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Evanston Insurance Co. v. Dan Ryan Builders, Inc.

United States District Court, D. Maryland

January 20, 2017

EVANSTON INSURANCE COMPANY; SUSSEX INSURANCE COMPANY f/k/a COMPANION SPECIALTY INSURANCE COMPANY; UNITED SPECIALTY INSURANCE COMPANY; and PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY Plaintiffs
v.
DAN RYAN BUILDERS, INC. Defendant

          MEMORANDUM AND ORDER RE: DISMISSAL

          Marvin J. Garbis United States District Judge.

         The Court has before it Dan Ryan Builders, Inc.'s Motion to Dismiss [ECF No. 54] and the materials submitted relating thereto. The Court has held a hearing and has had the benefit of the arguments of counsel.

         I. BACKGROUND

         The instant action relates to coverage under commercial general liability (“CGL”) policies that several insurers issued to Dan Ryan Builders, Inc. (“Dan Ryan”) and certain of its subcontractors.

         At all times relevant, Dan Ryan has been a residential home builder. In a period from a time prior to September 2005 through 2010, Dan Ryan and its subcontractors built a number of homes in West Virginia in high radon[1] areas.

         On October 31, 2014, two putative class actions (the “Underlying Actions”)[2] were filed in the Circuit Court of Jefferson County, West Virginia, alleging that Dan Ryan and its subcontractors (“the Subs”) defectively constructed the homes at issue, allowing excessive radon into the homes and thereby putting the homeowners at risk for lung cancer.

         Dan Ryan and the Subs sought to have their respective insurers provide defenses and indemnity. All of the insurers have denied coverage for various reasons, including a “pollution exemption.” As discussed herein, the litigation regarding coverage is now pending in overlapping litigation in the Circuit Court for Frederick County, Maryland and the District of Maryland. By the instant motion, Dan Ryan seeks, in effect, to have the litigation consolidated and proceed in the Circuit Court for Frederick County, Maryland.

         A. The Insurers

         1. Dan Ryan as Insured

         Dan Ryan is the insured in relevant policies issued by Evanston Insurance Company (“Evanston”), Sussex Insurance Company f/k/a Companion Specialty Insurance Company (“Sussex”), United Specialty Insurance Company (“USIC”), and Pennsylvania National Mutual Casualty Insurance Company (“Penn National”).

         2. The Subs as Insureds

         The Subs are insureds in relevant policies issued by Erie Insurance Exchange (“Erie”), Nationwide Mutual Insurance Company/Nationwide Mutual Fire Insurance Company (“Nationwide”), and Frederick Mutual Insurance Company (“Frederick Mutual”).

         3. Dan Ryan as Additional Insured

         Dan Ryan is an additional insured in the relevant Subs' policies issued by Erie, Nationwide, and Frederick Mutual.

         B. The State Case

         In April 2015, Erie filed “no coverage” declaratory judgment actions, later consolidated[3] in the Circuit Court for Frederick County, Maryland, against Dan Ryan, the Subs, and the plaintiffs in the Underlying Actions. Nationwide and Frederick Mutual later intervened as Plaintiffs.

         On September 28, 2016, Dan Ryan filed third-party complaints against Evanston, Sussex, USIC, and Penn National in the State Court Action.

         At present, all concerned with the relevant insurance coverage - Dan Ryan, its insurers, the Subs and their insurers, and the plaintiffs in the Underlying Actions - are parties in the State Case.

         C. The Federal Case

         The instant federal case is a “no coverage”[4] declaratory judgment action filed by Evanston against Dan Ryan invoking the Court's diversity jurisdiction under 28 U.S.C. § 1332(a). When filed, there was complete diversity between Plaintiff Evanston[5]and Defendant Dan Ryan[6].

         There ensued developments that present the jurisdictional issue depicted in the instant motion as set forth in the following chronology.

12/17/15

Dan Ryan answered and counterclaimed.

12/31/15

Dan Ryan converted from a Maryland corporation to Dan Ryan Builders West Virginia, LLC, a Maryland limited liability company. Yeager Affidavit ¶ 4, Ex. 2, ECF No. 56.

12/31/15

Dan Ryan's parent company, DRB Enterprises, Inc., converted to DRB Enterprises, LLC, a Delaware limited liability company.

1/1/16

Sumitomo Forestry America, Inc. (“Sumitomo America”) became a member of DRB Enterprises, LLC. [7]

7/14/16

Sussex (a South Carolina Corporation) [8] intervened as a Plaintiff.

8/4/16

USIC, a citizen of Delaware and Texas, intervened as a plaintiff. [9]

9/12/16

Penn National [10] (a Pennsylvania citizen) intervened as a plaintiff.

         D. The Instant Motion

         By the instant motion, Dan Ryan seeks dismissal for lack of diversity or by abstention.[11] Alternately, Dan Ryan contends that Erie, Nationwide, and Frederick Mutual (its additional insurers) must be joined to the instant action as necessary and indispensable parties, an action that would defeat diversity jurisdiction, and requests the Court dismiss under Rule[12] 19.

         II. DISMISSAL STANDARD

         Rule 12(b)(1) governs motions to dismiss for lack of subject matter jurisdiction. Biktasheva v. Red Square Sports, Inc., 366 F.Supp.2d 289, 294 (D. Md. 2005). It is well established that “[t]he burden of proving subject matter jurisdiction on a motion to dismiss is on the plaintiff, the party asserting jurisdiction.” Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982).

         The court may “consider evidence outside the pleadings” in a 12(b)(1) motion to determine if it has jurisdiction over the case. Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991). “Unless the jurisdictional facts are intertwined with the facts central to the merits of the dispute, the district court may then go beyond the allegations of the complaint and resolve the jurisdictional facts in dispute by considering evidence outside the pleadings, such as affidavits.” U.S. ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 348 (4th Cir. 2009) (quoting Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982)).

         “The court should grant the 12(b)(1) motion only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law.” ...


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