Starr Indemnity & Liability Company v. Exist, Inc.

Background

Exist was insured under a marine cargo policy issued by Starr. The policy included a Warehouse/Processing Endorsement, a “Pairs and Sets” clause, and a “Sue & Labor” clause.

Exist made two sets of claims. The first concerned apparel stolen from trailers in the outside yard of Exist’s warehouse in Fort Lauderdale, Florida, on November 22, 2021. Some goods were later recovered, and Starr alleged that the recovered goods were undamaged. The second concerned 610 boxes of clothing shipped from India to Florida that Exist reported as water-damaged after passing through a United Parcel Service facility in Koeln, Germany. Starr alleged that inspections raised questions about the extent and cause of the claimed damage.

Starr first sued for a declaration that it had no coverage obligation for the theft claim. In its amended complaint, Starr also sought declarations concerning the water-damage claim and asserted that coverage was unavailable because of the policy’s coverage language, the “Pairs and Sets” clause, Exist’s alleged breach of the “Sue & Labor” clause, alleged failure to mitigate losses, and alleged failure to comply with the notice-of-loss clause. The opinion states that Starr was not pursuing an asserted lack-of-insurable-interest theory.

Motion and Arguments

Exist moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. Exist argued that Starr’s lawsuit improperly sought only to confirm that its past denials of coverage were proper and functioned as an affirmative defense to a potential breach-of-contract action. Exist also moved on forum non conveniens grounds, meaning it argued that another forum would be more appropriate, and alternatively requested a more definite statement and severance of the theft and water-damage claims.

Court’s Analysis

The court focused first on whether Starr had stated a claim for declaratory relief under the Declaratory Judgment Act, 28 U.S.C. § 2201. The court explained that declaratory relief can be appropriate when it clarifies the parties’ legal relationship or addresses future obligations before damages accrue. It can also be useful in insurance disputes involving an insurer’s future duty to defend or indemnify.

The court distinguished those situations from Starr’s lawsuit. Starr sought declarations that it was not liable for the already-accrued theft and water-damage claims. The court concluded that the requested relief would not clarify future legal relations or prevent future harm. Instead, it would allow Starr to preempt Exist, the party that could bring a contract action for payment, and select the forum and timing of the dispute.

The court rejected the argument that a possible effect on Exist’s future storage practices supplied a sufficient prospective purpose. The opinion states that there was no evidence that Exist had declared an immediate intention to store goods outside its warehouse in the future or that Starr disputed a prospective claim. A possible advisory benefit was not enough to establish the immediate and real controversy required for declaratory relief.

The court also distinguished a Second Circuit decision involving an insurer’s declaratory action about future defense and indemnification obligations. According to the court, that decision concerned which action should receive priority under the first-filed rule, not whether the district court should exercise its discretion to hear the declaratory action in the first place.

Disposition

The court granted Exist’s motion to dismiss and dismissed the case without prejudice. The opinion did not decide whether Starr’s insurance policy covered either claim, and it did not state separate dispositions for Exist’s alternative requests for a more definite statement or severance. The Clerk of Court was directed to close the motion docket entry.