McFerrin et al v. United Specialty Insurance Company et al
ORDER granting 4 Motion to Dismiss for Failure to State a Claim; granting 4 Motion to Dismiss for Lack of Jurisdiction. Case dismissed. Signed by Judge Charles C. Lovell on 9/15/2016. (MKB)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
CARMEN L. McFERRIN, as Personal
Representative of the Estate of
GREGORY B. McFERRIN; and
CARMEN L. McFERRIN, individually,
UNITED SPECIALTY INSURANCE
COMPANY; MUHAMMAD “WALEED”
KHAN; AARAV TRUCKING, LLC;
GREWAL TRANS, INC.; and SAC
Before the Court is a Motion to Dismiss filed by Defendant United
Specialty Insurance Company. The motion is opposed by Plaintiff Carmen L.
The events underlying this declaratory judgment action occurred on
March 9, 2015, when a semi-truck driver named Asad Khan crossed a centerline
on Highway 12 and struck a pickup driven by McFerrin’s husband, Gregory
McFerrin, killing him. His widow, Carmen McFerrin, has previously settled her
claims against Asad Khan. McFerrin claims that Asad Khan was driving
distracted because he was talking on his cell phone with Defendant Muhammad
“Waleed” Khan (“Defendant Khan”), who was also driving a similar tractor/trailer
on the highway, just ahead of Asad. McFerrin asserts in this lawsuit that
Defendant Khan is liable for his own negligent acts leading up to and contributing
to the Asad Khan/McFerrin crash.
Both Defendant Muhammad Khan and Asad Khan were employees of
Defendant AARAV Trucking, Inc. (a California corporation), and driving on
behalf of Defendant Grewal Transportation, Inc. (a California corporation). The
trailer pulled by Defendant Muhammad Khan’s tractor was allegedly owned by
Defendant SAC Trans and leased to Grewal Transportation.
Defendant United Specialty Insurance Company (“United Specialty”) issued
a 2014-15 policy to Sac Trans Inc. in Alameda County, California, covering the
trailer pulled by Muhammad Khan. United Specialty contends there is no
coverage under the policy because the crash was not caused by the trailer that it
insured. United Specialty further asserts that its named insured–Sac Trans–was
not acting as a for-hire motor carrier in its leasing of the trailer.
As stated above, McFerrin has settled her claims against Asad Khan, the
driver who collided with Gregory McFerrin’s pickup truck on Highway 12.
Having settled her claims against Asad Khan, on October 5, 2015, Carmen
McFerrin filed a complaint against Muhammad Khan in First Judicial District,
Broadwater County, Montana. That lawsuit was removed by Muhammad Khan to
federal district court on November 9, 2015. See McFerrin v. Muhammad Waleed
Khan, AARAV Trucking, Grewal Trans Inc., Sac Trans Inc., Farasat Khan,
Farhan Khan, and C.H. Robinson Worldwide, Inc., CV 15-100-H-SEH. That
action is currently in discovery, and the district court recently denied Grewal
Trans Inc.’s motion for judgment on the pleadings. In that case, United Specialty
is providing defense counsel to Muhammad Khan under a reservation of rights.
On November 23, 2015, United Specialty (organized in Delaware and
having a principal place of business in Texas) filed a declaratory judgment action
in Alameda County Superior Court, California, against all the parties, asserting
that it was not liable under Sac Trans Inc.’s policy for the injuries suffered by
McFerrin. United Specialty Insurance Co. v. Muhammad Khan, AARAV Trucking
Inc., Sac Trans Inc., Grewal Transportation Inc., and Carmen McFerrin,
CV RG15794426. (See Doc. 5-1.) Excepting McFerrin, four of the five
defendants of this California declaratory judgment action are California citizens.
In response to the filing of this California declaratory judgment action,
McFerrin filed the instant declaratory judgment action in this Montana federal
district court, alleging that United Specialty is liable for McFerrin’s injuries
pursuant to the Sac Trans Inc. trailer policy.
Defendant United Specialty bases its motion to dismiss on two grounds.
First, United Specialty asserts that McFerrin’s complaint in this action violates
Montana’s ‘no direct action’ rule. Second, United Specialty asks that this Court
exercise its discretion under the Brillhart/Wilton exception to decline to accept
jurisdiction over this declaratory judgment action.
A long-standing rule of Montana common law is that “direct actions against
a liability insurer [by a third-party claimant] contravene the common law...”
Ulrigg v. Jones, 274 Mont. 215, 907 P.2d 937 (Mont. 1995); State Farm Mutual
Automobile Ins. Co. v. Solem, 191 Mont. 156, 622 P.2d 682 (Mont. 1981); Conley
v. USF&G Company, 98 Mont. 31, 37 P.2d 565 (1934); Cummings v. Reins
Copper Co., 40 Mont. 599, 107 P.2d 684 (1910). A third-party claimant’s first
obligation is to “establish that the insured was liable for the injuries or damages
for which coverage under the policy is claimed. Simply put, unless and until the
tort claimant establishes the liability of the tortfeasor, then there are no injuries or
damages ‘covered by the policy.’” Ulrigg, 907 P.2d 937 at 944. Until that
adjudication is completed, the third-party claimant is a stranger to the contract and
cannot sue the insurer without explicit statutory authorization. In 1981, the
Montana Supreme Court called this a “long-established Montana rule . . . that a
direction action against an insurer does not lie until the liability of the insured has
been established....” Solem, 622 P.2d at 684-85 (citing Conley v. USF&G Co. and
Cummings v. Reins). Because liability is still undetermined, this declaratory
judgment action against the insurer is indeed premature and in violation of
Montana’s no-direct action rule.
McFerrin cites an Unfair Trade Practices Act case, Ridley v. Guaranty
National Ins. Co., 286 Mont. 325, 951 P.2d 987 (Mont. 1997), for the proposition
that a third-party claimant may bring a declaratory judgment action against an
insurer prior to final settlement. However, the Ridley case is distinguishable
because in Ridley liability was already reasonably clear and, in particular, the
third-party claim was brought pursuant to a specific Montana statute (setting forth
the insurer’s duty to pay a third-party’s medical expenses). Such is not the case
here. Liability has not been determined, and the underlying claim in the instant
lawsuit is not a UTPA statutory violation but an interpretation of the insurance
In Ulrigg v. Jones, 274 Mont. 215, 907 P.2d 937 (1995), the Montana
Supreme Court reiterated the long-standing common law rule that liability of the
insured must be established before a third-party claimant may file an action
against an insurance carrier. For a justiciable controversy to exist, a ruling on the
duty to indemnify must not be speculative. Therefore, the determination whether
United Specialty owes a duty to indemnify should not precede a determination
whether Muhammad Khan is liable for the injuries suffered by McFerrin. See
Skinner v. Allstate Ins. Co., 329 Mont. 511, 127 P.3d 359 (Mont. 2005) (citing
Northfield Ins. Co. v. Montana Ass’n of Counties, 301 Mont. 472, 10 P.3d 813,
¶12 (Mont. 2000)).
United Specialty’s second basis for dismissal is that declaratory judgment
jurisdiction under 28 U.S.C. 2201(a) is not obligatory, and an identical declaratory
judgment action is already pending in a California state court. The Court notes
that the insured and all other defendants (save McFerrin) are California citizens.
Under the Brillhart/Wilton exception to declaratory judgment jurisdiction, a
federal district court may, in its discretion, decline to exercise jurisdiction over a
declaratory judgment action even though all jurisdictional requirements have been
met. Wilton v. Seven Falls Co., 515 U.S. 277, 282, 115 S.Ct. 2137 (1995) (citing
Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494, 62 S.Ct. 1173, 86 L.Ed.
1620 (1942)). It is considered generally to be “vexatious for a federal court to
proceed in a declaratory judgment suit where another suit is pending in a state
court presenting the same issues, not governed by federal law, between the same
parties.” Brillhart, 316 U.S. at 495. Indeed, a presumption is raised in favor of
declining jurisdiction when a parallel state court action is pending. Gov’t Emps.
Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (en banc).
When considering whether to abstain in a declaratory judgment action, a
court should “balance concerns of judicial administration, comity, and fairness to
the litigants.” Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 672 (9th Cir. 205)
(internal citations omitted). Further factors that should be given consideration are
(1) avoiding “needless determination of state law issues”; (2) discouraging “forum
shopping”; and (3) avoiding “duplicative litigation.” R.R. St. & Co. v. Transp.
Ins. Co., 656 F.3d 966, 975 (9th Cir. 2011). When diversity is the only basis for
jurisdiction, a determination that these factors favor abstention should “weigh
heavily in favor of dismissing the action.” Central United Life Ins. Co. v. Estate
of Gleason, No. CV 11-31-H-DWM, 2011 WL 6258448, at *2. The lack of a
compelling federal interest by itself supports abstention. R.R. St. & Co., 656 F.3d
at 975. McFerrin’s declaratory judgment claim is based on the diversity
jurisdiction of the parties and is duplicative litigation. The parallel California
litigation was filed first. In addition, the instant litigation violates Montana’s nodirection action rule. Under all these circumstances, this Court concludes that
accepting jurisdiction in this case would be contrary to the interests of comity and
The Court has considered McFerrin’s argument that the California court has
no personal jurisdiction over her and that she is not amenable to service of process
in the California proceeding. This may well be, but the California court is capable
of deciding whether McFerrin is a necessary party to that proceeding. In any
event, a declaratory judgment action filed by McFerrin is premature until liability
has been adjudicated.
IT IS HEREBY ORDERED that Defendant United Specialty Insurance’s
Motion to Dismiss For Failure to State a Claim and Motion to Dismiss for Lack of
Jurisdiction (Doc. 4) are both GRANTED. This case is DISMISSED, and the
Clerk of Court is directed to close the case.
Dated this 15th day of September, 2016.
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