Atain Specialty Insurance Company v. Davester LLC et al
Judge Indira Talwani: ORDER entered. MEMORANDUM AND ORDER: DENYING Hospitality's Motion to Stay 19 with respect to Atain's duty to defend, and GRANTING the motion with respect to Atain's duty to indemnify. (Vieira, Leonardo)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
ATAIN SPECIALTY INSURANCE CO.,
DAVESTER LLC d/b/a EMBARGO,
NEWMAN GALATI, TOWN TAXI
OF CAPE COD, INC., HUDSON
AGUIAR, and HOSPITALITY MUTUAL *
Civil Action No. 19-cv-11634-IT
MEMORANDUM & ORDER
October 10, 2019
This action by Plaintiff Atain Specialty Insurance Company (“Atain”) seeks a declaration
that Atain is not obliged to defend or indemnify its insured, Defendant Davester LLC d/b/a
Embargo (“Embargo”), with regard to claims in a state court proceeding entitled Newman Galati
v. Hudson Aguiar, Davester, LLC d/b/a Embargo, and Town Taxi of Cape Cod, Inc., Civ. A. No.
1972-CV-0283 (Barnstable Cty. Super. Ct. June 6, 2019) (“State Action”). Atain names as
Defendants here the four parties to the underlying action, as well as another insurer, Hospitality
Mutual Insurance Company (“Hospitality”). Hospitality now asks the court to stay this action
until the conclusion of the State Action. Motion to Stay [#19]. For reasons stated below,
Hospitality’s Motion to Stay [#19] is DENIED as to the issue of whether Atain has a duty to
defend Embargo in the State Action and GRANTED as unopposed as to the duty to indemnify.
In the State Action, Newman Galati asserts that he was a patron of Embargo, a restaurant,
that he was “highly and visibly intoxicated and unable to manage his own being,” and that
Embargo employees arranged for and placed him in a taxi with instructions to transport him
home. State Action Complaint (“State Action Compl.”) ¶ 7, attached as Ex. 1 to Mem. in Supp.
of Mot. to Stay [#20-1]. Galati alleges further that the taxi driver let him exit the vehicle, and that
he was subsequently struck by a car driven by Hudson Aguiar. Id. at ¶¶ 10, 11. Galati suffered
serious injuries, including amputation of his leg. Id. at ¶ 26. Galati alleges that Embargo
breached a duty of care for its patrons’ safety and well-being by putting a “highly and visibly
intoxicated Newman Galati into a taxicab instead of calling for medical services or the police.”
Id. at ¶ 22(a). Galati also asserts claims against Aguiar and Town Taxi of Cape Cod, Inc. Atain is
currently providing Embargo with a defense, under a reservation of rights. Mem. in Supp. of
Mot. to Stay 4 [#20].
In the action here, Atain asserts that the insurance policy at issue excludes coverage for
the claims asserted in the State Action. Opp. to Mot. to Stay 1 [#21]. Atain seeks a declaration
that it has neither a duty to defend nor a duty to indemnify Embargo (or any other entity) for the
claims made against Embargo in the State Action. Id. On September 25, 2019, Hospitality filed a
motion to stay on the grounds that the State Action is parallel, as it involves the same factual
issues, and that permitting this litigation to go forward will create piecemeal litigation. Mem. in
Supp. of Mot. to Stay [#20]. Hospitality further argues that all parties are amenable to process in
the State Action, that staying this action will avoid uneconomical proceedings, and that neither
case raises issues of federal law. Id. Atain does not object to staying this case with respect to its
claims regarding the duty to indemnify but opposes a stay of its claims regarding the duty to
defend. Opp. to Mot. to Stay 1 [#21].
“[D]istrict courts possess discretion in determining whether and when to entertain an
action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter
jurisdictional prerequisites.” Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995) (interpreting
Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942)). In exercising that discretion, the
court finds that the underlying action and the duty to defend claim involve distinct factual and
legal disputes. The State Action is directed to issues of liability relating to Mr. Galati’s injury;
whereas the duty to defend the claim is focused on whether, under the insurance policy at issue,
Atain is obligated to defend the State Action.
Importantly, the duty to defend can be resolved without adjudication of the issues in the
State Action. Under Massachusetts law, the duty to defend under an insurance policy arises when
‘“the allegations in a complaint are reasonably susceptible of an interpretation that states or
roughly sketches a claim covered by the policy terms,’ notwithstanding the possibility that the
underlying claim may ultimately fail, or that the merits of the claim are weak or frivolous.”
Holyoke Mut. Ins. Co. in Salem v. Vibram USA, Inc., 480 Mass. 480, 484 (2018) (quoting
Billings v. Commerce Ins. Co., 458 Mass. 194, 200 (2010)). See also Mt. Airy Ins. Co. v.
Greenbaum, 127 F.3d 15, 19 (1st Cir. 1997) (stating that an insurer is obligated to defend a claim
that falls within a policy’s coverage “[e]ven if the claim is baseless, as it is the claim which
determines the insurer’s duty to defend”) (internal citations omitted). Because the inquiry as to
Atain’s duty to defend will focus on the allegations of the complaint, without adjudication of the
underlying question of whether Embargo will ultimately be liable in the State Action, the
differences between the two actions weigh against granting a stay. See Atain Specialty Ins. Co.
v. Bos. Rickshaw LLC, 387 F. Supp. 3d 157, 160 (D. Mass. 2019) (finding that a question of
whether an insured owed a duty to defend is ripe even if the issue of liability in the underlying
lawsuit is unresolved).
The court recognizes that “at least where another suit involving the same parties and
presenting opportunity for ventilation of the same state law issues is pending in state court,” the
district court should take care to not “indulg[e] in ‘[g]ratuitous interference’” by permitting the
federal declaratory action to proceed. Wilton, 515 U.S. at 283 (citing Brillhart, 316 U.S. at 495).
Accordingly, before denying Hospitality’s motion to stay, the court considers factors that the
Supreme Court has identified as guidance for a district court in determining whether to exercise
jurisdiction, including “the scope of the pending state court proceedings and the nature of
defenses open there,” which “in turn, entails consideration of ‘whether the claims of all parties in
interest can be adjudicated satisfactorily in the state proceeding, which turns on whether
necessary parties have been joined, whether all necessary parties are amenable to process in the
state proceeding, and the virtue of avoiding uneconomical proceedings, etc.’” Wilton, 515 U.S.
at 283 (quoting Brillhart, 316 U.S. at 495); see also Petricca v. FDIC, 349 F. Supp. 2d 64, 67 (D.
Mass. 2004) (stating that in determining whether to exercise its discretion to dismiss or stay an
action, a court should compare the nexus between the two suits and consider the totality of the
circumstances); Travelers Cas. & Sur. Co. v. Boston Gas Co., 76 F. Supp. 2d 59, 62 (D. Mass.
1999) (applying the Wilton-Brillhart factors).
Here, none of the Wilton-Brillhart factors tilt in favor of granting a stay. Neither Atain
nor Hospitality are parties in the State Action. Because Atain would have to bring a separate
declaratory judgment action to adjudicate this matter in state court, the court does not find that
the claims of the parties of interest can be adjudicated satisfactorily in the existing state
proceeding or that all necessary parties have been joined. See Flectat Ltd. v. KASL Seabreeze,
LLC, 257 F. Supp. 3d 152, 156 (D. Mass. 2017). Likewise, because Atain would need to initiate
a separate action in order to seek relief and must defend Embargo pending that relief, the “virtue
of avoiding uneconomical proceedings” weigh in favor of allowing the action to proceed here.
Wilton, 515 U.S. 277 at 283.1
In sum, the court finds that the distinctions between the inquiries weigh in favor of
proceeding on the duty to defend claim, and that the Wilton-Brilhart factors do not weigh against
proceeding in this manner. Atain does not oppose staying the action as to the duty to indemnify.
Accordingly, the court DENIES Hospitality’s Motion to Stay [#19] with respect to Atain’s duty
to defend, and GRANTS the motion with respect to Atain’s duty to indemnify.
IT IS SO ORDERED.
Date: October 10, 2019
/s/ Indira Talwani
United States District Judge
Hospitality relies on two cases to assert that this case should be stayed pending resolution of the
State Action. See Mem. in Support of Mot. to Stay 4-5 [#20] (citing Flectat, 257 F. Supp. 3d 152
and Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Mar. Terminal, Inc., No. 14-14541, 2015 WL
3952766 (D. Mass. June 29, 2015)). However, those cases, in which the courts found common
factual issues between the underlying state action and federal declaratory action, are
distinguishable from the case at hand. In Nat’l Union Fire Ins., a key issue related to an exclusion
pertaining to the nature of a temperature failure in a warehouse was an issue that was also central
to the merits of the state court case. 2015 WL 3952766, at * 6. Focusing on the duty to
indemnify, the court found that factual similarities between the state and federal case weighed in
favor of staying that case. Similarly, in Flectat, the parties agreed that there was a “substantial
overlap between the necessary factual determinations in the state court action” and federal court
action, and sought to resolve that issue by asking the federal court to decide only some of the
claims. 257 F. Supp. 3d at 158. Considering the potential for piecemeal litigation, as well as
other issues of judicial economy, the court found that the factors weighed in favor of abstention.
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