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NATIONAL UNION FIRE INS. v. INTERNATIONAL WIRE GROUP

June 2, 2003

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, PLAINTIFF, AGAINST INTERNATIONAL WIRE GROUP, INC., DEFENDANT.


The opinion of the court was delivered by: Shira A. Scheindlin, District Judge

OPINION AND ORDER

National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union") seeks a declaration that it has not breached its contractual obligations to International Wire Group, Inc. ("IWG") and that IWG does not possess a legally cognizable claim for fraud or bad faith. IWG now moves to dismiss the action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons set forth below, the motion is granted.*fn1

I. BACKGROUND

A. Facts

IWG, a subsidiary of Hicks, Muse, Tate & Furst, Inc. ("Hicks Muse") assembles washing machine inlet hoses. See National Union Fire Ins. Co. of Pittsburgh, PA v. Hicks, Muse, Tate & Furst, Inc., No. 02 Civ. 1334, 2002 WL 1482625, at *1 (S.D.N.Y. Jul. 10, 2002). Since 1986, these hoses have been the subject of a number of product liability suits in which homeowners complain of property damage caused by exploding washing machines. See id.*fn2

In 1999, Hicks Muse's insurance broker, acting on behalf of Hicks Muse and its affiliates, purchased an umbrella insurance policy from National Union for the period April 1, 2000 through April 1, 2001 ("Policy").*fn3 See id. The Policy covered liability in excess of the coverage provided by a primary policy issued by Royal & Sunalliance Insurance Company ("Royal Policy"). See id. The Policy followed the same form as the Royal Policy, and thus only covered liability that would have been covered by the Royal Policy but for exhaustion of payment limits under the policy. See id. IWG was among the additional named insureds covered by the Policy. See id. at *2. At some point in 2001, IWG demanded coverage for the hose claims under the Policy. See id.

B. Procedural History

On January 28, 2002, National Union sued Hicks Muse in the Supreme Court of New York, New York County, seeking a declaration that it has no obligation to indemnify or defend IWG with respect to the hose claims ("New York Action I"). See Complaint in National Union Fire Ins. Co. of Pittsburgh, PA v. Hicks, Muse, Tate & Furst, Inc., No. 02600344, Ex. A to Memorandum of Law in Opposition to Defendant IWG's Motion to Dismiss the Complaint for Declaratory Relief ("Pl. Mem."). On February 20, 2002, Hicks Muse removed the action to this Court. See National Union, 2002 WL 1482625 at *1 n. 1. On March 26, 2002, National Union amended its complaint to add IWG as a defendant. See id. at *2.

Shortly after New York Action I was filed, IWG brought suit against National Union in Illinois state court, alleging that National Union had wrongfully denied coverage of the hose claims ("Illinois Action"). See Verified Complaint for Injunctive Relief and Other Damages in International Wire Group, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, et al., No. 02 CH 02470 ("Illinois Complaint"), Ex. A to Compl. Count 1 of the Illinois Complaint seeks injunctive relief. Count 2 seeks declaratory relief regarding National Union's coverage obligations. Counts 3, 4, and 5 allege breach of contract, fraud, and bad faith, respectively.

On September 13, 2002, this Court entered an order staying New York Action I "with respect to all claims and matters pending against defendant International Wire Group, Inc. until . . . a final disposition of the Illinois Action. . . ." 9/13/02 Order in New York Action I ("Stay Order"), Ex. A to Memorandum of Law in Support of Defendant IWG's Motion to Dismiss Complaint ("Def. Mem.").*fn4

On October 29, 2002, the Illinois Court ruled that all disputes relating to National Union's excess umbrella policies are governed by Texas law. See Transcript of 10/29/02 Conference in Illinois Action, Ex. B. to Def. Mem., at 3. On October 30, 2002, IWG voluntarily dismissed Counts 3, 4, and 5 of the Illinois Complaint. The following day, IWG sent a letter to National Union advising that IWG intended to bring an action against National Union under Section 21.21 of the Texas Insurance Code for bad faith, fraud, RICO, and other counts based on National Union's treatment of IWG's insurance claims.*fn5 See 10/31/02 Letter from Daniel J, Weber, Assistant General Counsel for IWG, to Andrew Nadolna of AIG Technical Services ("Notice Letter"), Ex. B to Compl. On December 31, 2002, exactly sixty days after the Notice Letter was sent, National Union filed the instant declaratory action ("New York Action II").

On April 3, 2003, more than three months after New York Action II was filed, IWG filed a complaint in the United States District Court for the Southern District of Texas seeking damages for alleged "unfair insurance settlement practices, insurance bad faith, fraud, defamation, breach of fiduciary duty, and common law negligence" ("Texas Action").*fn6 See Complaint in International Wire Group, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, et al., No. G-03-233 ("Texas Complaint") ¶ 1. The Texas Complaint was amended on April 28, 2003 to remove a non-diverse defendant. See 4/28/03 Letter to Court from Mark D. Sheridan, counsel for National Union.*fn7

II. LEGAL STANDARD FOR MOTION TO DISMISS

"Given the Federal Rules' simplified standard for pleading, `[a] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002) (emphasis added) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)). A complaint need not state the legal theory, facts, or elements underlying the claim, except in certain instances. Compare Fed.R.Civ.P. 8 with Fed.R.Civ.P. 9.*fn8 Pursuant to the simplified pleading standard of Rule 8(a), a complaint need only include "`a short and plain statement of the claim showing that the pleader is entitled to relief.'" Swierkiewicz, 534 U.S. at 512 (quoting Rule 8(a)(2)). A plaintiff need not, in other words, plead the elements of a ...


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