Shell Oil Co. v. Aetna Casualty & Surety Co.

158 F.R.D. 395, 1994 U.S. Dist. LEXIS 10849, 1994 WL 454798
CourtDistrict Court, N.D. Illinois
DecidedAugust 4, 1994
DocketNo. 93 C 5168
StatusPublished
Cited by12 cases

This text of 158 F.R.D. 395 (Shell Oil Co. v. Aetna Casualty & Surety Co.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shell Oil Co. v. Aetna Casualty & Surety Co., 158 F.R.D. 395, 1994 U.S. Dist. LEXIS 10849, 1994 WL 454798 (N.D. Ill. 1994).

Opinion

MEMORANDUM, OPINION AND ORDER

ANDERSEN, District Judge.

This case is before the court on the motion of defendants Aetna Casualty and Surety Company, AIU Insurance Company, Allianz Underwriters Insurance Company, Allstate Insurance Company, Arkwright Mutual Insurance Company, Azzaeurazioni Generali Trieste, Birmingham Fire Insurance Company, Employers Mutual Casualty Company, Fireman’s Fund Insurance Company, Granite State Insurance Company, Hartford Accident and Indemnity Company, Insurance Company of the State of Pennsylvania, Landmark Insurance Company, National Surety Corporation, National Union Fire Insurance Company of Pittsburgh, Pennsylvania, and Transamerica Premier Insurance Company to dismiss plaintiffs complaint pursuant to Fed.R.Civ.P. 12(b)(7) for failure to join indispensable parties. For the following reasons, we grant defendants’ motions.

BACKGROUND

On August 24, 1993, Shell Oil Company (“Shell”) filed this declaratory judgment action based on diversity jurisdiction. Its one-count complaint alleges that the defendants issued primary and excess Comprehensive General Liability (“CGL”) policies to Shell. Shell manufactures polybutylene resin which is extruded by other companies into tubing for use in plumbing and municipal water systems. Shell alleges that some of the plumbing and water systems installed from December 1, 1977 through June 30, 1985 have failed. Shell further alleges that it has spent millions of dollars in damages, settlement, legal fees and loss mitigation for these failures.

In this ease, Shell seeks a declaration that its liability insurers whose policies were in force when these systems were installed must indemnify Shell for amounts it has paid or may pay for claims arising from failures of the polybutylene piping systems. Defendants seek to dismiss the complaint for failure to join indispensable parties under Fed. R.Civ.P. 19.

Shell purchased primary CGL insurance covering the first several million dollars in claims, as well as several layers of excess or umbrella insurance. After the primary layer is exhausted, the first excess layer kicks in. After that layer is exhausted, the second excess layer kicks in, and so on. For each policy year between 1977 and 1985, Shell maintained excess insurance for at least $100 million in claims.

Shell did not sue eight non-diverse insurance companies that issued excess policies to Shell during the time period at issue. Those unnamed carriers are First State Insurance Company, Lexington Insurance Company, Prudential Reinsurance, American Re-Insurance, Highlands Insurance Company, Gibraltar, American Excess and Republic. It is undisputed that Shell’s reason for this nonjoinder was because their joinder would destroy diversity and eliminate a tactical advantage that Shell perceived based on the Seventh Circuit’s ruling in Eljer Manufacturing, Inc. v. Liberty Mutual Ins. Co., 972 F.2d 805 (7th Cir.1992), rev’g 773 F.Supp. 1102 (N.D.Ill.1991), cert. denied, — U.S. -, 113 S.Ct. 1646, 123 L.Ed.2d 267 (1993).1

Some of the policies issued by the omitted insurers underlie excess policies issued by some of the named defendants. Some of the policies issued by the omitted insurers share [399]*399layers of coverage with excess policies issued by some of the named defendants. In other words, the omitted insurers are either in the same layer or below the layer of coverage of the named defendants.

DISCUSSION

In considering a motion to dismiss, the court must accept as true all the well-pleaded material facts in the complaint and must draw all reasonable inferences from those facts in the light most favorable to the plaintiff. Perkins v. Silverstein, 939 F.2d 463, 466 (7th Cir.1991). The court is not, however, bound by the plaintiff’s legal characterization of the facts. Gomez v. Illinois State Bd. of Education, 811 F.2d 1030, 1039 (7th Cir.1987).

Rule 19 establishes a two-step inquiry to determine whether it is proper to dismiss an action if it is not feasible to join an interested person. Burger King Corp. v. American National Bank & Trust Co., 119 F.R.D. 672, 674 (N.D.Ill.1988), citing, Hansen v. Peoples Bank of Bloomington, 594 F.2d 1149, 1150 (7th Cir.1979). Rule 19(a) lists the criteria for determining whether an absent party should be joined if feasible. When the joinder of the absent party would destroy diversity jurisdiction, however, Rule 19(a) is inapplicable. Pasco Intern. (London) Ltd. v. Stenograph Corp., 637 F.2d 496, 500 (7th Cir.1980); Bio-Analytical Services, Inc. v. Edgewater Hospital, Inc., 565 F.2d 450, 452 (7th Cir.1977), cert. denied, 439 U.S. 820, 99 S.Ct. 84, 58 L.Ed.2d 111 (1978). If the plaintiff cannot join an absent party who should be joined if feasible under Rule 19(a),2 the court must then determine under Rule 19(b) whether, in equity and good conscience, the action should proceed among the parties before it or should be dismissed because the absent person is indispensable. See, e.g., Krueger v. Cartwright, 996 F.2d 928, 932 (7th Cir.1993); Pasco, 637 F.2d at 500.

In this case, defendants argue that there are at least eight omitted insurance companies that are both necessary and indispensable to this litigation. Defendants claim that the absent insurers are “indispensable parties” pursuant to Rule 19 because defendants’ potential liability is dependent on a determination of a number of issues, including:

a. whether the underlying policies issued by the omitted insurers provide coverage for Shell’s claimed losses;

b. what trigger of coverage is applied to the underlying policies issued by the omitted insurers;

c. whether the underlying policies issued by the omitted insurers are or will be exhausted;

d. whether the policies issued by the omitted insurers that share a layer with the named insurers’ policies provide coverage for Shell’s claimed losses;

e. whether the policies issued by the omitted insurers that share a layer with the named insurers’ policies have the same trigger of coverage; and

f. whether the policies issued by the omitted insurers that share a layer with the named insurers’ policies are or will be exhausted.

Because joinder of the omitted insurers would destroy diversity jurisdiction, defendants contend that Rule 19 requires dismissal of the suit.

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Bluebook (online)
158 F.R.D. 395, 1994 U.S. Dist. LEXIS 10849, 1994 WL 454798, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shell-oil-co-v-aetna-casualty-surety-co-ilnd-1994.