HOMESITE INSURANCE COMPANY v. NEARY et al

Filing 13

MEMORANDUM AND ORDER THAT THE MOTION OF DEFENDANT JOHN WARIS TO DISMISS OR IN THE ALTERNATIVE TO REMAND TO THE COURT OF COMMON PLEAS OF MONTGOMERY COUNTY, PENNSYLVANIA IS DENIED; ETC.. SIGNED BY HONORABLE HARVEY BARTLE, III ON 11/8/17. 11/8/17 ENTERED AND E-MAILED.(jl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
HOMESITE INSURANCE CO.
v.
MICHAEL P. NEARY, JR., et al.

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CIVIL ACTION

NO. 17-2297

MEMORANDUM
Bartle, J.

November 8, 2017
Plaintiff Homesite Insurance Co. (“Homesite”)

commenced this action against defendants John Waris and Michael
P. Neary, Jr. under the Declaratory Judgment Act, 28 U.S.C.
§ 2201.

Homesite seeks a declaration that it has no duty to

defend or indemnify Neary in a civil action brought by Waris in
the Court of Common Pleas of Montgomery County, Waris v. Neary,
No. 2014-04102 (Mont. Cnty. C.C.P. Feb. 25, 2014).

Before the

court is the motion of Waris to dismiss this action for lack of
subject matter jurisdiction under Rule 12(b)(1) of the Federal
Rules of Civil Procedure. 1
I
Under Rule 12(b)(1), a court must grant a motion to
dismiss if it lacks subject matter jurisdiction to hear a claim.
In his motion, Waris raises a facial, as opposed to factual,

1. Waris has moved to dismiss “or in the alternative, to Remand
to the Court of Common Pleas of Montgomery County,
Pennsylvania.” However, this action was not removed from state
court and thus we cannot remand it there. See 28 U.S.C. § 1447.

challenge to subject matter jurisdiction.

In reviewing a facial

challenge, which contests the sufficiency of the pleadings, “the
court must only consider the allegations of the complaint and
documents referenced therein and attached thereto.”

In re

Schering Plough Corp. Intron/Temodar Consumer Class Action,
678 F.3d 235, 243 (3d Cir. 2012) (quoting Gould Elec. Inc. v.
United States, 220 F.3d 169, 176 (3d Cir. 2000)).

We apply the

same standard as that applicable to a motion to dismiss for
failure to state a claim under Rule 12(b)(6).

Constitution

Party of Pa. v. Aichele, 757 F.3d 347, 358 (3d Cir. 2014).
Accordingly, we accept as true all material allegations set
forth in the complaint and construe those facts in favor of the
nonmoving party.

In re Schering Plough Corp., 678 F.3d at 243.
II

The following facts taken from the complaint and its
attached exhibits are treated as true for present purposes.
This action arises from an incident that occurred on or about
February 25, 2012, in which Waris was allegedly physically
assaulted by Neary.

At the time, Neary and Waris shared an

apartment in Bryn Mawr, Pennsylvania.

Following the incident,

Neary was arrested and charged criminally.

Subsequently he

pleaded guilty to a felony charge of aggravated assault in
violation of 18 Pa. Cons. Stat. Ann. § 2702(a)(1).

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On February 25, 2014, Waris instituted a civil action
in the Court of Common Pleas of Montgomery County against Neary
and his parents, who co-signed the lease for the Bryn Mawr
apartment.

The parties later stipulated to the dismissal of

Neary’s parents.

In the state civil action, Waris alleges that

the attack occurred without provocation and as a result of
Neary’s pre-existing mental health issues and alcohol
consumption.

He further asserts that Neary delayed seeking help

or medical care for Waris after the incident, which thereby
exacerbated Waris’ injuries.

The complaint alleges claims for

negligence and recklessness, negligent infliction of emotional
distress, and negligent failure to rescue.

It seeks recovery of

compensatory damages in excess of $50,000, punitive damages,
delay damages, and attorneys’ fees and costs.
At the time of the assault, Neary’s parents were
insured by a homeowners’ insurance policy underwritten by
Homesite.

By letter dated December 20, 2016, Homesite agreed to

provide each of the defendants named in the state civil action
with a defense subject to a full reservation of rights.
On May 18, 2017, Homesite commenced this action
seeking a declaration that it has no duty to defend or indemnify
Neary.

Specifically, Homesite asserts that Neary does not

qualify as an “Insured” under the policy because he was over the
age of twenty-one and did not reside with his parents at the
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time of the attack.

Homesite also maintains that the attack was

an intentional criminal act which is not a covered “Occurrence”
and is excluded under the terms of the policy.

Homesite also

asserts that the Nearys failed to give proper notice of the
civil suit to Homesite and that other insurance may cover this
loss.

Waris now moves to dismiss this action for lack of

subject matter jurisdiction under 28 U.S.C. § 1332 and the
Declaratory Judgment Act.
III
The Declaratory Judgment Act, 28 U.S.C. § 2201,
provides:
In a case of actual controversy within its
jurisdiction . . . any court of the United
States, upon the filing of an appropriate
pleading, may declare the rights and other
legal relations of any interested party
seeking such declaration, whether or not
further relief is or could be sought. Any
such declaration shall have the force and
effect of a final judgment or decree and
shall be reviewable as such.
28 U.S.C. § 2201(a).

The Act confers discretionary, rather than

compulsory, jurisdiction upon federal courts and thus “is an
exception to the general rule that ‘federal courts have a strict
duty to exercise the jurisdiction that is conferred upon them by
Congress.’”

Reifer v. Westport Ins. Corp., 751 F.3d 129,

134 (3d Cir. 2014) (quoting Quackenbush v. Allstate Ins. Co.,
517 U.S. 706, 716 (1996)).

Moreover, the Act “does not itself

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create an independent basis for federal jurisdiction but instead
provides a remedy for controversies otherwise properly within
the court’s subject matter jurisdiction.”

Auto–Owners Ins. Co.

v. Stevens & Ricci Inc., 835 F.3d 388, 394 (3d Cir. 2016)
(citing Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667,
671–72 (1950)).
In bringing this action, Homesite has invoked this
court’s diversity jurisdiction under 28 U.S.C. § 1332, which has
two requirements for the establishment of jurisdiction.

First,

the parties must be completely diverse, meaning that “no
plaintiff can be a citizen of the same state as any of the
defendants.”

Id.

Secondly, the matter in controversy must

exceed the sum or value of $75,000, exclusive of interest and
costs.

Id.
There is no dispute that the parties are of diverse

citizenship.

Homesite is a citizen of Wisconsin, Waris is a

citizen of Illinois, and Neary is a citizen of Texas.

However,

Waris asserts that Homesite cannot meet the amount in
controversy requirement necessary to establish diversity
jurisdiction because it seeks only declaratory relief.

We

disagree with this contention.
“Although declaratory judgment actions do not directly
involve the award of monetary damages, ‘it is well established
that the amount in controversy [in such actions] is measured by
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the value of the object of the litigation.”

Auto-Owners Ins.

Co., 835 F.3d at 397-98 (quoting Hunt v. Wash. State Apple
Advert. Comm’n, 432 U.S. 333, 347 (1977)).

In an insurance

coverage declaration action, courts look to the value of the
insurance policy and the damages alleged in the underlying case
to determine whether the jurisdictional amount in controversy
has been met.

See Jumara v. State Farm Ins. Co., 55 F.3d 873,

877 (3d Cir. 1995); Manze v. State Farm Ins. Co., 817 F.2d 1062,
1068 (3d Cir. 1987).

The allegations set forth in the complaint

control the determination unless it appears “to a legal
certainty the claim is really for less than the jurisdictional
amount.”

Jumara, 55 F.3d at 877 (quoting St. Paul Mercury

Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289 (1938)).

Here,

the policy at issue has coverage limits for personal liability
of $500,000 per occurrence.

Moreover, Waris has allegedly

suffered a traumatic brain injury resulting in permanent
physical difficulties and mental anguish.

Given the serious

nature of these alleged injuries and the relevant coverage
limits, we cannot say with a legal certainty that Waris would
recover less than $75,000.
Having determined that we have subject matter
jurisdiction over this action, we now consider whether to
exercise our discretion to decline such jurisdiction under the
Declaratory Judgment Act.

We must first determine whether there
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is a “parallel state proceeding.”

Reifer, 751 F.3d at 143, 146.

Although not dispositive, the “absence of pending parallel state
proceedings militates significantly in favor of exercising
jurisdiction.”

Id. at 144.

To be considered parallel, there

must be a “substantial similarity in issues and parties” between
the pending proceedings.

Kelly v. Maxum Specialty Ins. Grp.,

868 F.3d 274, 284 (3d Cir. 2017).

The “mere potential or

possibility that two proceedings will resolve related claims
between the same parties is not sufficient.”

Id. at 283-84.

We must then consider the following set of factors
when deciding whether to exercise discretionary jurisdiction:
(1) the likelihood that a federal court
declaration will resolve the uncertainty of
obligation which gave rise to the
controversy;
(2) the convenience of the parties;
(3) the public interest in settlement of the
uncertainty of obligation;
(4) the availability and relative
convenience of other remedies;
(5) a general policy of restraint when the
same issues are pending in a state court;
(6) avoidance of duplicative litigation;
(7) prevention of the use of the declaratory
action as a method of procedural fencing or
as a means to provide another forum in a
race for res judicata; and
(8) (in the insurance context), an inherent
conflict of interest between an insurer’s
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duty to defend in a state court and its
attempt to characterize that suit in federal
court as falling within the scope of a
policy exclusion.
Reifer, 751 F.3d at 146 (citing State Auto Ins. Cos. v. Summy,
234 F.3d 131, 134 (3d Cir. 2000)).

If a parallel state

proceeding does not exist, we must be “rigorous” in ensuring
that the lack of such proceedings is outweighed by these other
factors before declining jurisdiction.

Id. at 144.

Here, there is no pending parallel state proceeding.
Homesite is not a party to the civil action in the Court of
Common Pleas and no action for declaratory relief has been filed
in that court.

The questions of whether the Homesite insurance

policy covers Neary’s potential liability and whether Neary is
in fact liable to Waris are distinct.
287.

See Kelly, 868 F.3d at

Accordingly, there is no substantial similarity between

the state civil action and the instant declaratory judgment
action.
In the absence of parallel state court proceedings, we
must consider whether good reasons exist to override the
presumption in favor of jurisdiction.

After careful

consideration, we conclude that all of the factors outlined in
Reifer are either neutral or weigh in favor of exercising our
jurisdiction.

A declaration in this action will resolve the

uncertainty of Homesite’s obligation to defend and indemnify

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Neary, and Waris does not argue otherwise.

None of the parties

to this action is a resident of Pennsylvania, and therefore
litigating in this courthouse instead of Montgomery County does
not present any additional inconvenience.

This case does not

appear to involve questions of unsettled state law, and neither
party has raised issues of public interest that would be
affected by litigation in this court.

Although the parties

could seek other remedies in the form of declaratory relief in
the state court, to do so now would require the filing of a new
action.

It is arguably more convenient for the parties to

litigate in this court rather than start anew.

See Nationwide

Prop. & Cas. Ins. Co. v. Zatyko, No. 16-1010, 2016 WL 6804436,
at *4 (E.D. Pa. Nov. 16, 2016).
As discussed above, there is no pending parallel state
court action involving substantially the same issues and parties
and thus no need for restraint or concern for duplicative
litigation.

This action was not removed from state court and no

declaratory relief action was filed there.

Thus, there does not

appear to be any need for concern about procedural fencing or
res judicata.

Any inherent conflict of interest between

Homesite’s position in this declaratory judgment action and the
underlying civil suit would be the same regardless of whether
the insurance coverage dispute is litigated in state or federal
court, and therefore this factor is neutral.
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In summary, after

balancing the factors outlined in Reifer, this court finds no
reason to decline jurisdiction over this matter.
Accordingly, the motion of Waris to dismiss this
action will be denied.

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