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Colony National Insurance Co. v. Deangelo Brothers, Inc.

United States District Court, M.D. Pennsylvania

March 21, 2014

COLONY NATIONAL INSURANCE COMPANY and AMERICAN HOME ASSURANCE COMPANY, Plaintiffs,
v.
DeANGELO BROTHERS, INC. and UNION PACIFIC RAILROAD CO., Defendants.

MEMORANDUM OPINION

ROBERT D. MARIANI, District Judge.

I. Introduction

Presently before the Court is a Motion to Dismiss or to Drop a Party (Doc. 7), filed by Defendant DeAngelo Brothers, Inc., which is based on the allegation that DeAngelo has no stake in this declaratory judgment action. For the reasons discussed below, the Court will deny DeAngelo's Motion.

II. Factual Allegations and Procedural History

On February 14, 2013, Plaintiff Colony National Insurance filed a Complaint[1] (Doc. 1) in the Middle District of Pennsylvania, seeking adeclaration to resolve the scope of its obligations to provide coverage on an excess commercial liability insurance policy. ( See Compl., Doc. 1, at ¶¶ 2-3.) That Complaint alleges the following facts.

In 2006, acar collided with a Union Pacific Railroad train at a Union Pacific grade crossing in Oklahoma, killing one passenger and severely injuring another. ( Id. at ¶ 17.) That accident gave rise to a lawsuit in Oklahoma state court ("the Oklahoma action") against Union Pacific and the driver of the car, both of whom were alleged to have negligently contributed to the accident. ( Id. at ¶ 16.) Though Union Pacific is named as adefendant in this Middle District of Pennsylvania[2] Complaint (lithe Pennsylvania action"), the driver is not. Conversely, DeAngelo Brothers, the moving party behind the present motion, though a defendant in the Pennsylvania action, was not aparty to the Oklahoma lawsuit. ( Id. at ¶ 20.)

During the time of the underlying accident, DeAngelo Brothers contracted with Union Pacific to "perform certain vegetation control services at public grade crossings throughout [Union Pacific's] railroad system." ( ld. at ¶ 21.) The contract required DeAngelo Brothers to indemnify Union Pacific for, among other things, all liability ariSing from the injury or death of another person that was "associated with the Contractor's [Le., DeAngelo Brothers'] Work performed under this Agreement, a breach of the Agreement, the Contractor's failure to observe the health and safety provisions of the Agreement, or any activity or omission arising out of performance or nonperformance of this Agreement." ( ld., Ex. B, at § 13A.) However, the contract also provided that "the Contractor shall not indemnify the Railroad for any portion of the loss caused by the Railroad." ( ld.)

As part of the indemni'fication provision, the contract required DeAngelo Brothers to procure and maintain Commercial General Liability Insurance with a single limit of at least $5, 000, 000.00 for each occurrence or claim and an aggregate limit of at least the same, which was required to cover, among other things, bodily injury and death. ( ld., Ex. B, at § 4A.) It appears from the Complaint and contract that DeAngelo Brothers could, but was not required to, also utilize "umbrella or excess policies." ( Id. at ¶ 26; id., Ex. B., at § 4E.) The contract required that Union Pacific be listed as an additional insured on all of the poliCies at issue. ( Id., Ex. B, at § 4.)

DeAngelo Brothers procured commercial general liability insurance from Plaintiff American Home Assurance Company and commercial liability umbrella insurance from Plaintiff Colony Insurance. ( ld. at ¶¶ 28, 35; see also id., Ex. C(American Home policy); id., Ex. D(Colony policy).) On neither contract was Union Pacific listed as an additional insured, though Colony appears to admit in its Complaint that Union Paci'fic is covered under both policies. (See Compl. at ¶¶ 30-31, 37-38.) The American Home policy had an each occurrence limit of $1, 000, 000.00 and ageneral aggregate limit of $2, 000, 000.00, ( id., Ex. C, at 3), whereas the Colony policy had a $5, 000, 000.00 limit for both types, ( id., Ex. D, at 2). These policies were in force when the accident occurred and when the subsequent state-court litigation in Oklahoma ensued.

In late December 2012, in the midst of the Oklahoma litigation, Colony alleges that Union Pacific suddenly provided Colony "with a history of the various settlement offers exchanged between the parties [to the Oklahoma lawsuit] to date, including demands made by the underlying plaintiffs and offers made by [Union Pacific] that were reasonably likely to result in liability on Colony's part." ( ld. at ¶ 50.) Union Pacific then "demanded the full $5, 000, 000 limits of the Colony Policy to settle the Underlying Action prior to trial, " allegedly in a hurried manner and without full disclosure of Union Pacific's defense file. ( ld. at ¶¶ 51-54.) Ultimately, Union Pacific did settle, for $6, 500, 000.00. ( Id. at ¶ 55.) Colony never indemnified Union Pacific for the settlement. Instead, it disputes Union Pacific's entitlement to coverage, on the grounds that (1) Union Pacific was most at fault for the collision, and therefore not entitled to indemnity under insurance procured to cover DeAngelo Brothers' own acts or omissions, ( see id. at ¶¶ 44-48), and (2) Union Pacific did not adequately cooperate with Colony in the investigation or settlement of the case or properly notify it of or seek its consent before agreeing to any settlement offers, ( see id. at ¶¶ 49-56).

Colony then filed this Complaint seeking adeclaration of (1) the allocation of fault for the accident between Union Pacific and DeAngelo Brothers, ( see id. at ¶¶ 57-62), and (2) the amount of excess insurance coverage to which Union Pacific is entitled under Colony's policy, ( see id. at ¶¶ 63-70).

Colony's Complaint was filed on February 14, 2013. Shortly thereafter, on March 13, 2013, Union Pacific filed its own action in the United States District of Nebraska ("the Nebraska action"), naming Colony, American Home, and DeAngelo Brothers as Defendants. See generally Union Pac. R.R. v. Colony Nat'llns. Co., 8:13-cv-00084 (D. Neb. 2013). The Complaint in that case alleged aseries of declaratory-judgment and common-law and statutory claims against Colony and American Home. See id., Compl., Doc. 1, at ¶¶ 17-42. But most importantly for present purposes, it alleged a claim entitled "Contractuallndemnity and/or Contribution" against DeAngelo Brothers, which asserted that DeAngelo was liable to cover the costs of all settlement payments which Union Pacific made in the Oklahoma lawsuit to the extent not covered by the insurers. Id. at ¶¶ 15-16.

A review of the docket in the Nebraska action, as accessed through PACER, indicates that summonses were issued to all three Defendants on March 13. It is unclear if the summons was ever executed upon DeAngelo Brothers and no attorney appears to have entered an appearance in that case on DeAngelo's behalf. Nonetheless, amere six days after the issuance of summons in the Nebraska action, DeAngelo filed the Motion to Dismiss that is the subject of this Opinion, arguing essentially that it should be dropped as aparty to the Pennsylvania action because it did not have astake in it, as the Pennsylvania action allegedly concerns only the extent of liability between Union Pacific and the two insurers. ( See Brief in Supp. of DeAngelo Bros.' Mot. to Dismiss or to Drop a Party, Doc. 9, at 3-4.)

While this and other motions were pending in Pennsylvania, the Nebraska court was faced with its own motion to dismiss under the "first-'fiIed" rule, whereby the first case to which jurisdiction attaches has priority to consider a case. See Mem. Op., July 12, 2013, 8:13-cv-00084, Doc. 38, at 6-7 (quoting Boatmen's First Nat'l Bank of Kansas City v. Kansas Pub. Emps. Ret. Sys., 57 F.3d 638, 640 n.3 (8th Cir. 1995)). However, the Nebraska court found that, even though "the interests of justice" as applied through the first-filed rule indicated that Pennsylvania was the better forum for resolution of the dispute, outright dismissal was premature, given that the Pennsylvania court's decision of our pending motions could alter the jurisdictional landscape and cause Nebraska to become an appropriate forum. See id. at 15-16. Accordingly, rather than dismiss the action, the ...


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