Barba v. Allianz Global Risks U.S. Ins. Co.

JULIE BARBA, Plaintiff, v. ALLIANZ GLOBAL RISKS US INSURANCE COMPANY, Defendant.

16 Civ. 2673 (PAE)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

October 25, 2016

CORRECTED OPINION & ORDER

PAUL A. ENGELMAYER, District Judge:

This decision resolves a dispute over insurance coverage. Plaintiff Julie Barba ("Barba"), a survivor of a helicopter crash on a lake in Arizona in December 2012, sues Allianz Global Risks US Insurance Company ("Allianz") for breach of contract and breach of the duty of good faith and fair dealing. Barba is the assignee of an aviation insurance policy provided by Allianz to the owners of the helicopter that crashed. Barba claims that Allianz has breached its duty under the insurance policy to indemnify and defend the owners of the helicopter for their liability arising out of the 2012 crash.

Allianz now moves to dismiss Barba's Amended Complaint for failure to state a claim. For the reasons that follow, Allianz's motion is granted.

I. Background

A. Factual Background¹

1. The Helicopter Crash and Barba's Personal Injury Lawsuit

This action arises out of a helicopter crash on December 7, 2012 at Lake Roosevelt in Arizona. Am. Compl. ¶¶ 17-20. Barba was one of two passengers onboard a Robinson R 4411 helicopter, FAA Registration Number N557AC (the "Subject Helicopter"), leased and operated by Sky Blue Helicopters, Inc. ("Sky Blue"), and piloted by Sky Blue's owner, Frederick G. Cleeves ("Cleeves"). Id. ¶¶ 14, 18. Allegedly due to his own recklessness, Cleeves lost control of the Subject Helicopter, which plummeted into Lake Roosevelt, broke into pieces, and sank to the bottom of the lake. Id. ¶ 19. Remarkably, no occupant of the Subject Helicopter was killed. However, Barba was seriously injured, hospitalized for 12 days, and forced to undergo multiple surgeries for her wounds. Id. ¶ 20.

After the crash, Barba brought a personal injury lawsuit (the "Underlying Action") against Pollux Aviation, Inc. ("Pollux"), the owner and lessor of the Subject Helicopter, and Pollux's president, Larry T. Larrivee ("Larrivee"), in Maricopa County, Arizona. (Sky Blue had filed for bankruptcy shortly after the crash. Dkt. 16 at 4.) Barba's lawsuit alleged that Pollux and Larrivee had been "negligent in entrusting the Subject Helicopter to [Sky Blue and Cleeves], who had a history of prior helicopter crashes." Id. ¶ 22. Barba's lawsuit also alleged that Pollux and Larrivee—by nature of their arrangement with Cleeves—had "entered into a joint venturewith Cleeves, and that Pollux and Larrivee were therefore vicariously liable for [Cleeves's] negligence and recklessness." Id. ¶ 23.

2. Pollux's Insurance Policy With Allianz

Allianz, a California corporation, is an insurance company. Id. ¶ 2. Pollux and Larrivee had secured an Aviation Commercial General Liability Policy from Allianz, which covered the period between November 6, 2012, and November 6, 2016. Id. ¶¶ 9-10; Dkt. 11, Ex. 1 (the "Policy").

Three provisions of the Policy are relevant here. First, the Policy provided coverage for liability arising out of "aviation operations," defined to include:

all operations arising from the ownership, maintenance or use of locations for aviation activities including that portion of roads or other accesses that adjoin these locations. Aviation operations include all operations necessary or incidental to aviation activities.

Policy at 2 (bolded emphasis in original).

Second, the Policy contained an "Owned Aircraft" exclusion clause, which stated, in pertinent part:

g. Bodily Injury or Property Damage arising out of the ownership, maintenance, use or entrustment to others of any aircraft, auto, watercraft owned or operated by or leased, rented, or loaned to any Insured. Use includes operation and loading or unloading and with respect to aircraft, operated by also includes operation on behalf of any Insured. This exclusion applies even if the claims against any Insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that Insured, if the occurrence which caused the Bodily Injury or Property Damage involved the ownership, maintenance, use or entrustment to others of any aircraft, auto or watercraft that is owned or operated by or leased, rented or loaned to any Insured.

Id. at 7 (bolded emphases in original).

Third, the Policy contained a "Separation of Insureds" provision, which stated, in pertinent part, that:

This insurance afforded under the liability coverage applies separately to each Insured against whom a claim is made or suit is brought, but the inclusion herein of more than one Insured shall not operate to increase the applicable limits of the Company's liability.

Id. at 20.

3. Allianz's Disclaimer and the Assignment to Barba

On April 16, 2014, after the Underlying Action was filed, Allianz's counsel notified Pollux and Larrivee that Allianz would not provide coverage or indemnity under the Policy for liability arising out of the Subject Helicopter crash. Am. Compl. ¶¶ 26-28. Allianz relied, inter alia, on the Owned Aircraft exclusion provision to justify its position with regard to the coverage. Id.

On February 3, 2016, the parties to the Underlying Action (Barba, Pollux, and Larrivee) entered into a settlement agreement (the "Settlement Agreement"). The Settlement Agreement called for a stipulated good faith judgment of $1 million in Barba's favor. Id. ¶¶ 32-33. However, Barba agreed "not to take any action of any kind to collect any part of the judgment from Pollux or Larrivee"; instead, she committed to "attempt to recover and collect the Settlement Judgment and/or any such Judgment solely and exclusively against Allianz." Id. ¶ 37.² The Settlement Agreement assigned to Barba Pollux and Larrivee's rights against Allianz, specifically:

all of the Pollux Defendants' [Pollux's and Larrivee's] rights, claims, and causes of action against Allianz relating to or arising out of the Policy and/or any other applicable insurance policy or policies (collectively, the "Policies") in connection with the [Underlying Action], including but not limited to, all statutory rights, contractual rights, and rights arising in tort or equity (including but not limited to bad faith, waiver or estoppel), relating to Allianz's duties to defend the Pollux Defendants [Pollux and Larrivee] in the [Underlying Action], to indemnify the Pollux Defendants [Pollux and Larrivee] for any judgment against them in the [Underlying Action], and to settle the [Underlying Action] on behalf of the Pollux Defendants [Pollux and Larrivee].

Id. ¶ 36.

Pursuant to the Settlement Agreement, on February 19, 2016, Judge Patricia Starr of the Maricopa County Superior Court entered a judgment in Barba's favor against Pollux and Larrivee, jointly and severally (the "Judgment"). The Judgment is in the amount of $1 million, plus interest at the "statutory rate" until the Judgment is paid. Id. ¶ 39.

B. Procedural History of this Case

On April 11, 2016, Barba filed the original Complaint. Dkt. 1. On April 18, 2016, Barba filed the Amended Complaint. Dkt. 5. It brings claims for (1) breach of contract/wrongful denial of coverage; and (2) breach of the duty of good faith and fair dealing. Am. Compl. ¶¶ 40-53. It seeks (1) declaratory relief; (2) damages; and (3) attorneys' fees and costs. Id. at 11-12.

On July 20, 2016, Allianz filed a motion to dismiss the Amended Complaint, Dkt. 10, along with a memorandum of law, Dkt. 12 ("Def. Br."), and an affidavit by its counsel, Dkt. 11, in support. Allianz argues that, as a matter of law, it does not owe coverage to Pollux and Larrivee in connection with the Helicopter Crash that injured Barba. On August 24, 2016, Barba filed a brief in opposition. Dkt. 16 ("Pl. Br."). On September 7, 2016, Allianz replied. Dkt. 19 ("Def. Reply Br.").

II. Applicable Legal Standards

To survive a motion to dismiss under Rule 12(b)(6), a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Ad. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "Where a complaint pleads facts that are 'merely consistentwith' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557).

In considering a motion to dismiss, a district court must "accept[] all factual claims in the complaint as true, and draw[] all reasonable inferences in the plaintiff's favor." Lotes Co. v. Hon Hai Precision Indus. Co., 753 F.3d 395, 403 (2d Cir. 2014) (quoting Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 108 (2d Cir. 2010) (internal quotation marks omitted)). However, this tenet is "inapplicable to legal conclusions." Iqbal, 556 U.S. at 678. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. "[R]ather, the complaint's [f]actual allegations must be enough to raise a right to relief above the speculative level, i.e., enough to make the claim plausible." Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010) (quoting Twombly, 550 U.S. at 555, 570) (internal quotation marks omitted) (emphasis in Arista Records). A complaint is properly dismissed where, as a matter of law, "the allegations in [the] complaint, however true, could not raise a claim of entitlement to relief." Twombly, 550 U.S. at 558.

III. Discussion

A. Choice of Law

At the threshold, the Court must determine which state's substantive law applies to Barba's claims.

A federal court sitting in diversity must apply the substantive law of the state in which it sits, including that state's choice of law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Valley Juice Ltd. v. Evian Waters of Fr., Inc., 87 F.3d...