BrickStreet Mutual Insurance Company v. Zurich American Insurance Company
Filing
13
MEMORANDUM OPINION AND ORDER (Defendant's Motion to Dismiss) denying the defendant's 7 MOTION to Dismiss. Signed by Judge Joseph R. Goodwin on 8/13/2015. (cc: counsel of record; any unrepresented party) (taq)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
BRICKSTREET MUTUAL INSURANCE COMPANY,
Plaintiff,
v.
CIVIL ACTION NO. 2:15-cv-06172
ZURICH AMERICAN INSURANCE COMPANY,
Defendant.
MEMORANDUM OPINION AND ORDER
(Defendant’s Motions to Dismiss)
Pending before the court is the defendant’s Motion to Dismiss [Docket 7]. For the
reasons set forth below, the Motion to Dismiss is DENIED.
I.
Introduction
This case arises out of injuries suffered by Jonathan Posadas Gutierrez1 while working at
the Tunnel Ridge mine outside of Wheeling, West Virginia. As a result of his injuries, Mr.
Gutierrez commenced litigation against various entities in the Circuit Court of Ohio County,
West Virginia, including his employer, the Employers’ Innovative Network, LLC (“EIN”). The
underlying worker’s compensation claim was ultimately extinguished by a confidential
settlement agreement, but disputes remain over which insurance company or companies have
responsibility for paying the claim.
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Mr. Gutierrez was previously known as Jany Rivera Cordova.
In accordance with a professional employer organization (PEO) agreement between EIN
and Taggart Site Services Group, LLC (“Taggart”), EIN purchased workers’ compensation
insurance from BrickStreet Mutual Insurance Company (“BrickStreet”), which covered any
employee EIN provided to Taggart, including Mr. Gutierrez.2 Taggart, as an additional insured
under a policy issued by Zurich American Insurance Company (“Zurich”) to Taggart Global
USA, LLC, likewise had insurance coverage.
BrickStreet now seeks a declaration of whether Zurich is obligated to: (1) reimburse
BrickStreet for half of the workers’ compensation benefits already paid by BrickStreet to Mr.
Gutierrez; and (2) contribute equally to workers’ compensation benefits to be paid to Mr.
Gutierrez in the future. In the instant motion, Zurich has moved to dismiss BrickStreet’s
Declaratory Judgment Complaint (the “Complaint”) [Docket 1] on the grounds that the court
lacks subject matter jurisdiction and, in the alternative, because BrickStreet failed to state a claim
upon which relief can be granted.
II.
Legal Standard
A. Motion to Dismiss for Lack of Subject Matter Jurisdiction
Under Federal Rule of Civil Procedure 12(b)(1), a party may file a motion to dismiss for
lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). The plaintiff bears the burden of
proving that subject matter jurisdiction exists. Richmond, Fredericksburg & Potomac R.R. Co. v.
United States, 945 F.2d 765, 768 (4th Cir. 1991). In considering a motion to dismiss filed under
Rule 12(b)(1), the court “is to regard the pleadings as mere evidence on the issue, and may
consider evidence outside the pleadings without converting the proceeding into one for summary
judgment.” Id. The court should grant the motion “only if the material jurisdictional facts are not
Under the PEO agreement, EIN was required to “obtain and maintain workers’ compensation coverage on all
Worksite Employees assigned to Client’s workplace(s) and shall administer all related workers’ compensation
claims.” (PEO Agreement between EIN & Taggart [Docket 8-4] ¶ 2.3).
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in dispute and the moving party is entitled to prevail as a matter of law.” Id. Once a party
challenges a federal court’s subject matter jurisdiction, “the district judge is not obliged to accept
the plaintiff’s allegations as true and may examine the evidence to the contrary and reach his or
her own conclusions on the matter.” 5B Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 1350 (3d ed. 2004).
B. Motion to Dismiss for Failure to State a Claim
A motion to dismiss filed under Rule 12(b)(6) tests the legal sufficiency of a complaint or
pleading. Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). Federal Rule of Civil
Procedure 8 requires that a pleading contain a “short and plain statement of the claim showing
that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). As the Supreme Court stated in
Ashcroft v. Iqbal, the Rule 8 standard “does not require ‘detailed factual allegations,’ but it
demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A court cannot
accept as true legal conclusions in a complaint that merely recite the elements of a cause of
action supported by conclusory statements. Iqbal, 556 U.S. at 677–78. “To survive a motion to
dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Id. at 678 (quoting Twombly, 550 U.S. at 570). To achieve
facial plausibility, the plaintiff must plead facts that allow the court to draw the reasonable
inference that the defendant is liable, and those facts must be more than merely consistent with
the defendant’s liability to raise the claim from merely possible to probable. Id. In determining
whether a plausible claim exists, the court must undertake a context-specific inquiry, “[b]ut
where the well-pleaded facts do not permit the court to infer more than the mere possibility of
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misconduct, the complaint has alleged-but it has not ‘show[n]’—‘that the pleader is entitled to
relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
III.
Analysis
A. Motion to Dismiss for Lack of Subject Matter Jurisdiction
Zurich contends first that this court lacks subject matter jurisdiction because only the
Workers’ Compensation Office of Judges may decide issues related to Mr. Gutierrez’s workers’
compensation claim. In support of its argument, Zurich relies on West Virginia Code § 23-51(a), which provides, in relevant part:
The Insurance Commissioner, private carriers and self-insured employers may
determine all questions within their jurisdiction. In matters arising under
subsection (c), section eight, article two-c of this chapter, and under articles three
and four of this chapter, the Insurance Commissioner, private carriers and selfinsured employers shall promptly review and investigate all claims. The parties to
a claim are the claimant and, if applicable, the claimant’s dependents, and the
employer, and with respect to claims involving funds created in article two-c of
this chapter for which he or she has been designated the administrator, the
Insurance Commissioner. In claims in which the employer had coverage on the
date of the injury or last exposure, the employer's carrier has sole authority to act
on the employer's behalf in all aspects related to litigation of the claim. With
regard to any issue which is ready for a decision, the Insurance Commissioner,
private carrier or self-insured employer, whichever is applicable, shall promptly
send the decision to all parties, including the basis of its decision.
According to Zurich, under West Virginia Code § 23-5-1, “the sole jurisdiction for the
adjudication of worker[s’] compensation benefits is through the administrative process created
by the legislature.” (Mem. in Supp. of Def.’s Mot. to Dismiss [Docket 8], at 5). Zurich further
argues that BrickStreet had the opportunity to correct the order, thereby bringing Zurich into the
action, but failed to do so timely. See W. Va. Code § 23-5-1(e) (providing that the Insurance
Commissioner may correct an order that “is discovered to be defective or clearly erroneous or
the result of mistake, clerical error or fraud, or with respect to any order or decision denying
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benefits, otherwise not supported by the evidence,” so long as the correction is made within two
years).
BrickStreet, on the other hand, argues that West Virginia’s Workers’ Compensation Act
applies only to the administration of workers’ compensation claims, and not to corollary issues
such as insurance coverage disputes. BrickStreet points out that Chapter 23, Article 5 of the West
Virginia Code, upon which Zurich relies, is titled “Review” and is exclusively “devoted to the
process of reviewing, appealing, and potentially modifying . . . workers’ compensation awards to
injured employees.” (Pl.’s Resp. in Opp’n to Def.’s Mot. to Dismiss [Docket 10], at 2).
BrickStreet further contends that “[a]bsolutely nothing in [Article 5] says anything about
applying to insurance coverage disputes.” (Id.). I agree with BrickStreet’s reasoning.
The West Virginia Workers’ Compensation Act simply “addresses the related review
concepts of objections, protests, and appeals.” Rollins v. Mason Cnty. Bd. of Educ., 489 S.E.2d
768, 773 (W. Va. 1997). Plainly, the law does not divest the federal courts of the power to hear
actions properly brought under the jurisdictional reach of 28 U.S.C. § 1332. Cf. N. Ins. Co. of
New York v. David Nelson Const. Co., 41 F. Supp. 2d 1332, 1338 (M.D. Fla. 1999) (“[L]acking
in the Florida Statutes is any language that suggests an intention on the part of the state agency or
legislation to deal with all aspects related to workers’ compensation in the state in an exclusive
manner, (more specifically to avoid any federal involvement).”).
As further evidence of the court’s power to hear the case before me, a declaration of
insurance coverage is not integrally related to the operation of West Virginia’s workers’
compensation system. That is, “[i]t does not protect or enhance the ability of workers to obtain
compensation benefits, i.e., fixed benefits without regard to fault for workplace injuries.” Arthur
v. E.I. DuPont de Nemours & Co., 58 F.3d 121, 127 (4th Cir. 1995) (holding that a claim brought
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under section 23-4-2 of the West Virginia’s Workers’ Compensation Act was not a “workmen’s
compensation law[ ]” in accordance with the removal statute and thus could be heard in federal
court). Indeed, in the instant case, Mr. Gutierrez has already obtained an award of compensation
benefits for his injuries, and the only issue remaining is whether Zurich must, in addition to
BrickStreet, cover the award. Accordingly, I find the court’s jurisdiction to be proper in this case.
B. Motion to Dismiss for Failure to State a Claim
In the alternative, Zurich argues that BrickStreet’s declaratory judgment action should be
dismissed because, under West Virginia law and the PEO agreement, 3 BrickStreet’s insurance
policy is primary4 to the policy issued by Zurich to Taggart. Zurich specifically argues that
BrickStreet’s policy is primary under West Virginia’s PEO law, the PEO agreement itself, and
the Workers’ Compensation Rules of the West Virginia Insurance Commissioner. I am not
persuaded by Zurich’s arguments.
Under West Virginia Code § 33-46A-7(a), PEO agreements—such as the agreement
between Taggart and EIN—shall specifically allocate “[t]he responsibility to obtain workers’
compensation coverage for covered employees in compliance with all applicable law . . . .” If
this responsibility is allocated to the PEO under the agreement—here, EIN—then the agreement
“shall require that the PEO maintain and provide workers’ compensation coverage for the
covered employees from a carrier authorized to do business in this state.” W. Va. Code § 3346A-7(b)(1). Nonetheless, the client-employer—here, Taggart—likewise remains “liable . . . to
In reviewing a Rule 12(b)(6) dismissal, I may “consider documents attached to the complaint, see Fed.R.Civ.P.
10(c), as well as those attached to the motion to dismiss, so long as they are integral to the complaint and authentic.”
Philips v. Pitt Cnty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir. 2009).
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Typically, “primary coverage attaches immediately upon the happening of an ‘occurrence,’ or as soon as a claim is
made. The primary insurer is first responsible for indemnifying the insured in the event of a covered or potentially
covered occurrence of claim.” Horace Mann Ins. Co. v. General Star Nat. Ins. Co., 514 F.3d 327, 329 (4th Cir.
2008) (quoting Gauze v. Reed, 633 S.E.2d 326, 332 (W.Va. 2006)). Excess insurance, on the other hand, does not
provide initial coverage, but provides an additional layer of protection for losses that exceed the limits of primary
coverage. Id.
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provide workers’ compensation coverage for its covered employees.” Id. Critically, while West
Virginia’s PEO law requires both parties to the PEO agreement to maintain insurance coverage,
it does not delineate one party’s workers’ compensation policy as primary to the other.
Correspondingly, the PEO agreement itself required: (1) EIN to “obtain and maintain
workers’ compensation coverage on all Worksite Employees assigned to the Client’s
workplace(s)”; and (2) Taggart to “maintain its status as a complying employer with its current
insurance carrier.” (PEO Agreement between EIN & Taggart [Docket 8-4] ¶ 2.2). But like West
Virginia’s PEO law, the PEO agreement does not delineate one workers’ compensation policy as
primary to the other, and such an absence severely undermines Zurich’s argument. Indeed, other
sections of the PEO agreement provide conspicuously which policy is primary. (See, e.g., PEO
Agreement between EIN & Taggart [Docket 8-4] § 3.3 (providing that, with regard to general
liability insurance policies, Taggart “shall be considered primary . . . to any other liability
insurance carried by EIN”)). Put simply, the parties to the PEO agreement could have delineated
one workers’ compensation policy as primary to the other, but chose not to.
Finally, Zurich’s reliance on the Workers’ Compensation Rules of the West Virginia
Insurance Commissioner is misplaced. In support of its argument that the BrickStreet policy is
the primary policy, Zurich points to West Virginia Code Rule 85-31-6.3, which provides that
where the claimant is a covered employee, and where there is in effect both a PEO workers’
compensation policy and a direct purchase policy, the PEO policy shall be the primary policy. In
submitting this argument, however, Zurich ignores the narrow scope of Rule 85-31-6, which
applies only to “Master Policies.” According to the Rules’ definition section, a master policy is
an “arrangement under which a single policy issued to a PEO covers more than one clientemployer.” W. Va. Code R. 85-31-3.7 (emphasis added). Importantly, the policy here was issued
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to EIN for a single client-employer, Taggart, and therefore does not qualify as a master policy.5
(See PEO Agreement between EIN & Taggart [Docket 8-4]). Accordingly, Rule 85-31-6 does
not alter my analysis, and Zurich has failed to satisfy its burden under Rule 12(b)(6).
IV.
Conclusion
For the reasons set forth above, the defendant’s Motion to Dismiss [Docket 7] is
DENIED.
The court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party.
ENTER:
August 13, 2015
Rather, the EIN policy is a multiple coordinated policy. See W. Va. Code R. 85-31-3.8 (“‘Multiple Coordinated
Policy Basis’ or ‘MCP Basis’ means an arrangement under which a separate policy is issued to or on behalf of each
client-employer but certain payment obligations and policy communications are coordinated through the PEO.”).
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