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Attorneys'title Insurance Fund v. Rsui Indemnity Co.

United States District Court, S.D. Indiana, Indianapolis Division

March 31, 2015

ATTORNEYS' TITLE INSURANCE FUND a Florida corporation, on its own behalf and on behalf of Directors and Officers of the National Attorneys' Title Assurance Fund, Plaintiff,
v.
RSUI INDEMNITY COMPANY, Defendant.

ORDER ON DEFENDANT'S MOTION TO DISMISS

SARAH EVANS BARKER, District Judge.

This cause is before the Court on Defendant's Motion to Dismiss [Docket No. 20], filed on August 12, 2014, pursuant to Rules 12(b)(7) and 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiffs Attorneys' Title Insurance Fund, a Florida business trust, and Attorneys' Title Insurance Fund, Inc., a Florida corporation (collectively, "ATIF"), on their own behalf and on behalf of the Directors and Officers of the National Attorneys' Title Assurance Fund ("NATAF"), bring this declaratory action against the insurance company, Defendant RSUI Indemnity Company ("RSUI"), seeking a declaration of rights under the applicable insurance policy and a finding that RSUI is obligated to indemnify the insureds, including certain officers and directors of NATAF.

Factual Background

In 2010, ATIF purchased a Directors & Officers Liability Policy from RSUI, which was renewed each year thereafter. The most recent policy was in effect from August 2013 to August 2014. ATIF purchased the RSUI policies to provide liability insurance for directors and officers of NATAF, a title insurance company in which ATIF is a shareholder. NATAF is identified as an "additional named insured" on the RSUI policies. The RSUI policies were claims made and reported policies, meaning that they provided coverage only for claims first made and reported during the policy period.

This case involves a dispute over insurance coverage under the RSUI policies for numerous claims made against RSUI's insureds following a misappropriation of funds in 2010 by Accurate Land Title LLC, a title agent of NATAF. The underlying insurance claims at issue have been brought against NATAF and its officers and directors, not against ATIF. These claims are treated by RSUI collectively as a single claim ("the Accurate Claim"). RSUI denied the Accurate Claim, including the action recently filed by the Commissioner of the Indiana Department of Insurance against NATAF's deceased president and director, Ronald Hocker, primarily on the basis that the Accurate Claim was not first made and timely reported during the policy period of any of the RSUI policies.

On July 8, 2014, ATIF filed its complaint in this action in the Marion Circuit Court. The case was subsequently removed to this court on July 29, 2014. ATIF filed an amended complaint on August 4, 2014, seeking a declaratory judgment that RSUI has a duty to defend (Count I) and indemnify (Count II) ATIF and the directors and officers of NATAF in connection with the Accurate Claim. ATIF has also brought claims for estoppel/waiver (Count III); breach of contract (Count IV); breach of duty of good faith and fair dealing (Count V); illusory insurance (Count VI); and unjust enrichment (Count VII). On August 12, 2014, RSUI filed its motion to dismiss pursuant to Rule 12(b)(7), for failure to join required parties. RSUI also moved pursuant to Rule 12(b)(6) to dismiss Counts III, V, VI, and VII of the amended complaint for failure to state a claim upon which relief may be granted.

Rule 12(b)(7) Motion to Dismiss

I. Standard of Review

Rule 12(b)(7) allows dismissal of an action where a litigant fails to join a party under Federal Rule of Civil Procedure 19. Fed. R. Civ. Pro. 12(b)(7). Under Rule 19, an entity is a required party to an action if the court could not accord complete relief in that entity's absence. Fed. R. Civ. Pro. 19(a)(1)(A). Alternatively, an entity must be joined under Rule 19 if it claims an interest related to the subject matter of an action and "is so situated that disposing of the action in the person's absence may... impair or impede the person's ability to protect the interest; or... leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest." Fed. R. Civ. Pro. 19(a)(1)(B). In this procedural context, the court accepts all well-pleaded allegations from the complaint as true and draws all reasonable inferences in the plaintiff's favor. Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 479 n.2 (7th Cir. 2001) (citation omitted).

II. Discussion

Pursuant to Rule 12(b)(7), a party may move for dismissal of a lawsuit "when the other party has fail[ed] to join a required party' under Rule 19(a)...." No Baloney Mktg., LLC v. Ryan, 1:09-cv-0200-SEB-TAB, 2010 WL 1286720, at *13 (S.D. Ind. Mar. 26, 2010) (citing Fed. R. Civ. Pro. 12(b)(7)). Rule 19(a) provides:

(1) Required Party. A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if:
(A) in that person's absence, the court cannot accord complete relief among existing parties; or
(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the ...

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