ACE American Insurance Company v. Old Republic General Insurance Corporation
- William Orrick
- 3:20-cv-00482
- U.S. District Court · Northern District of California
- 10
In ACE American v. Old Republic, Judge Orrick denied Wesco’s motion to dismiss Scottsdale’s declaratory crossclaim, finding an actual controversy and retaining jurisdiction.
Wesco’s motion to dismiss was denied, and Scottsdale’s declaratory-relief crossclaim against Wesco was not dismissed at this stage.
What happened
ACE American Insurance Company v. Old Republic General Insurance Corporation concerns insurers’ responsibility for defense costs from a resolved state-court construction-defect lawsuit involving Layton Construction Company, LLC. Scottsdale sought a declaration that it did not owe Layton a duty to defend or Wesco reimbursement.
Wesco asked the court to dismiss Scottsdale’s crossclaim for lack of subject-matter jurisdiction, arguing that the underlying lawsuit had ended and the crossclaim was unnecessary and repetitive. Scottsdale argued that it sought relief specifically concerning any obligation to reimburse Wesco.
Judge William Orrick denied Wesco’s motion to dismiss. He found that Scottsdale’s crossclaim presented a real legal dispute and decided to keep jurisdiction because dismissing it at that stage might prevent Scottsdale from obtaining the specific relief it requested.
The detailed version
- ACE American Insurance Company v. Old Republic General Insurance Corporation · No. 3:20-cv-00482
- William Orrick
- July 15, 2020
Background
ACE brought an insurance-coverage action involving defense fees and costs from a resolved state-court action concerning alleged construction defects at a project. ACE alleged that Old Republic, Wesco, and Scottsdale had duties to defend Layton Construction Company, LLC, as an additional insured and should contribute to Layton’s defense costs.
Wesco filed a crossclaim against Scottsdale seeking equitable contribution for defense fees and costs that Wesco said it had paid. Scottsdale filed a crossclaim against Wesco seeking a declaration that Scottsdale did not owe Layton a duty to defend and therefore did not owe Wesco reimbursement.
Wesco’s Motion
Wesco moved under Federal Rule of Civil Procedure 12(b)(1), which allows dismissal for lack of subject-matter jurisdiction. Wesco argued that Scottsdale’s crossclaim concerned only a past duty to defend in an underlying action that had ended. Wesco also argued that the crossclaim was redundant of other claims in the case.
Court’s Analysis
The court held that Scottsdale’s crossclaim satisfied Article III’s case-or-controversy requirement. Although the underlying action had been resolved and the dispute involved multiple insurers rather than only an insurer and its insured, the court found that Wesco’s reimbursement claim created a sufficiently real dispute concerning Scottsdale’s alleged duty to defend.
The court recognized that it had discretion under the Declaratory Judgment Act to exercise jurisdiction over a declaratory-relief claim. It also recognized that courts may dismiss or strike redundant declaratory counterclaims when they serve no useful purpose and completely duplicate the factual and legal issues already before the court.
The court concluded that Scottsdale’s crossclaim might provide affirmative relief specifically addressing whether Scottsdale had to reimburse Wesco. A ruling on ACE’s other claims would not necessarily provide that same relief. Because dismissing the crossclaim at that stage might prevent Scottsdale from obtaining the relief it sought, the court exercised jurisdiction over it.
Disposition
The court denied Wesco Insurance Company’s motion to dismiss Scottsdale Insurance Company’s declaratory-relief crossclaim.
Read the full 10-page opinion on CourtListener, the free public archive maintained by the Free Law Project.