United States District Court, D. Arizona
St. Paul Fire & Marine Insurance Company, Charter Oak Fire Insurance Company, and Travelers Indemnity Company of America, Plaintiffs,
Lexington Insurance Company, American Home Insurance Company, Commerce & Industry Insurance Company, and Liberty Mutual Insurance Company, Defendants. Zurich American Insurance Company, Cross-Claimant,
Ohio Casualty Insurance Company, American Safety Indemnity Company, Lexington Insurance Company, American Home Insurance Company, Commerce & Industry Insurance Company, and Liberty Mutual Insurance Company, Cross-Defendants. American Home Insurance Company and) Commerce & Industry Insurance Company, Counter/Cross-Claimants,
St. Paul Fire & Marine Insurance Company, Charter Oak Fire Insurance Company, Travelers Indemnity Company of America, Ohio Casualty Insurance Company, Maryland Casualty Company, Zurich American Insurance Company, and American Guarantee & Liability Insurance Company, Counter/Cross-Defendants. Lexington Insurance Company, Counter/Cross-Claimant,
St. Paul Fire & Marine Insurance Company, Charter Oak Fire Insurance Company, Travelers Indemnity Company of America, Ohio Casualty Insurance Company, Maryland Casualty Company, Zurich American Insurance Company, and American Guarantee & Liability Insurance Company, Counter/Cross-Defendants.
STEPHEN M. McNAMEE, Senior District Judge.
For the reasons that follow, the Court declares the remaining parties' respective obligations, but declines to award further declaratory relief.
The origins of this declaratory judgment action can be traced back to a residential housing development (the "Development") constructed in Surprise, Arizona between 1996 and 2005. The general contractor was Del Webb Home Construction, Inc. ("DWHC"), a wholly owned subsidiary of Del Webb Communities, Inc. ("DWCI"), which is itself a wholly owned subsidiary of Del Webb Corp. (collectively "Del Webb"). DWHC entered into contracts with six different subcontractors for the provision of various construction tasks. The contracts required the subcontractors to maintain commercial general liability ("CGL") insurance with two million dollars in policy limits and to endorse Del Webb as an additional primary insured. (E.g., Docs. 221-1 at 5-6, 15, 25-26; 226-2 at 18; 265-3 at 17-18, 72-73, 99.) While allowing for the requisite CGL limits to be split between primary and excess policies, the contracts stated: "It is expressly agreed that any other insurance covering [Del] Webb is excess over and non-contributing with [the subcontractor's] commercial general liability insurance." (Id.)
On January 28, 2008 hundreds of Development homeowners served DWCI, the entity that sold the homes, with notice pursuant to Arizona's Purchaser Dwelling Act, Ariz. Rev. Stat. § 12-1361 et seq., alleging construction defects that implicated several subcontractors. On the same day, hundreds of other Development homeowners served DWCI with a demand for arbitration regarding analogous construction defects. The notice of construction defects eventually matured into a civil action, Glen Zelkind et al. v. Del Webb Communities, Maricopa Superior Court Case No. CV2008-3089, that has progressed to trial. The arbitration, however, was resolved in favor of the homeowners resulting in a $13.5 million award against Del Webb, which Del Webb appealed. As of January 3, 2014, the defense costs in the civil action were about to surpass the amount of the arbitration award.
On October 6, 2011, three insurers that were defending Del Webb in the underlying actions filed the instant action against 13 insurers who insured one or more subcontractors and/or Del Webb at various times but refused to contribute or contributed less than their share of defense costs. Plaintiffs sought a declaration of defense duties and a declaration of entitlement to equitable contribution. During nearly three years of proceedings, the complaint has been amended twice, 19 different insurers have appeared, and six Defendants filed counterclaims and crossclaims for relief identical to that sought by Plaintiffs.
The Court and the parties agreed at the April 16, 2012, Rule 16 conference to bifurcate the proceedings so that the first round of dispositive motions would resolve as a matter of law any disputes about whether a party had a duty to defend under one or more policies. (Docs. 97; see 319 at 2.) Four of the nineteen insurers had been dismissed (Docs. 87; 358) before the parties participated in a settlement conference that resulted in the dismissal of another three parties and 32 claims, counterclaims, and crossclaims (Docs. 366; 374; 375; 379; 380). Five dispositive motions were timely filed: one was withdrawn, two were denied as moot pursuant to settlement, and two were decided by the Court. Only two parties filed challenges to their duty to defend under any of their polices (Docs. 258; 267), but neither challenge was successful (Docs. 344; 350).
"In a case of actual controversy... any court of the United States... may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a) (emphasis added). The declaratory judgment case or controversy "requirement is identical to Article III's constitutional case or controversy requirement." American States Ins. Co. v. Kearns , 15 F.3d 142, 143 (9th Cir. 1994). This prerequisite is satisfied where "there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Cas. Co. v. Pacific Coal & Oil Co. , 312 U.S. 270, 273 (1941) (citing Aetna Life Ins. Co. of Hartford v. Haworth , 300 U.S. 227, 239-42 (1937)); Principal Life Ins. Co. v. Robinson , 394 F.3d 665, 671 (9th Cir. 2005) (discussing ripeness).
The controversy must not only be "real and substantial, " but must also be susceptible "of specific relief through a decree of a conclusive character" in the form of "an immediate and definitive determination of the legal rights of the parties... upon the facts alleged." Haworth , 300 U.S. at 241 (distinguishing "an opinion advising what the law would be upon a hypothetical state of facts"). "The litigant must clearly and specifically set forth facts sufficient to satisfy" the case or controversy requirement, Whitmore v. Arkansas , 495 U.S. 149, 155 (1990) (discussing standing), "for each form of relief sought." Friends of the Earth, Inc. v. Laidlaw Envtl. Serv., Inc. , 528 U.S. 167, 185 (2000) (same).
"So long as the court's exercise of jurisdiction over the suit passes constitutional and statutory muster, ' the district court has discretion to determine whether maintaining jurisdiction over the declaratory action would be appropriate." Allstate Ins. Co. v. Herron , 634 F.3d 1101, 1107 (9th Cir. 2011) (quoting Gov't Emp. Ins. Co. v. Dizol , 133 F.3d 1220, 1223 (9th Cir. 1998) (en banc)). The Ninth Circuit "allow[s] district courts broad discretion as long as it furthers the Declaratory Judgment Act's purpose of enhancing judicial economy and cooperative federalism.'" R.R. Street & Co. v. Transp. Ins. Co. , 656 F.3d 966, 975 (9th Cir. 2011) (quoting Dizol , 133 F.3d at 1224).
"When declaratory relief will not be effective in settling the controversy, the court may decline to grant it." Fed.R.Civ.P. 57 advisory committee notes (1937). If the sought declaration neither "serve[s] a useful purpose in clarifying and settling the legal relations at issue" nor "terminate [s] and afford[s] relief from the uncertainty, insecurity, and controversy giving rise to the proceeding, " then "the court should decline to render" declaratory relief Delno v. Market St. Ry. Co. , 124 F.2d 965, 968 (9th Cir. 1942) (quoting Edwin Borchard, Declaratory Judgments 299 (2d ed. 1941)).
The parties to this action all issued one or more of three different types of CGL policies that insured Del Webb. First are the parties that issued CGL policies directly to Del Webb. Plaintiff/Counter-Defendant St. Paul Fire & Marine Insurance Company ("St. Paul") issued two CGL policies directly to Del Webb (Doc. 197 ¶ 29), which included primary and excess insurance, that were subject to an "other insurance" provision stating in relevant part: "We have no duty to defend... if your Basic Insurance, or any other insurance, has a duty to defend.... We'll assume the duty to defend... only if... your Basic Insurance, or any other insurance, doesn't cover" liability. (Doc. 221-3 at 130, 164.) Similarly, ...