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Heins v. Commerce and Industry Insurance Co.

United States District Court, S.D. Ohio, Western Division, Dayton

October 24, 2017

PETER H. HEINS, et al., Plaintiffs,
v.
COMMERCE AND INDUSTRY INSURANC COMPANY, et al., Defendants.

          Walter H. Rice, District Judge.

          REPORT AND RECOMMENDATIONS [1]

          Sharon L. Ovington, United States Magistrate Judge.

         I. Introduction

         The facts in this case involve an airplane crash, the total destruction of the aircraft, the deaths of Clayton Michael Heins and Jacob Andrew Turner, and an aircraft insurance policy. Clayton's father, Peter H. Heins, owned the destroyed aircraft. After the crash, a dispute arose concerning insurance coverage, leading Peter H. Heins to file the present case in the Darke County, Ohio Court of Common Pleas. Defendants Commerce and Industry Insurance Company and AIG Aerospace Adjustment Services, Inc. removed the case to this Court asserting diversity jurisdiction under 28 U.S.C. § 1332.

         The parties do not dispute that the diversity-jurisdiction requirements are satisfied and that, consequently, removal of the case from state court was legally justified. Their dispute instead presents choice between alternatives: (1) whether this Court should decline to exercise its discretionary declaratory-judgment jurisdiction and remand the case to state court-as Plaintiff[2] asks (Doc. #s 7, 15); or (2) whether this Court should exercise its discretionary declaratory-judgment jurisdiction and retain the case here-as Defendants ask (Doc. #11).

         II. Background

         The airplane crash leading in the present case also generated a wrongful-death case filed by the Administrator of Jacob Turner's Estate in the Darke County Court of Common Pleas (the Turner case). Peter Heins is the defendant in the Turner case both individually and as Administrator of his son Clayton's Estate. (Doc. #7, Exh. A). It appears that the Turner case remains presently pending in Darke County.

         Returning to the instant case, Plaintiff Heins purchased an aircraft insurance policy from Defendant Commerce and Industry Insurance. His purchase occurred before the airplane crash happened. The subject of the insurance policy was the aircraft destroyed in the crash. The insurance policy was in effect at the time of the crash. See Doc. #9, PageID #s 172-73. Plaintiff Heins asserts in his Complaint that the insurance policy provided coverage for property damage to the aircraft and other losses. He further alleges that the policy required Commerce and Industry Insurance to “‘…defend and settle any suit or claim covered by this insurance….'” (Doc. #3, PageID #69, ¶5) (quoting, apparently, the aircraft insurance policy).

         After the crash occurred, Plaintiff Heins asked Commerce and Industry Insurance to “provide Plaintiff (individually) with a defense to any and all claims which might be asserted by the next of kin, survivors, or estate of Mr. Jake Turner….” Id. at ¶7. In September 2016, AIG Aerospace (as Commerce and Industry Insurance's agent) wrote a letter informing Plaintiff Heins that it planned to investigate the circumstances surrounding the crash. Id., PageID at ¶9; see Exh. B.

         A few months later, in January 2017, the Turner case was filed in the Darke County Court of Common Pleas. The Turner Complaint alleges that Clayton was the pilot of the aircraft involved in the crash and that Jacob was the passenger. It further alleges Clayton “possessed only a student pilot certificate and was not a licensed, qualified pilot.” (Doc. #7, Exh. A, PageID #142, ¶14). The Sixth Cause of Action in the Turner Complaint asserts that Peter H. Heins negligently and recklessly entrusted Clayton with the aircraft, or permitted him to access the aircraft, “which conduct directly and proximately caused the aircraft to crash … resulting in personal injuries and death to Jacob Andrew Turner.” Id. at ¶s 45-46.

         Facing potential individual liability in the Turner case, Plaintiff Heins might have been somewhat relieved when Commerce and Industry Insurance informed him (on January 24, 2017) that AIG would “accept defense of the matter and retain defense counsel to represent … [him] under the terms of the …” aircraft insurance policy. (Doc. #3, PageID #70, ¶12). The representation was limited to the Sixth Cause of Action in the Turner Complaint. Id. He might have been further relieved when Commerce and Industry Insurance's counsel soon filed an Answer on his behalf contesting the allegations in the Turner Complaint's Sixth Cause of Action. Id. at ¶13.

         Whatever relief Plaintiff Heins might have felt was fleeting because Commerce and Industry Insurance soon changed its mind. It notified “Plaintiff (individually) that it was rejecting the claim of physical damage to the aircraft; it was not providing coverage for the bodily injury and death of Jacob Turner; and, it was not providing Plaintiff (individually) with a defense in to the claim against him made [in the Turner case].” Id. at ¶14. In response, Plaintiff Heins filed the present case in the Darke County Court of Common Pleas and, as noted above, removal to this Court followed.

         He seeks a permanent injunction requiring Commerce and Industry Insurance to provide him with a defense to the Sixth Cause of Action in the Turner case or, alternatively, to reimburse him for the reasonable costs of attorney fees and expenses incurred in the Turner case. He further seeks to recover the maximum monetary amounts available under the aircraft insurance policy for indemnification, damages related to the destroyed aircraft, and punitive damages.

         Plaintiff Heins's Complaint is notably silent on the Declaratory Judgment Act. Claim One asserts theories of waiver and estoppel against Commerce and Industry Insurance. He ties these theories to the allegations that Commerce and Industry Insurance initially reserved its right to investigate, obtained counsel to represent him, filed an Answer in the Turner case but declined (shortly thereafter) to provide him with coverage in connection with the Turner case. Claim Two relies on these same allegations and asserts that Commerce and Industry Insurance denied coverage under the aircraft insurance policy in bad faith.

         Plaintiff Heins's Third Claim alleges, “Under the terms of The Policy, The Company is required to defend and pay the claims alleged in the [Turner case].” Id., PageID #72, ¶20. Claim Four frames additional theories of estoppel and bad faith as follows:

Because The Aircraft had been the object of a wrongful deprivation of the Aircraft without claim or color of right and with an unreasonable risk of permanent loss to Plaintiff … immediately prior to its impacting with the earth, The Company is estopped and precluded from denying coverages and its duty to Defendant Plaintiff against the claims in the [Turner case].
The Company's rejection of the claim for physical damage to the [A]ircraft, refusal to provide coverage for the bodily injury and death of Jacob Andrew Turner, and its withdrawal from defendant Plaintiff (individually) the claim made against him [in the Turner case] were actions made in bad faith.

(Doc. #3, PageID #72, ¶s 22-23).

         Bad faith emerges again in Plaintiff Heins's Fifth Claim-“The Company has rejected the claim for the total physical loss of the aircraft contrary to the terms of the policy and in bad faith”-and in his Sixth Claim-asserting bad faith denial of funeral and burial expenses. Id., PageID #73, ¶s 25, 27.

         III. Discussion

         Plaintiff Heins does not argue that this Court lacks diversity jurisdiction or that removal was improper. For good reason: There appears no doubt that complete diversity of citizenship exists between the parties and the amount in controversy exceeds $75, 000. See Doc. #28, PageID #s 4-8; see also Gray v. Bush, 628 F.3d 779, 783 (6th Cir. 2010). The presence of diversity jurisdiction is a salient point that Defendants emphasize in their fight against an Order remanding this case to state court. But before reaching this, more needs to be said about the Declaratory Judgment Act and the parties' declaratory-judgment arguments.

         The Declaratory Judgment Act provides that district courts “may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be brought.” 28 U.S.C. § 2201(a). “‘[D]istrict courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites.'” Adrian Energy Assocs. v. Michigan Pub. Serv. Comm'n, 481 F.3d 414, 421 (6th Cir. 2007) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995)).

         The parties first disagree over whether this case actually is a declaratory-judgment action. Plaintiff Heins maintains that this case “is essentially a declaratory judgment action” because he seeks to determine, in part, whether the aircraft insurance policy imposes certain obligations upon Defendant Commerce and Industry ...


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