Westfield Insurance Company v. Arnold et al
Filing
17
MEMORANDUM OPINION & ORDER: (1) 11 MOTION to Dismiss is GRANTED. (2) 12 MOTION to Dismiss is GRANTED. (3) Pla's action for declaratory judgment is DISMISSED w/o prejudice. Signed by Judge Joseph M. Hood on 4/14/2016.(SCD)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
WESTFIELD INSURANCE COMPANY,
Plaintiff,
v.
CASEY ARNOLD, individually,
and as Adminstratrix of the
Estate of Chad Arnold, and as
Next Friend and
Guardian/Conservator for
Miles Arnold, et al.
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Civil Case No.
5:16-cv-30-JMH
MEMORANDUM OPINION AND ORDER
Defendants.
***
This declaratory judgment action is pending for consideration
on the motions to dismiss filed by Casey Arnold [DE 11] and
Mediport, LLC, Dr. Timothy Carroll, Richard Covington, and Steve
Morris
[DE
12].
Defendant
Westfield
Insurance
(“Westfield”) opposes the motions.
[DE 13, 14].
discussed
motions
below,
the
defendants’
to
Company
For the reasons
dismiss
will
be
granted.
I.
This declaratory judgment action arises as a result of an
underlying wrongful death action filed in Scott County Circuit
Court, Kentucky (“the Scott Circuit Action”). In the Scott Circuit
Action, Casey Arnold (“Arnold”), one of the defendants herein, has
brought suit individually and as the adminstratrix of the estate
of Chad Arnold and as next friend and guardian/conservator for
Miles Arnold following the untimely death of her spouse at a 5K
racing event at the Kentucky Horse Park on March 2, 2013.
1, Third Amended Complaint].
negligence
claims
including
[DE 11-
Therein, Arnold asserts various
the
failure
to
respond
to
the
decedent’s demise in a timely fashion; failing to properly perform
CPR and to provide an external defibrillator, the failure to use,
operate equip, and maintain the ambulances at the event; as well
as other alleged instances of negligence.
The Defendants in the
Scott
Dr.
Circuit
Action
include
Mediport,
Carroll,
Richard
Covington, and Steve Morris (the “Negligence Defendants”).
Arnold has also filed a Motion to Amend the Complaint in the
Scott
Circuit
insurance
the
Company
to
assert
who
companies
indemnifying
Indemnity
Action
are
defendants
and
new
allegations
potentially
in
that
Landmark
the
responsible
for
including
RSUI
action,
American
against
Insurance
Company
(hereinafter “RSUI/Landmark”), as well as Westfield Insurance
Company.
[DE 11-5, Fourth Amended Complaint].
In particular, the
Fourth Amended Complaint asserts a claim for third party bad faith
against
RSUI/Landmark
on
numerous
grounds
and
a
declaratory
judgment action seeking a declaration of the rights and obligations
between RSUI/Landmark and Westfield.
Id.
Despite the pending Scott Circuit Action, on January 27, 2016,
Westfield filed the instant declaratory judgment action, pursuant
2
to
28
U.S.C.
§
2201,
seeking
a
declaration
that
Westfield,
Mediport’s automobile insurance carrier at the time of Mr. Arnold’s
death, has no duty to defend or indemnify the Negligence Defendants
in the Scott County Action.
[DE 1].
While Westfield named Arnold
as well as the Negligence Defendants in this action, Westfield did
not include RSUI/Landmark.
Id.
On February 22, 2016, Defendants Arnold, as well as the
Negligence Defendants, moved to dismiss Westfield’s complaint for
declaratory judgment on substantially similar grounds.
12].
[DE 11,
The motions to dismiss are addressed together herein.
II.
District courts retain discretion to determine “whether and
when to entertain an action under the Declaratory Judgment Act.”
Wilton
v.
Seven
Falls
Co.,
515
U.S.
277,
282
(1995).
The
Declaratory Judgment Act (the “Act”), 28 U.S.C. §§ 2201 et seq.,
provides that “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.”
U.S.C. § 2201(a).
28
The Act “confers discretion on courts, not
rights on litigants,” and the “propriety of issuing a declaratory
judgment may depend on equitable considerations.”
American Home
Assurance Co. v. Evans, 791 F.2d 61, 64 (6th Cir. 1986)(citing
Green v. Mansour, 474 U.S. 64 (1985)). Thus, this Court is under
no compulsion to exercise jurisdiction.
3
The Sixth Circuit has articulated five factors (the “Grand
Trunk factors”) to guide a district court in determining whether
to exercise jurisdiction under the Act.
Scottsdale Ins. Co. v.
Roumph, 211 F.3d 964, 968 (6th Cir. 2000)(citing Grand Trunk
Western Ry. Co. v. Consolidated Rail Corp., 746 F.2d 323, 326 (6th
Cir. 1984)).
Those factors include whether:
1. the
declaratory
controversy;
action
would
settle
the
2. the declaratory action would serve a useful purpose
in clarifying the legal relations in issue;
3. the declaratory remedy is being used merely for the
purpose of “procedural fencing” or “to provide an
arena for a race for res judicata”;
4. the use of a declaratory action would increase
friction between our federal and state courts and
improperly encroach on state jurisdiction; and
5. there is an alternative remedy which is better or
more effective.
Grand Trunk, 746 F.2d at 326. The Grand Trunk factors embody three
main principles: efficiency, fairness, and federalism.
Western
World Ins. Co. v. Hoey, No. 13-cv-2388, 2014 WL 6865300 at *2 (6th
Cir. Dec. 8, 2014).
The Court will analyze each factor in turn.
Settlement of the Controversy
The first factor focuses not on whether issuing a declaratory
judgment
would
settle
the
controversy
immediately
before
the
Court, but whether doing so would settle the “ultimate controversy”
in the underlying state court litigation.
4
Atain Specialty Ins. v.
Dwyer Concrete Lifting of Lexington, Inc., No. 12-cv-21, 2012 WL
2119407, at *3 (E.D. Ky. June 11, 2012).
The Sixth Circuit has
repeatedly held that “declaratory judgment actions seeking an
advance opinion on indemnity issues are seldom helpful in resolving
an ongoing action in another court.”
Bituminous Cas. Corp. v. J
& L Lumber Co., Inc., 373 F.3d 807, 812–13 (6th Cir. 2004)(quoting
Manley, Bennett, McDonald & Co. v. St. Paul Fire & Marine Ins.
Co., 91 F.2d 460, 463 (6th Cir. 1986)).
“It is a rare case in
which federal district courts should assert jurisdiction over an
insurance
company’s
indemnity
issues
declaratory
ancillary
to
judgment
an
action
ongoing
to
state-court
resolve
case.”
Nautilus Ins. Co. v. Grayco Rentals, Inc., No. 10-cv-133, 2011 WL
839549, *1 (E.D. Ky. Mar. 7, 2011).
In the Scott Circuit Action, Arnold has asserted claims for
negligence
and
negligence
per
se
against
the
Negligence
Defendants, and declarations as to priority and/or pro rata share
of
defense
costs
and/or
indemnity
RSUI/Landmark and Westfield policies.
payments
[DE 11-5].
between
the
Here, Westfield
asks the Court to declare that Westfield’s has no duty to pay or
extend coverage to the Negligence Defendants for any damages sought
in the Scott Circuit Action.
[DE 1 at 9].
Thus, there can be no
doubt that the issues in the Scott Circuit Action and the instant
case are inextricably intertwined:
the issue of Westfield’s duty
to defend and indemnify is tied to the overall liability of the
5
Negligence Defendants as well as the responsibility of the other
insurance players, RSUI/Landmark, notably, who are not parties to
this action.
Sixth Circuit precedent suggests that, often times, while
“declaratory actions might clarify the legal relationship between
the insurer and the insured, they do not settle the ultimate
controversy between the parties which is ongoing in state court.”
Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 555 (6th Cir. 2008);
see also Travelers Indem. Co. v. Bowling Green Prof'l Assoc., PLC,
495 F.3d 266 (6th Cir. 2007) (district court erred in exercising
jurisdiction
where
declaratory
judgment
would
not
settle
the
separate action); U.S. Fire Ins. Co. v. Abex Aluminum, Inc., 161
F. App'x 562, 565 (6th Cir. 2006) (unpublished); State Auto Ins.
Co. v. Kennedy Homes, LLC, No. 09-cv-178, 2011 WL 65880, *2 (E.D.
Ky. Jan. 10, 2011)(“In the present case, the declaratory action
will not settle the ultimate controversy.
State Auto is not a
party to the underlying state court action, and similarly, the
state court plaintiffs and co-defendants are not parties to this
action.”).
Here, the Court finds that because the priority between the
relevant insurance policies will not be decided in this action nor
will the liability of the Negligence Defendants be decided, any
ruling by this Court will not settle the underlying controversies
of the Scott Circuit Action.
Moreover, unless the Court were to
6
decide in favor of Westfield, and still, even so, deciding the
narrow issue of Westfield’s duty to indemnify may actually confuse,
rather than clarify, the wider controversy of the negligence claims
as well as the duties of the other relevant insurers.
reasons,
the
first
factor
counsels
against
For these
exercising
jurisdiction.
Clarification of Legal Relations
The second Grand Trunk factor requires the Court to analyze
whether the declaratory action will serve a useful purpose in
clarifying the legal relations in issue.
326.
Grand Trunk, 746 F.2d at
As stated above, because the other relevant insurers, namely
RSUI/Landmark, are not parties to this action, it is impossible
for
this
Court
to
adequately
clarify
surrounding the insurance policies at issue.
the
legal
relations
If the Court were to
determine whether the Westfield policy provides for a defense
and/or indemnify, as Westfield requests, only a partial answer to
the complex insurance questions surrounding the underlying action
will be provided.
The question of priority and reimbursement of
defense costs, which are contended in the Scott Circuit Action,
will remain, especially given RSUI/Landmark’s “eroding policy”
defense.
Therefore, the second factor also weighs in favor of
dismissal of this action.
Procedural Fencing and the Race for Res Judicata
7
The
third
factor
is
intended
plaintiffs from forum-shopping.
to
prevent
declaratory
The Court must evaluate whether
the plaintiff “has filed in an attempt to get its choice of forum
by filing first.”
Scottsdale, 513 F.3d at 555.
There is little
doubt that once Westfield was ultimately disclosed as an insurer,
the state court’s consideration of the issue raised here – i.e.
whether
Westfield
has
a
inevitable and looming.
duty
to
defend
and
indemnify
–
was
However, because Westfield was not yet a
party to the Scott Circuit Action when Westfield filed the instant
action, the Court is reluctant to impute improper motive to
Westfield by filing this action.
Id. at 558.
assuming
in
that
declaratory
Westfield
judgment
acted
herein,
the
good
Nevertheless, even
faith
ultimate
in
seeking
outcome
of
a
its
procedural behavior has been to remove this case from the natural
plaintiff's control, which weighs against this Court exercising
jurisdiction.
See
Stand.
Ret.
Services,
Inc.
v.
Kentucky
Bancshares, Inc., No. 5:14-cv-26, 2014 WL 4783016, at *4 (E.D. Ky.
Sept. 24, 2014).
Therefore, the third factor also weighs in favor
of dismissal.
Friction Between Federal and State Courts
“The Supreme Court has cautioned that where another suit
involving
the
same
parties
and
presenting
opportunity
for
ventilation of the same state law issues is pending in state court,
a
district
court
might
be
8
indulging
in
‘[g]ratuitous
interference,’ if it permitted the federal declaratory action to
proceed.”
omitted).
Scottsdale,
513
F.3d
at
559
(internal
citations
Nevertheless, “the mere existence of a state court
proceeding is not determinative of improper federal encroachment
upon state jurisdiction.”
Id. at 560.
Thus, when considering
the fourth factor, district courts must analyze the following three
sub-factors:
(1)
whether
the
state
court's
fact-finding
is
necessary to the declaratory judgment; (2) which court, federal or
state, is in a better position to resolve the issues; and (3)
whether the issue in the federal action implicates important state
policies and thus more appropriate for state court. Id.
One issue before the state court in the Scott Circuit Action
is whether any of the defendants engaged in intentional misconduct
during discovery.
This issue directly affects the “erosion”
defense of RSUI/Landmark, and likewise, the interplay of all
insurance policies involved.
Thus, the first sub-factor weighs in
favor of dismissal because the state court’s resolution of certain
factual issues is necessary for this Court’s resolution of the
declaratory judgment action.
Id.
As to the second sub-factor, the Court finds that the state
court is in a better position to resolve the issues because,
through the Fourth Amended Complaint, all relevant issues and
parties are before the state court and the parties therein have
already engaged in nearly two years of litigation and discovery.
9
In this action, Westfield seeks a declaration that it has no
duty to pay or indemnify the defendants for any damages sought in
the Scott Circuit Action. [DE 1, 1-2].
Analyzing the Westfield
policy to determine whether the claimed loss is covered or whether
exclusions are triggered, i.e. whether Arnold’s allegation of
negligence concern use of an automobile and are subject to a
professional services exclusion, requires analysis of state law,
including potentially the Kentucky Motor Vehicle Reparations Act
and the Kentucky Board of Emergency Medical Services, for which
the state court is better suited to resolve.
State Auto., 2011 WL
65880 at *6 (“While federal courts are certainly competent to
resolve insurance contract disputes […] “[t]he Sixth Circuit has
found that states are in a better position to resolve insurance
contract disputes because they are more familiar with state law,
regulate the insurance companies for the protection of their
citizens, and are in the best position to identify and enforce the
public policies underlying those regulations.”);
In sum, weighed together, the three sub-factors of the fourth
Grand Trunk factor also indicate that this Court should decline to
exercise jurisdiction over the declaratory judgment suit.
Alternative Remedies
Because
this
action
would
not
resolve
the
many
complex
insurance issues at play in the Scott Circuit Action, especially
in light of the fact that RSUI and Landmark are not parties to
10
this
action,
the
better
alternative
is
for
this
declaratory
judgment action to be decided in the Scott Circuit Action. Indeed,
the Sixth Circuit has noted that is the better alternative, stating
that declaratory actions seeking an opinion regarding indemnity
issues “should normally be filed, if at all, in the court that has
jurisdiction over the litigation which gives rise to the indemnity
problem.”
Bituminous Cas. Corp. v. J & L Lumber Co., Inc., 373
F.3d 807, 812 (6th Cir. 2004) 812 (quoting
Manley, Bennett,
McDonald & Co. v. St. Paul Fire & Marine Ins. Co., 791 F.2d 460,
463 (6th Cir.1986)). If the actions are filed in two separate
courts “confusing problems of scheduling, orderly presentation of
fact issues and res judicata are created.” Id. (quoting Manley,
791 F.2d at 463). Therefore, the fifth factor also weighs against
the Court exercising jurisdiction.
III.
In conclusion, the Court finds that all five Grand Trunk
factors
weigh
jurisdiction
in
over
favor
of
this
Westfield’s
Court
declining
declaratory
to
exercise
judgment
action.
Accordingly, it is hereby ORDERED as follows:
(1)
the Motion to Dismiss filed by Defendant, Casey Arnold,
individually, as adminstratrix of the Estate of Chad Arnold, and
as Next Friend and Guardian/Conservator of Miles Arnold [DE 11] is
GRANTED;
(2)
the Motion to Dismiss filed by Defendants, Mediport,
11
LLC, Dr. Timothy Carroll, Richard Covington, and Steve Morris [DE
12] is GRANTED;
(3)
Plaintiff’s action for declaratory judgment [DE 1] is
DISMISSED without prejudice.
This the 14th day of April, 2016.
12
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