LEXINGTON INSURANCE COMPANY, INC. v. CONVE AVS VEGA MESA LLC et al

Filing 11

OPINION. Signed by Judge Jose L. Linares on 10/4/2016. (JB, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

LEXINGTON INSURANCE COMPANY,
INC.,
Plaintiff,

CIVIL ACTION NO. 16-5389 (JLL)

OPINION

V.

CONVE AVS VEGA MESA LLC, et al.,
Defendants.

LINARES, District Judge

LEXINGTON INSURANCE COMPANY, INC. (hereinafter, “the Insurer”)
provided professional liability insurance to Conve AVS Vega Mesa LLC (hereinafter,
“the Insured”). The Insurer brought this federal action (hereinafter, “Declaratory
Judgment Action”) for a judgment declaring that it was not obligated to defend and
indemnify the Insured in ongoing state-court litigation concerning a contract to build a
bleach manufacturing facility (hereinafter, “State Contract Action”).

(Sc dkt. 1 at

1—18.)’ The Court ordered the Insurer to show cause why this complaint should not be
dismissed pursuant to Brillhart abstention. (çç dkt. 4 at 1—5.) The Court will not restate
the contents of the Order to Show Cause.

The Court will refer to documents by the docket entry numbers and the page numbers
imposed by the Electronic Case filing System.

THE INSURER argues in response that none of the issues before this Court “will

be addressed, nor could they be adjudicated, in the State Contract Action.” (See dkt. 7 at
7.) However, there are claims pending against the Insured in the State Contract Action
concerning its alleged failure to: (1) properly pay one party; and (2) perfonri proper
construction, design, and engineering services for another party. To determine whether
the Insurer’s duty to provide coverage was triggered, this Court would need to make
substantive determinations on whether the Insured engaged in proper conduct, and
whether the Insured perfornied its services in a proper manner. These determinations
would either duplicate or interfere with the adjudications by the state court overseeing the
State Court Action. Therefore, the Court finds the Insurer’s argument to be without
merit.
THE INSURER also relies on certain language from 1100 Adams St. Condo.

Ass’n v. Mt. Hawley Ins. Co., No. 14-2203, 2014 U.S. Dist. LEXIS 147145, at *13
(D.N.J. Oct. 14, 2014), which states that a federal court should abstain under Brillhart
where there is another proceeding pending in a state court in which all of the matters in
controversy between the parties could be fully adjudicated. (S dkt. 7 at 7.) The
Insurer’s citation is curious, because that court then went on to clarify that “the state court
action and the declaratory judgment action need not be strictly parallel (i.e., presenting
identical claims and involving identical parties) in order for a district court to find that
abstention.

.

.

is warranted.” 1100 Adams St. Condo. Ass’n, 2014 U.S. Dist. LEXIS

147145, at *13_14. Thus, that opinion supports this Court’s intention to abstain under

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Brilihart from adjudicating the claims in this Declaratory Judgment Action.2
THE INSURER also argues that Reifer v. Westport Ins. Co., 751 F.3d 129 (3d

Cir. 2014), curbed what the Insurer characterizes as “part of a larger trend” by certain
federal district courts to abstain under Brilihart that was “problematic.” (Dkt. 7 at 9.)
That argument is without merit, as a review of recent case law reveals that the application
of Brillhart abstention remains robust since Reifer was issued. See. e.g., Rachel II, Inc. v.
State Nat’l Ins. Co., No. 15-1096, 2016 WL 1273941 (E.D. Pa. Mar. 31, 2016); Nugiel v.
Westchester fire Ins. Co., No. 15-7787, 2015 WL 6739111 (D.N.J. Nov. 3, 2015);
Capitol Specialty Ins. Corp. v. Am. Legion, No. 15-6024, 2015 U.S. Dist. LEXIS 103555
(D.N.J. Aug. 7, 2015); Owen v. Hartford Ins. Co., No. 14-924, 2014 WL 2737842 (D.N.J.
June 17, 2014).
THE INSURER is also concerned about possible prejudice in the State Court

Action due to “the introduction of evidence that [the Insured] carried liability insurance,”
and thus “[t]he coverage issue must be addressed in an action separate from the State
Contact Action.” (Dkt. 7 at 4—5.) The Court has already addressed the Insurer’s concerns
in the Order to Show Cause. (See dkt. 4 at 3 (suggesting, inter alia, that the Insurer may
bring the declaratory judgment claims in a separate action before the same New Jersey
state court overseeing the State Contract Action).)

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The Insurer also failed to advise this Court that: (1) the cited opinion is a Report and
Recommendation from a Magistrate Judge that was adopted by a district court; and (2) the
district court abstained from exercising jurisdiction pursuant to Brillhart. $.çç 2014 U.S. Dist.
LEXIS 156505, at *1 (D.N.J. Nov. 5, 2014).
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_______

THE COURT, therefore, intends to dismiss the complaint without prejudice

pursuant to the doctrine of Brilihart abstention, and with leave to the Insurer to bring
these claims in state court in 30 days. The Court will issue an appropriate order and
judgment.

SE L. LINARES
United States District Judge
Dated: October

,

2016

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