MEMORANDUM AND ORDER

DOUGLAS P. WOODLOCK, District Judge.

Through the motion now before me in this complex insurance litigation between Tocci Building Corporation of New Jersey, Inc. ("Tocci") and various of its primary and excess insurers, an excess carrier seeks dismissal of the claim against it. In the underlying litigation, Tocci faces two lawsuits in New York state courts seeking relief for property and other damages that occurred when a housing development— for which Tocci was the general contractor—sustained serious water damage. Tocci initiated this case against its primary insurers, alleging breach of the duty to defend and other related claims. Tocci later amended the complaint to seek declaratory relief regarding the obligations of its excess insurers' to indemnify Tocci for any liability that may result from the underlying suits. One of the excess carriers, National Union Fire Insurance of Pittsburgh ("National Union") has filed the motion now before me. For reasons set out more fully below, I find that Tocci has met its pleading burden and will deny the motion.

I. BACKGROUND

Because this is a motion dismiss, I must accept all well-pleaded factual allegations in the complaint as true and resolve any inferences in Tocci's favor. See Sanchez v. Pereira-Castillo, 590 F.3d 31, 41 (1st Cir.2009).

Tocci's suit against its insurers arises from an action filed against Tocci by the real-estate developer Archstone. (Am. Compl. ¶ 1.) That litigation (the "Archstone litigation") is currently pending in the Supreme Court of New York for Nassau County. (Am. Compl. ¶ 1; Memo., Ex. E. [hereinafter "Archstone Compl."]) The Archstone litigation includes various contract and torts claims stemming from a contract entered into by Tocci and Archstone in 2002. (Archstone Compl. ¶ 9.) The contract at issue set out the terms under which Tocci agreed to act as general contractor for the construction of a large apartment complex in Westbury, New York. (Am. Compl. ¶ 13.)

Some time after June 2007, Archstone detected that the Westbury complex "was suffering from pervasive water intrusion and entrapment issues affecting each of the 20 apartment buildings at the Project." (Archstone Compl. ¶ 22.) Archstone alleges extensive damage to the buildings, including to "exterior sheathing, insulation, framing, flooring and carpeting materials, and interior wallboard at numerous locations throughout the project." (Archstone Compl. ¶ 23.) Furthermore, while performing initial repairs, Archstone became aware of other defects in the construction that required repair or replacement, including "defects associated with structural, plumbing, electrical and site work components." (Archstone Compl. ¶ 27.)

The damage was so severe that it forced Archstone to vacate the apartments and terminate the leases of all of its tenants. (Archstone Compl. ¶¶ 25-26.) The evictions led to a number of tenant suits for property and other damage arising from the water entrapment and eviction. (Archstone Compl. ¶ 28.) Archstone claims that the damages incurred are "in excess of $40 million." (Archstone Compl. ¶ 29.) Archstone first sued Tocci on January 17, 2008, and, on June 8, 2009, filed a second amended complaint for breach of contract, negligence, contractual indemnity, and action on performance bond. (Archstone Compl. at 11-13.) Archstone seeks to recover from Tocci all of its damages, plus interest, arising from the water entrapment and other defective work and products. (Archstone Compl. ¶ 37.)

While general contractor for the Westbury project, Tocci took out several insurance policies. Tocci entered into two consecutive contracts with Virginia Surety Company ("VSC") for primary, comprehensive general liability insurance running from October 21, 2004, through October 21, 2005, and from October 21, 2005, through October 21, 2006 (collectively, the "VSC policies"). (Am. Compl. ¶ 14-15.) The policy limits for each of the one-year VSC policies were $2 million for each occurrence and $4 million in aggregate. (Am. Compl. ¶ 19.) To supplement this primary insurance, Tocci contracted with National Union to provide commercial umbrella liability insurance corresponding to the underlying primary VSC policies. (Am. Compl. ¶¶ 35-36.) The National Union policies were effective during the same time periods as the VSC policies and listed the corresponding VSC policies as the relevant scheduled underlying insurance.1 (Am. Compl. ¶¶ 35-36, 42-43.) The limit of both of the National Union policies' coverage was $10 million for each occurrence and $10 million for the annual aggregate. (Am. Compl. ¶¶ 40-41.)

Among other provisions, the National Union policies included a duty to indemnify Tocci as follows:

(Memo., Ex. C at NU04-004; Memo., Ex. D. at NU05-040.) The National Union policies defined the retained limit as:

(Memo., Ex. C at NU04-025; Memo., Ex. D. at NU05-041.) The self insured retention for each occurrence under the National Union policies is $10,000. (Memo., Ex. C at NU04-001; Memo., Ex. C. at NU04-001.)

Tocci tendered the Archstone litigation for defense to National Union in January 2008. (Am. Compl. ¶ 44.) Tocci contends National Union has failed to take a coverage position or to participate in settlement discussions regarding the Archstone litigation. National Union has maintained that it has no duty to take any action regarding the Archstone litigation unless and until the VSC policies are exhausted.

Tocci first filed suit against VSC and The Travelers Indemnity Co., Tocci's other primary insurer during the Westbury project, on July 15, 2008, in Massachusetts Superior Court in Middlesex County. That case was removed to this court in August 2008. Tocci amended its complaint on June 29, 2010, to include declaratory judgment claims against its excess and umbrella insurers, including National Union. (Am. Compl.) National Union responded by moving to dismiss the claim against it.

II. ANALYSIS

National Union argues that Tocci's declaratory judgment must be dismissed on two interrelated grounds. First, National Union contends that, as an excess insurer in this case, it need not be involved in the litigation until VSC's policies have been exhausted. Because there is no live controversy until the VSC policies are exhausted, National Union argues, there is no "actual controversy" necessary to sustain a declaratory judgment action. Second, National Union maintains that Tocci has failed to plead that there is any possibility that VSC's policies will be exhausted because the Archstone complaint does not allege any damages covered by the VSC policies. Consequently, National Union maintains, its own policy can never be triggered because the VSC policies will never exhaust. For its part, Tocci argues that it has adequately pleaded a claim under VSC's policies and that, in any event, National Union's policies are umbrella liability plans that may cover certain claims not covered by the VSC policies.

I interpret National Union's motion to dismiss as raising two grounds for dismissal: (1) lack of jurisdiction on ripeness grounds and (2) failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). I will address each ground in turn.

A. Ripeness

An action for declaratory judgment "enable[s] litigants to clarify legal rights and obligations before acting upon them." Ernst & Young v. Depositors Econ. Prot. Corp., 45 F.3d 530, 534 (1st Cir.1995). It has long been settled that "[f]ederal courts retain substantial discretion in deciding whether to grant declaratory relief." Id. However, an action seeking a declaratory judgment must present an "actual case or controversy" within the meaning of Article III of the United States Constitution.2 Id. at 535. This ripeness requirement exists "to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements." Abbott Labs. v. Gardner, 387 U.S. 136, 148, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967), overruled on other grounds, Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977). The party seeking a declaratory judgment bears the burden of establishing that the district court has jurisdiction. Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83, 95, 113 S.Ct. 1967, 124 L.Ed.2d 1 (1993).

The First Circuit has established a two-part ripeness inquiry: "First, the court must consider whether the issue presented is fit for review. . . . [Then] the court [must] consider the extent to which hardship looms—in an inquiry that typically turns upon whether the challenged action creates a direct and immediate dilemma for the parties." Ernst & Young, 45 F.3d at 535 (citations and internal quotation marks omitted). There is no definition of the required showing for each prong of the test, but "both prongs . . . ordinarily must be satisfied in order to establish ripeness." Id. The First Circuit, however, has "acknowledge[d] the possibility that there may be some sort of sliding scale under which, say, a very powerful exhibition of immediate hardship might compensate for questionable fitness, . . . or vice versa." Id.

1. Fitness

With respect to fitness, "the critical question . . . is whether the claim involves uncertain and contingent events that may not occur as anticipated or may not occur at all." Id. at 536 (quoting Mass. Ass'n of Afro-Am. Police, Inc. v. Boston Police Dep't, 973 F.2d 18, 20 (1st Cir.1992)). However, "[t]hat the liability may be contingent does not necessarily defeat jurisdiction of a declaratory judgment action." Associated Indem. Corp. v. Fairchild Indus., Inc., 961 F.2d 32, 35 (2d Cir.1992) (citations omitted). Actions for declaratory judgment in the insurance context nearly always depend upon several contingencies—whether the insured will be found liable, the extent of coverage, the size of any potential damage award or settlement, etc. As such, "litigation over insurance coverage has become the paradigm for asserting jurisdiction despite future contingencies that will determine whether a controversy ever actually becomes real." Id. (citation and internal quotation marks omitted). Consequently, courts have found that "whether an insurer is liable on a policy issued to an insured for injuries sustained by a third party" is "one common to typical disputes over insurance coverage" and ripe for adjudication in declaratory judgment actions in federal court. Twin City Fire Ins. Co. v. Innovative Aftermarket Sys., L.P., 597 F.Supp.2d 295, 300 (D.Conn.2009); see also Raytheon Co. v. Cont'l Cas. Co., 123 F.Supp.2d 22, 30 (D.Mass.2000) ("Issues of coverage under insurance policies, including questions concerning the meaning of language in an insurance policy, are often decided by means of a declaratory judgment action." (citing Thattil v. Dominican Sisters of Charity of Presentation of Blessed Virgin, Inc., 415 Mass. 381, 613 N.E.2d 908, 910 n. 6 (1993))). Courts have similarly held, "[i]n the context of excess insurance policies, that the liability of an excess insurer is contingent does not per se defeat jurisdiction over a declaratory judgment."3 UnitedHealth Grp., Inc. v. Lexington Ins. Co., No. Civ. 05-1289 DSDSRN, 2006 WL 695523, at *3 (D.Minn. Mar. 17, 2006).

In determining whether a declaratory judgment action involving an excess insurer is ripe, "courts should focus on `the practical likelihood that the contingencies will occur.'" Associated Indem., 961 F.2d at 35 (quoting 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2757 (2d ed.1983)); see also E.R. Squibb & Sons, Inc. v. Lloyd's & Cos., 241 F.3d 154, 177 (2d Cir.2001) (per curiam) (affirming the standard laid out in Associated Indemnity); Raytheon, 123 F.Supp.2d at 30-31 (following the Associated Indemnity standard). The only Massachusetts state court decision that research has identified as addressing the justiciability of excess insurer's liability, based on contingent events, applied the Associated Indemnity standard. See Hoechst Celanese Corp. v. Liberty Mut. Ins. Co., No. Civ. A. 90-4369, 1999 WL 20522, at *2 (Mass.Super.Ct. Nov. 24, 1998). In applying the standard laid out by the Second Circuit in Associated Indemnity, the court in Hoechst Celanese observed that "absolute proof that an excess insurer's policies will be triggered is by no means required in order to establish a ripe controversy." Id. (citation and quotation marks omitted).4

In undertaking the "practical likelihood" analysis, courts have often compared the amount claimed against the insured to the attachment point of the relevant excess insurance as a method for determining whether there is a "reasonable likelihood that the claims will mature as to that [excess insurer]." Raytheon, 123 F.Supp.2d at 30 (citation and internal quotation marks omitted); see also Md. Cas. Co. v. W.R. Grace & Co., No. 88 CIV. 2613, 1996 WL 306372, at *3 (S.D.N.Y. June 7, 1996) ("[T]he Court can compare the current evidence on exhaustion of underlying insurance to the various attachment points of the moving defendant-insurers' policies to determine if there is a reasonable likelihood— given the facts and circumstances of this case—that [the insured] will reach those attachment points."). In conducting this inquiry, however, "there is no precise formula or line of demarcation, as each case presents unique facts and circumstances." Md. Cas. Co., 1996 WL 306372, at *3.

Archstone claims damages that exceed $40 million. (Am. Compl. ¶ 29.) The parties are in agreement that VSC's policy limits are $2 million per occurrence and $4 million in aggregate per year. Even if the $40 million is equally divided between the three relevant years of the project, $13.3 million would be at issue for each year. That far exceeds VSC's policy limit either per occurrence or in aggregate. See Bankers Trust Co. v. Old Republic Ins. Co., 959 F.2d 677, 681 (7th Cir.1992) ("Were there only a 10 percent chance of its obtaining a judgment in excess of those limits . . . the actuarial value of its claim against [the excess insurer] would still be substantial."). Although there has not been final resolution of the question whether Archstone's claims fall within VSC's policy coverage,5 it appears from the Amended Complaint that there is a reasonable likelihood that the relevant claims will exceed the VSC policies' limits. Consequently, there is a reasonable likelihood that National Unions' policies would be triggered, indeed, potentially exhausted as well. See Associated Indem., 961 F.2d at 35-36 (noting that inflation and potential error could increase the total settlement above the $25 million limit even though the estimated remediation would be only $15 million); Clark Constr. Grp., Inc. v. Eagle Amalgamated Serv., Inc., No. 01-2478, 2005 WL 946911, at *3 (W.D.Tenn. Mar. 9, 2005) (finding a practical likelihood of exceeding the $1 million policy limit given that the underlying claim was for more than $1 million); cf. Md. Cas. Co., 1996 WL 306372, at *4 (granting motion to dismiss as to defendant—excess insurers whose policies had attachment points greater than $12 million but denying the motion as to those with lesser attachment points); Hoechst Celanese Corp., 1999 WL 20522, at *2 (dismissing the claim because the expected damages totaled only $7.3 million, and the excess insurance attached at $16 million).

That the insured has not yet proven with certainty that the primary coverage extends to the claims against it does not render the claim unripe. See Bankers Trust, 959 F.2d at 681 (denying the motion to dismiss because the injured third party "has sued for $30 million and there is no suggestion that that is a grossly inflated estimate of its loss, should it be able to establish liability" (emphasis added)). Courts have refrained from making a detailed examination of the policy terms and exclusions when determining whether there is a "practical likelihood" that the primary limit could be exceeded. See id.; UnitedHealth Grp., 2006 WL 695523, at *4. Such an inquiry, courts have found, is better left to a later stage in the litigation. See Raytheon, 123 F.Supp.2d at 28-29.

In considering whether a declaratory judgement claim against an excess insurer presents an actual controversy, courts have also looked to whether the excess insurer contests the substantive merits of the primary carrier's coverage. See, e.g., E.R. Squibb & Sons, Inc. v. Accident & Cas. Ins. Co., 853 F.Supp. 98, 102 (S.D.N.Y.1994), aff'd, 241 F.3d at 176. This is because, if an excess insurer disputes whether the underlying primary insurance covers the damages alleged against the insured, the existence of such a dispute is "at least obliquely contrary to the argument that [it] ha[s] no interest in the outcome" of the present litigation. See id. (noting that when the excess carriers "joined in the contest of the substantive issues in the case" it undermined their argument that there exists no live controversy involving the excess carriers); see also Clark Constr. Grp., 2005 WL 946911, at *3 (noting that a dispute regarding the coverage of the excess policy is a controversy, and a declaratory judgment would "clarify the legal relations in issue by determining [the excess carrier's] responsibility for Plaintiff's impending liability"). Given that National Union's substantive argument of non-coverage in many ways "mirrors" VSC's argument of non-coverage, which plainly is justiciable, it appears that "a real disagreement" exists between National Union and Tocci. See Bankers Trust Co., 959 F.2d at 681.

Likewise, National Union expends considerable effort here in arguing that VSC's policies do not cover Archstone's claimed damages and that a variety of exclusions in the VSC policies would preclude indemnification by either VSC or National Union. Indeed, in its memorandum of law in support of its motion to dismiss, National Union explicitly "reserves the rights to file a separate Motion for Summary Judgment, addressing [exclusions from coverage included in the National Union policies], and arguing that the National Union Policies do not provide [that] coverage is available to Tocci for the claims in the [Archstone] Complaint."

The nature of the briefing on the motion before me demonstrates that there is an actual controversy regarding the terms and coverage of National Union's policies. Because the interpretation of insurance policy terms and coverage is a matter of law appropriate for judicial resolution, Tocci's action for declaratory relief against National Union is ripe for adjudication. See Ruggerio Ambulance Serv., Inc. v. Nat'l Grange Ins. Co., 430 Mass. 794, 724 N.E.2d 295, 298 (2000) (noting that the scope of coverage of an insurance policy is a question of law suitable for resolution by the court); see also UnitedHealth Grp., 2006 WL 695523, at *4 (finding a declaratory judgment claim against an excess carrier ripe because whether the thirty-five claims denied by the primary insurer were covered by that insurance was a question of law that the court could decide).

For these reasons, Tocci's declaratory judgment claim against National Union is fit for resolution by this court.

2. Hardship

In determining hardship, "[t]he key question involves the usefulness of a declaratory judgment, that is, the extent to which the desired declaration `would be of practical assistance in setting the underlying controversy to rest.'" Ernst & Young, 45 F.3d at 537 (quoting Rhode Island v. Narragansett Indian Tribe, 19 F.3d 685, 693 (1st Cir.1994)). Alternatively stated, the question is whether denying a declaratory judgment mechanism will create a hardship for one or more parties. Consequently, "the greater the hardship, the more apt a court will be to find ripeness." Id. at 536.

The complexity and scope of Archstone's claims against Tocci suggest that National Union's involvement in the present litigation would be of significant "assistance in setting the underlying controversy to rest." Id. at 537. In a complex insurance case such as the one at issue here, which includes multiple primary and excess insurers covering different claims over differing periods of time, it is fundamentally practical for the parties and beneficial for purposes of judicial efficiency to have all of the implicated insurers present and participating. Proceeding without an insurer, by contrast, would hinder or delay comprehensive settlement negotiations and impede resolution of the case. See Bankers Trust Co., 959 F.2d at 682 (noting that by keeping an excess carrier in litigation despite the contingencies at issue, a court can hold off on the declaratory action to see if the case becomes moot or, alternatively, "accelerate the resolution of this case in order to facilitate a settlement of the other [underlying] one").

National Union's indemnification responsibility is a key variable in this overall dispute; its presence in this case is critical to the resolution of all related cases. National Union has proved unwilling to participate voluntarily in dispute resolution related to the Westbury project, and its absence from this case would work a hardship on all of the parties attempting to resolve the underlying claims.

An additional relevant hardship can be a "concern that [the insured] will be forced to re-litigate the issues already decided in this case" against the excess insurer. See Md. Cas. Co., 1996 WL 306372, at *6; see also UnitedHealth Grp., 2006 WL 695523, at *4 (noting the hardship of litigating against the same excess insurer "issues which could have been conclusively determined in this lawsuit"). Should any judgment or settlement against Tocci exceed the $2 million limit on VSC's policies ($4 million in total for both years), Tocci would undoubtedly then seek payment by National Union on those claims. In the absence of privity between VSC and National Union, principles of res judicata would nevertheless presumably permit National Union to relitigate issues on which Tocci prevailed against VSC. The uncertainty and duplicative costs of any such re-litigation would constitute a significant hardship not to mention an unnecessary drain on judicial resources.

3. Conclusion

Tocci's claim for declaratory judgment regarding National Union's obligations under its insurance policies is fit for review and ripe for resolution by this court. National Union's absence from this suit would result in considerable hardship for Tocci and for the other insurers involved in this litigation. Accordingly, I am satisfied that Tocci has adequately established this court's jurisdiction over the claim.

B. Failure to State a Claim (Rule 12(b)(6))

National Union argues that Tocci has failed to state a claim for which relief may be granted because it has not pleaded "specific, plausible facts" that VSC's policies would indemnify Archstone's claims against Tocci or, therefore, that VSC's policies would be exhausted and trigger National Union's policies. More specifically, National Union argues that the many exclusions from coverage contained in VSC's policies preclude coverage of Archstone's claims by either VSC or National Union. Tocci disagrees, asserting that its pleadings were sufficient and that the VSC exclusions are not applicable to Archstone's claims. National Union's substantive arguments regarding the applicability of VSC's policy exclusions are premature and more appropriately raised in a motion for summary judgment. Additionally, Tocci has alleged facts sufficient to make out its claim against National Union and survive the pleadings requirements.

When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), while I must "take all the factual allegations in the complaint as true," I "need not accept as true legal conclusions from the complaint or naked assertions devoid of further factual enhancement." Maldonado v. Fontanes, 568 F.3d 263, 266 (1st Cir.2009) (quoting Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1950, 1960, 173 L.Ed.2d 868 (2009)) (internal quotation marks and citations omitted). The First Circuit, interpreting the Supreme Court's decision in Iqbal, has established "two principles [to] guide our assessment of the adequacy of the plaintiff's pleadings." Id. at 268. First, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (quoting Iqbal, 129 S.Ct. at 1949). Second, "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. (quoting Iqbal, 129 S.Ct. at 1949). The First Circuit further recognized that this inquiry is "context-specific" and requires the court "to draw on its judicial experience and common sense." Sanchez, 590 F.3d at 48 (quoting Iqbal, 129 S.Ct. at 1950).

National Union argues that, in Count VIII of the Amended Complaint, Tocci merely recites a conclusory statement of law that, under Iqbal, is not sufficient to plead a "plausible claim for relief." National Union fails to take into consideration the entirety of the Amended Complaint. In the Amended Complaint, Tocci identifies the relevant National Union policies and quotes language from the policies that indicates that National Union's policies provide excess indemnification over VSC's primary policies. (Am. Compl. ¶¶ 35-44.) Tocci lays out the policy limits and, when describing VSC's policies, provides the appropriate attachment points of the excess insurance provided by National Union's policies. (Am. Compl. ¶¶ 19, 40-44.) VSC's alleged coverage is also described in detail in the Amended Complaint. (Am. Compl. ¶¶ 14-27.) Tocci's claim against National Union thus contains more than mere conclusory statements of law.

National Union also argues that it is unclear that any damage took place prior to the expiration of National Union's policies in October 2006. (Memo. at 13.) Archstone became aware of the water intrusion and resulting damage sometime after June 2007. (Archstone Compl. ¶ 22.) However, it is uncertain at what point prior to that date the water intrusion occurred or what caused the water intrusion. It is clear, however, that the construction of the Westbury complex was largely complete before National Union's 2005-2006 policy expired and that some tenants had established residency as early as 2005. (Aug. 5, 2009 Hr'g Tr. at 8, 23-24.) It is plausible, therefore, that the water intrusion —or the cause of the water intrusion— occurred or began prior to October 2006. Residual uncertainty regarding the date of any occurrence relevant to Archstone's claims, therefore, does not provide grounds for granting this motion to dismiss.

The bulk of National Union's argument rests upon exclusions contained in VSC's primary policies. National Union contends that, by virtue of these extensive exclusions, VSC's policies do not cover Archstone's claims against Tocci. National Union discusses ten exclusions in varying degrees of detail. While many of these exclusions may well prove to exclude some or all of the damages claimed by Archstone, legal resolution of the applicability of those exclusions is not proper in the context of a motion to dismiss. See Raytheon, 123 F.Supp.2d at 28 ("[W]hile there may be policy provisions and facts which would support a summary judgment ruling later on, these `facts' do not have to be included in the complaint.").

An insurer denying coverage under a policy has the duty to prove any affirmative defenses, including the application of any policy exclusion. See U.S. Liab. Ins. Co. v. Selman, 70 F.3d 684, 688 (1st Cir. 1995) (stating that after the insured establishes that the alleged damages were within the ambit of the policy, the burden shifts to the insurer "to prove a defense to coverage, say the applicability of a policy exclusion or the insured's failure to comply with conditions precedent"); see also McGinnis v. Aetna Life & Cas. Co., 398 Mass. 37, 494 N.E.2d 1322, 1323 (1986). However, "[w]hether either party will be able to meet their burden is better resolved at a later stage in the proceeding." Raytheon, 123 F.Supp.2d at 29-30. Given the number of disputed facts and provisions in both the National Union and VSC policies, it is inappropriate to interpret those policies or provisions at this time because the level of detail required to interpret the relevant policies "exceeds any requirement of notice pleading." Id. at 29.

III. CONCLUSION

For the foregoing reasons, I find that Tocci's claim for declaratory relief presents an adequately pled actual controversy ripe for adjudication by this court. The motion to dismiss (Dkt. No. 131) is DENIED.