NEW MARKET REALTY 1L LLC v. GREAT LAKES INSURANCE SE (2022)

ORDER

Before the Court is Plaintiff New Market Realty 1L, LLC's Motion to Dismiss the Amended Counterclaim. (Doc. 25). Defendant Great Lakes Insurance SE filed a response in opposition. (Doc. 29). For the reasons explained below, Plaintiff's Motion is denied.

I. BACKGROUND AND STATEMENT OF FACTS

This case involves an insurance coverage dispute regarding a commercial lines policy, identified as policy number LK453754 (the “Policy”), which Defendant, Great Lakes Insurance SE, issued to Plaintiff, New Market Realty 1L LLC. The Policy provides coverage for ten (10) different scheduled properties. (See Doc. 15-1, pp. 17-19 (Commercial Property Coverage Part Declarations). Significantly, the Policy contains a PROTECTIVE SAFEGUARDS ENDORSEMENT (CP 04 11 10 12) (the “Protective Safeguards Endorsement”) which provides, in relevant part:

A. The following is added to the Commercial Property Conditions:

Protective Safeguards

1. As a condition of this insurance, you are required to maintain the protective devices or services listed in the Schedule above.

2. The protective safeguards to which this endorsement applies are identified by the following symbols:

* * * *

“P-9”, the protective system described in the Schedule.

* * * *

B. The following is added to the Exclusions section of:

Causes Of Loss – Basic Form

Causes Of Loss – Broad Form

Causes Of Loss – Special Form

Mortgage holders Errors And Omissions Coverage

Form

Standard Property Policy

We will not pay for loss or damage caused by or resulting from fire if, prior to the fire, you:

1. Knew of any suspension or impairment in any protective safeguard listed in the Schedule above and failed to notify us of that fact; or

2. Failed to maintain any protective safeguard listed in the Schedule above, and over which you had control, in complete working order.

* * * *

(Id. at 41). The P-9 protective safeguard is described in the Protective Safeguards Schedule as “fire extinguishers” and the scheduled properties to which the P-9 protective safeguard is applicable are described as Premise No. 9, Building No. 1 and Premise No. 10, Building No. 1. (Id.).

On or about December 21, 2020, during the Policy term, the scheduled property located at 1140 15th Avenue S., St. Petersburg, FL 33705 suffered fire damage (“the loss”). Defendant, however, refused coverage for the loss. As such, on January 21, 2022, Plaintiff filed a one-count complaint for breach of contract based on Plaintiff's claim for damages caused by the loss. (Doc. 15, Amended Complaint). On February 24, 2022, Defendant filed its Amended Answer, Affirmative Defense, and Counterclaim for Declaratory Judgment. (Doc. 24). In its amended counterclaim, Defendant asserts two counts for declaratory relief, pursuant to 28 U.S.C. § 2201, to determine its obligations and Plaintiff's rights, if any, under the Policy and the extent to which those rights and obligation are modified by the Protective Safeguards Endorsements of the Policy.

Through the instant Motion, Plaintiff seeks dismissal of the amended counterclaim on the basis that: (1) it is improper for Defendant to seek declaratory relief for past conduct of the parties; (2) the amended counterclaim fails to plead ambiguity in the Policy; and (3) the amended counterclaim is duplicative of Plaintiff's breach of contract action. (Doc. 25). In response, Defendant asserts that its amended counterclaim is properly pled, states a viable claim for declaratory judgment, and serves a useful purpose because it should result in a declaration that Defendant's interpretation of the Policy's Protective Safeguards Endorsement is correct.

II. STANDARD OF REVIEW

“A motion to dismiss a counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6) is evaluated in the same manner as a motion to dismiss a complaint.” Geter v. Galardi S. Enterps., Inc., 43 F. Supp. 3d 1322, 1325 (S.D. Fla. 2014) (internal quotation marks and citation omitted). In deciding a motion to dismiss, the district court is required to view the complaint in the light most favorable to the plaintiff. See Murphy v. Fed. Deposit Ins. Corp., 208 F.3d 959, 962 (11th Cir. 2000) (citing Kirby v. Siegelman, 195 F.3d 1285, 1289 (11th Cir. 1999)). The Federal Rules of Civil Procedure do not require a claimant to set out in detail the facts upon which the claim is based. Instead, Rule 8(a)(2) requires a short and plain statement of the claim showing that the pleader is entitled to relief in order to give the defendant fair notice of what the claim is and the grounds upon which it rests. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1964, 167 L.Ed.2d 929 (2007) (citation omitted).

Therefore, a plaintiff is required to allege “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 1965 (citation omitted). While the Court must assume that all allegations in the complaint are true, dismissal is appropriate if the allegations do not “raise [the plaintiff's] right to relief above the speculative level.” Id. (citation omitted). The standard on a Rule 12(b)(6) motion is not whether the plaintiff will ultimately prevail in his or her theories, but whether the allegations are sufficient to allow the plaintiff to conduct discovery in an attempt to prove the allegations. See Jackam v. Hospital Corp. of Am. Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir. 1986).

III. THE DECLARATORY JUDGMENT ACT

Under the Declaratory Judgment Act, “any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). This language “only gives the federal courts competence to make a declaration of rights; it does not impose a duty to do so.” Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th Cir. 2005) (citing Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942)). Thus, courts retain broad discretion over whether or not to exercise jurisdiction under the Declaratory Judgment Act. Evanston Ins. Co. v. Gaddis Corp., No. 15-CIV-60163, 2015 WL 2070386, at *2 (S.D. Fla. May 4, 2015) (citing Knights Armament Co. v. Optical Sys. Tech., Inc., 568 F. Supp. 2d 1369, 1374 (M.D. Fla. 2008)) (emphasis added); see also MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 136, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995)) (noting that the Declaratory Judgment Act “confer[s] on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants”).

In addition to exercising such discretion to decline jurisdiction, courts may dismiss a counterclaim for declaratory judgment as redundant. See Evanston, 2015 WL 2070386, at *2 (citing Medmarc Cas. Ins. Co. v. Pineiro & Byrd PLLC, 783 F. Supp. 2d 1214, 1217 (S.D. Fla. 2011)). When deciding whether to dismiss such a counterclaim as redundant, however, “courts consider whether the declaratory judgment serves a useful purpose. To determine whether the declaratory judgment serves a useful purpose, courts should consider whether resolution of plaintiff's claim, along with the affirmative defenses asserted by defendants, would resolve all questions raised by the counterclaim.” Medmarc, 783 F. Supp. 2d at 1217 (internal quotation marks and citations omitted). However, “[e]ven [where] the counterclaim [is] wholly redundant, this Court may exercise its discretion by not dismissing the counterclaim.” Id. (emphasis added).

IV. DISCUSSION

A. Actual Controversy

The Declaratory Judgment Act requires that there must be an “actual controversy” between the parties that is substantial, immediate, and not hypothetical. Plaintiff contends that Defendant's claim for declaratory relief in its amended counterclaim is inappropriate inasmuch as it “requests the court to make various factual determinations regarding the past conduct of the parties.” (See Doc. 25, p. 3) (emphasis added). Defendant responds that a declaratory judgment is warranted because an actual controversy exists in this case as to the determination of the rights, duties, and obligations of all parties under the Policy. (See Doc. 24, ¶¶ 53, 63, 69). The Court agrees with Defendant that its amended counterclaim for declaratory relief constitutes an actual controversy appropriate for judicial resolution. Defendant pleads the existence of a legal relationship between the parties, as well as an ongoing live controversy with respect to contractual obligations under the subject Policy. (Doc. 24, ¶¶ 33, 53, 63, 69). In the “REQUESTED RELIEF” section of its amended counterclaim, Defendant asks that this Court: (1) Declare that the Policy requires Plaintiff to maintain at least two (2) fire extinguishers at the subject Property, pursuant to the Protective Safeguards Endorsement, which describes safeguard “P-9” as “FIRE EXTINGUISHERS” (emphasis added); and (2) Declare that the Policy does not provide coverage for the Loss due to Plaintiff's failure to maintain “FIRE EXTINGUISHERS” in material breach of the Protective Safeguards Endorsement of the Policy and, therefore, Defendant owes no duty to indemnify any claims arising from the Loss. (Doc. 24, p. 18) (emphasis added).

Plaintiff sues Defendant in the Complaint for breach of the Policy in denying Plaintiff's claim for insurance proceeds and it demands payment under the Policy. (Doc. 15). And Defendant's amended counterclaim requests that the Court adjudicate the rights of the parties under the Policy, which the Court can determine based on the pleadings and the Policy. A court may issue a declaratory judgment under these circumstances. See Daytona Beach Riverhouse, Inc. v. Chubb Custom Ins. Co., No. 6:13-cv-1461-Orl-22GJK, 2014 WL 12611320, at *3 (M.D. Fla. Mar. 20, 2014).

B. Failure to Allege Ambiguity

Next, Plaintiff seeks dismissal of the amended counterclaim on the basis that it fails to specifically allege that the Policy is “ambiguous.” However, “a legal dispute over the correct interpretation of a contract is an appropriate subject for declaratory relief.” Pediatrix Med. Grp. of Fla., Inc. v. Aetna Inc., No. 18-60908-CIV, 2018 WL 4997092, at *6 (S.D. Fla. Aug. 27, 2018). The purpose of declaratory relief is to clarify the legal relations between parties to a dispute. See Medmarc Cas. 783 F. Supp. 2d at 1216. The court, in effect, declares the parties’ legal rights and responsibilities, so that they may conform their future conduct to the law and minimize the risk of future injury. See Eisenberg v. Standard Ins. Co., 2009 WL 1809994, at *3 (S.D. Fla. Jun. 25, 2009); see also Cantonis Co. v. Certain Interested Underwriters at Lloyds, London, No. 18-81703-CIV, 2019 WL 3429962, at *3 (S.D. Fla. May 9, 2019); Miami Yacht Charters, LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh Pa., No. 11-21163-CIV, 2012 WL 1416428, at *3 (S.D. Fla. Apr. 24, 2012) (dismissing a counterclaim for declaratory relief because “[i]dentification of a contractual provision in need of construction is necessary to state a claim for declaratory judgment, but Defendant identified none”); Centre Hill Cts. Condo. Ass'n, Inc. v. Rockhill Ins. Co., No. 19-CV-80111, 2019 WL 7899220, at *3 (S.D. Fla. Apr. 10, 2019) (dismissing counterclaim because defendant “identified no contractual provision that is vague or ambiguous and requires interpretation or construction”).

Here, Defendant's amended counterclaim specifically identifies the Protective Safeguards Endorsement of the Policy as being at-issue and it alleges “[t]here is an actual and justiciable controversy, within the meaning of 28 U.S.C. § 2201, between [Defendant] and the Plaintiff, as to the respective rights and obligations under the Policy, and pursuant to the Protective Safeguards Endorsement, with respect of the subject Loss.” (Doc. 25, ¶¶ 63, 69). At the outset of the amended counterclaim, Defendant states that “[t]his is a counterclaim for declaratory judgment, pursuant to 28 U.S.C. § 2201, to determine [Defendant's] obligations and Plaintiff's rights, if any, under a commercial lines insurance policy issued by [Defendant], and the extent to which those rights and obligation are modified by the PROTECTIVE SAFEGUARDS ENDORSEMENT (CP 04 11 10 12) of the Policy.” (Doc. 24, ¶ 27). Furthermore, a review of the “REQUESTED RELIEF” portion of the amended counterclaims seeks: (1) a declaration regarding the interpretation of the Protective Safeguards Endorsement; and (2) a declaration that Defendant owes no duty to indemnify any claims arising from the alleged fire loss. (Doc. 24, p. 18). Accordingly, Defendant has adequately pled uncertainty in interpretation of the Policy.

C. Redundancy of Declaratory Relief Claims

Finally, Plaintiff seeks dismissal of Defendant's amended counterclaim on the basis that the dispute raised therein is subsumed within Plaintiff's breach of contract claim and redundant to Defendant's affirmative defense. Defendant, in turn, asserts that its amended counterclaim is not merely duplicative of its affirmative defense, but rather, it serves a useful purpose and adds value. The Court agrees with Defendant. Defendant's success on its affirmative defense to Plaintiff's breach of contract claim would only relieve it of liability from that particular claim. Defendant's amended counterclaim, however, asks for an affirmative declaration that its interpretation of the PROTECTIVE SAFEGUARDS ENDORSEMENT (CP 04 11 10 12) is correct. (Doc. 24, ¶ 46.). Therefore, even if Defendant prevails against Plaintiff on its breach of contract claim, it will not necessarily obtain such a positive declaration. See, e.g., Medmarc, 783 F. Supp. 2d at 1217 (quoting Procentury Ins. Co. v. Harbor House Club Condo. Ass'n, Inc., 652 F. Supp. 2d 552, 556-57 (D. N.J. 2009) (“In instances where the declaratory relief is based on contract interpretation, courts are reluctant to dismiss a counterclaim for declaratory relief as redundant even when it is a near ‘mirror image’ of the complaint because a ‘ruling adverse to the plaintiff on plaintiff's claim would merely result in a judgment that plaintiff was not entitled to the relief requested; although it might logically flow from that judgment that defendant's interpretation of the contract was the correct one, defendants would not be entitled to a judgment to that effect unless [they] specifically requested one.”)).

Furthermore, the Court agrees with Defendant that if Plaintiff's breach of contract claim and Defendant's affirmative defenses are truly redundant, then Plaintiff would suffer no prejudice in allowing Defendant's amended counterclaim to proceed alongside Plaintiff's breach of contract claim. See Regions Bank v. Commonwealth Land Title Ins. Co., No. 11-23257-CIV, 2012 WL 5410609, at *5 (S.D. Fla. Nov. 6, 2012) (“If, as plaintiff argues, the counterclaims are truly repetitious, then plaintiff will not have to expend much time on any additional discovery or briefing.”). Finally, even if Defendant's amended counterclaim is wholly redundant, this Court can exercise its discretion by not dismissing it because “motions to dismiss made under Rule 12(b)(6) only test the validity of the claim, not its redundancy; a redundant claim should not be dismissed as long as it is valid.” Wichael v. Wal-Mart Stores, E., LP, No. 6:14-cv-579-Orl-40DAB, 2014 WL 5502442, at *2 (M.D. Fla. Oct. 30, 2014).

ACCORDINGLY, it is ORDERED AND ADJUDGED that:

Plaintiff New Market Realty 1L, LLC's Motion to Dismiss the Amended Counterclaim (Doc. 25) is DENIED. Plaintiff shall file its answer to the amended counterclaim on or before May 2, 2022.

DONE and ORDERED at Tampa, Florida, this 22nd day of April, 2022.

SUSAN C. BUCKLEW, United States District Judge