National Casualty Company v. Crawford et al
Filing
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MEMORANDUM AND ORDER granting in part, and denying in part defendant Thomas & Sons Trucking, LLC's 20 Motion to Stay These Proceedings or in the Alternative to Dismiss this Declaratory Judgment Action, and defendant Penny Crawford's 22 Motion to Dismiss or in the Alternative Stay the DeclaratoryJudgment Action until Resolution of the Contemporaneous State Action. The court denies the requests to dismiss but grants the requests to stay. The case is stayed. Defendants are directed to notify the court within thirty days of the resolution of the state court case. Signed by District Judge Carlos Murguia on 1/21/2015. (mg)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
NATIONAL CASUALTY COMPANY,
Plaintiff,
v.
THOMAS & SONS TRUCKING, L.L.C.,
CLAUDE CRAWFORD, AND PENNY
CRAWFORD,
Defendants.
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Case No. 14-4023-CM
MEMORANDUM AND ORDER
Plaintiff National Casualty Company filed this action seeking declaratory judgment against
defendants Thomas & Sons Trucking, L.L.C., Claude Crawford, and Penny Crawford regarding
insurance coverage issues. (Doc. 1.) The case is before the court on Defendant Thomas & Sons
Trucking, L.L.C.’s Motion to Stay These Proceedings or in the Alternative to Dismiss this Declaratory
Judgment Action (Doc. 20) and Defendant Penny Crawford’s Motion to Dismiss or in the Alternative
Stay the Declaratory Judgment Action until Resolution of the Contemporaneous State Action (Doc.
22). Defendants ask the court to stay or dismiss this case in light of a related personal injury action in
Mitchell County, Kansas District Court. According to defendants, the state court action could decide
whether defendant Penny Crawford—the injured party—was acting in the course of employment at the
time of her injuries.
It is within the district court’s discretion whether to exercise jurisdiction over an action under
the Declaratory Judgment Act. Wilton v. Seven Falls Co., 515 U.S. 277, 282, 289 (1995); St. Paul Fire
& Marine Ins. Co. v. Runyon, 53 F.3d 1167, 1168 (10th Cir. 1995). But a district court “should not
entertain a declaratory judgment action over which it has jurisdiction if the fact-dependent issues are
likely to be decided in another pending proceeding.” Kunkel v. Cont’l Cas. Co., 866 F.2d 1269, 1276
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(10th Cir. 1989). The Tenth Circuit has set forth five factors that a court should evaluate in
determining whether to exercise jurisdiction over a declaratory judgment action:
(1) whether a declaratory action would settle the controversy; (2) whether it
would serve a useful purpose in clarifying the legal relations at issue; (3) whether
the declaratory remedy is being used merely for the purpose of procedural fencing
or to provide an arena for a race to res judicata; (4) whether use of declaratory
action would increase friction between our federal and state courts and improperly
encroach upon state jurisdiction; and (5) whether there is an alternative remedy
which is better or more effective.
United States v. City of Las Cruces, 289 F.3d 1170, 1187 (10th Cir. 2002) (quoting State Farm Fire
& Cas. Co. v. Mhoon, 31 F.3d 979, 983 (10th Cir. 1994)) (recognizing the factors of Brillhart v.
Excess Ins. Co., 316 U.S. 491 (1942), but applying the Mhoon factors). The court need not first
evaluate whether the state court and federal court actions are parallel, but should inquire as to the
similarity between the two proceedings as part of the Mhoon factor analysis. Id. at 1183. The degree
of identity of the parties and issues are “only factors in the analysis; they are not determinative.” Id.
The court therefore analyzes all of the Mhoon factors.
The first Mhoon factor weighs slightly in plaintiff’s favor. This declaratory action would settle
the insurance coverage issues raised in the case. On the other hand, this action would leave
outstanding the underlying liability issues, which are being litigated in state court.
The second Mhoon factor also weighs in plaintiff’s favor. The Declaratory Judgment Act
“enables parties uncertain of their legal rights to seek a declaration of rights prior to injury.” Kunkel,
866 F.2d at 1274 (citation omitted). Declaratory judgment actions are appropriate to clarify legal
relations before final adjudication of an underlying action because an insurer has a duty to defend,
conduct settlement negotiations, and pay any judgment or settlement amount entered against its
insured. Id. at 1275; Nationwide Mut. Ins. Co. v. Smith, No. 11-1266-JAR-GLR, 2014 WL 806183, at
*2 (D. Kan. Feb. 28, 2014). A declaratory judgment from this court relating to the coverage issues
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presented would serve a useful purpose in clarifying the parties’ legal relations and resolving
uncertainty surrounding plaintiff’s obligations.
Under the third Mhoon factor, the court must consider whether the declaratory remedy is being
used for procedural fencing. This factor weighs slightly in defendants’ favor. “‘In looking at whether
the declaratory judgment action is being used in order to gain a procedural advantage, the court
considers the timeliness of the actions at issue.’” Ortiz v. Biscanin, 190 F. Supp. 2d 1237, 1246 (D.
Kan. 2002) (quoting Bd. of County Comm’rs v. Cont’l W. Ins. Co., 184 F. Supp. 2d 1117, 1121 (D.
Kan. 2001)). Plaintiff did not timely file this action to clarify its obligations under the policy after
defendant Penny Crawford made demands. Instead, plaintiff filed this action two weeks after the
related state court action was filed. Defendant Penny Crawford asserts that plaintiff forum-shopped by
purposefully failing in state court to raise affirmative defenses. But plaintiff is not named in the state
court action. In state court, plaintiff is only paying for defendant Thomas & Sons’ defense under a
complete reservation of rights. In any event, the state court action was filed first. If plaintiff first
obtains a judgment in this court, the federal judgment may impact the outcome of the first-filed state
court case. This court is hesitant to risk such interference.
The fourth factor is particularly significant to the court, and weighs in defendants’ favor. This
action involves key factual issues that are also before the state court. The issue to be decided in this
declaratory judgment action is whether defendant Penny Crawford was acting in the course of her
employment at the time of the accident, making the employee exclusion in the policy applicable.
Defendant Penny Crawford’s employment status at the time of her injuries is relevant to the underlying
state court proceedings. Whether her injury arose in the course of her employment is intertwined with
the questions raised in the state court action—how the accident occurred, who was at fault, and
whether there are any defenses to fault. Where state court actions involve questions of affirmative
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defenses to fault regarding whether an employee is acting within the course of employment, and thus
affecting insurance coverage issues, courts find that staying the declaratory actions is appropriate. See,
e.g., Nationwide, 2014 WL 806183, at *3 (citing Schering Corp. v. Griffo, 872 F. Supp. 2d 1220, 1243
(D.N.M. 2012)). While no affirmative defenses regarding acting in the course of employment are
presently raised in the initial state court answer, the defendants in the state court action reserved the
right to raise additional defenses. (Doc. 23-2.) Because factual issues with respect to the defendants’
potential affirmative defenses in state court could overlap with the issues in this case, the court finds
that a determination of the issue in this case could encroach upon state court jurisdiction and possibly
cause friction between federal and state courts. The fourth Mhoon factor supports a stay.
The fifth and final Mhoon factor is neutral. “Declaratory judgment actions are particularly
appropriate for situations in which insurance companies seek a declaration of their liability.” Cont’l
W. Ins. Co., 184 F. Supp. 2d at 1122. “Courts have ‘expressly recognized that one of the primary
functions of the [Federal Declaratory Judgment] Act is to provide the [insurer] . . . such a forum.’” Id.
(quoting Horace Mann Ins. Co. v. Johnson, 953 F.2d 575, 579 (10th Cir. 1991)). Here, no alternate
remedy will resolve the insurance coverage issues. The state action will resolve only the liability and
damage issues, and plaintiff is not a party to that action. However, staying this case until the state tort
action is resolved is a more efficient treatment of the case. This lawsuit involves key factual issues
regarding defendant Penny Crawford’s employment status at the time of the accident, which could be
addressed in the state court action. In deciding the state tort claims, the state court is going to become
intimately familiar with the facts surrounding the accident. While not all of these facts will be relevant
to determine if defendant Penny Crawford’s injuries constitute a covered loss, some facts may be.
Moreover, the outcome of the state court action could ultimately moot this case.
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This court determines the balance of the Mhoon factors weighs in favor of staying this
declaratory judgment action pending the resolution of the state tort action.
IT IS THEREFORE ORDERED that defendant Thomas & Sons Trucking, L.L.C.’s Motion
to Stay These Proceedings or in the Alternative to Dismiss this Declaratory Judgment Action (Doc. 20)
and defendant Penny Crawford’s Motion to Dismiss or in the Alternative Stay the Declaratory
Judgment Action until Resolution of the Contemporaneous State Action (Doc. 22) are denied in part
and granted in part. The court denies the requests to dismiss but grants the requests to stay.
IT IS FURTHER ORDERED that the case is stayed. Defendants are directed to notify the
court within thirty days of the resolution of the state court case.
Dated this 21st day of January, 2015, at Kansas City, Kansas.
s/ Carlos Murguia
CARLOS MURGUIA
United States District Judge
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