Country Mutual Insurance Co. v. Kambic

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
COUNTRY 	MUTUAL 	INSURANCE
CO.,
Plaintiff,
vs.
WILLIAM J. KAMBIC, JR.,
Defendant.
Case No. 3:21-cv-00042-JMK
ORDER DENYING DEFENDANT’S
MOTION TO DISMISS
COMPLAINT FOR
DECLARATORY JUDGMENT
Before the Court at Docket 9 is Defendant William J. Kambic Jr.’s Motion
to Dismiss Complaint for Declaratory Judgment (the “Motion”). 	The Motion has been
fully briefed at Dockets 17 and 18. For the following reasons, the motion is DENIED.
I. 	BACKGROUND
Mr. Kambic previously owned a house in Chugiak, Alaska. 	In December
2018, Wells Fargo Bank (“Wells Fargo”) foreclosed on the property.1 Mr. Kambic entered
into litigation with Wells Fargo over the foreclosure, alleging defective notice under Alaska
1 Docket 10 at 2.
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Statute § 34.20.070.2 The parties continued litigation until they entered into a confidential
settlement agreement in February 2021.3
In 	September 	2019, 	Country 	Mutual 	Insurance 	Company 	(“Country
Mutual”) issued Mr. Kambic an insurance policy for the property.4 The policy, renewed
through September 2021, provides for structural coverage up to $1,278,200 and personal
property coverage of $958,650.5 Mr. Kambic was the named insured on the policy, along
with First National Bank Alaska (“First National Bank”) as an additional insured
mortgagee.6 Wells Fargo was not listed as an additional insured on the policy.7
In December 2020, Mr. Kambic discovered extensive water damage to the
property due to a frozen water line. Mr. Kambic reported the loss to Country Mutual and
began work to remediate the property.8
In January 2021, Country Mutual learned that Wells Fargo should have been
listed on Mr. Kambic’s policy as an additional insured, and that First National Bank no
longer held a deed of trust on the property.9 As such, on January 13, 2021, Country Mutual
issued a reservation of rights letter to Kambic.10 	In this letter, Country Mutual advised
Mr. Kambic that his claim for the December 2020 water damage might be denied due to
the ownership dispute and litigation with Wells Fargo.11 Country Mutual then attempted
2 See Kambic v. Wells Fargo, et al., Case No. 3:20-cv-00120-SLG.
3 Id. at Docket 99.
4 See Docket 1-2.
5 Id.
6 Docket 1-1.
7 See id.
8 Docket 10 at 3.
9 Docket 17 at 7; see also Docket 1-3.
10 Docket 1-4.
11 Id.
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to intervene in the litigation with Wells Fargo as Intervenor-Plaintiff, alleging that
Mr. Kambic violated the insurance contract and that it did not owe a duty of coverage for
the property at issue.12 On February 19, 2021, Mr. Kambic and Wells Fargo entered into
a confidential settlement agreement, and Country Mutual’s Motion to Intervene was denied
as moot.13 As of April 8, 2021, pursuant to the settlement agreement, Wells Fargo has full
ownership rights of the property.14
On February 23, 2021, Country Mutual filed the present action, naming both
Mr. Kambic and Wells Fargo as defendants;15 however, Country Mutual voluntarily
dismissed Wells Fargo as a defendant on April 9, 2021.16 The Complaint requests that this
Court issue (1) “a declaratory judgment determining that the Country insurance policy
number [A54K5224230] does not provide coverage for Kambic and/or Wells Fargo for the
water damage found in December 2020 to the property at issue,” and (2) “a declaratory
judgment determining that Kambic made material misrepresentations or omissions on the
policy application and the policy is void ab initio.”17
On April 26, 2021, Mr. Kambic filed this Motion to Dismiss Complaint for
Declaratory Judgment, asserting that County Mutual’s claims are jurisdictionally deficient.
12 See Kambic v. Wells Fargo, et al., Case No. 3:20-cv-00120-SLG at Docket 92.
13 Id. at Docket 100.
14 Docket 10 at 2–3.
15 Docket 1.
16 Docket 6.
17 Docket 1 at 10.
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II. 	LEGAL STANDARD
Under Federal Rule of Civil Procedure 12(b)(1), a party may move for
dismissal for lack of subject matter jurisdiction.18 In reviewing a Rule 12(b)(1) motion, a
district court takes the allegations in plaintiff’s complaint as true.19 	However, “[o]nce
challenged, the party asserting subject matter jurisdiction has the burden of proving its
existence.”20
A jurisdictional attack under Rule 12(b)(1) may be facial or factual. A factual
attack “disputes the truth of the allegations, that by themselves, would otherwise invoke
federal jurisdiction.”21 	To resolve a factual attack, the Court may consider evidence
outside the pleadings “without converting the motion to dismiss into a motion for summary
judgment,” and “need not presume the truthfulness of the plaintiffs’ allegations.”22 “Once
the moving party has converted the motion to dismiss into a factual motion by presenting
affidavits or other evidence properly brought before the court, the party opposing the
motion must furnish affidavits or other evidence necessary to satisfy its burden of
establishing subject matter jurisdiction.”23
18 Mr. Kambic brings his motion under both Federal Rules of Civil Procedure 12(b)(1) and
12(b)(6), but apart from a brief recitation of Rule 8(a)(2), his argument appears to be an entirely
jurisdictional challenge. 	See Docket 9 at 1–2, 6–7. 	The Court therefore treats his motion as seeking
dismissal for lack of subject matter jurisdiction under Rule 12(b)(1).
19 Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004).
20 Rattlesnake Coal. v. U.S. Envtl. Prot. Agency, 509 F.3d 1095, 1102 n.1 (9th Cir. 2007).
21 Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).
22 Id.
23 Id. (quoting Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n.2 (9th Cir. 2003).
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III. 	DISCUSSION
Mr. Kambic challenges: (1) the factual basis for diversity jurisdiction under
28 U.S.C. § 1332; and (2) the Court’s exercise of jurisdiction under the Declaratory
Judgment Act, 28 U.S.C. § 2201.24 Both challenges are without merit.
A. 	Subject Matter Jurisdiction Exists Under 28 U.S.C. § 1332
This Court has jurisdiction over suits between citizens of different states
where the amount in controversy exceeds $75,000, exclusive of interest and costs.25 Here,
Mr. Kambic does not challenge the parties’ diversity; the only issue before the Court is
whether the amount in controversy is sufficient to create jurisdiction.26 	The Court
concludes that it is.
In general, the amount in controversy is determined by the district court on
the face of the pleadings at the time of filing.27 Jurisdiction attaches if the plaintiff, in good
faith, claims more than the requisite amount.28 	Therefore, to justify dismissal, “it must
appear to a legal certainty that the claim is really less than the jurisdictional amount.”29
In actions for declaratory relief, “the amount in controversy is measured by
the value of the object of the litigation.”30 Specifically, in actions “brought either by the
insured or the insurer as to the validity of the entire contract between the parties, the amount
24 See Docket 9.
25 28 U.S.C. § 1332(a).
26 See Docket 9 at 7.
27 Pachinger v. MGM Grand Hotel-Las Vegas, Inc., 802 F.2d 362, 363 (9th Cir. 1986).
28 See id.; Budget Rent-A-Car, Inc. v. Higashiguchi, 109 F.3d 1471, 1473 (9th Cir. 1997).
29 Higashiguchi, 109 F.3d at 1473.
30 Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002) (per curiam) (quoting Hunt v. Wash.
State Apple Adver. Comm'n, 432 U.S. 333, 347 (1977)).
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in controversy is the face value of the policy.”31 	This standard applies when the insurer
sues to cancel a policy for fraud.32 By contrast, in disputes over whether coverage exists
for a particular occurrence, the amount in controversy is the value of the claim in
question.33
Here, 	Country 	Mutual 	seeks 	declaratory 	relief 	to 	determine 	whether
Mr. Kambic’s policy, as a whole, is void due to his alleged misrepresentations.34 Country
Mutual asserts, and Mr. Kambic does not appear to dispute, that the policy provides
coverage up to $2.1 million.35 	As the face value of the policy is well over $75,000, this
clearly satisfies the requisite amount in controversy.
Mr. Kambic argues that because Wells Fargo took full ownership of the
property in April 2021, he has no future interest in the house or the insurance policy, thus
freezing the amount in controversy at his present losses: $67,410.63 for both his personal
property damage and the initial remediation of the home.36 This argument misrepresents
how diversity jurisdiction vests with federal courts. 	The amount in controversy is
31 State Farm Fire & Cas. Co. v. Domaika, No. A05-0051-cv-RRB, 2005 WL 1719265, at *1 n.7
(D. Alaska July 22, 2005) (quoting 14B Charles Alan Wright, Arthur R. Miller & Edward Cooper, FEDERAL
P RACTICE AND P ROCEDURE § 3710 (3d ed. 1998)); see also Elhouty v. Lincoln Benefit Life Co., 886 F.3d
752, 756 (9th Cir. 2018) (“[I]t is long-established that in declaratory judgment actions about whether an
insurance policy is in effect or has been terminated, the policy’s face amount is the measure of the amount
in controversy.”); Higashiguchi, 109 F.3d at 1473 (maximum liability is relevant to determining amount in
controversy if validity of entire insurance policy is at issue).
32 See 14AA Charles Alan Wright, et al., FEDERAL P RACTICE AND P ROCEDURE § 3710 (4th ed.
2021). 33 See id.; Higashiguchi, 109 F.3d at 1473; Canadian Indem. Co. v. Republic Indem. Co., 222 F.2d
601, 604 (9th Cir. 1955).
34 Docket 1 at 10.
35 See Docket 17 at 11; Docket 1-2.
36 See Docket 18 at 2; Docket 10 at 2–3.
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determined at the time of filing and, if satisfied, jurisdiction attaches.37 “Events occurring
after the filing of the complaint that reduce the amount recoverable below the requisite
amount do not oust the court from jurisdiction,” nor does the eventual inability of the
plaintiff to recover the alleged amount.38
Jurisdiction 	attached 	when 	Country 	Mutual 	filed 	its 	Complaint 	on
February 23, 2021, seeking a determination whether its policy with Mr. Kambic was
void.39 	Mr. Kambic entered into a confidential settlement agreement with Wells Fargo
four days earlier, on February 19, but he did not cede full ownership of the home to Wells
Fargo until April 2021.40 	At the time of filing, the policy was active and Mr. Kambic
purported to be the property’s owner: 	he had submitted a claim for the property’s water
damage, and further, had other covered events occurred, Mr. Kambic could have submitted
additional claims under the policy.41 The fact that Wells Fargo retained full ownership of
the property seven weeks later, and that Mr. Kambic will not make additional repairs to the
home, does not divest the Court’s jurisdiction.
37 See Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d 1102, 1106 (9th Cir. 2010) (citing
St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289–90 (1938)); Hill v. Blind Indus. & Servs.
of Maryland, 179 F.3d 754, 757 (9th Cir. 1999); 14AA Charles Alan Wright, et al., FEDERAL P RACTICE
AND P ROCEDURE § 3702.4 (4th ed. 2021); see also Newman-Green, Inc. v. Alfonzo Larrain, 490 U.S. 826,
830 (1989) (noting that for determining diversity of citizenship, “[t]he existence of federal jurisdiction
ordinarily depends on the facts as they exist when the complaint is filed”).
38 Higashiguchi, 109 F.3d at 1473 (citing St. Paul Mercury Indem. Co., 303 U.S. at 293); see also
Chavez v. JPMorgan Chase & Co., 888 F.3d 413, 417 (9th Cir. 2018); Coventry Sewage Assocs. v. Dworkin
Realty Co., 71 F.3d 1, 7–8 (1st Cir. 1995) (district court appropriately retained jurisdiction after discovering
that independent third party’s error had initially inflated the amount in controversy).
39 Docket 1 at 10.
40 Docket 10 at 2–3.
41 See Docket 1-2, Docket 1-4.
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Because the parties are diverse and the amount in controversy exceeds
$75,000, this Court has diversity jurisdiction under 28 U.S.C. § 1332.
B. 	Jurisdiction is Appropriate Under the Declaratory Judgment Act
Mr. Kambic next argues that Country Mutual’s request for declaratory
judgment is inappropriate. 	The Declaratory Judgment Act provides that “[i]n a case of
actual controversy within its jurisdiction . . . any court of the United States . . . may declare
the rights and other legal relations of any interested party seeking such declaration, whether
or not further relief is or could be sought.”42 The Act does not confer jurisdiction; rather,
it “allow[s] earlier access to federal courts in order to spare potential defendants from the
threat of impending litigation” by providing an avenue for parties to adjudicate their rights
and obligations in disputes that have “not reached a stage at which either party may seek a
coercive remedy,” or where “[the] party who could sue for coercive relief has not yet done
so.”43
Entertaining an action under the Declaratory Judgment Act is discretionary.44
When presented with a request for declaratory relief, a district court must first consider
(1) whether the case presents an actual controversy within its jurisdiction, and, if so,
(2) whether retaining jurisdiction is appropriate under the factors set out by Brillhart v.
42 28 U.S.C. § 2201(a).
43 Seattle Audubon Soc. v. Mosely, 80 F.3d 1401, 1405 (9th Cir. 1996).
44 Gov’t Emp. Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998) (explaining that jurisdiction
is discretionary under the Act, but that this discretion is “not unfettered”).
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Excess Ins. Co. of Am. and its progeny.45 The Court concludes that both considerations are
met.
1. 	The case presents an actual controversy
Declaratory relief actions are justiciable if “there is a substantial controversy,
between parties having adverse legal interests, of sufficient immediacy and reality to
warrant the issuance of a declaratory judgment.”46 Mr. Kambic does not appear to refute
that a controversy exists between himself and Country Mutual, only that Country Mutual’s
request for declaratory judgment is inappropriate to resolve it.47 Further, the Ninth Circuit
has “consistently held that a dispute between an insurer and its insured over the duties
imposed 	by 	an 	insurance 	contract 	satisfies 	the 	Article 	III 	case 	and 	controversy
requirement.”48 This Court sees no reason to find the present case any different: there is
a concrete, immediate dispute as to whether Mr. Kambic’s policy is void, and, as such,
whether Country Mutual has a duty of coverage for his claims.
45 See id.; Allstate v. Herron, 634 F.3d 1101, 1107 (9th Cir. 2011); Brillhart v. Excess Ins. Co. of
America, 316 U.S. 491 (1942).
46 Seattle Audubon, 80 F.3d at 1405; see also United States v. Washington, 759 F.2d 1353, 1357
(9th Cir. 1985) (“The limitations upon issuance of a declaratory judgment, expressed as a doctrine of
judicial discretion, reflect concerns similar to those underlying the case and controversy limitation of
Article III.”).
47 See Docket 9 at 10–11.
48 Dizol, 133 F.3d at 1222 n.2 (actual controversy existed where insurer faces possibility of having
to honor a policy that was invalid due to insurer’s breach of its terms); see also American Nat’l Fire Ins. v.
Hungerford, 53 F.3d 1012, 1015–16 (9th Cir. 1995); Am. States Ins. Co. v. Kearns, 15 F.3d 142, 144 (9th
Cir. 1994), Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273–74 (1941).
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The Court finds that this case presents an actual controversy within its
jurisdiction,49 and thus turns to the question of whether exercising that jurisdiction is
appropriate.
2. 	The Brillhart factors weigh in favor of retaining jurisdiction
The 	Ninth 	Circuit 	adopted 	the 	Brillhart 	factors 	as 	“the 	philosophic
touchstone for the district court” in determining whether to exercise its discretion:
(1) avoid needless determination of state law issues; (2) discourage litigants from filing
declaratory actions as means of forum shopping; and (3) avoid duplicative litigation.50 Not
an exhaustive list, the Court may also consider whether retaining jurisdiction would:
“(4) resolve all aspects of the controversy in a single proceeding; (5) serve a useful purpose
in clarifying the legal relations at issue; (6) permit one party to obtain an unjust res judicata
advantage; (7) risk entangling federal and state court systems; or (8) jeopardize the
convenience of the parties.”51
This case does not involve unsettled or novel issues of state law.52 	It is a
“straightforward contract dispute” as to whether Mr. Kambic breached the terms of the
policy such that coverage is void.53 There currently are no pending state law claims, so a
49 For the reasons stated above, this Court has jurisdiction over the controversy under 28 U.S.C.
§ 1332. 50 Dizol, 133 F.3d at 1225.
51 Allstate, 634 F.3d at 1107; see also Dizol, 133 F.3d at 1225 n.5 (quoting Kearns, 15 F.3d at 145).
52 See Nat’l Chiropractic Mut. Ins. Co. v. Doe, 23 F. Supp. 2d. 1109, 1118 (D. Alaska 1998)
(“[T]he Ninth Circuit made clear that the concern address in this factor is with unsettled issues of state law,
no fact-finding in the specific case.”).
53 See id.; Allstate, 634 F.3d at 1108 (finding that a “straightforward contract dispute” between an
insurer and its insured over whether insured breached the policy contract and voided its coverage did not
involve needless determination of state law).
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declaratory judgment will not entangle the court systems or create duplicative litigation.54
Deciding this case necessarily will resolve all aspects of the controversy in a single
proceeding, since it will determine whether the insurance policy is void ab initio. Neither
party has asserted that federal court is a more or less convenient forum than state court.
Therefore, the only factors that potentially could weigh in favor of dismissal
(and the only arguments that Mr. Kambic raises in his Motion) are whether Country Mutual
filed this action as a means of forum shopping or to obtain an unjust res judicata advantage,
and whether a declaratory judgment serves a useful purpose in clarifying the legal relations
going forward.55
The Court finds no evidence of forum shopping or a race to res judicata.
Mr. Kambic argues that he is the natural plaintiff in this dispute, and, as such, Country
Mutual filed this action to preempt his forum of choice and “avoid litigation in a forum not
of their choosing.”56 However, Mr. Kambic does not provide any factual support for these
claims. 	Moreover, he has not asserted that this forum is inconvenient or inappropriate,
much less why this forum would be unjustly favorable to Country Mutual.57
54 See id.
55 Mr. Kambic also argues that because a breach of contract claim would “resolve any question
regarding the interpretation of the contract, there is no need for declaratory relief and dismissal of a
companion declaratory relief claim is appropriate.” In support, Mr. Kambic cites to cases in which the
plaintiff brings both a breach of contract claim and an identical claim for declaratory judgment, and where
the defendant moves to dismiss the declaratory relief claim as unnecessary. See, e.g., Vascular Imaging
Prof’ls Inc. v. Digirad Corp., 401 F. Supp. 3d 1005 (S.D. Cal. 2019); Streamcast Networks, Inc. v. IBIS
LLC, No. CV 05-04239 MMM, 2006 WL 5720345, at *3–4 (C.D. Cal. May 2, 2006). This case law is
inapposite, as neither party has brought a breach of contract claim, companion or otherwise, to make
declaratory relief duplicative or unnecessary.
56 Docket 9 at 7, 11.
57 See Dizol, 133 F.3d at 1225 (“We know of no authority for the proposition that an insurer is
barred from invoking diversity jurisdiction to bring a declaratory judgment action against an insured on an
issue of coverage.”); U.S. Fire Ins. Co. v. Prieto, No. 19-00186 JAO-RT, 2020 WL 3317914, at *21 (D.
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Nor is there evidence that Country Mutual filed suit merely as a reaction to
Mr. Kambic’s threat of litigation. Mr. Kambic did not file an action in state court, nor did
he present evidence that he threatened to do so,58 and Country Mutual already had
attempted to intervene in Mr. Kambic’s related litigation with Wells Fargo.59 This Court
will apply the same substantive law as any action Mr. Kambic might have filed in Alaska
state court, so Country Mutual is not “racing to res judicata” in a different jurisdiction.60
Instead, Mr. Kambic’s argument rests on the idea that he might have brought
suit as the plaintiff in a different forum at a later, unspecified date.61 This is insufficient to
find forum shopping, or to show that Country Mutual will obtain an unfair res judicata
advantage.62 	Country 	Mutual’s 	choice 	to 	pursue 	a 	declaratory 	judgment 	before
Mr. Kambic filed suit is not evidence of forum shopping; indeed, it is in line with the
purposes of the Act.63
Haw. June 18, 2020) (no forum shopping exists when federal district court is an appropriate forum and
plaintiff merely preferred federal resolution); Ryan on Behalf of Syndicates and Ins. Cos., 902 F. Supp.
1064, 1068 (D. Alaska 1995) (district court is an appropriate forum for declaratory actions to determine the
right of insurers and insureds).
58 See Nat’l Chiropractic, 23 F. Supp. 2d. at 1118 (“Forum shopping would only exist if
[Defendant insured] had commenced a declaratory judgment proceeding in state court against [Plaintiff
insurer] under parallel state law . . . and, perhaps concerned at some preliminary rulings by a state judge,
[Plaintiff insurer] had filed this federal action.”).
59 Kambic v. Wells Fargo, et al., Case No. 3:20-cv-00120-SLG at Docket 92.
60 See Allstate, 634 F.3d at 1108; BASF Corp. v. Symington, 50 F.3d 555, 559 (8th Cir. 1995)
(district court erred in hearing declaratory action that was “chiefly calculated to take advantage of favorable
statute of limitations law” in different state).
61 Docket 9 at 1–2, 7–9.
62 See Nat’l Chiropractic, 23 F. Supp. 2d. at 1118; Dizol, 133 F.3d at 1225; see also BASF Corp.,
50 F.3d at 559 (noting that federal courts “regularly consider the merits of affirmative defenses raised by
declaratory plaintiffs”).
63 See Seattle Audubon, 80 F.3d 1401 at 1405 (describing the purpose of the DJA as allowing
potential defendants to adjudicate their rights when the party who may sue for coercive relief has yet to do
so); see also Dizol, 133 F.3d at 1225 (“[T]here is no presumption in favor of abstention in declaratory
actions generally, nor in insurance coverage cases specifically”).
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Next, the Court finds that a declaratory action is useful to clarifying the legal
relations between the parties. Mr. Kambic argues that because “the alleged claims for both
parties have accrued” and the alleged misrepresentations on his policy occurred in the past,
Country Mutual’s claims “are not directed towards ‘clarifying’ any of its ‘future’
obligations towards Kambic.”64 	The Court struggles to see how Country Mutual’s
complaint is not directed towards its future obligations. 	A declaratory judgment will
determine Country Mutual’s future behavior and legal relation to Mr. Kambic, namely,
whether it owes him a duty of coverage under the disputed policy. 	The facts of the case
necessarily occurred in the past, but this does not preclude declaratory relief from serving
a useful purpose in resolving the parties’ current rights and obligations.
Therefore, the Court concludes that the Brillhart factors weigh in favor of
exercising discretion to hear Country Mutual’s declaratory judgment action.
IV. 	CONCLUSION
For the reasons stated above, Mr. Kambic’s Motion to Dismiss Complaint
for Declaratory Judgment at Docket 9 is DENIED.
IT IS SO ORDERED this 14th day of October, 2021, at Anchorage, Alaska.
/s/ Joshua M. Kindred
JOSHUA M. KINDRED
United States District Judge
64 Docket 9 at 11.
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