Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_16-cv-01083/USCOURTS-azd-2_16-cv-01083-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Declaratory Judgment

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Berkshire Hathaway Specialty Insurance Company, 

Plaintiff, 

v. 

City of Phoenix, et al., 

Defendants. 

No. CV-16-01083-PHX-JAT

ORDER GRANTING DEFENDANT 

CITY OF PHOENIX’S MOTION TO 

DISMISS 

 

 Pending before the Court is Defendant City of Phoenix’s Motion to Dismiss 

Plaintiff’s complaint (Doc. 31) and Motions to Dismiss Crossclaims by various 

Defendants (Docs. 66, 77) and Defendants TIG Insurance and North River Insurance 

Company’s Motion to Dismiss Plaintiff’s complaint (Doc. 53) and Motions to Dismiss 

Crossclaims by various defendants (Docs. 70, 71). The Court now rules on the motions. 

I. Background1

 Plaintiff Berkshire Hathaway, formerly known as Stonewall Insurance Company, 

issued two insurance policies to the City, both effective from July 1, 1976 through July 1, 

1977. Policy 13556 is an umbrella policy providing $300,000 of coverage for net losses 

 1

 When ruling on a motion under Federal Rule of Civil Procedure 12(b)(1), the 

Court must accept the allegations in the Complaint as true and draw all reasonable 

inferences from the facts in favor of the non-moving party. Wolfe v. Strankman, 392 F.3d 

358, 362 (9th Cir. 2004); see also infra n.2. 

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exceeding a self-insured retention of $300,000. (Doc. 1 at 2) Policy 13710 is an excess 

policy providing $2,750,000 of coverage for net losses exceeding a self-insured retention 

of $1,000,000. (Id.) Under the terms of both policies, the City is required to exhaust all 

applicable underlying insurance coverage before coverage may be triggered under 

Plaintiff’s policies. (Doc. 1 at 10) 

 A. The Tarazon Action 

 In 2013, the City was named as a defendant in a lawsuit filed by Carlos Tarazon 

and his wife, Soledad Tarazon (“the Tarazon action”). The suit alleged the City was liable 

for injuries Mr. Tarazon developed through exposure to asbestos while he was employed 

by the City. The City ultimately settled the Tarazon action for $500,000 without 

Plaintiff’s knowledge or consent. (Doc. 1 at 11) 

 During the course of the Tarazon action, the City demanded coverage from 

Plaintiff under both Policy 13556 and Policy 13710. (Doc. 1 at 7, 24) In response to the 

City’s demands, Plaintiff requested additional information with which to evaluate the 

claim and establish whether the City had met its self-insured retention under Policy 

13556. Plaintiff also requested documentation showing the likelihood that the City’s 

coverage from its additional underlying insurance policies was or was likely to be 

exhausted. (Doc. 1 at 10) The City responded to Plaintiff, but did not provide Plaintiff 

with all of the requested documentation or adequate information for Plaintiff to make a 

determination regarding the availability of coverage. 

 After the settlement, the City filed suit in state court demanding coverage from 

four of its insurance carriers, not including Plaintiff: First State Insurance Company, 

Twin City Fire Insurance Company, New England Reinsurance Company, and the 

Nutmeg Insurance Company (collectively, “the Hartford insurers”). (See Doc. 94) The 

case was removed to federal court wherein the Honorable Judge Neil V. Wake entered 

judgment against the City. City of Phoenix v. First State Ins. Co., et al., No. CV-15-

00511, 2016 WL 4591906 (D. Ariz. Sept. 2, 2016) (“the Hartford case”). The Court held 

that, under the terms of the excess and umbrella policies, the Hartford insurers had no 

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duty to indemnify the City because the settlement amount was less than the City’s selfinsured retention limits. Id. Although the City is appealing the ruling in the Hartford case, 

it has not filed suit against Plaintiff seeking coverage for its liability in the Tarazon 

action. 

 B. The Herrera Action 

 In May 2015, the City was named as a defendant in a second asbestos injury suit 

filed against it in state court. (Doc. 1 at 13) That action alleges that the City is liable for 

the injuries and death of Francisco Herrera, who was allegedly exposed to asbestos while 

he was employed by the City. This action is still pending in Maricopa County Superior 

Court as Francisco Herrera, et al. v. Certainteed Corp., et al., Cause No. CV2014-

009632 (“the Herrera action”). 

 After it learned of the Herrera action, the City again demanded coverage from 

Plaintiff under Policy 13556 and 13710. (Doc. 1 at 13) Plaintiff responded with a formal 

request for additional information from the City. The City did not respond to Plaintiff’s 

request, and has taken no further action in seeking coverage from Plaintiff relating to the 

Herrera action. 

 C. Procedural History 

 On April 18, 2016, Plaintiff filed a Complaint in this Court, naming the City and 

several of the City’s insurers as defendants. The Complaint alleges six claims for relief 

seeking declaratory judgments that: (1) the City breached its duty to cooperate with 

Plaintiff such that Plaintiff has no duty to indemnify, (2) the City breached its duty to 

inform Plaintiff of ongoing settlement negotiations such that Plaintiff has no duty to 

indemnify, (3) the Tarazon and Herrera actions constitute “separate occurrences” 

requiring the exhaustion of two self-insured retentions before the City’s policies are 

triggered, (4) the City’s decision to seek coverage from the Hartford precludes it from 

seeking coverage under its Berkshire policies until its Hartford coverage is exhausted, (5) 

any coverage available to the City under its Berkshire policies should be allocated pro 

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rata among all relevant insurers, and (6) Berkshire is entitled to reimbursement of any 

excess payments it may make in excess of its pro rata share of liability. 

 The City responded with a motion to dismiss under Federal Rule of Civil 

Procedure 12(b) (without specifying which subsection), arguing Plaintiff has not shown 

that this Court should exercise its discretion to decide these claims under the Federal 

Declaratory Judgment Act, 28 U.S.C. § 2201, et seq. 

II. Legal Standard 

 The City argues argues the facts alleged in the Complaint do not support 

concluding that the Court should exercise its discretionary jurisdiction under the 

Declaratory Judgment Act. See Brillhart v. Excess Ins. Co., 316 U.S. 491, 495 (1942) 

(outlining factors for the District Court to weigh before granting declaratory relief). (Doc. 

31 at 5–7). But before this Court can determine whether it should exercise jurisdiction 

over Plaintiff’s claims for declaratory relief, it must first determine that it has subjectmatter jurisdiction over the claims. Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 

(9th Cir. 2005); American States Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir. 1994); see 

also Chapman v. Pier 1 Imports (U.S.) Inc., 631 F.3d 939 (9th Cir. 2011) (explaining that 

the Court may sua sponte examine jurisdictional issues). Accordingly, this Court will 

consider the City’s motion under Rule 12(b)(1) and determine whether the allegations 

therein are “insufficient on their face to invoke federal jurisdiction.” See Safe Air for 

Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).2

 

 The inquiry for determining whether subject-matter jurisdiction exists under the 

Declaratory Judgment Act is “identical to Article III’s constitutional case or controversy 

requirement.” Kearns, 15 F.3d at 143. A case is ripe for review when an actual 

controversy exists, meaning “the facts alleged, under all the circumstances, show that 

there is a substantial controversy . . . of sufficient immediacy and realty to warrant the 

issuance of a declaratory judgment.” Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 

 

2

 Because the City does not challenge the truth of the facts alleged within the Complaint, the Court treats the City’s motion as a facial, rather than a factual, attack 

under Rule 12(b)(1). See Safe Air for Everyone, 373 F.3d at 1039. 

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270, 273 (1941). If a claim “rests upon contingent future events that may not occur as 

anticipated, or indeed may not occur at all,” it is not ripe for this Court’s consideration. 

Texas v. United States, 523 U.S. 296, 300 (1998) (internal quotation omitted); see also 

Golden v. Zwickler, 394 U.S. 103, 108 (1969) (explaining that the prohibition against 

issuing advisory opinions is “as true of declaratory judgment as any other field”).

III. Analysis 

 A. The Tarazon Action and the Hartford Case 

 First, the Court considers whether Plaintiff’s claims represent an actual 

controversy as they relate to the Tarazon action. When a claim is made involving an 

excess insurance policy, the fact that liability under that policy is still contingent does not 

necessarily preclude this Court’s jurisdiction over it. See Associated Indem. Corp. v. 

Fairchild Indus., Inc., 961 F.2d 32, 35 (2d Cir. 1992). But jurisdiction is only appropriate 

if the occurrence of the contingency triggering the coverage is a “practical likelihood.” 

Century Indem. Co. v. Marine Grp., LLC, 848 F.Supp.2d 1229, 1235 (D. Oregon 2012) 

(citing Associated Indem, 961 F.2d at 35). 

 Given the disposition of the Tarazon and Hartford cases, the Court finds no 

practical likelihood of the occurrence of a coverage-triggering contingency. In the 

Hartford case, Judge Wake held the City was not entitled to coverage from its Hartford 

insurers because the Tarazon action’s $500,000 settlement did not exceed the City’s selfinsured retention limits. City of Phoenix v. First State Ins. Co., et al., 2016 WL 4591906 

at *8. Judge Wake further held the Hartford insurers had not incurred a duty to defend the 

City and were not liable for any of the City’s more than $1,400,000 in defense costs. Id. 

at *14. In addition, the Court explained that under Arizona law, any obligations for either 

liability or defense costs should be allocated pro rata over the applicable policy periods; 

in other words, if an insurance policy was effective for one of the twenty-six years in 

question during the suit, the maximum liability that may be deemed coverable under that 

policy is one twenty-sixth of the total settlement amount. Id. at *11–12 (explaining that 

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pro rata allocation is appropriate in light of the law, policy language, and “the City’s 

reasonable expectations”). 

 Considering Plaintiff’s excess policies in light of Judge Wake’s Hartford decision, 

there is little probability that Plaintiff will be liable to the City for claims related to the 

Tarazon action. Plaintiff’s excess policy has a retention limit of $300,000. Its umbrella 

policy limit is $1,250,000. But its coverage was effective for only one of the twenty-six 

years in question in the Tarazon action: July 1, 1976 through July 1, 1977. Even if the 

Court were to assume the City is entitled to coverage for both the settlement amount and 

the total amount of defense costs, the most the City would reasonably be able to claim 

from Plaintiff is one-twenty sixth of that amount — less than $80,000. Because this 

amount is well below the $300,000 self-insured retention limit, it is unlikely that the City 

will choose to file suit seeking coverage from Plaintiff. Accordingly, the Court cannot 

conclude that the contingency required to trigger coverage under Plaintiff’s policies is a 

practical likelihood; Plaintiff’s claims as they relate to the Tarazon action are therefore 

unripe and not entitled to declaratory judgment regarding whether the City breached a 

duty to Plaintiff. 

 B. The Herrera Action and Future Suits 

 Plaintiff also seeks a determination of its obligations as they relate to the Herrera 

action or to “any suits brought against Phoenix that may be pending or that may be 

brought in the future.” But the Herrera action is still pending decision from the Arizona 

Superior Court, and no other potential claimant has yet filed suit against the City. 

Accordingly, Plaintiff’s claims are entirely dependent upon unknown outcomes, namely: 

(1) the outcome of the Herrera case against the City and other insurers, and (2) the 

possibility that another defendant exists and will file a similar suit against the City. Under 

these circumstances, Plaintiff’s claims for declaratory relief are not ripe.3

 

 

 

3

 For the same reasons, Plaintiff’s request for declaratory judgment regarding whether the Tarazon action and Herrera action constitute “separate occurrences” for the purposes of determining coverage are not ripe for determination. (See Doc. 1 at 16–17). 

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 Plaintiffs argue that, notwithstanding the lack of a substantive adjudication on the 

merits, the Court is capable of determining the obligations of all insurers based on the 

policy language and controlling law. The Court also notes Plaintiff’s argument that a 

declaratory judgment in this action is desirable in terms of judicial efficiency and 

economy. But the value of an early ruling in this case, even if such a ruling possible, is 

undermined by the potential for an appeal: even if this Court were to issue an immediate 

determination of the rights and obligations of each party, such a determination may not 

be “final” for quite some time. Accordingly, the interest of judicial economy would be 

better served by waiting until there is a concrete set of facts from which this Court can 

make a determination as to the actual, rather than hypothetical, obligations of each 

insurer. Moreover, if the Herrera action ends in a determination that there is no liability 

on the part of the City of Phoenix, any determination made by this Court regarding the 

liability of the insurers would be rendered moot and the judicial resources undertaken to 

make such a determination would be put to waste. 

 As the Court noted during oral argument, it also recognizes that an anticipatory 

declaration of rights may be helpful to the insurers for the purpose of settlement 

negotiations in the Herrera action and other potential cases. But even without a 

declaratory judgment from this Court, Plaintiff and other insurers are still capable of 

determining an amount representing their aggregate potential settlement. The insurers 

could further agree that any such amount is subject to readjustment and reapportionment 

in accordance with a judicial determination. In other words, an immediate determination 

from this Court would not make the parties appreciably more capable of entering into a 

favorable settlement agreement. 

 Because a determination of the rights and obligations of Plaintiff would be purely 

advisory, and because other considerations make the issues presented in the complaint 

inappropriate for decision at this time, this Court declines to accept jurisdiction over the 

complaint. See See Principal Life Ins. Co., 394 F.3d at 669 (“If a case is not ripe for 

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review, then there is no case or controversy, and the court lacks subject-matter 

jurisdiction”). 

 C. Contribution from Other Insurers 

 Finally, the Court considers whether Plaintiff’s claims for pro rata apportionment 

of liability and equitable contribution from the City’s other insurers represent an actual 

controversy. Plaintiff asks this Court to determine the appropriate apportionment of 

liability in the hypothetical event that it and one or more other insurers are required to 

provide coverage under the terms of any number of policies. But no insurer named in this 

suit has been required to pay indemnity regarding the claims in the Tarazon action; 

indeed, there has been a determination that the Hartford Insurers are not required to do 

so. And no liability has yet been attributed to the City in the Herrera action. Accordingly, 

these claims do not represent a ripe justiciable controversy. See Travelers Indem. Co. v. 

Standard Accident Ins. Co., 329 F.2d 329, 332 (7th Cir. 1964) (plaintiff insurer’s request 

for declaration that other insurance company would be liable, “before judgment [had] 

been reached in the [underlying] action,” was “purely speculative and therefore not 

proper for decision in this declaratory judgment”). 

IV. Conclusion 

 Based on the foregoing, 

IT IS ORDERED that Defendant City of Phoenix’s Motion to Dismiss (Doc. 31) 

is granted. Defendant North River Insurance and TIG Insurance’s Motion to Dismiss 

(Doc. 53) is also granted. Plaintiff’s action is dismissed without prejudice as unripe, and 

the Clerk of the Court shall enter judgment accordingly, including all counterclaims and 

crossclaims addressed below. 

IT IS FURTHER ORDERED denying all other pending motions (Docs. 66, 70, 

71, and 77) as moot. 

IT IS FURTHER ORDERED that Cross Claimants First State Insurance 

Company, Twin City Fire Insurance Company, New England Reinsurance Corporation, 

and Nutmeg Insurance Company’s counter-claims against Plaintiff and cross-claims 

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against the City, Pacific Indemnity Company, Century Indemnity Company, TIG 

Insurance Company, North River Insurance Company, and Travelers Casualty and Surety 

Company (Doc. 48) are dismissed without prejudice as not ripe; Cross Claimant 

Traveler’s Casualty and Surety Company’s counter-claims against Plaintiff and crossclaims against the City, Twin City Fire Insurance Company, New England Reinsurance 

Corporation, Pacific Indemnity Company, TIG Insurance Company, North River 

Insurance Company, Nutmeg Insurance Company, Century Indemnity Company, First 

State Insurance Company (Doc. 59) are dismissed without prejudice as not ripe. 

 Dated this 8th day of November, 2016. 

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