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Nautilus Insurance Co v. Dubin & Associates

August 19, 2011


The opinion of the court was delivered by: Harry D. Leinenweber, Judge United States District Court


Nautilus Insurance Company (hereinafter, "Nautilus") brought the instant declaratory judgment action against its insured, Dubin & Associates, Inc. (hereinafter, "Dubin"), and Willie Wakefield (hereinafter, "Wakefield"). Dubin has filed a Motion to Dismiss Nautilus' Complaint pursuant to FED. R. CIV. P. 12(b)(1), alleging that Nautilus failed to plead facts sufficient to establish subject matter jurisdiction. For the reasons stated herein, Dubin's Motion to Dismiss is granted. Nautilus is given 30 days from the date of this Order to replead its Complaint.


The following facts are taken from Nautilus' Complaint. Nautilus issued to Dubin an insurance policy (the "Nautilus policy") that was effective from April 14, 2004 to April 14, 2005. The Nautilus policy states, in relevant part:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.

In an endorsement, the Nautilus policy contains an "Employee Exclusion" barring coverage for any bodily injury that occurs to "an employee of the insured arising out of and in the course of:

(a) employment by the insured; or (b) performing duties related to the conduct of the insured's business." The endorsement defines "employee" as "includ[ing], but is not limited to, any persons hired by, loaned to, leased to, contracted for, or volunteering services to the insured, whether or not paid by the insured."

In 2006, Wakefield filed a lawsuit against Dubin in the Circuit Court of DuPage County, Ill., under the caption Willie Wakefield v. Dubin & Associates, Inc. et al., Case No. 06 L 860. Wakefield alleges that in March 2005 Dubin was the general contractor for the construction of buildings at 4500 W. Belmont Ave. in Chicago. Asbach & Vanselow, Inc. ("Asbach") and Air-Rite Heating and Cooling ("Air-Rite") were subcontractors on the project. Wakefield, a sheet metal installer for Air-Rite, alleges he was struck and injured by a load of lumber that fell from a forklift operated by an Asbach employee. Wakefield alleges negligent conduct by both Dubin and Asbach. Nautilus, which is not named in the Complaint, seeks a declaratory judgment in this Court to determine whether it has a duty to defend or indemnify Dubin in the Wakefield litigation.

Dubin has moved to dismiss the Complaint for failure to show the existence of an actual controversy. Absent from the Complaint is any allegation that Dubin ever demanded that Nautilus defend or indemnify it with respect to the Wakefield litigation. Nor is there any allegation that Dubin has ever indicated that it intends to make a claim under the Nautilus policy. The question in this case boils down to whether, given the gossamer-thin nature of Nautilus' pleading, it has adequately alleged that a live controversy exists between the parties. The Court finds that it has not.


A. Legal Standard

Here, Dubin's Rule 12(b)(1) Motion attacks the sufficiency of the Complaint, so the Court "must accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff." Alicea-Hernandez v. Catholic Bishop of Chi., 320 F.3d 698, 701 (7th Cir. 2003). Even so, Nautilus must sufficiently allege the existence of a case or controversy with respect to its duty to defend and indemnify Dubin.

The Declaratory Judgment Act gives federal courts discretionary power to issue declaratory judgments. But for the Court to exercise this power, it must have an independent basis of subject matter jurisdiction. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950). In this case, Nautilus' Complaint is premised on diversity jurisdiction.

When determining whether an actual controversy exists under the Declaratory Judgment Act, the question is whether there is a real dispute between parties with adverse legal interests "of sufficient immediacy and reality to warrant issuance of a declaratory judgment" and to ensure that such a judgment is not merely an advisory opinion. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (U.S. 2007)(citing Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941)). In other words, a party bringing a declaratory judgment action must allege a direct injury or threat of injury that is "real and ...

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