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West Bend Mutual Insurance Co. v. Swain

United States District Court, W.D. Kentucky, Louisville

April 20, 2017



          Charles R. Simpson III, Senior Judge.

         I. Introduction

         This matter is before the Court on two motions. Defendant Carless Swain moves this Court to dismiss the complaint for declaratory judgment by Plaintiff West Bend Mutual Insurance Company (“West Bend”), ECF No. 11. West Bend responded, ECF No. 14. Swain replied, ECF No. 18. Swain has also filed a supplemental pleading in support of her motion to dismiss, ECF No. 28.

         Additionally, West Bend moves this Court for leave to file its first amended complaint, ECF No. 22. Defendant Carless Swain responded, objecting to the motion, ECF No. 23. West Bend replied, ECF No. 24. Because these motions include common issues of fact and law, the Court will address them in the same memorandum opinion and order. For the reasons below, the Court will grant Swain's motion to dismiss West Bend's declaratory judgment complaint. The Court will deny West Bend's motion for leave to file its first amended complaint.

         II. Background

         In this declaratory judgment action, West Bend seeks a declaration that it has no obligation to indemnify Defendant K&Q, Inc. d/b/a Lil' Kings and Queens Development Center (“K&Q, Inc.”) in an underlying state court case. Compl. ¶ 30, ECF No. 1. The state court case arose on May 5, 2016 when Swain filed suit against K&Q, Inc. in the Jefferson County, Kentucky Circuit Court. St. Ct. Compl. 1, ECF No. 1-2. Swain then filed an amended complaint adding the Estate of LS as a plaintiff and adding Jacquelin O. Thomas as a defendant. First Am. St. Ct. Compl. 1, ECF No. 11-5. Swain also filed a second amended complaint adding West Bend, Raven Allen, and Sha'Vonda Hicks as defendants. Second Am. St. Ct. Compl. 1, ECF No. 22-3.

         In the underlying case, Swain alleges that on April 18, 2016, her two-year-old son, LS, was in the custody of K&Q, Inc., Thomas, Allen, and Hicks (collectively, “State Court Defendants”). Second Am. St. Ct. Compl. ¶ 5, ECF No. 22-3. While under their care, LS was left in a vehicle and died of hyperthermia. Id. ¶¶ 9, 11-12. Swain alleges that the State Court Defendants were negligent in caring for LS. Id. ¶ 14. West Bend was added as a defendant because it had issued a business owner's liability insurance policy (“the Policy”) to K&Q, Inc., which was in effect when LS died. Policy 3, ECF No. 1-1.

         West Bend filed suit in this Court on August 18, 2016, seeking a declaratory judgment against Swain and K&Q, Inc. Compl. 1, ECF No. 1. West Bend seeks a declaration “that no insurance coverage is available under the Policy for the claims asserted in the Underlying Litigation” and “that West Bend has no obligation under the Policy to defend or indemnify” K&Q, Inc. Id. ¶ 30. West Bend bases its claim on the presence of a specific exclusion in the Policy for “‘bodily injury' . . . arising out of the ownership, maintenance, use or entrustment to others of any . . . ‘auto' . . . owned or operated by or rented or loaned to any insured.” Policy 82- 84, ECF No. 1-1.

         After initiation of the instant action, Swain and the Estate of LS filed a third party complaint for declaratory judgment in the Jefferson Circuit Court against West Bend. Third Party St. Ct. Compl. 1, ECF No. 11-6. This third party complaint seeks a declaratory judgment that West Bend “owes insurance coverage and a duty to indemnify for the actions” of the state court defendants. West Bend moved to dismiss the third party complaint. St. Ct. Order 1, ECF No. 28-1. On March 3, 2017, the Jefferson Circuit Court denied West Bend's motion to dismiss the third party complaint. Id.

         III. Discussion

         Under Federal Rule of Civil Procedure 15(a)(2), a party may amend a pleading only if the Court grants leave to amend or if the opposing party consents. This Court “should freely grant leave to amend when justice so requires.” Fed.R.Civ.P. 15(a)(2). Whether to grant leave to amend lies within this Court's discretion. See Duggins v. Steak ‘N Shake, Inc., 195 F.3d 828, 833 (6th Cir. 1999).

         West Bend seeks to add the following defendants to this case: the estate of Defendant Swain's minor child, Jacquelin Thomas, Raven Allen, and Sha'Vonda Hicks. Mot. Amend 3, ECF No. 22. West Bend also seeks to add two alternative claims for relief: (1) that “no coverage is owed as to any liability on the part of Jacquelin Thomas as Ms. Thomas was not providing services as a child care provider with respect to Defendant Swain's minor child, ” and (2) that “no coverage is owed as a result of another exclusion contained within the Policy which states that the Policy does not apply to ‘bodily injury […] arising out of […] [t]he violation of any statute, or governmental rule or regulation.'” Id.

         Defendant Swain urges this Court to deny West Bend's motion to amend the complaint because, even amended, the complaint would not survive her motion to dismiss this case. Resp. Mot. Amend, ECF No. 23. She argues in her motion to dismiss that (1) the complaint fails to adequately allege subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), (2) West Bend failed to join several necessary and indispensable parties under Federal Rule of Civil Procedure 12(b)(7), and (3) this Court should abstain from exercising jurisdiction. Mot. Dismiss 1, ECF No. 11.

         A. Subject Matter Jurisdiction

         Swain moves to dismiss West Bend's complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. Id. She asserts that West Bend has not established diversity jurisdiction. Id. Under 28 U.S.C. § 1332(a), this Court has original diversity jurisdiction when the suit is between “citizens of different states” and “where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interests and costs.” Corporations are “deemed to be a citizen of every State . . . by which it has been incorporated and of the State . . . where it has its principal place of business.” 28 U.S.C. § 1332(c). But “an unincorporated association, such as a labor union or a partnership, has no separate legal identity so its citizenship, at least for the purposes of diversity jurisdiction, is the citizenship of each of its members.” Certain Interested Underwriters at Lloyd's, London, England v. Layne, 26 F.3d 39, 41 (6th Cir. 1994) (citations omitted). The plaintiff has the burden of establishing diversity jurisdiction. Id.; See also Fed. R. Civ. P. 8(a).

         The Court finds that West Bend properly pleads diversity of citizenship. West Bend asserts that it “is a Wisconsin insurance company whose principal place of business is located at 1900 South 18th Avenue, West Bend, Wisconsin, 53095, which is authorized to transact, and does transact, business within the Commonwealth of Kentucky. For jurisdictional purposes, West Bend is a citizen of the State of Wisconsin.” Prop. Am. Compl. ¶ 1, ECF No. 22-4. West Bend also asserts the addresses of all Defendants, and asserts that none of them are residents of Wisconsin. Id. ¶¶ 3-10.

         Swain argues that the complaint must be dismissed because “West Bend did not identify its corporate status or support its claimed citizenship.” Mem. Supp. Mot. Dismiss 3, ECF No. 11-4. Similarly, she argues that West Bend's motion to file an amended complaint must be denied because “West Bend has failed to provide any admissible evidence to support its counsel's assertion that [it] is a corporation under Wisconsin law.” Resp. Mot. Amend 3, ECF No. 23.

         Swain asserts that, in determining whether a company is incorporated, the Court should look at how the state in which it resides treats it. Mem. Supp. Mot. Dismiss 3, ECF No. 11-4. She is correct in that whether an entity is incorporated for purposes of diversity is determined by the law of the state in which the entity resides. See Brocki v. Am. Express Co., 279 F.2d 785, 786 (6th Cir. 1960). Swain argues that Wisconsin does not consider West Bend to be a corporation because when she searched for “West Bend Mutual Insurance Company” in Wisconsin's corporate records, the results turned up no such corporation. Id. West Bend responds that in Wisconsin, mutual insurance companies are treated as corporations. Resp. Opp. Mot. Dismiss 3, ECF No. 14 (citing W.S.A. §§ 611.01, 611.12). West Bend points out that, under Wisconsin law, a mutual insurance company is required to register with the commissioner of insurance of Wisconsin. Id. (citing W.S.A. §§ 611.01, 611.12). In its response to Defendant Swain's motion to dismiss, West Bend attached a document entitled “Company Demographics” from the National Association of Insurance Commissioners. Ex. 1, ECF No. 14-1. This document states that West Bend's “State of Incorporation” is Wisconsin. Id. Therefore, under Wisconsin law, West Bend is a corporation for purposes of diversity jurisdiction.

         West Bend also properly pleads the amount in controversy requirement. West Bend asserts that it issued a policy to K&Q, Inc. that “limits businessowners-liability claims to $1, 000, 000 per occurrence and $2, 000, 000 in aggregate.” Prop. Am. Comp. ¶ 11, ECF No. 22-4. Thus, West Bend asserts that the amount in controversy exceeds $75, 000 because “it includes the $1, 000, 000 per-occurrence coverage limits of the Policy and any costs of defending Swain's suit.” Id. ¶ 13. Therefore, this Court has subject matter jurisdiction based on diversity of citizenship.

         B. Necessary and Indispensable Parties

         In her motion to dismiss, Swain argues that West Bend's complaint should be dismissed because it has failed to join the Estate of LS and Jacquelin O. Thomas. Mem. Supp. Mot. Dismiss 4, ECF No. 11-4. Federal Rule of Civil Procedure 12(b)(7) allows a party to move to dismiss for “failure ...

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