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National Union Fire Insurance Co. v. Brickyard Vessels, Inc.

United States District Court, E.D. Virginia, Alexandria Division

November 4, 2014

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Plaintiff/Counter-Defendant,
v.
BRICKYARD VESSELS, INC., Defendant/Counter-Claimant.

MEMORANDUM OPINION

JAMES C. CACHERIS, District Judge.

This matter is before the Court on Plaintiff National Union Fire Insurance Company of Pittsburgh, PA's ("National Union" or "the insurer") Motion to Dismiss Defendant Brickyard Vessels, LLC's ("Brickyard" or "the insured") Amended Counterclaim. [Dkt. 25] For the reasons discussed below, the Court will grant National Union's Motion to Dismiss the Amended Counterclaim.

I. Background[1]

On March 9, 2014 in the Biscayne Bay off the coast of Miami, Florida, marine vessel CONTENDER 36 collided with MASTERPIECE, a marine vessel owned by Brickyard, causing injury to two passengers aboard the CONTENDER 36 and physical damage to both vessels. (Compl. [Dkt. 1] at 3.) At the time of collision, Brickyard was the named insured and MASTERPIECE was the covered vessel under an AIG Recreational Marine Insurance Policy ("the Policy") issued by National Union. (Id. at ¶¶ 8, 37.) Brickyard submitted a claim under the Policy for damage to the MASTERPIECE. (Id. at ¶ 16.) National Union investigated the claim but determined there was no coverage for any loss stemming from the collision because Brickyard breached certain warranties contained in the Policy. (Id. at ¶ 33.)

First, National Union contends MASTERPIECE was ineligible to carry any passengers for hire as a foreign-built vessel, and by chartering and carrying passengers for hire at the time of the collision, MASTERPIECE breached the Occasional Charter Warranty. (Compl. ¶¶ 19, 20.) Second, National Union alleges that MASTERPIECE violated U.S. Coast Guard regulations because at the time of the collision, the Captain of MASTERPIECE did not possess a U.S. merchant mariner credential or U.S. Coast Guard license, and the number of passengers aboard MASTERPIECE exceeded the maximum number permitted by U.S. Coast Guard regulations. (Id. at ¶ 26-29.) Two days after notifying Brickyard of the coverage denial, National Union filed this suit pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a declaration from this Court that it is not obligated to cover any damage, injury and/or loss arising out of the collision, nor is it obligated to provide a defense or liability coverage for Brickyard against any claims arising out of the collision. (Id. at 4, 6.)

Brickyard filed an answer and counterclaim for one count of "statutory bad faith" against National Union, contending National Union violated Florida law by failing to honestly settle Brickyard's claim under the Policy in good faith. (Answer & Countercl. [Dkt. 5] at 11-12 (citing Fla. Stat. §§ 624.155(1)(b)(1), 626.9541(1)(i)(3)(a)-(b)).) In count two, Brickyard claims it is entitled to punitive damages as a result of National Union's alleged bad faith. (Id. at 12-13.) Brickyard filed an amended answer and counterclaim as a matter of right under Rule 15 of the Federal Rules of Civil Procedure. (Am. Answer & Countercl. [Dkt. 15].) Brickyard's two-count counterclaim brought pursuant to Florida law, however, substantively remained the same.

National Union now moves to dismiss Brickyard's amended two-count countcounterclaim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. [Dkt. 25] National Union contends that Virginia law applies to the underlying substantive claims in this admiralty action, and thus argues that Brickyard's counterclaim brought under Florida statute fails to state proper claim for relief. (Pl.'s Mem. [Dkt. 26] at 2-9.) Brickyard opposes National Union's motion and argues that Florida law applies to the substantive claims as this Court sits in diversity. (Def.'s Opp'n [Dkt. 28] at 7-11.) If the Court determines that Virginia law applies, Brickyard asks in the alternative for leave to amend the counterclaim, and does not attempt to argue the sufficiency of the counterclaims under Virginia law. (Id. at 11-12.)

The Court finds that Virginia law applies to the substantive claims in this admiralty action, and therefore, because Brickyard's counterclaim fails to state a cognizable claim for relief under Virginia law, the motion to dismiss will be granted.

II. Standard of Review

In deciding a Rule 12(b)(6) motion, a court must be mindful of the liberal pleading standards under Rule 8, which require only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8. While Rule 8 does not require "detailed factual allegations, " a plaintiff must still provide "more than labels and conclusions" because "a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555-56 (2007) (citation omitted). To survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Twombly , 550 U.S. 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 . However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" to meet this standard, id., and a plaintiff's "[f]actual allegations must be enough to raise a right to relief above the speculative level...." Twombly , 550 U.S. at 555. Moreover, a court is not required to accept legal conclusions as true. District 28, United Mine Workers of Am., Inc. v. Wellmore Coal Corp. , 609 F.2d 1083, 1085 (4th Cir. 1979).

III. Analysis

Before the Court analyzes the sufficiency of Brickyard's counterclaim, it must first determine what law governs those substantive claims.

A. Choice of Law

"The first step in a choice of law analysis involving multiple grounds for subject matter jurisdiction is to determine the basis of the court's jurisdiction." Zepsa Indus., Inc. v. Kimble, No. 3:08cv4-RJC , 2008 WL 4891115, at *1 (W.D. N.C. Nov. 11, 2008). The parties agree that the underlying dispute in this matter sounds in contract; specifically, a recreational marine insurance policy. National Union asks for a declaration that it is not required to pay out insurance proceeds under the Policy, and Brickyard brings counterclaims relating to National Union's performance under the Policy. (Pl.'s Mem. at 1 ("National Union filed its Complaint for Declaratory Judgment on July 23, 2014 seeking a declaration that there is no coverage under a contract of recreational marine insurance... for damages."); Def.'s Opp'n at 8 ("Brickyard's Counterclaims implicate performance of a contract because they concern National Union's failure to pay for collision-related losses and to otherwise satisfy its ...


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