GEICO Indemnity Company v. Littles

Filing 14

ORDER: Defendant's Motion to Dismiss 6 is denied. Signed by Judge H Russel Holland on 9/28/16.(REW)

WO

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA

GEICO INDEMNITY COMPANY,

)
)
Plaintiff,
)
)
vs.
)
)
BRAD LITTLES,
)
)
Defendant.
)
__________________________________________)

No. 2:16-cv-1130-HRH

ORDER
Motion to Dismiss
Defendant moves to dismiss plaintiff’s complaint.1 This motion is opposed.2 Oral
argument was requested but is not deemed necessary.
Background
In 2014, defendant Brad Littles purchased a Harley Davidson motorcycle which he
then insured with plaintiff, GEICO Indemnity Company.3 Plaintiff alleges that in the

1

Docket No. 6.

2

Docket No. 11.

3

Complaint for Declaratory Judgment at 2, ¶¶ 9-10, Docket No. 1.
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process of obtaining his motorcycle insurance, defendant declined underinsured motorist
(UIM) coverage.4
Plaintiff alleges that on November 21, 2015, defendant was a passenger in a vehicle
that was involved in single vehicle accident.5 Defendant was allegedly injured in the
accident and claims that his medical bills exceed $159,000.6 Plaintiff alleges that defendant
settled his claim with the driver of the vehicle for policy limits of $15,000.7 Defendant then
made a claim under his policy with plaintiff, seeking $100,000 in UIM coverage.8
Defendant contends that UIM coverage is available under his policy with plaintiff because
any alleged rejection of that coverage was ineffective because plaintiff did not comply with
Arizona law when offering him UIM coverage.
On April 19, 2016, plaintiff commenced this diversity action in which it seeks a
declaration that the “UIM coverage in the Policy is not applicable and is not owed to
Defendant[.]”9

4

Id. at 2-3, ¶¶ 11-20.

5

Id. at 4, ¶ 21.

6

Id.

7

Id. at ¶ 22.

8

Id. at ¶ 23.

9

Id. at 5, ¶ A.
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Pursuant to Rule 12(b)(1), Federal Rules of Civil Procedure, defendant now moves
to dismiss plaintiff’s complaint.
Discussion
A Rule 12(b)(1) motion is brought to raise a challenge to the court’s subject matter
jurisdiction. Here, defendant is not arguing that this court lacks subject matter jurisdiction
over plaintiff’s claim under the Declaratory Judgment Act. Rather, defendant contends that
the court should decline to exercise its jurisdiction under the Act.
“The Declaratory Judgment Act uses permissive language.” R.R. Street & Co. Inc.
v. Transport Ins. Co., 656 F.3d 966, 975 (9th Cir. 2011). The Act provides that federal courts
“may declare the rights and other legal relations of any interested party” in a declaratory
judgment action. 28 U.S.C. § 2201(a) (emphasis added).
“In evaluating whether to hear a declaratory judgment action, a district court must
first determine ‘whether there is an actual case or controversy within its jurisdiction.’”
Lexington Ins. Co. v. Silva Trucking, Inc., Case No. 2:14–CV–0015 KJM CKD, 2014 WL
1839076, at *5 (E.D. Cal. May 7, 2014) (quoting Am. States Ins. Co. v. Kearns, 15 F.3d 142,
143 (9th Cir. 1994)). Here there is an actual controversy within the court’s diversity
jurisdiction. The completely diverse parties disagree as to the availability of $100,000 of
UIM coverage.

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“The court must then decide ‘whether to exercise its discretion by analyzing the
factors set out in Brillhart....“ Id. (quoting Principal Life Ins. Co. v. Robinson, 394 F.3d 665,
669 (9th Cir. 2005)). The Brillhart factors are: “The district court should avoid needless
determination of state law issues; it should discourage litigants from filing declaratory
actions as a means of forum shopping; and it should avoid duplicative litigation.”
Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998).
Additional factors the court may consider are
“whether the declaratory action will settle all aspects of the
controversy; whether the declaratory action will serve a useful
purpose in clarifying the legal relations at issue; whether the
declaratory action is being sought merely for the purposes of
procedural fencing or to obtain a ‘res judicata’ advantage; or
whether the use of a declaratory action will result in entanglement between the federal and state court systems. In addition,
the district court might also consider the convenience of the
parties, and the availability and relative convenience of other
remedies.”
Id. at 1225 n.5 (citation omitted).
Defendant first contends that there is a presumption in favor of abstention in
insurance cases. This contention is wrong. “[T]here is no presumption in favor of
abstention in declaratory actions generally, nor in insurance coverage cases specifically.”
Id. at 1225.
Defendant next argues that the court should decline to exercise its jurisdiction
because this case involves questions of state insurance law which are best left to state
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courts. Defendant cites to Employers Reinsurance Corp. v. Karussos, 65 F.3d 796, 798 (9th
cir. 1995), overruled on other grounds by Dizol, 133 F.3d 1220, in support of this argument.
In Karussos, the court observed that courts should generally “decline to assert jurisdiction
in insurance coverage and other declaratory relief actions presenting only issues of state
law during the pendency of parallel proceedings in state court unless there are circumstances present to warrant an exception to that rule.” Id. (citation omitted). Defendant
argues that this rule helps prevent federal courts from needlessly deciding questions of
state law and discourages forum shopping.
But, as plaintiff is quick to point out, the foregoing general rule only applies if there
are pending cases involving the same controversy in both state and federal court. Here,
the only pending case is the instant federal case. Because there is no pending state court
case, if the court were to exercise its jurisdiction, it would not be needlessly deciding
questions of state law or encouraging forum shopping nor would be there be any
entanglement between the state and federal court systems. While this case involves issues
of state law, “‘[f]ederal and state courts are equally capable of applying settled state law’”
to a particular set of facts. Madren v. Belden, Inc., Case No. 12–CV–01706–RMW, 2012 WL
2572040, at *5 (N.D. Cal. July 2, 2012) (quoting Heritage Farms, Inc. v. Solebury Township,
671 F.2d 743, 747 (3d Cir.1982)).

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Defendant also argues that if the court were to exercise its jurisdiction, he will be
deprived of his chosen forum. But the same could be said as to plaintiff if the court were
to dismiss this action. Plaintiff would then be deprived of its chosen forum. There is no
reason for the court to abstain simply because defendant might prefer state court and
plaintiff prefers federal court.
Defendant also seems to be suggesting that a federal forum will be less efficient but
does not explain why this might be so. It is the court’s perception that the federal forum
will be as efficient and convenient as the state forum.
Finally, there are no other factors that suggest that abstention would be appropriate.
The declaratory action that plaintiff has filed in this court will resolve all the issues between
the parties and will serve a useful purpose in clarifying the legal relations at issue. There
is no procedural fencing going on here and this action has not been filed to obtain a res
judicata advantage. In short, there is no reason for the court to decline to exercise its
jurisdiction over this declaratory action.
Conclusion
Based on the foregoing, defendant’s motion to dismiss10 is denied.
DATED at Anchorage, Alaska, this 28th day of September, 2016.
/s/ H. Russel Holland
United States District Judge
10

Docket No. 6.
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