State Farm Life Insurance Company v. Erik Morgan Bolin as Administrator of the Estate of Julia Anne Bolin

Filing 17

ORDER denying without prejudice 5 Motion to Dismiss; granting 5 Motion to Stay; denying without prejudice 7 Motion to Consolidate Cases; granting 10 Motion to Stay. Signed by District Judge Richard Voorhees on 5/11/2011. (cbb)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
STATESVILLE DIVISION
5:11-CV-1
STATE FARM LIFE INSURANCE
COMPANY,

)
)
)
Plaintiff,
)
)
v.
)
)
ERIK MORGAN BOLIN, as
)
ADMINISTRATOR OF THE ESTATE )
OF JULIA ANNE BOLIN,
)
)
Defendant.
)
___________________________________ )

ORDER

THIS MATTER is before the Court on Defendants’ Motion to Dismiss or, in the
Alternative, Stay (Doc. 5) filed March 14, 2011; Plaintiff’s Motion to Consolidate (Doc. 7) filed
March 28, 2011; and Defendants’ Motion to Stay (Doc. 10) filed April 14, 2011. Defendants first
ask this Court to dismiss Plaintiff’s Complaint, arguing that this Court should exercise its discretion
to pass on State Farm’s declaratory judgment action. Alternatively, Defendants ask this court to stay
this case pending the resolution of a related case currently before this Court, Spires, et. al. v. State
Farm Life Insurance Company, 5:11-cv-32. Plaintiff, meanwhile, asks for this case to be
consolidated with Spires, et. al. v. State Farm Life Insurance Company, 5:11-cv-32. For the reasons
stated below, Defendants’ motion to stay is hereby GRANTED. All other motions are dismissed
without prejudice.

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I. BACKGROUND
This action arises out of a contractual dispute over whether State Farm Life Insurance
Company (“State Farm”) is obligated to pay proceeds to beneficiaries on a life insurance policy
issued to Julia Anne Bolin (the “Decedent”). On November 19, 2009, Decedent executed and
submitted an application for term life insurance coverage from State Farm in the amount of
$1,250,000.00. Decedent subsequently delivered the insurance application to State Farm through
State Farm’s authorized agent, Sheryl Hill Insurance Agency, Inc. (“State Farm’s Agent”). Decedent
designated her four children as beneficiaries (“Beneficiaries”) of the requested policy. In exchange
for the Decedent’s initial premium payment, State Farm’s Agent provided Decedent with an
executed State Farm Life Insurance Company Binding Receipt (the “Binding Receipt”). The Binding
Receipt contained a provision stating that “No death benefit is provided by this receipt unless such
death results from an accident that occurs or an illness that first manifests itself after the Application
Date.” The Decedent passed away on January 8, 2010. Shortly after the Decedent’s passing, the
Beneficiaries submitted claims for payment of death benefits under the Binding Receipt. To date,
State Farm has not paid death benefits to the Beneficiaries of the policy.
On or about January 12, 2010, the North Carolina Medical Examiner issued a death
certificate listing Decedent’s cause of death as “pending.” On June 25, 2010, the Medical Examiner
issued a Supplemental Report of Cause of Death listing Decedent’s immediate cause of death as
“ischemic heart disease.” The named beneficiaries contend that when Decedent submitted the
insurance application on November 19, 2009, she was not suffering from any illness brought about
by or in any way connected with ischemic heart disease. State Farm contends that there were
multiple instances in which Decedent’s ischemic heart disease manifested itself before November
17, 2009, including prior treatment and hospitalization for chest pain and cardiopulmonary
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treatment. Thus, the gravamen of the dispute is whether Decedent suffered from an “illness” at the
time she submitted her life insurance application and whether State Farm is obligated to pay the
beneficiaries in accordance with the terms of the Binding Receipt.
On January 3, 2011, State Farm filed a Complaint for Declaratory Judgment pursuant to 28
U.S.C. 2201, et seq., and Rule 57 of the Federal Rules of Civil Procedure, seeking a judicial
determination of its rights and obligations under the terms of the Binding Receipt. See State Farm
Life Insurance v. Bolin, 5:11-cv-1. On March 11, 2011, the named beneficiaries under the Binding
Receipt brought suit in Iredell County Superior Court alleging breach of contract. State Farm
removed the beneficiaries’ case on March 17, 2011. See Spires, et. al. v. State Farm Life Insurance
Company, 5:11-cv-32. On March 25, 2011, State Farm amended its Complaint to include the
Beneficiaries. Thus, both the declaratory judgment action and the Beneficiaries’ breach of contract
action are currently before this Court.
II. DISCUSSION
When two suits are pending before federal district courts, the general principle is to avoid
duplicative litigation. I.A. Durbin, Inc. v. Jefferson Nat. Bank, 793 F.2d 1541, 1551 (11th Cir. 1986).
“The power to stay proceedings is incidental to the power inherent in every court to control the
disposition of the cases on its docket with economy of time and effort for itself, for counsel, and for
litigants.” International Nickel Co., Inc., v. Martin J. Barry, Inc., 204 F.2d 583, 586 (4th Cir. 1953)
(quoting Landis v. N. American Co., 299 U.S. 248, 254-55 (1936)). “Trial courts are afforded broad
discretion in determining whether to stay or dismiss litigation in order to avoid duplicating a
proceeding already pending in another federal court.” I.A. Durbin, Inc. v. Jefferson Nat. Bank, 793
F.2d 1541, 1551-52 (11th Cir. 1986).
Whether it is proper to dismiss or stay a case often turns upon whether the questions
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presented are indeed identical questions. The parties concede that the issues involve in both actions
are identical or nearly identical; namely, whether State Farm is obligated to pay the named
beneficiaries under the terms of the Binding Receipt. In both actions, resolution of this issue will
turn on whether the decedent’s death resulted from an illness that manifested itself before the
Decedent submitted her life insurance application. As such, failure to dismiss this case or to grant
a stay would result in the litigation of identical issues in parallel proceedings, a result that federal
courts have routinely sought to avoid. See, e.g., Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d
1197, 1203 (2d Cir. 1970) (courts already heavily burdened with litigation with which they must of
necessity deal should not be called upon to duplicate each other’s work in cases involving the same
issues and the same parties) (citations omitted).
This Court recognizes that the Declaratory Judgment action was filed first, a fact that may
normally weigh in favor of allowing that suit to proceed. Nevertheless, State did not amend its
Complaint for a Declaratory Judgment to name the Beneficiaries until after the Beneficiaries filed
their breach of contract action in state court. Additionally, as the Supreme Court has noted, “[w]ise
judicial administration, giving regard to conservation of judicial resources and comprehensive
disposition of litigation, does not counsel rigid mechanical solution of such problems [parallel
proceedings].” Kerotest Mfg., 342 U.S. at 183. See also Pacesetter Systems, Inc. v. Medtronic, Inc.,
678 F.3d 93, 95 (9th Cir. 1982) (“‘first to file’ rule is not rigid or inflexible rule to be mechanically
applied, but rather is to be applied with a view to the dictates of sound judicial administration”).
This Court finds that (1) the instant case and Spires, et. al. v. State Farm Life Insurance
Company, 5:11-cv-32, are duplicative; (2) that the Beneficiaries’ lawsuit in Spires is the principal
action, as the plaintiffs of that suit possess the real claim at issue between the parties while the
claims asserted in the instant action are derivative and secondary; and (3) the Beneficiaries’ lawsuit
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is capably of fully resolving all matters at issue between the parties. Moreover, consolidating this
case with Spires could lead to juror confusion regarding the identity of the “true plaintiff” and
unnecessary use of judicial resources. For these reasons, granting a stay of the instant case pending
the outcome of Spires, et. al. v. State Farm Life Insurance Company, 5:11-cv-32, will promote
judicial economy and is therefore appropriate.
III. CONCLUSION
For the reasons stated above, staying this action pending the resolution of Spires, et. al. v.
State Farm Life Insurance Company, 5:11-cv-32 is appropriate when considering that this court
must give “due regard to conservation of judicial resources and comprehensive disposition of
litigation.” I.A. Durbin, 793 F.2d at 1551.
THEREFORE, IT IS HEREBY ORDERED THAT:
(1) Defendants’ Motion to Dismiss or, in the Alternative, Stay (Doc. 5) is DENIED without
prejudice as to the Motion to Dismiss, but GRANTED as to the Motion to Stay.
(2) Plaintiff’s Motion to Consolidate (Doc. 7) is DENIED without prejudice.
(3) Defendants’ Motion to Stay (Doc. 10) is GRANTED.

Signed: May 11, 2011

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