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Liberty Corporate Capital Ltd. v. Kalmus

United States District Court, W.D. Texas, San Antonio Division

July 6, 2017

Liberty Corporate Capital Ltd. and Amtrust Corporate Member Ltd., Plaintiffs,
v.
Stuart Roy Kalmus, Eric Tiedtke, and Tiedtke Marketing Group, Inc., Defendants.

          MEMORANDUM OPINION

          ROYCE C. LAMBERTH, UNITED STATES DISTRICT JUDGE

         Before the Court is defendants Eric Tiedtke and Tiedtke Marketing Group's Motion to Dismiss Plaintiffs' First Amended Complaint Pursuant to Federal Rule of Civil Procedure 12(b)(1), filed January 5, 2017, ECF No. 19. Having considered the motion, responses, replies, exhibits, filings, and applicable law, the Court will deny the defendants' motion.

         I. BACKGROUND

         Defendant Dr. Stuart Roy Kalmus was a self-employed dentist who suffers from a bilateral essential tremor of his hands, arms, and shoulders which has been progressive over the past twenty years. Pis.' Am. Compl. 3-4, ECF No. 14. Dr. Kalmus first consulted his primary care physician regarding his essential tremor on March 9, 2012. Id. at 4. On October 19, 2012, Dr. Kalmus sought specialized medical attention for his essential tremor from a neurologist, was prescribed medication, and was diagnosed with an essential tremor just over a month later. Id.

         On or around June 30, 2013, Dr. Kalmus applied for permanent and total disability insurance. Id. at 5. Dr. Kalmus' application was prepared by defendant Eric Tiedtke and/or defendant Tiedtke Marketing Group, Inc., and the insurance policy went into effect July 1, 2013. Id. Two months later, Dr. Kalmus consulted with another neurologist regarding his essential tremor. Id. It is undisputed that Dr. Kalmus was aware of his condition before, during, and after applying for the policy.

         On or around July 13, 2015, Dr. Kalmus sent a Proof of Loss statement to Hanleigh Management, Inc., the policy's Coverholder. Id. The Proof of Loss statement declares that Dr. Kalmus became permanently and totally disabled as a result of his essential tremor on July 1, 2015. Id. at 6. Hanleigh Management, Inc. investigated Dr. Kalmus' claim, at which point Dr. Kalmus provided them with medical records which verified his diagnosis of essential tremor and his subsequent disability. Id.

         Plaintiffs Liberty Corporate Capital Ltd. and AmTrust Corporate Member Ltd. are the underwriters of Dr. Kalmus' policy. In their amended complaint, plaintiffs seek declaratory judgment that (1) Dr. Kalmus' essential tremor is a pre-existing condition not covered by the policy; (2) there is no loss due to injury or sickness under the policy; (3) the pre-existing condition limitation bars coverage; (4) Rider #1 bars coverage for Dr. Kalmus' claim; (5) Dr. Kalmus' essential tremor did not manifest itself while the policy is in force and his total disability did not commence within 1 year of a covered sickness; and (6) there is a lack of fortuity. Id. at 9-20. In the alternative, plaintiffs seek declaratory judgment that defendant Eric Tiedtke and/or defendant Tiedtke Marketing Group, Inc. should indemnify plaintiffs for any damages resulting from defendants' breach of the agency relationship. Id. at 20. Specifically, the plaintiffs claim that Tiedtke misrepresented the nature of the policy's coverage of preexisting conditions.

         Dr. Kalmus has filed a counterclaim against all plaintiffs for breach of contract, violations of the Prompt Payment of Claims provisions of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act (DTPA), and violations of the Texas Insurance Code attributable to the plaintiff underwriters. Second Am. Answer, Counter-cl., and Cross-cl. 11-14, ECF No. 18. Dr. Kalmus has also filed a cross-claim against Eric Tiedtke and Tiedtke Marketing Group for violations of the DTP A, violations of the Texas Insurance Code, and Negligent Misrepresentations. Id. at 15-19.

         Defendants Eric Tiedtke and Tiedtke Marketing Group filed a Motion to Dismiss plaintiffs' original complaint pursuant to Federal Rules of Procedure 12(b)(1) and 12(b)(6). Mot. to Dismiss 1-2, ECF No. 10. Defendants argued that this Court lacks jurisdiction because the matter is not ripe for consideration since there has not yet been a judgment or a determination as to coverage, and that even if the matter is ripe that the plaintiffs failed to plead facts which would allow the plaintiffs to indemnify Eric Tiedtke or the Tiedtke Marketing Group. Id. at 4-6.

         Plaintiffs filed an amended complaint shortly thereafter, and defendants Eric Tiedtke and Tiedtke Marketing Group filed a Motion to Dismiss the plaintiffs' amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(1). Mot. to Dismiss Pis.' First Am. Compl. 1-2. Defendants argued that the matter is not ripe for consideration since there has not yet been a judgment or a determination as to coverage. Id. at 3-5.

         II. LEGAL STANDARD

         The Federal Rules of Civil Procedure require this Court to dismiss a cause for lack of subject matter jurisdiction "when the court lacks the statutory or constitutional power to adjudicate the case." Home Builders Assn. of Mississippi, Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998). In matters of jurisdiction, "the burden of establishing federal jurisdiction rests on the party seeking the federal forum." Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001).

         The Federal Declaratory Judgment Act only grants the federal courts jurisdiction to provide declaratory relief in "a case of actual controversy." 28 U.S.C. § 2201(a). When considering a declaratory judgment action, a district court must engage in a three-step inquiry: (1) whether it is justiciable; (2) whether, if the court has jurisdiction, it has the authority to grant declaratory relief; and (3) whether the court should exercise its discretion to decide the action. Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 896 (5th Cir. 2000). With regards to the first step, "A declaratory judgment action is ripe for adjudication only where an 'actual controversy' exists. Id. (quoting 28 U.S.C. § 2201(a)). An actual controversy is typically found when there is "a substantial controversy of sufficient immediacy and reality between parties having adverse legal interests." Middle South Energy, Inc. v. New Orleans, 800 F.2d 488, 490 (5th Cir. 1986). When looking at ripeness, a case that is ripe is one in which any remaining issues are "purely legal, and will not be clarified by further factual development." Thomas v. Union ...


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