Hanover Insurance v. Superior Labor Services, Inc.

Citations: 316 F.R.D. 179; 2016 WL 1089338Docket: CIVIL ACTION Nos. 11-2375 c/w 14-1930, 14-1933

Court: District Court, E.D. Louisiana; March 21, 2016; Federal District Court

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Gray Insurance Company’s motion to dismiss the amended third-party claim against it is granted. The case stems from two personal injury lawsuits in state court against Allied Shipyard, Inc., where plaintiffs allege negligence related to harmful sandblasting activities that released hazardous substances into their neighborhood, resulting in physical and property damages. Allied has filed third-party demands against its contractors, Masse Contracting, Inc. and Superior Labor Services, Inc., seeking indemnity based on job responsibilities and claims of additional assured status under insurance policies held by Masse and Superior.

Masse has been named directly as a defendant by plaintiffs following Allied’s third-party demands. The contractors sought coverage from their insurers, leading to multiple lawsuits filed in federal court. Three federal actions linked to the state cases are consolidated, including Hanover Insurance Company's complaint, which argues it has been defending Superior against Allied’s claims. Hanover contends that other insurers are not participating in this defense and seeks a declaratory judgment to establish it has no duty to indemnify or defend Superior. Hanover also claims that if it does have such a duty, the other insurers should share the costs. Additionally, Hanover has included Allied in its complaint, asserting that Allied is not an additional assured under its policies and thus not entitled to defense or indemnity in the state lawsuits.

Hanover requests a court declaration that if it is found liable to defend or indemnify Allied, then Arch, State National, and other unnamed insurance companies must cover their respective portions of the defense and indemnity costs for Superior and Allied in related State-Court Lawsuits. Arch Insurance Company filed a declaratory judgment action against Superior and Allied, seeking to clarify its obligations under insurance policies and asserting that it has no duty to defend or indemnify Superior, nor does Allied qualify as an additional assured under those policies. Arch also seeks reimbursement for defense costs already incurred on behalf of Superior. In a separate action against Masse and Allied, Arch seeks similar declarations regarding its insurance policies issued to Masse, asserting it holds no defense or indemnity obligations to Masse in the State-Court Lawsuits.

Masse, in response, filed a third-party complaint against several insurers, including Gray Insurance Company, claiming they have a duty to defend and indemnify it in the lawsuits. This complaint was amended to include additional insurers. Gray subsequently filed a motion to dismiss the third-party claim, arguing it was improper under Rule 14 and that the court lacks jurisdiction over Masse's claims against it. The court will treat this motion as a motion to strike, focusing on the proper application of Rule 14, which allows a defending party to bring in third parties who may be liable for part or all of the claim against them. The third-party liability must be derivative of the main claim against the defendant.

Gray asserts that Masse's third-party claim against it is unauthorized under Rule 14 because Gray's potential liability to Masse does not hinge on the outcome of Arch's claim against Masse. Rule 14 is designed to enhance efficiency in litigation by allowing related claims to be addressed in a single lawsuit. However, established precedent indicates that a separate and independent claim cannot be maintained against a third party under Rule 14, even if it arises from the same factual circumstances as the main claim. Impleader is permissible only when the third-party defendant's liability is contingent upon the main claim's outcome and cannot be used to consolidate distinct actions or claims.

Masse's claim against Gray alleges that Gray provided insurance coverage from November 15, 2002, to November 15, 2005, and has a duty to defend or indemnify Masse in the State-Court Lawsuits, which are distinct from Arch's federal lawsuit against Masse. Masse argues that if Arch prevails in its declaratory action, it could affect its obligations to Allied, leading Allied to seek indemnity from Gray, thus making Gray a proper third-party defendant.

In contrast, Gray contends that if Arch is successful, it would not owe any duties to Masse, and consequently, Gray would not be liable to Masse for any claims related to Arch. Gray maintains that Masse has not demonstrated that Gray’s liability would derive from Arch's claim against it, as the insurance policies held by Arch and Gray are separate. The Court concludes that Masse’s claim against Gray does not depend on Arch’s claim against Masse, as the two policies are independent. Therefore, if Arch prevails, it will have no obligations to Masse, and by extension, Gray cannot be liable to Masse for any part of Arch's claim.

Masse has no liability to pass on to Gray, which means Gray cannot be secondarily liable to Masse for Arch's claim against Masse. If Arch fails in its claim against Masse and is found to have a duty to defend or indemnify Masse, Gray remains free from secondary liability regarding Arch's claims. The resolution of Arch's claim does not influence Gray's duty to indemnify or defend Masse in the State-Court Lawsuits. Although Arch's claim and Masse's third-party claim against Gray arise from similar underlying facts related to those lawsuits, they are independent claims. Under Rule 14, an unrelated claim cannot be maintained against a third party simply because it shares general factual connections with the main claim. Therefore, Masse's third-party claim against Gray is procedurally improper. 

Masse contends that several factors should be considered in allowing impleader, such as prejudice to other parties and the substance of the third-party claim, but the Court deems it unnecessary to evaluate these factors given that Masse's claims do not comply with Rule 14. Masse argues for a "declaratory judgment exception" to Rule 14 based on case law, but the Court rejects this notion and finds the cited cases distinguishable. Notably, in American Fidelity, the Fifth Circuit allowed a third-party complaint due to the close interconnection of the underlying issues, whereas, in the current case, the main and third-party claims do not share substantially the same facts. The independent evaluation of Arch’s and Gray’s insurance policies will require distinct evidence, and the outcomes of each analysis will not impact the other.

Masse's third-party demand against Gray has been struck from the amended third-party complaint because it is not dependent on Arch's claim against Masse. The Court granted Gray’s motion to strike, resulting in the dismissal of Masse's claim against Gray without prejudice. Masse is required to file a memorandum by March 24, 2016, at 5:00 p.m. to justify why additional third-party claims against remaining defendants should not also be stricken for failing to comply with Rule 14. The Court noted a lack of supplemental jurisdiction over Masse's claim against Gray, emphasizing that the claims do not form part of the same case or controversy as required by 28 U.S.C. § 367a. The excerpt cites relevant case law establishing that third-party claims must be derivative of the main claim to be appropriate under Rule 14.

A Rule 14 claim allows a defendant to transfer liability to a third-party defendant for claims made by the original plaintiff. Impleader is only permissible when the third-party's liability is derivative of the defendant's liability, meaning the outcome of the main claim must directly affect the third-party's potential liability. Merely arising from the same transaction or set of facts as the original claim is insufficient for impleader. A third-party complaint must demonstrate a valid basis for the third-party defendant's liability; otherwise, it is improper under Rule 14. Courts have denied impleader in instances where the third-party plaintiff sought to include parties unrelated to the main claim, such as in cases involving different types of insurance policies. The Fifth Circuit upheld the dismissal of a third-party complaint when it lacked this basis for liability.

The court indicated that there is a situation that could be considered under Rule 14, differing from typical impleader cases where a third party is secondarily liable for the original defendant's judgment. In the case of Joe Grasso, boat owners sued the United States for a tax refund, leading the U.S. to implead the boat captains, who might also be liable for the same taxes. The Fifth Circuit upheld the dismissal of this third-party complaint, emphasizing that the government needed to demonstrate that liability was an "either/or proposition" between the boat owners and the captains, which it failed to do. The court concluded that the third-party claim was essentially a separate tax claim and could not proceed. The current case does not align with the situation in Joe Grasso. The court noted that the question of whether one insurer owes a duty to indemnify or defend Masse is not an "either/or proposition" like in Grasso. Masse’s claims against the third-party defendant Gray are separate from Arch’s claims and cannot be brought under Rule 14.