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Hartford Accident & Indem. Co. v. Zurich AM. Ins. Co.

United States District Court, D. Maryland

August 19, 2019

HARTFORD ACCIDENT & INDEM. CO., Plaintiff
v.
ZURICH AM. INS. CO., et al., Defendants

          MEMORANDUM

          James K. Bredar Chief Judge

         This case involves various insurance companies that allegedly insured Tate Andale, Inc., a Maryland corporation. Between 1958 and 1985, Tate manufactured products containing asbestos and has since been the subject of civil complaints for asbestos-related injuries. Hartford Accident & Indemnity Company now sues the other insurance companies that may have insured Tate, seeking a declaration pursuant to 28 U.S.C. § 2201(a) as to the insurance companies' respective liabilities for Tate's insurance coverage claims for asbestos-related bodily injury claims. Zurich American Insurance Company crossclaims for declaratory judgment, restitution, and subrogation. One of the companies, Pennsylvania National Mutual Casualty Insurance Company ("Penn National"), moves to dismiss all counts of the complaint and crossclaim and, alternatively, to stay proceedings. No. hearing is required. See Local Rule 105.6 (D. Md. 2016). For the reasons set forth below, the Court will deny Penn National's motions to dismiss and grant its motion to stay.

         I. Background

         At the motion to dismiss stage, the Court takes the allegations of the complaint as true, see, e.g., Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997), and construes any disputed allegations in the light most favorable to the plaintiff, In re Royal Ahold N. V. Sees. & ERISA Litig., 351 F.Supp.2d 334, 376 n.32 (D. Md. 2004) ("[Resolution of [a] factual dispute is inappropriate when ruling on a motion to dismiss .. .."). The Court summarizes those allegations in Hartford's complaint that are relevant to the currently pending motions.

         Tate "designs and manufactures industrial strainers, filters, valves, and vents, and in the past, supplied certain products that allegedly contained asbestos." (Compl. ¶ 19, ECF No. 1.) The complaint also refers to Tate as "Tate Engineering, Inc." and "Tate Enterprises." (Id. ¶ 1.)

         In the complaint, Hartford alleges, "[o]n information and belief," that each of the named insurance companies issued insurance policies to Tate or its predecessors. (Id. ¶ 12-18.) From September 1958 to September 1964, Perm National issued insurance policies to Tate. (Id. ¶ 16.) From March 1964 to June 1970, Zurich insured Tate. (Id. ¶ 15.) From June 1970 to June 1986, Hartford itself issued yearly policies of liability insurance to Tate. (Id. ¶ 12.) Hartford notes that some of these insurance policies had asbestos exclusions. (Id. ¶ 14.) Hartford also alleges that other insurers may have issued policies that provide coverage for asbestos claims. (Id. ¶ 18.)

         When claimants began to sue Tate, alleging asbestos-related bodily injury ("asbestos suits"), Tate tendered the asbestos suits to Hartford, Zurich, and Penn National for insurance coverage. (Id. ¶ 20-21, 24.) Hartford alleges that Hartford and Zurich have been defending Tate against those suits and that Penn National has not participated in the defense. (Id.) Each company asserts that it has no coverage obligations for the asbestos suits. (Id. ¶ 25-26.) Hartford's complaint seeks a declaration as to which, and to what extent, each insurance company has an obligation to defend or indemnify Tate. (Id. ¶ 28, 30.)

         In the crossclaim, Zurich adds some allegations and claims. (Zurich's Ans., Counterclaim & Crossclaim, ECF No. 21.) Zurich alleges that the company that is now Tate Andale was incorporated as Temco Machine Works in 1957. (Id. ¶ 8, 11.) In 1966, Temco Machine Works changed its name to Tate Temco. (Id. ¶ 9.) In 1985, Tate Temco entered into a purchase agreement with the Andale Company, and its name was changed to Tate Andale. (Id. ¶ 10-11.) Zurich repeats Hartford's declaratory judgment claims and adds crossclaims against Perm National for reimbursement, restitution of overpayments, and subrogation.

         Before Hartford even filed suit, Penn National sued Tate in March 2017. (Pa. Nat'l Mot. Dismiss Compl. Exh. 1, Civ. No. ADC-17-670 Compl.) Penn National sought a declaration that it "owes no duty under applicable law or the Alleged Policies to indemnify or defend Tate Andale with regard to any claims for injury that occurred during the alleged policy periods of September 20, 1958 to March 9, 1964." (Id. at 7.) That case-for purposes of this Memorandum, the "Penn National case"-is currently before another judge in this district, who has ordered that discovery end by February 2020, that the parties file dispositive motions by March 31, 2020, and that trial commence sometime after June 2020. See Pa. Nat'l Mut. Cas. Ins. Co. v. Tate Andale, Inc., Civ. No. ADC-17-670, 7/31/19 Status Report, ECF No. 77. A trial in that case would seek to resolve whether Penn National issued the alleged commercial liability insurance policies and what the terms of those policies were. See id., Memo. Op. at 8-17, ECF No. 59.

         II. Legal Analysis

         Penn National moves to dismiss the instant complaint for lack of subject matter jurisdiction, (Pa. Nat'l 12(b)(1) Mot. Dismiss Compl., ECF No. 15), and failure to state a claim, (Pa. Nat'l 12(b)(6) Mot. Dismiss Compl., ECF No. 16). In the alternative, Penn National moves to stay. (Id.) Penn National also moves to dismiss Zurich's crossclaim for lack of subject matter jurisdiction and failure to state a claim. (Pa. Nat'l Mot. Dismiss CC, ECF No. 41.) Because Penn National advances similar arguments against Hartford's complaint and Zurich's crossclaim, the Court will analyze the motions together, turning first to subject matter jurisdiction and second to failure to state a claim. Then, if necessary, the Court will address whether to stay proceedings.

         A. Federal Rule of Civil Procedure 12(b) (1)

         "A motion to dismiss based on lack of subject matter jurisdiction pursuant to [Rule 12(b)(1)] raises the question of whether the court has the competence or authority to hear the case." Davis v. Thompson, 367 F.Supp.2d 792, 799 (D. Md. 2005). The plaintiff bears the burden of establishing subject matter jurisdiction. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). A challenge to a court's subject matter jurisdiction may be either facial, i.e., the complaint fails to allege facts upon which subject matter jurisdiction can be based, or factual, i.e., the jurisdictional allegations of the complaint are not true. Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009). Here, Perm National appears to be making a facial challenge. In a facial challenge, "the facts alleged in the complaint are taken as true, and the motion must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction." Id. at 192.

         Penn National argues that the court lacks subject matter jurisdiction because Penn National is not an adverse party to Hartford or Zurich and, as such, the proceeding fails to be a case or controversy as required by Article III of the U.S. Constitution. (Pa. Nat'l 12(b)(1) Mot. Dismiss Compl. Mem. at 2, ECF No. 15-1.) Penn National bases this conclusion on the fact that its alleged period of coverage does not overlap with those of Hartford or Zurich. (Id. at 3.) Citing Maryland law, Penn National explains that Maryland has adopted a "pro-rata" approach to losses that span multiple insurance policy periods so that the losses are divided among insurers based on the amount of time they each contracted to provide coverage. (Id.) In essence, Penn National argues that its liability to Tate, if ...


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