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Allied Property and Casualty Insurance Company v. Alvin Roberts

June 20, 2011

ALLIED PROPERTY AND CASUALTY INSURANCE COMPANY, PLAINTIFF,
v.
ALVIN ROBERTS, SHIRLEY ROBERTS, ALFONSO GARCIA, JESSIE HERNANDEZ, ALBERT HUNG, MANUEL A.P. GONZALES AND ALLSTATE INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

Through this action, Plaintiff Allied Property and Casualty Insurance Company ("Allied") seeks rescission of a homeowners policy issued to its insureds, Defendants Alvin and Shirley Roberts ("the Robertses"), and a declaratory judgment that it owes no coverage for two tort actions brought against the Robertses in Sacramento County Superior Court.

Allied further seeks a judicial declaration of the rights, duties, obligations and interests of all the parties regarding the action, including the rights, duties, obligations and interests of Defendant Allstate Insurance Company ("Allstate") pursuant to the Declaratory Judgment Act. 28 U.S.C. § 2201(a) (2006). Presently before the Court is Allstate's Motion to Dismiss Allied's Complaint for lack of subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1).*fn1 Allstate's Motion was filed on April 18, 2011. (Def.'s Mot. to Dismiss, ECF No. 6.) Allied filed a timely opposition to Allstate's Motion on May 26, 2011, (Pl.'s Opp'n, ECF No. 16), and Allstate filed a timely reply (Def.'s Reply, ECF No. 22). For the reasons set forth below, Allstate's Motion to Dismiss is denied.

BACKGROUND*fn2

This action arises from a dispute over insurance coverage for a fire that took place on September 16, 2008, in a warehouse on a property in Galt, California, owned by the Robertses. The fire caused property damage and two fatalities. As a result, two tort actions were brought against the Robertses, as indicated above.

At the time of the fire, a policy of liability insurance was in effect for the home that was located on the Galt property. That policy was issued by Allied to the Robertses. Two additional homeowners insurance policies were also issued by Allied to the Robertses.

According to Allied, the Robertses failed to disclose to Allied the existence of the warehouse, as well as the fact that business activities were being conducted there. Allied claims that material misrepresentations in that regard entitle Allied to rescind the insurance policies it issued to the Robertses. Allied also alleges that it is not obligated to defend the Robertses against the tort actions brought in state court, because its policies do not cover injuries or property damage arising from business activities conducted on an insured location, nor do they cover injuries occurring at uninsured locations.

At the time of the fire, the Robertses were also insured under a Personal Umbrella Policy issued by Allstate. Allied alleges that if its policy is rescinded or if the Court determines that Allied is not obligated to defend the Robertses against the underlying actions, Allstate's policy may "drop down" and "afford defense and indemnity" to the Robertses. As such, Allstate's interests may be impacted by the outcome of Allied's action against the Robertses. Accordingly, Allied named Allstate as an additional defendant in this lawsuit. As indicated above, it is Allstate's Motion to Dismiss for lack of subject matter jurisdiction that is now before the Court for adjudication.

STANDARD

Federal courts are courts of limited jurisdiction, and are presumptively without jurisdiction over civil actions. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). The burden of establishing the contrary rests upon the party asserting jurisdiction. Id. Because subject matter jurisdiction involved a court's power to hear a case, it can never be forfeited or waived. United States v. Cotton, 535 U.S. 625, 630 (2002). Accordingly, lack of subject matter jurisdiction may be raised by either party at any point during the litigation, through a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1). Arbaugh v. Y&H Corp., 546 U.S. 500, 506 (2006); see also Int'l Union of Operating Eng'rs v. Cnty. of Plumas, 559 F.3d 1041, 1043-44 (9th Cir. 2009). Lack of subject matter jurisdiction may also be raised by the district court sua sponte. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999). Indeed, "courts have an independent obligation to determine whether subject matter jurisdiction exists, even in the absence of a challenge from any party." Id.; see Fed. R. Civ. P. 12(h)(3) (requiring the court to dismiss the action if subject matter jurisdiction is lacking).

There are two types of motions to dismiss for lack of subject matter jurisdiction: a facial attack, and a factual attack. Thornhill Publ'g Co. v. Gen. Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979).

Thus, a party may either make an attack on the allegations of jurisdiction contained in the nonmoving party's complaint, or may challenge the existence of subject matter jurisdiction in fact, despite the formal sufficiency of the pleadings. Id.

When a party makes a facial attack on a complaint, the attack is unaccompanied by supporting evidence, and it challenges jurisdiction based solely on the pleadings. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). If the motion to dismiss constitutes a facial attack, the Court must consider the factual allegations of the complaint to be true, and determine whether they establish subject matter jurisdiction. Savage v. Glendale High Union Sch. Dist. No. 205, 343 F.3d 1036, 1039 n.1 (9th Cir. 2003). In the case of a facial attack, the motion to dismiss is granted only if the nonmoving party fails to allege an element necessary for subject matter jurisdiction. Id. However, in the case of a facial attack, district courts "may review evidence beyond the complaint without converting the motion to dismiss into a motion for summary judgment." Safe Air for Everyone, 373 F.3d at 1039.

In the case of a factual attack, "no presumptive truthfulness attaches to plaintiff's allegations." Thornill, 594 F.2d at 733 (internal citation omitted). The party opposing the motion has the burden of proving that subject matter jurisdiction does exist, and must present any necessary evidence to ...


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