Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-3_14-cv-00248/USCOURTS-alnd-3_14-cv-00248-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1331 Fed. Question

---

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

NORTHWESTERN DIVISION

PENNSYLVANIA NATIONAL )

MUTUAL CASUALTY )

INSURANCE COMPANY, )

)

Plaintiff, )

)

vs. ) Civil Action No. CV-14-S-248-NW

)

THE RETIREMENT SYSTEMS )

OF ALABAMA, ALABAMA )

REAL ESTATE HOLDINGS, )

INC., QUALITY COATINGS & )

DRYWALL, INC., THE OHIO )

CASUALTY INSURANCE )

COMPANY, and LIBERTY )

MUTUAL GROUP, INC., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

Plaintiff, Pennsylvania National Mutual Casualty Insurance Company (“Penn

National”), filed this declaratory judgment action on February 12, 2014. The case

1

currently is before the court on the “Motion to Dismiss or in the Alternative to Stay”

filed by defendants The Retirement Systems of Alabama (“RSA”) and Alabama Real

Estate Holdings (“AREH”). Upon consideration ofthe motion, plaintiff’s response, 2 3

 Doc. no. 1 (Complaint). 1

Doc. no. 6. Defendants submitted evidence in support of their motion. Federal Rule 2

of Civil Procedure 12(d) states that, 

FILED

 2014 Jun-05 AM 10:30

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 1 of 18
and defendants’ reply, the court concludes the motion is due to be denied.

4

I. STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b) permits a party to move to dismiss a

complaint for, among other reasons, “failure to state a claim upon which relief can be

granted.” Fed. R. Civ. P. 12(b)(6). This rule must be read together with Rule 8(a),

which requires that a pleading contain only a “short and plain statement of the claim

showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). While that

pleading standard does not require “detailed factual allegations,” Bell Atlantic Corp.

[i]f, on a motion under Rule 12(b)(6) or 12(c), matters outside the

pleadings are presented to and not excluded by the court, the motion must be

treated as one for summary judgment under Rule 56. All parties must be given

a reasonable opportunity to present all the material that is pertinent to the motion.

Fed. R. Civ. P. 12(d) (alteration supplied). Thus, courts usually “do not consider anything

beyond the face of the complaint and documents attached thereto when analyzing a motion to

dismiss.” Financial Security Assurance, Inc. v. Stephens, Inc., 500 F.3d 1276, 1284 (11th Cir.

2007) (citing Brooks v. Blue Cross & Blue Shield of Florida, Inc., 116 F.3d 1364, 1368 (11th

Cir. 1997)). The Eleventh Circuit “recognizes an exception, however, in cases in which a

plaintiff refers to a document in its complaint, the document is central to its claim, its contents

are not in dispute, and the defendant attaches the document to its motion to dismiss.” Financial

Security Assurance, 500 F.3d at 1284 (citing Harris v. Ivax Corp., 182 F.3d 799, 802 n.2 (11th

Cir. 1999); Brooks, 116 F.3d at 1368-69). Documents from prior judicial proceedings also can

be considered without converting the motion to dismissinto one for summaryjudgment, because

such documents are “public records that [are] ‘not subject to reasonable dispute’ because they

[are] ‘capable of accurate and ready determination by resort to sources whose accuracy could not

reasonably be questioned.’” Horne v. Potter, 392 F. App’x 800, 802 (11th Cir. 2010) (quoting

Fed. R. Evid. 201(b); other citations omitted) (alterations supplied). Here, the documents

attached by defendants are pleadings from the underlying state court action, and a courtesy copy

of an unpublished federal district court opinion. Thus, it is not necessary to convert the motion

to dismiss into one for summary judgment under Federal Rule of Civil Procedure 56. 

 Doc. no. 12. 3

 Doc. no. 13. 4

2

Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 2 of 18
v. Twombly, 550 U.S. 544, 550 (2007), it does demand “more than an unadorned,

the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (citations omitted). As the Supreme Court stated in Iqbal:

A pleading that offers “labels and conclusions” or “a formulaic

recitation of the elements of a cause of action will not do.” [Twombly,

550 U.S., at 555]. Nor does a complaint suffice if it tenders “naked

assertion[s]” devoid of “further factual enhancement.” Id., at 557. 

To survive a motion to dismiss founded upon Federal Rule of

Civil Procedure 12(b)(6), [for failure to state a claim upon which relief

can be granted], a complaint must contain sufficient factual matter,

accepted as true, to “state a claim for relief that is plausible on its face.” 

Id., at 570. A claim has facial plausibility when the plaintiff pleads

factual content that allows the court to draw the reasonable inference

that the defendant is liable for the misconduct alleged. Id., at 556. The

plausibility standard is not akin to a “probability requirement,” but it

asks for more than a sheer possibility that a defendant has acted

unlawfully. Ibid. Where a complaint pleads facts that are “merely

consistent with” a defendant’s liability, it “stops short of the line

between possibility and plausibility of ‘entitlement to relief.’” Id., at

557 (brackets omitted). 

Two working principles underlie our decision in Twombly. First,

the tenet that a court must accept as true all of the allegations contained

in a complaint is inapplicable to legal conclusions. Threadbare recitals

of the elements of a cause of action, supported by mere conclusory

statements, do not suffice. Id., at 555 (Although for the purposes of a

motion to dismiss we must take all of the factual allegations in the

complaint astrue, we “are not bound to accept astrue a legal conclusion

couched as a factual allegation” (internal quotation marks omitted)). 

Rule 8 marks a notable and generous departure fromthe hyper-technical,

code-pleading regime of a prior era, but it does not unlock the doors of

discovery for a plaintiff armed with nothing more than conclusions. 

Second, only a complaint that states a plausible claim for relief survives

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Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 3 of 18
a motion to dismiss. Id., at 556. Determining whether a complaint

states a plausible claim for relief will, asthe Court of Appeals observed,

be a context-specific task that requires the reviewing court to draw on

its judicial experience and common sense. 490 F.3d, at 157-158. But

where the well-pleaded facts do not permit the court to infer more than

the mere possibility of misconduct, the complaint has alleged — but it

has not “show[n]” — “that the pleader is entitled to relief.” Fed. Rule

Civ. Proc. 8(a)(2). 

In keeping with these principles a court considering a motion to

dismiss can choose to begin by identifying pleadings that, because they

are no more than conclusions, are not entitled to the assumption of truth. 

While legal conclusions can provide the framework of a complaint, they

must be supported by factual allegations. When there are well-pleaded

factual allegations, a court should assume their veracity and then

determine whether they plausibly give rise to an entitlement to relief. 

Iqbal, 556 U.S. at 678-79 (emphasis added). 

II. RELEVANT ALLEGATIONS OF PLAINTIFF’S COMPLAINT

Plaintiff seeks a judgment from this court declaring that it has no duty to

defend or indemnify defendant Quality Coatings & Drywall, Inc. (“Quality

Coatings”), and its sureties, Ohio Casualty Insurance Company (“Ohio Casualty”),

and Liberty Mutual Group, Inc. (“Liberty Mutual”), for claims asserted against

Quality Coatings by defendants RSA and AREH in the case styled The Retirement

Systems of Alabama, et al. v. Quality Coatings and Drywall, Inc., et al., Civil Action

No. CV-2013-900131 in the Circuit Court of Lauderdale County, Alabama (“the

4

Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 4 of 18
underlying litigation”). The underlying litigation arose from the construction of the

5

River Heritage Hotel in Florence, Alabama (“the Hotel”). 

Quality Coatings entered into a Construction Trade Contract with AREH in

March of 2004. Among other work to be performed, Quality Coatings was

responsible for cold formed metal framing, gypsum drywall, and wall installation at

the Hotel. AREH and Ohio Casualty later executed a surety bond in the amount of 6

$2,151.655. Ohio Casualty subsequently was acquired by Liberty Mutual, and both

companies are parties to the underlying litigation, based upon Ohio Casualty’s

agreement to act as a surety for Quality Coatings under the Construction Trade

Contract. 

7

RSA is a successor-in-interest to AREH on the Construction Trade Contract. 

Both RSA and AREH filed the underlying litigation against Quality Coatings and its

bond companies, Ohio Casualty and Liberty Mutual, seeking to recover for the

improper installation of drywall in the Hotel, and remediation of mold that developed

as a result. Specifically, RSA and AREH assert claims for breach of contract, breach

of warranty, negligence, and a declaratory judgment. They allege that Quality

Coatings “constructed the demising walls on [the Hotel] such that there was a

 Complaint ¶ 11. 5

Id. 6

Id. ¶ 12. 7

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Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 5 of 18
separation in the firewall, a separation which rendersthe firewall non-compliant with

the City of Florence’s ordinances and defective, and caused the growth of mold in

[the Hotel].”

8

RSA and AREH seek to recover damages in the amount of $252,073.19 for

expenses incurred in repairing, replacing, and remedying the allegedly defective

drywall installed by Quality Coatings. They also seek to recover $322,380.30 for the

costs of remediating the mold damage caused by the allegedly defective drywall. 

RSA and AREH have declared Quality Coatings in default of its contractual

obligations, and demanded that Ohio Casualty and/or Liberty Mutual make payment

under the performance bond. Both of those entities have refused payment. In

addition, RSA and AREH have withheld payment due to Quality Coatings in the

amount of $76,999.76 for work it performed on another project. 

9

Plaintiff issued Commercial General Liability Policy No. CX9 0675702 (“the

Policy”) to Quality Coatingsfor the period of September 1, 2011 to January 1, 2014.

10

Plaintiff currently is providing a defense to Quality Coatings in the underlying

litigation under a reservation of rights, and Ohio Casualty and Liberty Mutual also

Id. ¶ 13 (alterations supplied). The Complaint cites to “Exhibit A,” which purportedly 8

is a copy of the state court complaint, but the record does not actually contain an Exhibit A to

plaintiff’s complaint.

Id. ¶ 15. 9

Id. ¶ 17. 10

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Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 6 of 18
have sought a defense and indemnity from plaintiff.

11

Plaintiff asks this court to issue a judgment declaring that it does not have a

duty to defend or indemnify Quality Coatings, or either of its sureties. Specifically,

Penn National asserts:

37. Quality Coatings did not employ subcontractors to perform

the subject work. Quality Coatings[’]faulty construction of the firewall

is not an accident and thus not an “occurrence” as defined by the Policy. 

Moreover, the firewall was constructed in 2004/2005[,] more than six

years before the Penn National Policy wasissued. To the extent that any

“property damage” arising from Quality Coatings’ faulty workmanship

occurred prior to the Penn National Policy[,] there is no “occurrence.”

38. The Fungi or Bacteria Exclusion expressly provides that the

insurance does not apply to the claim in the Underlying Litigation. 

Moreover, damages sought in the Underlying Litigation, including . . .

damages for the remediation of Quality Coatings[’] faulty construction,

are expressly excluded under the terms of the Policy, and therefore

would not give rise to an “occurrence.” Thus, there is no “occurrence”

under the Policy, and even if there ware, said “occurrence” would be

excluded from coverage pursuant to the “fungi and bacteria,”

“commercial liability,” and “business risks” exclusions.

12

Additionally, plaintiff asserts that the claims asserted in the underlying

litigation fall under a Policy exclusion for “expected” or “intended” injuries.

13

Finally, plaintiff asserts that it is not required to indemnify Ohio Casualty or Liberty

Mutual because those entities are not named insureds or additional insureds under the

 Complaint ¶ 16. 11

Id. ¶¶ 37-38 (alterations supplied). 12

Id. ¶¶ 43-44. 13

7

Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 7 of 18
Policy.

14

Quality Coatings, Ohio Casualty, and Liberty Mutual filed an answer and

counterclaims on March 26, 2014. All of those defendants asserted a counterclaim

15

for breach of contract against plaintiff, based on the company’s refusal to defend and

pay the defense costs of Ohio Casualty and Liberty Mutual. Quality Coatings 16

asserted a counterclaim against plaintiff for breach of the enhanced obligation of

good faith, based upon plaintiff’s alleged failure to communicate to Quality Coatings

that it was providing a defense under a reservation ofrights. Quality Coatings, Ohio

17

Casualty, and Liberty Mutual also all asserted a counterclaim against plaintiff for bad

faith, based upon plaintiff’s alleged bad faith refusal to provide coverage for Ohio

Casualty and Liberty Mutual.18

III. RELEVANT PROCEDURAL HISTORY OF THE UNDERLYING

LITIGATION

Owners Insurance Company (“Owners”), an entity that also issued a

Commercial General LiabilityPolicy(No. 38028913-11) and a Commercial Umbrella

Policy (No. 4602891300) to QualityCoatings (together, the “Owners’ Policies”), filed

Id. ¶¶ 45-57. 14

 Doc. no. 9. 15

Id. at 9 (Count One).

16

Id. at 9-10 (Count Two).

17

Id. at 10-11 (Count Three). 18

8

Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 8 of 18
a motion to intervene in the underlying litigation on June 11, 2013. Owners stated 19

that it also was defending Quality Coatings in the underlying litigation under a

reservation of rights. It sought intervention in order “to gather facts related to the

20

Plaintiffs’ claim and clarify the legal allegations against its insured in order to

determine whether there is coverage for Quality Coatings under its policy.”21

Specifically, Owners stated the following possible reasons that coverage might be

lacking under the Owners’ Policies:

a. Owners’ policies cancelled, at the request of the insured Quality

Coatings, on September 1, 2011. Damages alleged by RSA

against Quality Coatings may not fall within Owners’ policy

period.

b. The damages alleged by RSA against Quality Coatings may not

arise from an “occurrence” as defined by Owners’ policy.

c. Owners’ policy contains a complete exclusion for damage arising

from mold or mildew.

d. The complaint against Quality Coatings alleges breach of

contract. Breach of contract is not an “occurrence” as defined by

Owners’ policy and Alabama law. Further, Owners’ policy

contains exclusion b. Exclusion b removes coverage for any

“bodily injury” or “property damage” for which the insured is

obligated to pay damages by reason of the assumption of liability

Doc. no. 7 (“Notice of Filing Materials in Support of Defendant’s Motion to Dismiss 19

or in the Alternative, to Stay”), Exhibit 1 (Motion to Intervene in Case No. 41-CV-2013-900131

in the Circuit Court of Lauderdale County, Alabama) ¶ 1.

Id. ¶ 5. 20

Id. ¶ 6. 21

9

Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 9 of 18
in a contract or agreement.

e. The complaint by RSA against Quality Coatings alleges breach of

warranty. Breach of warranty is a type of breach of contract. See

discussion under letter d. above. Further, the definition of “your

work” includes warranties or representations made at any time

with respect to the fitness, quality, durability, performance or use

of “your work.” Owners’ policy contains exclusion l which

eliminates coverage for damage to “your work.” 

f. The complaint filed by RSA against Quality Coatings alleges

negligence in the performance of the scope of work of the

contract. While couched in terms of negligence, this count is

basically a restatement of the allegations in the count for breach

of contract. See discussion under letter d above. Further, faulty

workmanship, in the form of negligent construction, is not

considered an “occurrence” under Alabama law.

g. Owners’ policy contains exclusion l which eliminates coverage

for “property damage” to “your work.” Owners’ policy does not

cover replacement of faulty work performed by the insured.

h. The complaint filed by RSA against Quality Coatings asks the

court for a declaratory judgment. A declaratory judgment asks

the court to declare the rights and obligations of the parties to the

lawsuit. Owners’ policy covers only “bodily injury” or “property

damage.” A declaration of rights and obligations is neither

“bodily injury” nor “property damage.” 

i. Quality Coatings may have violated a condition of the policy

requiring it to provide timely notice of an occurrence to Owners.22

Owners emphasized that it was not asking the state court to “decide any issue of

Id. ¶¶ 3(a)-(i). 22

10

Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 10 of 18
coverage,” or to declare the respective parties’ rights. Instead, Owners asked to be 23

allowed to participate in discovery, but not in trial, except to submit “special jury

verdict forms and/orspecial interrogatories, through the court, to the jury, concerning

any verdict entered against Quality Coatings, Inc. in order to determine whether the

verdict or any portion of the verdict is covered by Owners’ policy.”24

The state court granted Owners’ motion on June 14, 2013. On July 3, 2013,

25

RSA and AREH filed a response to the motion to intervene and a request for the state

court to reconsider its previous order granting that motion. Among other reasons,

RSA and AREH asserted that Owners would have the “right to file a declaratory

judgment action regarding these issues once this case isresolved[,] particularly asthe

threshold issues of coverage in a potential declaratory judgment action and the issues

presented in this action are not the same.” In the brief filed in this court by RSA and

26

AREH in support of their motion to dismiss or to stay, those parties represent that the

Id. ¶ 7. 23

Id. at 4 (Demand for Relief) ¶ d. 24

Doc. no. 7 (“Notice of Filing Materials in Support of Defendant’s Motion to Dismiss 25

or in the Alternative, to Stay”), at Exhibit 3 (June 14, 2013 Order of the Circuit Court of

Lauderdale County, Alabama).

Doc. no. 7 (“Notice of Filing Materials in Support of Defendant’s Motion to Dismiss 26

or in the Alternative, to Stay”), Exhibit 2 (Response to Motion to Intervene and Request for

Reconsideration”) ¶ 6 (alteration supplied). 

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Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 11 of 18
state court has not yet ruled on the motion for reconsideration. They also represent

27

that plaintiff Penn National never filed a motion to intervene in the underlying

litigation.

28

III. DISCUSSION

RSA and AREH argue that the complaint for declaratory judgment filed by

plaintiff, Penn National, in this court should be dismissed pursuant to the Supreme

Court’s decision in Wilton v. Seven Falls Co., 515 U.S. 277 (1995). There, the

Supreme Court confirmed that district courts have broad discretion in deciding

whether to dismiss orstay a federal declaratory judgment action during the pendency

of parallel state court proceedings, explaining:

There is nothing automatic or obligatory about the assumption of

jurisdiction by a federal court to hear a declaratory judgment action. By

the Declaratory Judgment Act, Congress sought to place a remedial

arrow in the district court’s quiver; it created an opportunity, rather than

a duty, to grant a new form of relief to qualifying litigants. Consistent

with the nonobligatory nature of the remedy, a district court is

authorized, in the sound exercise of its discretion, to stay or to dismiss

an action seeking a declaratory judgment before trial or after all

arguments have drawn to a close. In the declaratory judgment context,

the normal principle that federal courts should adjudicate claims within

Doc. no. 8 (“Memorandum in Support of Defendants’ Motion to Dismiss or in the 27

Alternative to Stay”), at 3, ¶ 6.

Id. at 3, ¶ 7. Plaintiff appears to agree with this representation. See doc. no. 12 28

(Plaintiff’s “Response and Memorandum of Law in Opposition to the Retirement Systems of

Alabama’s and Alabama Real Estate Holdings, Inc.’s Motion to Dismiss or in the Alternative

to Stay Proceedings”), at 4, ¶ 6 (“RSA has filed a Response to Motion to Intervene and Request

for Reconsideration which remains pending in the Underlying Litigation.”).

12

Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 12 of 18
their jurisdiction yields to considerations of practicality and wise

judicial administration.

Id. at 288 (citations and footnote omitted). The Court also noted that, “where the

basis for declining to proceed is the pendency of a state proceeding, a stay will often

be the preferable course, because it assuresthat the federal action can proceed without

risk of a time bar if the state case, for any reason, fails to resolve the matter in

controversy.” Id. at 288 n.2.

TheEleventh Circuit, speaking through the panel decision in Ameritas Variable

Life Insurance Co. v. Roach, 411 F.3d 1328 (11th Cir. 2005), specifically addressed

a “federal court’s discretionary decision whether to abstain from exercising

jurisdiction over state-law claims in the face of parallel litigation in the state courts.” 

Id. at 1331 (emphasis supplied). In Ameritas, the court held that district courts have

“‘substantial latitude in deciding whether to stay or dismiss a declaratory judgment

suit in light of pending state proceedings.’” Id. at 1332 (quoting Wilton, 515 U.S. at

286). The Eleventh Circuit also provided a list of factors to aid district courts in

balancing state and federal interests. Id. at 1331. The court specifically noted,

however, that the “list is neither absolute nor is any one factor controlling”; instead,

it serves as “merely [a] guidepost.” Id. (alteration supplied). Those guideposts

include:

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Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 13 of 18
(1) the strength of the state’s interest in having the issues raised in the

federal declaratory action decided in the state courts;

(2) whether the judgment in the federal declaratory action would settle

the controversy;

(3) whether the federal declaratory action would serve a useful purpose

in clarifying the legal relations at issue;

(4) whether the declaratory remedy is being used merely for the purpose

of “procedural fencing” — that is, to provide an arena for a race for res

judicata or to achieve a federal hearing in a case otherwise not

removable;

(5) whether the use of a declaratory action would increase the friction

between our federal and state courts and improperly encroach on state

jurisdiction;

(6) whether there is an alternative remedy that is better or more

effective;

(7) whether the underlying factual issues are important to an informed

resolution of the case;

(8) whether the state trial court is in a better position to evaluate those

factual issues than is the federal court; and

(9) whether there is a close nexus between the underlying factual and

legal issues and state law and/or public policy, or whether federal

common or statutory law dictates a resolution of the declaratory

judgment action.

Id.

As an initial matter, RSA and AREH contend that this case and the underlying

litigation are “parallel litigation,” as contemplated by the Eleventh Circuit in

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Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 14 of 18
Ameritas, because “[t]he Circuit Court of Lauderdale County, Alabama, by its order

granting Owners’ Motion to Intervene[,] has already assumed jurisdiction over many

of the same issues that are raised by Penn National’s Complaint for Declaratory

Judgment[ in this action]. Specifically, according to RSA and AREH, 29

Owners’ Intervention and Penn National’s Complaint for

Declaratory Judgment involve many of the same issues:

(A) whether the damages alleged by RSA against Quality

Coatings fall within the subject policy periods . . . .;

(B) whether the damages alleged by RSA against Quality

Coatings arise from an “occurrence” as defined by the

policies. . . .;

(C) whether RSA’s damages are excluded by certain mold,

mildew, fungi and bacteria exclusions. . . .;

(D) whether the policies cover contractual claims. . . .;

(E) whether RSA’s breach of warranty claims are excluded

pursuant to policy exclusions dealing with contractual

liability. . . .;

(F) whether the claims for negligent construction are excluded

by contractual liability language in the policies. . . .;

(G) whether the subject policies cover damagesto “your work.”

. . .

30

This court disagrees. This case and the underlying litigation are not “parallel

 Doc. no. 8, at 5 (alterations supplied). 29

Id. at 6-7 (citations to the record omitted). 30

15

Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 15 of 18
proceedings.” Penn National is not a party to the underlying litigation, by intervention

or otherwise. The central issue in the underlying litigation is Quality Coatings’

liability to RSA and AREH for faulty work performed, whereasthe central issue in the

present case is Penn National’s obligation to defend and indemnify Quality Coatings. 

See, e.g., State Farm Fire and Casualty Co. v. Knight, No. 09-0783-WS-B, 2010 WL

551262, *3 n.9 (S.D. Ala. Feb. 11, 2010) (“Where the declaratory judgment action is

brought by an insurer against an insured, there are no parallel proceedings if ‘(1) the

insurer was not a party to the suit pending in state court; and (2) the state court actions

involved issues regarding the insured’s liability, whereas the federal suit involved

matters of insurance coverage.’”) (quoting Continental Casualty Co. v. Advance

Terrazzo & Tile Co., 462 F.3d 1002, 1006 (8th Cir. 2006)). 

Owners’ intervention in the underlying litigation does not alter that conclusion. 

Owners specifically stated that it was not seeking a declaration regarding its obligation

to provide a defense or indemnity coverage to any party in the underlying litigation. 

Moreover, to the extent that the special jury verdict forms and special interrogatories

Owners asked to submit to the jury in the underlying litigation will concern issues of

coverage, it will be coverage under the policy Owners issued to Quality Coatings, not

coverage under the policy Penn National issued to Quality Coatings. Even though

Quality Coatings’ two policies may bear some similarities, they are not identical. 

16

Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 16 of 18
Accordingly, a finding of coverage under the Owners’ policies will not necessarily

dictate a finding of coverage under the Penn National policy. Only the Penn National

policy is at issue in this suit. 

Additionally, the Ameritas factors, considered as a whole, do not weigh in favor

of dismissing orstaying this case. This declaratory judgment action would settle the

31

question of coverage under Quality Coatings’ policywith Penn National— a question

that has not been raised in the underlying litigation. There is no concern about friction

between, or inconsistent rulings from, the state court and this court, because the same

issues are not being decided in both fora. Specifically, the factual underpinnings of

the underlying litigation — i.e., Quality Coatings’ liability to RSA and AREH for

allegedly faulty workmanship — will not be relevant to the issue of coverage that

forms the basis of this lawsuit. The same is true for any findings regarding coverage

for RSA and AREH’s claims under an entirely separate policy issued by an entirely

separate insurer, Owners.

IV. CONCLUSION AND ORDER

Because this case and the underlying litigation are not “parallel litigation,” it is not 31

even necessary to consider the Ameritas factors. See Atlantic Casualty Insurance Co. v. GMC

Concrete Co., Inc., No. 07-0563-WS-B, 2007 WL 4335499, *3 (S.D. Ala. Dec. 7, 2007) (“A

number of courts have either held or suggested that the absence of parallel proceedings

undermines the premise of a Wilton discretion analysis, rendering it inappropriate or

inapplicable.”) (citations omitted). Even so, the court will discuss the Ameritas factors here for

the sake of completeness.

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Case 3:14-cv-00248-CLS Document 17 Filed 06/05/14 Page 17 of 18
In accordance with the foregoing, the “Motion to Dismiss or in the Alternative

to Stay” filed by defendants RSA and AREH is DENIED. Those defendants must file

an answer to plaintiff’s complaint on or before June 12, 2014.

DONE this 5th day of June, 2014.

______________________________

United States District Judge

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