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Axis Specialty Insurance Co. v. Brickman Group Ltd

January 28, 2010

AXIS SPECIALTY INSURANCE COMPANY
v.
THE BRICKMAN GROUP LTD, LLC



The opinion of the court was delivered by: Padova, J.

MEMORANDUM

This dispute concerns an excess insurance policy that Plaintiff Axis Specialty Insurance Company ("Axis") issued to Defendant Brickman Group LTD, LLC ("Brickman"). Brickman has filed a Motion to Dismiss the Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(7) or, in the alternative, to Transfer Venue to the District of New Jersey. For the following reasons, we dismiss Axis's claim for equitable subrogation, but deny the Motion in all other respects.

I. BACKGROUND

The Amended Complaint alleges that, in 2006, a woman named Deborah Peisel commenced an action in the New Jersey state courts against Home Depot and Brickman (the "Peisel Action"), alleging that she sustained injuries in a fall in the Home Depot parking lot due to Brickman's inadequate snow removal. (Am. Compl. ¶¶ 25-26.) On September 2, 2008, Peisel settled with Brickman for $1,150,000 (the "Peisel Settlement"). (Id. ¶ 33.)

During the relevant time period, Brickman was self-insured for the first $250,000 of its liability, and it maintained two excess insurance policies. (Id. ¶¶ 6-7.) The first was an ACE American Insurance Company ("ACE") policy, which provided $750,000 in excess coverage for the "'ultimate net loss' in excess of the 'retained limit.'" (Id. ¶¶ 8-10.) The policy defined "retained limit" to be the amount shown in the Declarations, which was $250,000. (Id. ¶¶ 11- 12.) The policy further stated that the retained limit did not include "any expenses incurred by the Insured in the defense of any claim or 'suit.'" (Id. ¶ 13.) Endorsement 10 of the policy further stated that ACE and Brickman would share defense costs on any claim in excess of the retained limit in proportion to each party's share of any settlement or judgment. (Id. ¶ 14.) The endorsement finally provided that the policy "did not apply to defense, investigation, settlement, or legal expenses." (Id. ¶ 15.)

Brickman's second excess policy was an umbrella policy with Axis. (Id. ¶ 16.) The Axis policy provided $5 million of coverage "in excess of the 'retained limit' which the insured becomes legally obligated to pay as damages... because of 'bodily injury.'" (Id. ¶¶ 17-18.) The policy defined "retained limit" as the "limits of 'underlying insurance' scheduled in the Declarations," which was $1 million. (Id. ¶ 20.) Finally, the policy provided that Axis would only have a duty to defend suits covered by the policy, but not covered by the underlying insurance, and suits arising after the limits of the underlying insurance were exhausted by the payment of damages. (Id. ¶ 23.)

The $1,150,000 settlement in the Peisel Action was funded with $750,000 from ACE, and $400,000 from Axis. (Id. ¶ 34.) Brickman did not contribute to the settlement, taking the position that its funding of defense costs excused its participation. (Id. ¶ 35.) Axis contends in the instant action that Brickman should have contributed its $250,000 in self-insurance to the settlement, thereby reducing Axis's required contribution by that amount.

The Amended Complaint contains four counts. The first is for Declaratory Relief and seeks a declaration that (1) the ACE policy did not include within its underlying limit or retained limit any amounts expended by Brickman for its defense; (2) Axis had no duty to defend or pay any defense costs incurred by or on behalf of Brickman; and (3) Brickman was required to fund the first $250,000 of the Peisel settlement. Count II alleges that Brickman breached its contract with Axis by failing to fund the first $250,000 of the Peisel Settlement. Count III asserts that Brickman was unjustly enriched by Axis's payment of $400,000 to the settlement, because Axis's only obligation was $150,000, i.e., Brickman should have paid $250,000. Count IV asserts a claim for equitable subrogation and alleges that (1) Brickman was primarily liable for the first $250,000 of the Peisel Settlement, (2) Axis ultimately paid that amount, and (3) equitable subrogation will correct that injustice.

II. DISCUSSION

In its Motion to Dismiss or Transfer, Brickman first argues that each of the four claims should be dismissed because they fail to state claims upon which relief may be granted. It next argues, pursuant to Fed. R. Civ. P. 12(b)(7), that the entire Amended Complaint should be dismissed for failure to join ACE as a necessary party as required by Fed. R. Civ. P. 16. Finally, and in the alternative, Brickman argues that the case should be transferred to New Jersey pursuant to 28 U.S.C. § 1404.

A. Fed. R. Civ. P. 12(b)(6) -- Faiilure to State a Claim

When considering a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), we look at the facts alleged in the complaint and its attachments. Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). We take the factual allegations of the complaint as true and draw all reasonable inferences in favor of the plaintiff. Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citing Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)). The "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

1. Declaratory Judgment Claim

Brickman first argues, without any citation to legal authority, that the declaratory judgment claim should be dismissed because Axis seeks a declaration of Brickman's obligations under the ACE policy, when it has no standing to seek such relief because it is neither a party nor a third-party beneficiary to that policy. The issue of standing under the Declaratory Judgment Act is determined by federal law. Fed. Kemper Ins. Co. ...


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