Everett Cash Mutual Insurance Co. v. Mann et al

Filing 28

MEMORANDUM OPINION AND ORDER by Chief Judge Greg N. Stivers on 1/18/2019. Respondent's Motion for Leave to Supplement (DN 21 ) is GRANTED. Respondent's Motion to Dismiss (DN 15 ) is GRANTED, and this matter is dismissed without prejudice. The Clerk shall strike this matter from the active docket.cc:counsel; Ann Batterton (JWM)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
BOWLING GREEN DIVISION
CIVIL ACTION NO. 1:17-CV-00201-GNS
EVERETT CASH MUTUAL INSURANCE CO.

PETITIONER

v.
JACKIE MANN, et al.

RESPONDENTS

MEMORANDUM OPINION AND ORDER
This matter is before the Court on Respondent’s Motion to Dismiss (DN 15) and
Respondent’s Motion for Leave to Supplement (DN 21). The motions are ripe for adjudication.
For the reasons outlined below, the motions are GRANTED.
I.

STATEMENT OF FACTS AND CLAIMS

On July 13, 2017, Respondent Mark Adam Bennett (“Bennett”), an employee of Mann
Construction, LLC (“Mann Construction”), was injured when a lift operated by Respondent Jackie
Mann (“Mann”) fell over and knocked Bennett off the roof of a structure where trusses were being
set. (Pet. ¶ 9, DN 1). Bennett was hospitalized for more than three weeks following his fall, and
the medical expenses from his hospitalization exceed $382,000.
On the day of the accident, Mann provided notice to Petitioner Everett Cash Mutual
Insurance Co. (“Everett Cash”), which had issued a small contractor policy to “Jackie Mann d/b/a
Mann Construction.” (Pet. ¶¶ 7, 9). The coverage limits on the policy for bodily injury and

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property damage are $1 million for each occurrence. On November 6, 2017, Mann submitted a
notice of a property damage claim relating to the accident. (Pet. ¶ 12).
On December 15, 2017, Everett Cash petitioned this Court for a declaratory judgment to
determine whether there was coverage under the policy for these losses and whether Mann made
false statements in his application for insurance coverage. (Pet. ¶¶ 40-96). Subsequently, on
February 14, 2018, Bennett and his wife (“the Bennetts”) filed a lawsuit against Mann, Mann
Construction, and Everett Cash in Russell Circuit Court. (Resp’t’s Mot. Dismiss. Ex. A, DN 151). In that lawsuit, the Bennetts asserted personal injury claims and seek a declaration of insurance
coverage relating to their tort claims. (Resp’t’s Mot. Dismiss Ex. A, ¶¶ 23-35).
II.
A.

DISCUSSION

Respondent’s Motion to Supplement (DN 21)

Bennett moves to supplement his dispositive motion with a copy of the answer and crossclaim filed by Mann in the Russell Circuit Court Action. (Resp’t’s Mot. Suppl. Mot. Dismiss, DN
21). Everett Cash objects to the motion as immaterial and irrelevant. (Pet’r’s Resp. Mot. Leave
1, DN 23). It also contends that “[t]his belated attempt to engage in procedural fencing by filing
the same claim in multiple forums, only strengthens the basis for the denial of the Respondent,
Mark Adam Bennett, [sic] motion to dismiss.” (Pet’r’s Resp. Mot. Leave 1-2). Because it is
necessary to consider all claims asserted in the Russell Circuit Court action in determining whether
to hear this declaratory judgment action, this Court will grant the motion.
B.

Respondent’s Motion to Dismiss (DN 15)

Bennett moves to dismiss this declaratory judgment action. (Resp’t’s Mot. Dismiss 2-6,
DN 15). He contends that the Court should decline to exercise jurisdiction over this litigation in
light of the related case pending in Russell Circuit Court. (Resp’t’s Mot. Dismiss 2-6).

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Under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), “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, whether or not further relief is or could be sought.” A
court’s exercise of jurisdiction under the Declaratory Judgment Act, however, is discretionary—
not mandatory. See Bituminous Cas. Corp. v. J & L Lumber Co., 373 F.3d 807, 812 (6th Cir. 2004)
(citing Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942)). When deciding if a
declaratory ruling is appropriate, a court should consider whether the judgment will serve a useful
purpose in clarifying and settling the legal relations in issue, and whether it will terminate and
afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding. See
Grand Trunk W. R. Co. v. Consol. R. Corp., 746 F.2d 323, 326 (6th Cir. 1984). In addition, the
Sixth Circuit has outlined the following factors to determine whether a district court should
exercise jurisdiction over a request for a declaratory judgment:
(1) whether the declaratory action would settle the controversy; (2) whether the
declaratory action would serve a useful purpose in clarifying the legal relations in
issue; (3) whether 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) whether
the use of a 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.
Id.; see also Scottsdale Ins. Co., 513 F.3d 546, 564 (6th Cir. 2008). The Grand Trunk factors
embody three main principles: efficiency, fairness, and federalism. See W. World Ins. Co. v. Hoey,
773 F.3d 755, 759 (6th Cir. 2014) (citation omitted).
1.

Settlement of the Controversy and Clarification of Legal Relations

In insurance coverage cases, most courts consider the first two Grand Trunk factors
together because “it is almost always the case that if a declaratory judgment will settle the
controversy, then it will clarify the legal relations in issue.” Flowers, 513 F.3d at 555 (citations

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omitted). Ultimately, “a declaratory judgment is proper if it will only have to decide purely legal
questions or engage in fact-finding that does not affect the parties in the underlying action.”
Argonaut-Midwest Ins. Co. v. Johnson, No. 3:14-CV-00395-TBR, 2014 WL 6804284, at *2 (W.D.
Ky. 2014) (internal quotation marks omitted) (citations omitted).
In this case, Everett Cash is a named party in the Russell Circuit Court action, and both the
Bennetts and Mann are seeking a declaration of rights as to whether Everett Cash’s insurance
policy provides coverage for the claims asserted against Mann in the state court action.1 While
Everett Cash requests that this Court determine that the policy should not have been issued due to
Mann’s misrepresentations, Everett Cash also seeks a determination that there is no coverage for
the claims in the Russell Circuit Court action on the basis that Bennett was employed by Mann at
the time of the injury. There is a strong likelihood that the state court will address this particular
issue as well as other factual issues that will be raised in this case. Accordingly, consistent with
the Sixth Circuit’s holding in Bituminous, the first factors weigh against this Court exercising
jurisdiction.
2.

Race for Res Judicata

The third factor considers “whether the use of the declaratory judgment action is motivated
by ‘procedural fencing’ or [is] likely to create a race for res judicata.” Flowers, 513 F.3d at 558.
The Sixth Circuit has explained that this analysis is “meant to preclude jurisdiction for ‘declaratory
plaintiffs who file their suits mere days or weeks before the coercive suits filed by a “natural
plaintiff” and who seem to have done so for the purpose of acquiring a favorable forum.’” Id.
(quoting AmSouth Bank v. Dale, 386 F.3d 763, 788 (6th Cir. 2004)). Where there is no direct

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Everett Cash moved to dismiss the claims asserted against it in the Russell Circuit Court action,
but that court denied the motion on November 27, 2018. (Pet’r’s Resp. Mot. Dismiss Ex. A, DN
16-1).
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evidence in the record to suggest a declaratory action was motivated by such “procedural fencing,”
courts “are reluctant to impute an improper motive to a plaintiff.” Id. (citations omitted).
Time is often considered in analyzing this factor. For example, this Court recently was
unwilling to impute a bad motive in a case where a plaintiff filed a declaratory action in federal
court four weeks after being put on notice of the defendants’ claim and six weeks before the
underlying action was filed. See Westerfield Ins. Co. v. Estate of McMahan, No. 3:16-CV-00809TBR, 2017 WL 1658952, at *3 (W.D. Ky. May 1, 2017). In this case, Mann put Everett Cash on
notice of the claim on November 6, 2017, and Everett Cash filed this action on December 15, 2017.
Bennett subsequently filed the Russell Circuit Court action on February 14, 2018.
As the Sixth Circuit has noted, “[a] district court should not deny jurisdiction to a plaintiff
who has not ‘done any more than choose the jurisdiction of a federal rather than a state court, a
choice given by Congress.” Flowers, 513 F.3d at 558 (quoting State Farm Fire & Cas. Co. v.
Odom, 799 F.2d 247, 250 n.1 (6th Cir. 1986)). Like this Court’s decision in Estate of McMahan,
this Court will not impute a bad motive to Everett Cash based on the timing of this action. This
factor is considered to be neutral with respect to the determination of whether to exercise
jurisdiction.
3.

Increased Friction Between Federal and State Courts

Fourth, the Court must consider “whether accepting jurisdiction would increase friction
between federal and state courts.” Id. at 559. “[T]he mere existence of a state court proceeding is
not determinative of improper federal encroachment upon state jurisdiction.” Allstate Ins. Co. v.
Green, 825 F.2d 1061, 1067 (6th Cir. 1987). There are three sub-factors this Court must consider:
(1)
whether the underlying factual issues are important to an informed
resolution of the case;
(2)
whether the state trial court is in a better position to evaluate those factual
issues than is the federal court; and
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(3)
whether there is a close nexus between the underlying factual and legal
issues and state law and/or public policy, or whether federal common law or
statutory law dictates a resolution of the declaratory judgment action.
Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6th Cir. 2000).
“First, the Court must determine whether the state court’s resolution of the factual issues
is necessary to the district court’s resolution of the declaratory judgment.” Flowers, 513 F.3d at
560. In cases seeking a declaration regarding “the scope of insurance coverage,” the Sixth Circuit
has “recognized that such questions can sometimes be resolved as a matter of law and do not
require factual findings.” Id. (citing Stewart Title, 327 F.3d at 454; Green, 825 F.2d at 1067). In
this case, this Court would have to make factual findings regarding the alleged misrepresentations
made by Mann, which could also be made by the Russell Circuit Court. Importantly, there is a
dispute as to whether Bennett was an employee of Mann Construction at the time of his injury and
therefore excluded by the policy issued by Everett Cash or whether Bennett was an independent
contractor for whom coverage existed.

Because Bennett’s injury claims are inextricably

intertwined with the determination of his employment status at the time of his injury, this subfactor weighs in favor of declining jurisdiction.
The second sub-factor “focuses on which court, federal or state, is in a better position to
resolve the issues in the declaratory action.” Flowers, 513 F.3d at 560. “Generally, state courts
are better situated than federal courts to resolve disputes over state regulated insurance contracts
and novel questions of state law.” Arrowood Indem. Co. v. Drees Co., No. 14-169-DLB-CJS,
2015 WL 136107, at *7 (E.D. Ky. 2015) (citing Travelers Indem. Co. v. Bowling Green Prof’l
Assoc., 495 F.3d 266, 272 (6th Cir. 2007); Bituminous, 373 F.3d at 815-16). Courts have also
noted, however, that “not all issues of insurance contract interpretation implicate such fundamental
state policies that federal courts are unfit to consider them.” Flowers, 513 F.3d at 561; compare
Stewart Title, 327 F.3d at 454 (reasoning that because the declaratory plaintiff-insurer was not a
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party to the state court action, and the issues before the federal court were not before the state
court, the principles of comity would not be offended) with Flowers, 513 F.3d at 561 (“despite the
clear indications from the Kentucky courts regarding how such an issue should be resolved,
Kentucky courts are in a better position to resolve the insurance policy interpretation in this case.”).
Here, there are questions of contract formation and interpretation under Kentucky law, which the
Russell Circuit Court is well-suited to address. The Court finds that this factor weighs in favor of
declining jurisdiction.
“The final sub-factor requires the court to determine whether the issue in the federal action
implicates important state policies and therefore would be more appropriate for the state court to
address.” Secura Ins. Co. v. Gray Const., Inc., 661 F. Supp. 2d 721, 730 (W.D. Ky. 2009). The
Sixth Circuit has held that issues of “insurance contract interpretation are questions of state law
with which the Kentucky state courts are more familiar and, therefore, better able to resolve.”
Bituminous, 373 F.3d at 815. Concern for public policy, and the position that state courts occupy
in best identifying and enforcing such policy, has “been frequently applied in cases of insurance
contract interpretation and [the Sixth Circuit has] held on a number of occasions that a district
court should stay or dismiss complaints filed by insurance companies seeking a declaratory
judgment as to their underlying state court lawsuits.” Travelers, 495 F.3d at 273 (collecting cases).
Because the dispute involves the formation and interpretation of an insurance policy under
Kentucky law, it appears to be more appropriate for the Russell Circuit Court to resolve the issues
raised in the Petition. The Court finds that this factor weighs in favor of abstention.
4.

Availability of Alternative Remedy

The Sixth Circuit has stated that the district court should “deny declaratory relief if an
alternative remedy is better or more effective.” Grand Trunk, 746 F.2d at 326. Following a split

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in precedent regarding “the possibility of seeking a declaratory judgment or indemnity action in
state court counsels against the district court exercising jurisdiction[,]” the Sixth Circuit held that
“rather than applying a general rule, our inquiry on this factor must be fact specific, involving
consideration of the whole package of options available to the federal declaratory plaintiff.”
Flowers, 513 F.3d at 562.
As is almost always the case, there are alternative remedies available; the question,
however, is whether any of these are better or more effective. Everett Cash is already a party to
the Russell Circuit Court action. In that action, both the Bennetts and Mann are seeking a
declaration of rights relating to insurance coverage for the claims asserted by the Bennetts there.
(Resp’t’s Mot. Dismiss Ex. A, ¶¶ 31-35; Resp’t’s Mot. Leave Suppl. Reply Ex. A, at 2-4, DN 211). Even without the assertion of any claim by Bennett and Mann against Everett Cash in the state
court action, Everett Cash would certainly be entitled to file its declaration of rights action in state
court to obtain the same relief it seeks here. While Everett Cash apparently would prefer to be in
this forum, its preference does not diminish the fact that the Russell Circuit Court can provide an
appropriate remedy.
Given that both forums can address the coverage issues, this Court cannot say that either
would necessarily be better or more effective. By declining to exercise jurisdiction over this
matter, however, this Court can avoid interfering with the state proceeding and ensure this action
does not create friction between the federal and state courts.
Thus, in light of the factors outlined by the Sixth Circuit in Grand Trunk and Bituminous,
this Court declines to exercise jurisdiction over the Petition for Declaratory Judgment. The Court
will dismiss this action.

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III.

CONCLUSION

For the reasons outlined above, IT IS HEREBY ORDERED as follows:
1.

Respondent’s Motion for Leave to Supplement (DN 21) is GRANTED.

2.

Respondent’s Motion to Dismiss (DN 15) is GRANTED, and this matter is

DISMISSED WITHOUT PREJUDICE. The Clerk shall strike this matter from the active
docket.

January 18, 2019

cc:

counsel of record

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