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

United States District Court, Fourth Circuit

June 11, 2013

GENERAL INSURANCE COMPANY OF AMERICA
v.
THE WALTER E. CAMPBELL COMPANY, INC. et al.

MEMORANDUM

WILLIAM M. NICKERSON, Senior District Judge.

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 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. It 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." Id . (internal quotations omitted). "Whether the necessary collision of 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 Co. 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 ...


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