LOUISE W. FLANAGAN, District Judge.
This matter comes before the court on motion of defendants Hartford Fire Insurance Company and Hartford Casualty Insurance Company (collectively, "Hartford") to stay or dismiss, filed December 14, 2011 (DE #43). Plaintiff Harleysville Mutual Insurance Company ("plaintiff" or "Harleysville") responded in opposition on January 27, 2012, and Hartford replied February 13, 2012. Accordingly, the issues raised are ripe for adjudication. For the following reasons, Hartford's motion is DENIED.
On November 17, 2011, plaintiff filed amended complaint for declaratory judgment pursuant to 28 U.S.C. § 2201 and Federal Rule of Civil Procedure 57. Plaintiff seeks a declaratory judgment concerning the rights, obligations, and liabilities of the parties under certain policies of liability insurance with respect to damages which have arisen as a result of three construction projects: (1) a multi-family residential property commonly known as Ashley Knoll Apartments, located in Charleston, South Carolina ("Ashley Knoll Apartments"); (2) a multi-family residential property commonly known as Southampton Pointe located in Mount Pleasant, South Carolina ("Southampton Pointe"); and (3) the Vista Cove condominium project located in St. Augustine, Florida ("Vista Cove").
First Financial Insurance Company ("First Financial") and Assurance Company of America ("Assurance Company") each filed answer to the amended complaint on December 7, 2011. G.R. Hammonds, Inc. a/k/a G.R. Hammonds Roofing, Inc. a/k/a Hammonds Roofing ("G.R. Hammonds"), the insured, answered on December 9, 2011, and First Mercury Insurance Company ("First Mercury") answered on February 28, 2012. Further, on April 3, 2012, plaintiff filed notice of dismissal as to defendant First Mercury Emerald Insurance Services, Inc.
Defendant Hartford filed the instant motion to dismiss on December 14, 2011. Hartford asks the court to either stay or dismiss this action, where Hartford filed a related action in South Carolina state court on September 21, 2012, which action Harleysville removed to the United States District Court for the District of South Carolina. Hartford contends that the "first-filed" rule is inapplicable in this case and further argues that the balance of convenience favors resolution in South Carolina of the disputed issues.
Plaintiff alleges as follows in its amended complaint. Defendant G.R. Hammonds, at all times pertinent to this action, was engaged in construction and performed the roofing work as a subcontractor during the original construction of the buildings at Ashley Knoll Apartments, Southampton Pointe, and Vista Cove.
Defendant Hartford issued to G.R. Hammonds commercial general liability policies with coverage periods from May 17, 1995, ultimately through February 10, 2002. Subsequently, G.R. Hammonds was insured by Assurance from October 28, 2001 through October 28, 2002, First Financial from October 28, 2002 through October 28, 2003, Harleysville from October 28, 2003 through October 28, 2006, and First Mercury from October 28, 2006 through October 28, 2009.
G.R Hammonds performed roofing work as a subcontractor on Ashley Knoll Apartments between early 1998 and March 21, 2001, at which date original construction was completed.
On or about August 13, 2010, Concord West of the Ashley Homeowners' Association, along with numerous individual homeowners, filed suit against G.R. Hammonds in the Court of Common Pleas, County of Charleston, South Carolina (the "Under lying Concord West Lawsuit"). The plaintiffs asserted against G.R. Hammonds claims of negligence and breach of implied warranties. G.R. Hammonds made a claim for liability coverage with Hartford, Assurance, First Financial, Harleysville, and First Mercury, as a result of the claims asserted against it in the Underlying Concord West Lawsuit.
Harleysville and Hartford inform in their memoranda that a settlement of all claims against G.R. Hammonds in the Underlying Concord West Lawsuit was reached on or about September 1, 2011. Harleysville, Hartford, and Assurance agreed to settle the suit on behalf of G.R. Hammonds by each paying one third of a $1,000,000 settlement. The insurers further agreed to later resolve issues of allocation and trigger.
G.R. Hammonds installed the roof and related flashings on the Southampton Pointe buildings between 1998 and 1999, when the buildings were originally constructed.
Harleysville and Hartford inform in memoranda that a settlement of all claims against G.R. Hammonds was reached in the Underlying Southampton Pointe Lawsuits on or about November 11, 2011, with Hartford, Assurance, and First Mercury agreeing to pay a $450,000 settlement on behalf of G.R. Hammonds.
The Vista Cove condominiums were constructed in multiple phases, apparently between 1999 and 2004, yielding approximately three hundred total residential units. Again, G.R. Hammonds provided roofing and other services for at least a portion of the construction as a subcontractor with general contractors Vercon Construction, Inc. ("Vercon"), and Landsouth Construction, LLC ("Landsouth").
On or about January 14, 2009, Vista Cove Condominium Association filed a complaint in the Circuit Court for the Seventh Judicial Circuit in and for St. Johns County, Florida, naming as defendants Vercon and Landsouth, among others, and seeking recovery for alleged construction defects. Landsouth and Vercon filed third-party complaints against G.R. Hammonds on October 27, 2009 and April 15, 2010, respectively. Finally, on February 11, 2011, the Vista Cove Condominium Association moved to file amended complaint in order to assert direct causes of action against G.R. Hammonds.
The parties inform in their Rule 26(f) joint report that the Vista Cove lawsuit has settled, with Harleysville agreeing to pay $105,000, and First Financial and Assurance agreeing to pay a combined total of $105,000, all on behalf of G.R. Hammonds.
Harleysville brings this action pursuant to the Declaratory Judgment Act, which provides in relevant part:
28 U.S.C. § 2201(a).
The Declaratory Judgment Act is "an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant."
Plaintiff seeks a declaratory judgment adjudging the relative rights and obligations of the parties under their respective policies of liability insurance as to the Underlying Concord West, Southampton Pointe, and Vista Cove Lawsuits. Where the parties inform that the Underlying Concord West and Vista Cove Lawsuits have settled, and the Southampton Pointe Lawsuits have reached settlement in principle, the court finds that this declaratory judgment action would clarify and settle certain legal relations between the parties, and is therefore appropriate.
However, Hartford contends that the court should dismiss plaintiff's claims for declaratory judgment and maintains that these issues should instead be resolved in South Carolina state court, where Hartford filed suit on September 21, 2011. For the reasons discussed below, Hartford's request is DENIED.
The Fourth Circuit adheres to the "first-filed rule," which holds that when similar lawsuits are filed in multiple fora, "`the first suit should have priority' absent the showing of balance of convenience in favor of the second action."
Here, with reference to the above factors, the court determines that the first-filed rule is applicable. Complaint in this case was filed September 6, 2011, about two weeks before Hartford initiated the South Carolina action, on September 21, 2011. The parties to the two actions are nearly identical. Further, the issues raised in each are similar. Plaintiff seeks declaratory judgment adjudging and declaring the rights and responsibilities of the insurer parties under their respective policies of liability insurance as to the Underlying Concord West, Southampton Pointe, and Vista Cove Lawsuits. Hartford, in the South Carolina action, requests judgment declaring each insurer's share of the $1 million settlement of the Underlying Concord West Lawsuit, and further requests equitable contribution for any amount it paid in excess of its share. Based on the timing, party, and issue similarities, the first-filed rule, absent some exception, will apply.
Hartford contends, however, that the balance of convenience supports dismissing this action in favor of the South Carolina suit. The Fourth Circuit "recognizes an exception to the first-filed rule when the balance of convenience favors the second action."
Here, the balance of convenience favors this court. Plaintiff chose to file in the Eastern District of North Carolina. According to the amended complaint, the insured, G.R. Hammonds, is both incorporated in North Carolina and has its principal place of business there. All of the relevant insurance policies were issued to G.R. Hammonds in North Carolina. Of the insurers, only First Financial has its principal place of business in North Carolina. But no insurer is incorporated in or has its principal place of business in South Carolina.
While both the Ashley Knoll Apartments and Southampton Pointe are located in South Carolina, this alone does not tip the balance in favor of resolution in South Carolina, particularly where the third complex, Vista Cove, is in Florida. Because the insured, G.R. Hammonds, resides in North Carolina and because the relevant insurance policies were issued to the insured in North Carolina, the balance of convenience favors this court.
Next, Hartford contends that plaintiff engaged in improper "procedural fencing" when it "raced to the courthouse" to file this declaratory judgment action. As Hartford acknowledges in its memorandum, the "Fourth Circuit has not stated explicitly that special circumstances may warrant an exception to the first-filed rule."
Here, there is no indication that Hartford had notified Harleysville of its intention to file suit, either through provision of a courtesy copy of a complaint or some other form of communication. Rather, the three insurers involved in the Concord West settlement — Harleysville, Hartford, and Assurance — apparently were unable to reach an agreement as to a preferred means of determining the trigger and allocation of their respective insurance policies. Harleysville therefore filed suit in the Eastern District of North Carolina, which forum, as evidenced by the above balance-of-convenience analysis, is proper.
Where Harleysville filed suit first and no exception to the first-filed rule applies, this court finds no cause to stay or dismiss plaintiff's claim for declaratory judgment as to the parties' rights and obligations with respect to the Underlying Concord West, Southampton Pointe, and Vista Cove Lawsuits. Accordingly, Hartford's motion is DENIED.
For the foregoing reasons, defendant Hartford's motion to dismiss or stay (DE #43) is DENIED.
SO ORDERED.