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Westchester Surplus Lines Insurance Co. v. Grange Mutual Casualty Co.

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

June 17, 2015

WESTCHESTER SURPLUS LINES INSURANCE COMPANY as Subrogee of Tank Industry Consultants, Inc., Plaintiff,
v.
GRANGE MUTUAL CASUALTY COMPANY, Defendant. GRANGE MUTUAL CASUALTY COMPANY, Third-Party Plaintiff,
v.
HALLMARK SPECIALTY INSURANCE COMPANY, and F & F COATING, INC. Default Entered on 2/25/2015, Third-Party Defendants.

ENTRY ON MOTION TO STRIKE THIRD-PARTY COMPLAINT

TANYA WALTON PRATT JUDGE, United States District Court

This matter is before the Court on Hallmark Specialty Insurance Company’s (“Hallmark”) Motion to Strike Grange Mutual Casualty Company’s (“Grange”) Third-Party Complaint. (Filing No. 44). Hallmark asks the Court to strike Grange’s Third-Party Complaint based upon improper use of impleader under Federal Rule of Civil Procedure 14 and because Grange had already instituted an independent action against Hallmark asserting the same claims for relief. For the reasons set forth below, Hallmark’s Motion is GRANTED.

I. BACKGROUND

The present lawsuit was filed by Plaintiff Westchester Surplus Lines Insurance Company (“Westchester”) against Grange, and arose out of a workplace injury that occurred September 9, 2010 when an employee of F & F Coating tragically fell to his death while performing welding repairs on a water tower in Kokomo, Indiana. The employee’s estate brought a lawsuit against all the companies involved in the water tower project, which included Tank Industry Consultants, Inc. (“Tank”). That lawsuit resulted in a settlement of $100, 000.00, plus $48, 122.13 in fees and costs for defending the action, which Westchester paid. Westchester subsequently filed the present action against Grange to recover monies which it paid on Tank’s behalf. Westchester believes that Grange is obligated to reimburse the monies it paid pursuant to the declarations page of American Suncraft Construction Company’s (“American Suncraft”) liability policy, in which Tank is listed as an additional insured. Grange has not reimbursed Westchester for said monies.

Along with its Answer to Westchester’s complaint, Grange filed a Third-Party Complaint against Hallmark (Filing No. 11). The Third-Party Complaint is seeking indemnity pursuant to a separate and independent subcontractor agreement between American Suncraft and F & F Coating. Grange contends that under the terms of the subcontract agreement between American Suncraft and F & F, Coating, Hallmark and F & F Coating were to defend and hold American Suncraft and Grange harmless from any claims, losses, damages and expenses. In response, Hallmark asserts that Grange’s Third-Party Complaint is improper under Rule 14 of the Federal Rules of Civil Procedure, and fails to state a claim upon which relief can be granted. Moreover, because Grange has already instituted an independent action against Hallmark, they contend that Grange’s Third-Party Complaint is wholly unnecessary, cumulative and would create an unnecessary burden for Hallmark in defending itself against these two actions simultaneously. For these reasons, Hallmark asks the Court to strike the Third-Party Complaint under Rule 12(f).

II.LEGAL STANDARD

A. Motion to Strike

Federal Rule of Civil Procedure 12(f) allows the court to “strike from a pleading an insufficient defense or redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). The court may, (1) act on its own, or (2) on a motion made by a party either before responding to the pleading or, if a response is not allowed, within 21 days after being served with the pleading. Id. Motions to strike are generally disfavored; however, “where . . . motions to strike remove unnecessary clutter from the case, they serve to expedite, not delay.” Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir. 1989).

B. Third-Party Practice

Federal Rule of Civil Procedure 14 provides that “[a] defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it.” Fed.R.Civ.P. 14. Courts interpreting this rule have recognized that “[t]he third-party defendant must be secondarily liable [derivative liability] to the third-party plaintiff in the event the third-party plaintiff is found to be liable to the plaintiff.” Green Line Mfg. Corp. v. Foreboard Corp., 130 F.R.D. 397, 399 (N.D. Ind. 1990). “The rule is not altered merely by the fact that the alleged third-party claim grew out of the same transaction.” U.S. Gen., Inc. v. City of Joliet, 598 F.2d 1050, 1053 (7th Cir. 1979). Furthermore, “[e]ven though it may arise out of the same general set of facts as the main claim, a third-party claim will not be permitted when it is based upon a separate and independent claim.” United States v. Joe Grasso & Son, Inc., 380 F.2d 749, 751 (5th Cir. 1967). “The distinguishing characteristic of a claim filed pursuant to Rule 14(a) is that the defendant is attempting to transfer to the third-party defendant the liability asserted against the defendant by the original plaintiff.” Green, 130 F.R.D. at 399 (quoting Forum Ins. Co. v. Ranger Ins. Co., 711 F.Supp. 909, 915 (N.D. Ill. 1989). As was identified by the Northern District of Indiana, a two-part test governs impleader under Rule 14: (1) the third-party defendant’s liability must be secondary or dependent on the outcome of the main claim; and (2) the third-party plaintiff must be able to transfer all or part of his liability to the third-party defendant.” Deutsche Credit Corp. v. Nat’l Bank & Trust Co. of South Bend, 114 F.R.D. 4, 7 (N.D. Ind. 1986).

III. DISCUSSION

Hallmark contends that the liability Grange seeks to impose upon it must fail, as it is not derivative. “Liability is derivative where it is dependent on the determination of liability in the original action.” Beale v. Revolution Portfolio, LLC, No. 07-C-6909, 2009 WL 1285527, at *2 (N.D. Ill. May 7, 2009). Hallmark alleges that Grange’s third-party claims are neither derivative in nature nor secondary or dependent upon Westchester’s claim against Grange in the present lawsuit for the following reasons:

1. Westchester’s claims against Grange relate to Grange’s failure to defend and indemnify Tank as an additional insured on Grange’s policy issued to American Suncraft. See Exhibit A, B. (Filing No. 44-1; Filing No. 44-2).
2. Grange’s claims against Hallmark relate to Hallmark’s failure to defend and indemnify American Suncraft pursuant to an indemnity agreement contained within a subcontract between American Suncraft and F & F ...

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