Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-01827/USCOURTS-cand-3_04-cv-01827-6/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Insurance Contract

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For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

THE FLINTKOTE COMPANY, a Delaware

Corporation,

Plaintiff,

v.

GENERAL ACCIDENT ASSURANCE COMPANY

OF CANADA, a Canada insurance company;

GENERAL ACCIDENT FIRE AND LIFE

ASSURANCE CORPORATION LIMITED OF

PERTH, SCOTLAND, a Scotland insurance company;

and Does ONE through TEN,

Defendants.

 /

No. C 04-01827 MHP

MEMORANDUM & ORDER

Re: Motion to Dismiss

On April 14, 2004, plaintiff Flintkote Company filed an action in San Francisco Superior

Court against defendants General Accident Assurance Company of Canada and General Accident

Fire and Life Assurance Corporation Limited of Perth, Scotland, predecessors of Aviva Insurance

Company of Canada. The state complaint alleged breach of contract for defendants’ failure to

defend or indemnify plaintiff for claims covered under an insurance policy issued to two of

plaintiff’s subsidiaries. Defendants removed the action to this court. Now before the court is

defendants’ motion to dismiss a portion of plaintiff’s First Amended Complaint. Having considered

the parties’ arguments and submissions, and for the reasons set forth below, the court rules as

follows.

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BACKGROUND

Plaintiff, presently based in San Francisco, is a company that formerly mined and sold

asbestos and asbestos-based products. Defendants are insurance companies that issued general

liability policies to two of plaintiff’s Canadian subsidiaries—The Flintkote Company of Canada

LTD and The Flintkote Mines Limited. Plaintiff was recently forced to seek bankruptcy protection

as a result of the enormous volume of asbestos-related litigation that arose in response to the

revelation that exposure to asbestos fibers can have severe long-term health consequences. Plaintiff

brought the present action in order to obtain declaratory relief related to the scope of coverage under

plaintiff’s policies with defendants, as well as indemnification for money paid out as a result of past

litigation.

The parties appeared before this court for a status conference on March 20, 2006. At the

status conference, the parties noted that a dispute had arisen as to the scope of the declaratory relief

sought by plaintiff. Plaintiff claimed to seek declaratory relief as to all asbestos claims, past, present

and future, for which defendants might have a duty to defend or a duty to indemnify. Defendants

claimed that plaintiff is only entitled to seek relief as to lawsuits which have terminated, either

through a final judgment or settlement, and lawsuits which have already been filed but are still

pending. In order to clarify the scope of the litigation, defendants permitted plaintiff to file a First

Amended Complaint (“FAC”) which clearly articulates plaintiff’s request for a declaration applying

to future asbestos lawsuits. Defendants now move to dismiss the portion of the FAC relating to

future lawsuits on the grounds that it is not a proper case or controversy under Article III of the

United States Constitution.

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1)1 asserts that the court

lacks “jurisdiction over the subject matter.” Fed. R. Civ. P. 12 (b)(1). The party claiming federal

jurisdiction has the burden to prove that jurisdiction exists. Sissoko v. Rocha, 440 F.3d 1145, 1161

(9th Cir. 2006). Federal district courts are “courts of limited jurisdiction” and Article III of the

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Constitution restricts the jurisdiction of federal courts to “cases” and “controversies.” Exxon Mobil

Corp. v. Allapattah Servs., 125 S. Ct. 2611, 2616–17 (2005); Lujan v. Defenders of Wildlife, 504

U.S. 555, 559–60 (1992). The dispute “must be a real and substantial controversy admitting of

specific relief through a decree of a conclusive character, as distinguished from an opinion advising

what the law would be upon a hypothetical state of facts.” Aetna Life Ins. Co. v. Haworth, 300 U.S.

227, 241 (1937) (citing Muskrat v. United States, 219 U.S. 346 (1911)).

DISCUSSION

I. Plaintiff’s Claim for Declaratory Relief

Plaintiff’s FAC contains two claims. The first claim, for breach of contract, seeks damages

associated with defendants’ alleged failure to defend plaintiff in past lawsuits with asbestos-related

claims, as well as indemnification for any settlement payments or adjudications of liability in those

past lawsuits. FAC ¶¶ 10–12. Defendants do not contest the justiciability of the breach of contract

claim.

Plaintiff’s second claim, for declaratory relief, seeks two separate declarations with respect to

defendants’ duties in pending and future lawsuits with asbestos-related claims. First, plaintiff seeks

a declaration that “Defendants . . . are obligated under the Policies to defend Plaintiff against

asbestos-related claims, both pending and in the future.” FAC ¶ 15. Second, plaintiff seeks a

declaration that “Defendants . . . are obligated under the Policies to indemnify Plaintiff for

settlement payments, adjudications, or other determinations of liability relating to asbestos-related

claims.” Id. Plaintiff defines “asbestos-related claims” as “claims of bodily injury from asbestos

exposure implicating Plaintiff, triggering the Policies, and not otherwise excluded by the Policies.” 

Id.

Defendants do not contest the justiciability of plaintiff’s second claim as it applies to

“pending” asbestos-related claims—lawsuits which have already been filed against plaintiff but have

not yet reached resolution through settlement or final judgment. Defendant argues only that the

court may not provide declaratory relief as to future, unfiled lawsuits because plaintiff’s claims

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against defendants with respect to future lawsuits are not actual cases or controversies as required by

Article III.

II. Declaratory Relief Pertaining to Future Lawsuits

Defendants’ argument is not novel. The D.C. Circuit considered a nearly identical

justiciability challenge twenty-five years ago in Keene Corp. v. Insurance Co. of North America,

667 F.2d 1034 (D.C. Cir. 1981). In Keene, a manufacturer of asbestos products sued its insurers,

seeking a declaration that the insurers had a duty to defend plaintiff in any lawsuit seeking recovery

for an asbestos-related disease, as well as a duty to indemnify plaintiff to the full extent of its

liability in those suits. Id. at 1039. The insurance companies moved to dismiss based on plaintiff’s

failure to identify a case or controversy, alleging that “Keene must raise insurance coverage issues in

the context of a particular case in which an insurance company has refused to defend or indemnify

Keene.” Id.

The court disagreed, finding that Keene had adequately established the existence of a live

controversy between the parties:

This suit by Keene does not present a hypothetical set of facts. Keene has been, and

will continue to be, sued for injuries that result from the use of its asbestos products. 

For each of these suits—past, present, and future—the rights and obligations of

Keene and its insurers must be resolved. There can be no question that the

interpretation of the contracts at issue in this case presents a “real and substantial

controversy” that can be specifically resolved by a decision in this case.

Aetna implies that the rights and obligations created by the insurance policies cannot

be determined without consideration of the facts of a particular tort suit. We have

before us, however, the terms of the insurance policies and the facts of the particular

types of diseases whose coverage is at issue. We are not aware or informed of any

facts that would come to light in a particular tort suit that would be relevant to the

determination of the policies’ applicability to Keene’s liability for asbestos-related

injury. We hold, therefore, that the case is justiciable.

Id. at 1040.

In ACandS, Inc. v. Aetna Casualty & Surety Co., 666 F.2d 819 (3d Cir. 1981), the Third

Circuit considered a similar dispute between an asbestos manufacturer and its insurers. The district

court found the case to be nonjusticiable:

The district court decided that the matters before it were not justiciable, and

dismissed the complaint and cross-claim. The court determined that it was being

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asked to render a constitutionally impermissible advisory opinion as to the legal

interrelationship of ACandS, Aetna and Travelers: there was no concrete dispute

because the parties and the facts of the underlying asbestos suits were not before the

court; plaintiff had no actual need for a determination of insurance coverage since it

had not yet become liable to pay any judgment; and declaratory relief would not

necessarily terminate the controversy. The claims for declaratory relief were thus

dismissed as beyond the constitutional competence of a federal court.

Id. at 822. The Court of Appeals rejected this reasoning, finding the case to be justiciable:

The dispute between Aetna, Travelers and ACandS as to the coverage of the

insurance policies is real and concrete. The factors that will determine the relative

duties and benefits under the insurance contracts are independent of the underlying

claims and are being presented in an adversarial context by parties with adverse

interests. . . . Declaratory suits to determine the scope of insurance coverage have

often been brought independently of the underlying claims albeit the exact sums to

which the insurer may be liable to indemnify depend on the outcome of the

underlying suits.

Id. at 822–23.

The Ninth Circuit endorsed the reasoning of ACandS in Eureka Federal Savings & Loan

Association v. American Casualty Co., 873 F.2d 229, 232 (9th Cir. 1989). In Eureka, a savings and

loan sued an insurer seeking a declaration of coverage for two of the savings and loan’s directors,

who were named defendants in a parallel lawsuit. Id. at 230–31. The insurer argued that the court

lacked jurisdiction to decide the scope of coverage because the liability of the directors had not yet

been established. Id. at 231. The Ninth Circuit disagreed, noting that resolution of the coverage

issue would facilitate settlement of the dispute: “The respective interests and obligations of insured

and insurers, when disputed, require determination much in advance of judgment . . . . To delay for

the sake of more concrete development would prevent the litigants from shaping a settlement

strategy and thereby avoiding unnecessary costs.” Id. at 232 (quoting ACandS, 666 F.2d at 823).

The facts in this case are indistinguishable from those in Keene and ACandS. Plaintiff has

already tendered many cases to defendants for defense and indemnification, and will continue to do

so in the future as the asbestos-related claims against plaintiff continue to be filed, notwithstanding

plaintiff’s bankruptcy. Defendants thus far have refused coverage altogether. There is no doubt that

the dispute in this case is “real and concrete.”

Defendants also argue that the cases cited by plaintiff concern ripeness, while defendants

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challenge plaintiff’s complaint as requiring an impermissible advisory opinion. As an initial matter,

this argument is untenable in light of the language in ACandS rejecting the district court’s finding

that the relief sought was an advisory opinion. See 666 F.2d at 822. Moreover, defendants have not

provided any coherent explanation of how the two doctrines apply differently to the present case. 

Defendants also attempt to distinguish Keene and ACandS on the grounds that the relief

sought in those cases was less specific than the relief requested in this case—declarations of

“coverage” as opposed to a declaration of “liability.” This argument misconstrues the nature of the

relief plaintiff seeks and the relief requested in the precedent cases. Plaintiff’s second claim requests

a declaration that certain categories of asbestos-related claims trigger the duty to defend and

indemnify: “claims of bodily injury from asbestos exposure implicating Plaintiff, triggering the

Policies, and not otherwise excluded by the Policies.” The plaintiff in ACandS requested far more

detailed declarations as to the respective obligations of several insurers, each of which advanced

arguments for how liability should be divided. 666 F.2d at 821. Similarly, in Keene the plaintiff

requested a declaration that “any stage in the progression of an asbestos-related disease triggers

coverage of Keene’s entire liability under each of the policies.” 667 F.2d at 1039. The requested

declaration of coverage in this case is no more detailed than those sought in Keene and ACandS.

Defendants also argue that they have no present duty to defend against claims that have not

yet been filed against plaintiff. While that may be true, it has no bearing on plaintiff’s request for

clarification as to what asbestos-related cases will trigger that duty.

None of the cases cited by defendants is applicable here, as all involve disputes that were

unlikely to materialize at all. In Solo Cup Co. v. Federal Insurance Co., 619 F.2d 1178 (7th Cir.

1980), the court found that the dispute was not ripe where no claims had yet been filed against the

plaintiff and the insurer had not yet refused coverage. In Siebels Bruce Group v. R.J. Reynolds

Tobacco Co., No. C 99-00593, 1999 WL 760527, at *10 (N.D. Cal. Sept. 21, 1999) (Patel, C.J.), this

court found that there was no likelihood of future claims. In addition, the court noted that the relief

requested—a precise determination of the degree of fault between two tortfeasors—was impossible

to determine without regard to the facts of a specific case. Id. In Board of Education ex rel. Johnson

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County v. United States Gypsum Co., 580 F. Supp. 284, 293 (E.D. Tenn. 1984), vacated in part, 664

F. Supp. 1127 (E.D. Tenn. 1985), the plaintiff had “not alleged that there are any outstanding claims

against it arising out of the presence of asbestos in the school.” Finally, in Atlanta Gas Light Co. v.

Aetna Casualty & Surety Co., 68 F.3d 409, 415 (11th Cir. 1995) the court found that the plaintiff

had not yet been required to engage in environmental cleanup or contacted any of its insurers at all. 

Here, in contrast, defendants concede that there are already pending cases in which defendants have

refused to defend plaintiff which justify declaratory relief. The declaratory relief sought will apply

equally to yet-to-be-filed suits.

Defendants’ argument in support of dismissal appears to be predicated on the absurd

assumption that plaintiff must individually litigate defendants’ obligations with respect to each

asbestos-related lawsuit that is filed. Aside from being impossible, this suggested approach would

frustrate the entire purpose of obtaining insurance policies with broad duties to defend.

The flaw in defendants’ motion is perhaps underscored best by defendants’ inability to

articulate the consequences of dismissing the future component of plaintiff’s claims: “Moreover,

Flintkote misunderstands the basis for defendants’ Motion. It is not ‘that no declaration issued by

this Court can be applied in the future.’ . . . Instead, the basis for Aviva’s Motion is that as to future,

unmade asbestos claims, the parameters of which are entirely unknown, a declaration of the parties’

rights as to those claims would constitute a prohibited advisory opinion.” Reply Brief at 1. Given

that there is indisputably a present controversy between the parties regarding coverage, which

extends to currently pending claims, there is no difference between “appl[ying]” the court’s

declaratory ruling to future claims and “declar[ing]. . . the parties’ rights as to those claims.”

The nature of the declaratory relief available in this lawsuit is of course limited by the need

to avoid delving into the details of particular asbestos claims against plaintiff. The relief sought by

plaintiff, however, is categorical—imposing a duty to defend and indemnify plaintiff in asbestosrelated lawsuits. Defendants do not appear to dispute that the court may make categorical

declarations which apply to pending lawsuits. Extending the scope of the declaratory relief to

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additional similar lawsuits, which will be filed in the future with a high degree of certainty, does not

exceed the court’s authority under Article III.

CONCLUSION

For the foregoing reasons, defendants’ motion to dismiss is DENIED.

IT IS SO ORDERED.

Dated: July 3, 2006 

MARILYN HALL PATEL

District Judge

United States District Court

Northern District of California

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1. Defendants purport to bring their motion to dismiss under Rule 12(b)(6), for failure to state a

claim. A motion to dismiss for lack of subject matter jurisdiction under Article III, however, falls

under Rule 12(b)(1).

ENDNOTES

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