only fact pleaded

connecting Plaintiff and the Accident is the declaration: "Progressive received notice of the
Accident on May 15, 2016." (Compl. ^ 19.) Importantly, however, the Complaint provides

no information regarding the person who gave this notice or the context in which Plaintiff
received it. Simply put, all the Complaint provides is Plaintiffs anticipation of a coverage

disagreement and various steps taken by Plaintiffto determine its footing should such a
dispute arise, which is insufficient to establish a case or controversy.

Therefore, the Court will dismiss Plaintiffs complaint without prejudice and grant

Plaintiff leave to file an amended complaint. Additionally, the Court finds that justice

requires allowing Plaintiff to correct the misnaming of a defendant and that doing so will not
work to prejudice any party. As such, the Court grants Plaintiffs Motion to Withdraw

Request for Entry of Default (ECF No. 13) and Plaintiffs Motion to Amend/ Correct Named
Defendant (ECF No. 14).

An appropriate Order will accompany this Memorandum Opinion.

/s/

Henry E. Hudson
United States District Judge

Date:

IH 2olT

Richmond, VA