Great American Alliance Insurance Company v. Windermere Baptist Conference Center, Inc. et al

Filing 31

ORDER denying Defendant's motion to stay, Doc. 25 . Signed by Judge Nanette Laughrey on 7/18/2016. (Hatting, Elizabeth)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MISSOURI
CENTRAL DIVISION
GREAT AMERICAN ALLIANCE
INSURANCE COMPANY,
Plaintiff,
vs.
WINDERMERE BAPTIST
CONFERENCE CENTER, INC., et al.,
Defendants.

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No. 2:16-cv-04046-NKL

ORDER
Pending before the Court is Defendant Windermere Baptist Conference Center,
Inc.’s motion to stay, Doc. 25. For the reasons set forth below, Windermere’s motion is
denied.
A.

Background
Plaintiff Great American Alliance Insurance Company filed this motion under the

Declaratory Judgment Act, seeking a declaration that it has no duty to defend or
indemnify Windermere in a lawsuit currently pending in the Circuit Court of Morgan
County, Missouri. The Morgan County lawsuit was filed by Jeremy and Karlee Richards,
who seek damages from Windermere for claims arising out of injuries Karlee Richards
sustained while attending a camp at Windermere’s facilities.

Great American has

declined to provide a defense to Windermere in the Morgan County lawsuit.

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B.

Discussion
Windermere contends that this action should be stayed because it is a parallel

proceeding to the Morgan County action. “Suits are parallel if the substantially same
parties litigate substantially the same issues in different forums. . . . As a functional
matter, though, state proceedings are parallel if they involve the same parties or if the
same parties may be subject to the state action and if the state action is likely to fully and
satisfactorily resolve the dispute or certainty at the heart of the federal declaratory
judgment action.” Lexington Ins. Co. v. Integrity Land Title Co., Inc., 721 F.3d 958, 968
(8th Cir. 2013) (quotations omitted).
This declaratory judgment is not a parallel proceeding to the Morgan County
lawsuit. Great American is not a party to the liability suit. Moreover, the coverage issues
raised by Great American in this lawsuit are not pending before the Morgan County court
in any form. In this declaratory judgment action Great American has asked the Court to
determine whether it owes Windermere a duty to defend or indemnify it under the terms
of the applicable insurance policy. While this determination may necessitate a few
factual inquiries similar to those being made in the Morgan County liability action, the
fact that there may exist a few overlapping factual issues does not make this a parallel
action. See id. at 970 (“Resolution of Fidelity’s tort and contract claims against Integrity
would demand no interpretation of the E & O policy nor clarify for Lexington whether it
owed a defense to Integrity in Fidelity’s two lawsuits.”). Given the distinct parties and
distinct issues raised in the lawsuits, they are not parallel proceedings.

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Windermere contends that even if the lawsuits are not parallel proceedings, the
Court may still choose to stay the case. The Eighth Circuit has identified six Scottsdale
factors to apply to determine whether a stay is appropriate in the absence of a parallel
proceeding:
(1) [W]hether the declaratory judgment sought will serve a useful
purpose in clarifying and settling the legal relations in issue;
(2) [W]hether the declaratory judgment will terminate and afford
relief from the uncertainty, insecurity, and controversy giving
rise to the [federal] proceeding;
(3) [T]he strength of the state’s interest in having the issues raised in
the federal declaratory judgment action decided in the state
courts;
(4) [W]hether the issues raised in the federal action can more
efficiently be resolved in the court in which the state action is
pending;
(5) [W]hether permitting the federal action to go forward would
result in unnecessary entanglement between the federal and state
court systems, because of the presence of overlapping issues of
fact or law; and
(6) [W]hether the declaratory judgment action is being used merely
as a device for procedural fencing – that is, to provide another
forum in a race for res judicata or to achiev[e] a federal hearing
in a case otherwise not removable.
Scottsdale Ins. Co. v. Detco Industries, Inc., 426 F.3d 994, 998 (8th Cir. 2005). “Where
no [] parallel state action is pending, discretion to abstain or grant a stay still exists, but
that discretion is less broad . . . .” Lexington, 721 F.3d at 968.
The Scottsdale factors do not weigh in favor of the requested stay in this case.
Factors one, two, and four do not support a stay of the case. The declaratory judgment
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sought would clearly be useful for clarifying whether Great American owes Windermere
a duty to defend or indemnify; resolution of this question will settle the coverage
controversy. These issues are distinct from the liability questions being raised in the
Morgan County action, and given the differing parties and legal questions it is far from
certain that coverage could be more efficiently litigated in state court.1

See id. at 971

(concluding that factors one, two, and four supported denial of a state where the state
court action involved distinct issues concerning liability and resolution of the coverage
issues in state court was neither certain nor efficient).
Factor three is relatively neutral. Windermere has not advanced any argument to
explain why the state court has a unique interest in presiding over the coverage dispute.
The parties are diverse and the amount in controversy exceeds $75,000, which satisfies
the requirements for federal diversity jurisdiction. Absent some compelling interest of
the state of Missouri in litigating this action, the lawsuit’s relation to the pending liability
action in Morgan County is insufficient to conclude that factor three weighs in favor of a
stay.
Factors five and six also do not weigh in favor of the requested stay. While
Windermere correctly points out that there are some overlapping factual issues between
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Windermere contends at multiple points that the Court should grant the requested stay
because it is a non-profit with limited resources and the costs of litigating in state and
federal court are significant. The costs of litigation for Windermere do not justify a stay
for two reasons. First, given the independent issues in the liability and coverage suits, it
is overwhelmingly likely that even if the Court granted a temporary stay this case would
eventually have to be litigated and Windermere would incur the corresponding costs of
this litigation anyway. Second, if the Court ultimately determines that Great American
breached its duty to defend, Windermere may be entitled to reimbursement of the
expenses incurred to defend itself in the liability action.
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the liability and coverage actions, it overlooks the significant distinctions between the
legal issues relevant to the declaratory judgment action and those at issue in the liability
suit.
As both parties recognize, the coverage dispute in the declaratory judgment action
requires determinations of whether Great American had a duty to defend and whether it
has a duty to indemnify Windermere for any judgment arising out of the liability action.
The Missouri Supreme Court has specifically distinguished between the issues relevant to
the duty to defend and the facts ascertained through a trial in a liability action:
‘The duty to defend is broader than the duty to indemnify. To
suggest that the insured must prove the insurer’s obligation to pay
before the insurer is required to provide a defense would make the
duty to defend provision a hollow promise[.] The duty to defend
arises whenever there is a potential or possible liability to pay based
on the facts at the outset of the case and is not dependent on the
probable liability to pay based on the facts ascertained through trial.
The duty to defend is determined by comparing the language of the
insurance policy with the allegations in the complaint. If the
complaint merely alleges facts that give rise to a claim potentially
within the policy’s coverage, the insurer has a duty to defend.’
Columbia Cas. Co. v. HIAR Holding, L.L.C., 411 S.W.3d 258, 265 n.10 (Mo. 2013)
(emphasis in original) (quoting McCormack Baron Mgmt. Servs., Inc., 989 S.W.2d 168,
170-71 (Mo. 1999)). Even if the Court determines that Great American had a duty to
defend Windermere, this does not necessarily mean that it will be required to indemnify
Windermere, as the duty to indemnify “turns on whether the claim is actually covered by
the Policy.” Am. Econ. Ins. Co. v. Jackson, 476 F.3d 620, 624 (8th Cir. 2007).
The coverage issues in this declaratory judgment action require independent
factual determinations regarding the content of the complaint in the liability action and
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language of the insurance policy. These are not the same facts being decided in the
liability action. It would be inefficient to stay the declaratory judgment action simply
because it is possible at some point in the future that the Court could be called upon to
decide a factual issue which overlaps with the liability action. If there comes a time
when the Court determines that it cannot proceed in this case due to the potential for
inconsistency with the liability action, the case may be stayed at that point. Given the
need for independent discovery on coverage and legal determinations of the issues
associated with coverage, however, a stay at this point would only serve to delay the case.
See Ex. A, First Mercury Insurance Co. v. Quaff, Inc., Case No. 4:14-cv-00299-BCW,
Doc. #26 (W.D. Mo. Oct. 6, 2014) (denying stay); Ex. B., Cincinnati Specialty
Underwriters Ins. Co. v. Solaris Power Services, LLC, 2015 WL 3544857 (W.D. Mo.
June 4, 2015) (denying stay).
C.

Conclusion
For the reasons set forth above, Defendant’s motion to stay, Doc. 25, is denied.

/s/ Nanette K. Laughrey
NANETTE K. LAUGHREY
United States District Judge
Dated: July 18, 2016
Jefferson City, Missouri

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