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AMERICAN NATIONAL FIRE INSURANCE CO. v. MIRASCO INC.

May 15, 2001

AMERICAN NATIONAL FIRE INSURANCE CO. AND GREAT AMERICAN INSURANCE CO., PLAINTIFFS,
v.
MIRASCO, INC., DEFENDANT. MIRASCO, INC., PLAINTIFF, V. AMERICAN NATIONAL FIRE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Robert W. Sweet, U.S.D.J.

  OPINION

American National Fire Insurance Co. and Great American Insurance Co. (the "Insurers"), plaintiffs in 99 Civ. 12405 (the "New York Action") and defendants in 00 Civ. 5098 (the "Georgia Action"), have moved for summary judgment to dismiss the punitive damage counterclaim of defendant Mirasco, Inc. ("Mirasco") in the New York Action as well as a similar claim in the Georgia Action. Both the counterclaim and claim are based upon a Georgia statute providing a remedy for bad faith on the part of the insurer. For the reasons set forth below, the motion is granted at this time.

These New York and Georgia Actions represent opposing sides of the same coin, an insurance claim by Mirasco relating to a shipment of frozen beef liver rejected by Egyptian authorities upon its arrival in Alexandria. Diligent lawyering has provided additional basis for another scrimmage of motion practice before reaching the merits of the dispute. In order to determine whether or not Mirasco has a claim for damages resulting from the alleged bad faith treatment by the Insurers of this claim, it is necessary to determine the law which will be applied to the insurance policy giving rise to the claim in view of the absence of any choice of law provision.

Prior Proceedings

Following informal discussion concerning the resolution of an insurance claim filed early in 1999 by Mirasco, on December 22, 1999, the Insurers commenced the New York Action against Mirasco seeking a declaration that they were not obligated to pay Mirasco's losses under the policy. In response Mirasco asserted a counterclaim against the Insurers under Georgia law for breach of contract and bad faith.

On March 8, 2000, Mirasco commenced the Georgia Action against the Insurers in the Superior Court of Georgia, Fulton County, seeking compensatory and exemplary damages, including attorneys' fees, under Georgia law for the Insurers' breach of the policy and their bad faith denial of Mirasco's claim. The Insurers removed the Georgia Action to federal court, and Mirasco sought to remand. After finding that diversity jurisdiction existed, the United States District Court for the Northern District of Georgia, on July 5, 2000, transferred the Georgia Action to this Court, stating:

Plaintiff asserts that Defendants' declaratory judgment motion was filed in anticipation of litigation as it was filed while the parties were negotiating over Defendants' refusal to pay on Plaintiff's claim. The vice president of Mirasco apparently met with representatives for Defendants on December 8, 1999. Defendants filed their declaratory judgment action on December 28, 1999. Defendants assert that they did not file in anticipation of litigation but simply because they saw no resolution to the liability dispute. They assert that it is common in the insurance industry to file a declaratory judgment action in such situation.
Although the court finds it a close call as to whether Defendants did, indeed, file their action in anticipation of litigation, the court will nonetheless transfer this case in the interest of judicial economy. These actions clearly should be consolidated for purposes of adjudication in order to preserve judicial resources and avoid inconsistent judgments, and as the convenience of witnesses may favor transfer the court will so grant it. See e.g., Tingley Systems, Inc. v. Bay State HMO Management, Inc., 833 F. Supp. 882 (M.D.Fla. 1993) (finding convenience of parties and witnesses favored transfer of action to district in which defendant's declaratory judgment action was pending; although both parties would be inconvenienced by litigating in other's chosen forum, all parties and witnesses would be more inconvenienced by litigating related actions in separate courts); Allstate Ins. Co. v. Clohessy, 9 F. Supp.2d 1314 (M.D.Fla. 1998) (explaining "the first-filed action is preferred, even if it is declaratory, unless considerations of judicial and litigant economy, and the just effective disposition of disputes, require otherwise"); Martin, 811 F. Supp. at 686 (granting transfer to court in which declaratory judgment action pending when said court had already denied transfer as not doing so would result in waste of judicial resources and the possibility of inconsistent judgments).

In the New York Action complaint, the Insurers asserted that maritime law governed the action which gave rise to a motion by Mirasco to dismiss and to stay the New York Action. In an order of September 20, 2000, familiarity with which is assumed, it was held that jurisdiction was based solely upon diversity of citizenship.

Discovery has gone forward, and the Insurers have moved to dismiss Mirasco's claim for punitive damages based upon the Insurers' bad faith in responding to its claim. That motion, the subject of this opinion, was deemed fully submitted on February 21, 2001.

The Facts

The Insurers are Ohio corporations with their principal place of business in Cincinnati and licensed to do business in New York as a marine insurance company. Mirasco is a Georgia corporation with its principal place of business in Atlanta.

On March 15, 1990, the Insurers issued an insurance policy to Mirasco entitled "Open Cargo Policy No. 7375220" (the "Policy") which was originally effective March 15, 1990 and which was rewritten effective March 15, 1996. International Insurance Brokers, Inc. ("IIB") in New York on behalf of Mirasco prepared the Policy and submitted it to the Insurers' New York office where it was executed and returned to IIB.

The Policy provides coverage for physical loss or damage to lawful goods in transit. The Policy covers conveyances:

Per steamer and/or steamers and/or motor vehicles and/or barge and/or sailing vessel and/or land conveyance and/or aircraft and/or mail and/or parcel post and ...

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