The Roman Catholic Diocese of Rockville Ctr. v. Arrowood Indem. Co.

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THE ROMAN CATHOLIC DIOCESE OF ROCKVILLE CENTRE, NEW YORK, Plaintiff, v. ARROWOOD INDEMNITY COMPANY, Defendant.

No. 20-CV-11011 (VEC)

United States District Court, S.D. New York

February 23, 2022

OPINION & ORDER

VALERIE CAPRONI, UNITED STATES DISTRICT JUDGE

The Roman Catholic Diocese of Rockville Centre, New York (the “Diocese”) sued Arrowood Indemnity Company (“Arrowood”) alleging breach of contract and seeking declaratory judgments about the scope of Arrowood's duties to defend and indemnify the Diocese in connection with claims involving childhood sexual abuse by members of the clergy. See Compl., Dkt 51.^[1] The Diocese moved for a partial judgment on the pleadings and for a stay of the proceedings as to the duty to indemnify. See Not. of Mot., Dkt. 55. Arrowood moved to amend its answer to convert some of its affirmative defenses to counterclaims. See Not. of Mot., Dkt. 65. For the following reasons, the pending motions are GRANTED in part and DENIED in part.

BACKGROUND

On February 14, 2019, New York state enacted the Child Victims Act (“CVA”). Compl. ¶ 2.^[2] The CVA expanded the statute of limitations that applies to civil suits against parties whose actions or omissions facilitated sexual abuse of children. Id. Hundreds of alleged victims of child sexual abuse have filed suit against the Roman Catholic Diocese of Rockville Centre, New York, which is the seat of the Roman Catholic Church on Long Island. Id. ¶¶ 3, 5. To facilitate its defense of those claims, many of which are decades old, the Diocese has identified insurance policies that it contends were in effect when the alleged abuse occurred. Id. ¶ 19; List of Ins. Policies by Policy Period, Dkt. 51-1. Royal Insurance Company, which is now known as Arrowood Indemnity Company insured the Diocese from the Diocese's founding in 1957^[3]through 1976. Compl. ¶ 22; Ans., Dkt 53 ¶ 7. According to Arrowood, the Diocese has asked it to defend 129 lawsuits filed pursuant to the CVA. Resp., Dkt. 58 at 2. Arrowood contends that it has agreed to defend 121 of those lawsuits and has paid $620, 000 towards the Diocese's defense costs. Id. at 2, 10.

On October 1, 2020, given the likely financial impact of the newly filed sexual abuse claims, the Diocese filed for Chapter 11 protection. See Petition, 20-BK-12345, Dkt. 1.^[4] On the same day that it filed its Chapter 11 petition, the Diocese commenced an adversary proceeding against several insurance companies, including Arrowood, to address coverage disputes related to the sexual abuse claims. See Compl., 20-AP-1227, Dkt. 1. In the adversary proceeding, the Diocese sought declaratory judgments outlining its rights and the insurance companies' obligations pursuant to the various insurance policies at issue. See id. ¶¶ 82-87. The Diocese also alleged claims for breach of contract against the insurance companies for violating their duty to defend and for disclaiming their obligations to indemnify the Diocese on some claims. Id. ¶¶ 88-92.^[5]

On May 17, 2021, the Undersigned granted Arrowood's motion to withdraw the reference to the Bankruptcy Court as to the Diocese's claims against it. See Opinion, Dkt. 42.^[6]Accordingly, the Diocese's claims against Arrowood that had been part of the adversary proceeding are now before this Court. On June 16, 2021, the Diocese moved for a partial judgment on the pleadings and for a stay of the proceedings as to the duty to indemnify. Not. of Mot., Dkt. 55.^[7] Arrowood opposed that motion. Resp., Dkt. 58. On June 25, 2021, Arrowood moved to amend its answer, Not. of Mot., Dkt. 65; and the Diocese opposed, Resp., Dkt. 70.

DISCUSSION

I. Motion for Judgment on the Pleadings

A. Legal Standard

“The standard for granting a Rule 12(c) motion for judgment on the pleadings is identical to that of a Rule 12(b)(6) motion for failure to state a claim.” Patel v. Contemp. Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001); see also Ashley v. Gonzalez, No. 19-CV-6282, 2020 WL 7027501, at *2 (S.D.N.Y. Nov. 30, 2020) (“The difference between a Rule 12(b)(6) and Rule 12(c) motions is largely academic because the standard under Rule 12(c) is the same as the standard under Rule 12(b)(6).” (cleaned up)). The Court must accept as true all material factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor. Johnson v. Rowley, 569 F.3d 40, 43 (2d Cir. 2009). To survive a Rule 12(c) motion, the complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. at 44 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To satisfy the “plausibility” requirement, a complaint must do more than make “[t]hreadbare recitals of the elements of a cause of action.” Iqbal, 556 U.S. at 678. Rather, the elements of the cause of action must be supported by well-pleaded facts that permit the Court to infer “that the pleader is entitled to relief.” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

“On a [Rule] 12(c) motion, the court considers the complaint, the answer, any written documents attached to them, and any matter of which the court can take judicial notice for the factual background of the case.” L-7 Designs, Inc. v. Old Navy LLC, 647 F.3d 419, 422 (2d Cir. 2011) (cleaned up). “A complaint is [also] deemed to include any written instrument attached to it as an exhibit, materials incorporated in it by reference, and documents that, although not incorporated by reference, are ‘integral' to the complaint.” Id. (quoting Sira v. Morton, 380 F.3d 57, 67 (2d Cir. 2004)). For a document to be “integral” to the complaint, the complaint must “rel[y] heavily upon its terms and effect.” Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (quoting Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995)).

B. Prohibition on Advisory Opinions

In its motion for partial judgment on the pleadings, the Diocese seeks several declaratory judgments, including that “(a) Arrowood has a duty to defend the entire action when any claims against the Diocese are potentially covered; and (b) Arrowood may not rely upon materials outside of the complaint to deny or limit its duty to defend.” See Mem. of Law, Dkt. 56 at 20.

Under the Declaratory Judgment Act, “in a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration ....” 22 U.S.C. § 2201. “A declaratory judgment action presents an actual controversy if ‘the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.'” In re Prudential Lines Inc., 158 F.3d 65, 70 (2d Cir. 1998) (quoting Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941)). Although federal courts are prohibited from opining on abstract questions, see Public Serv. Comm'n v. Wycoff Co., 344 U.S. 237, 242 (1952), “[t]he difference between an abstract question and a ‘controversy' contemplated by the Declaratory Judgment Act is necessarily one of degree, ” see Certain Underwriters at Lloyd's London v. St. Joe Mins Corp., 90 F.3d 671, 675 (2d Cir. 1996) (internal citation omitted).

In the insurance context, a court may decline to enter a declaratory judgment as to the insurer's duty to defend and indemnify if the question “is not amenable to mass resolution but must be determined in each case with specific reference to, inter alia, the nature of the injury claimed ....” Am. Home Prods. Corp. v. Liberty Mut. Ins. Co., 748 F.2d 760, 766 (2d Cir. 1984). In this matter, questions about Arrowood's duty to defend are best answered when tethered to particular sexual abuse claims or sets of facts relating to particular sexual abuse claims. Accordingly, in an exercise of its discretion, the Court declines to enter abstract declarations as to the scope of Arrowood's duty to defend. The Court will instead address the scope of Arrowood's duty to defend in the context of the particular claims and sets of facts discussed in the parties' pleadings.

Accordingly, the Diocese's motion that the Court declare in the abstract (a) that Arrowood has a duty to defend the entire action when any claims against the Diocese are potentially covered and (b) that Arrowood may not rely upon materials outside of the complaint to deny or limit its duty to defend is denied.

C. The G.C., Kelly, B.R., and F.C. Lawsuits

The Diocese seeks a declaratory judgment that Arrowood has an obligation to defend the Diocese in the following four lawsuits:

• G.C. v. Diocese of Rockville Ctr., No. 900035/2019 (Sup. Ct. Nassau Cnty. 2019)

• Kelly v. Diocese of Rockville Ctr., No. 900064/2019 (Sup. Ct. Nassau Cnty. 2019)

• B.R. v. Diocese of Brooklyn, No. 512125/2020, (Sup. Ct. Kings Cnty. 2020)

• F.C. v. Diocese of Rockville Ctr., No. 900125/2020 (Sup. Ct. Nassau Cnty. 2020)

See Compl. ¶¶ 56-67; Mem. of Law, Dkt. 56 at 20. Arrowood has disclaimed any obligation to defend the Diocese in those four lawsuits, all of which allege abuse by Romano Ferraro, a priest at the time of the alleged abuse. Ans. ¶¶ 80, 83, 94-108.^[8]

Arrowood contends that under the relevant insurance policies ^[9] it is only required to cover bodily injury “caused by an occurrence.” Id. ¶ 14. The pertinent insurance policies define “occurrence” to mean “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.” Id. ¶¶ 17-18. Arrowood pleads that given the fact that the...