Starr Indemnity & Liability Company v. Chart Industries, Inc.

Background

Starr brought a declaratory-judgment action concerning whether it ultimately had a duty to indemnify Chart under an excess liability policy. The dispute arose from several state and federal lawsuits concerning a March 2018 accident at the Pacific Fertility Center in San Francisco. Those lawsuits allege that eggs and embryos stored in a freezer tank manufactured by Chart were destroyed when the tank failed and that Chart knew the tank was defective.

Chart moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), arguing that the federal court lacked jurisdiction because the dispute was not ripe. Ripeness requires a sufficiently definite and concrete dispute rather than one dependent on uncertain future events. Chart argued that the duty to indemnify depended on the outcome of the underlying litigation, including whether Chart would be found liable and whether its liability would exceed the $100 million covered by other excess insurance before Starr’s $50 million policy would apply. Chart alternatively sought a stay or transfer to the Northern District of Georgia.

Court’s analysis

The court explained that the duty to indemnify generally arises after the damages in the underlying litigation are fixed. It distinguished that duty from the duty to defend, which can arise from the allegations in an underlying complaint. Although the Ninth Circuit had recognized that some declaratory actions concerning duties to defend and indemnify satisfy the constitutional requirement of a live controversy, Starr cited no Ninth Circuit decision addressing an action involving only the duty to indemnify. Starr also did not explain how its indemnity obligation could be resolved before liability was determined in the underlying litigation.

Starr argued that Chart’s separate lawsuit in the Northern District of Georgia, along with Chart’s prior demands that Starr make its policy limits available, showed that an actual dispute already existed. Chart did not dispute making the demand or Starr’s refusal to comply, but argued that Starr had not adequately alleged those facts in this complaint.

The court treated Chart’s argument as a facial jurisdictional challenge, meaning a challenge to whether the complaint’s allegations themselves establish federal jurisdiction. The court concluded that the current complaint did not contain allegations establishing ripeness. However, the court stated that information Starr had already provided appeared sufficient to allow Starr to amend the jurisdictional allegations. The court expressed reluctance to credit what it called Chart’s apparent gamesmanship.

Disposition

The court GRANTED Chart’s motion to dismiss with leave to amend. Starr could file an amended complaint within 21 days of the order. The court DENIED Starr’s administrative motion seeking leave to file a motion for determination of applicable law without prejudice to raising the issue later. The court also DIRECTED the parties to file a joint status report of three pages or less concerning settlement negotiations, the underlying litigation, and the effect of developments in those matters on the declaratory-judgment action. The court did not decide whether Starr ultimately had a duty to indemnify Chart.