AXIS INSURANCE COMPANY v. THE PNC FINANCIAL SERVICES GROUP, INC. et al
Filing
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OPINION. Signed by Judge Mark R. Hornak on 9/29/15. (bdb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
AXIS INSURANCE COMPANY,
Plaintiff,
v.
THE PNC FINANCIAL SERVICES GROUP,
INC. ET AL,
Defendants.
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Case No. 15-cv-405
ELECTRONICALLY FILED
OPINION
Mark R. Hornak, United States District Judge
AXIS Insurance Company brought this declaratory judgment action to determine whether
it would ever be required to indemnify part of PNC Financial Services Group’s liabilities from a
separate underlying litigation.
Sort of.
More accurately, AXIS brought this declaratory
judgment action to determine whether five specific defenses would absolve AXIS of any
obligation to indemnify PNC for the litigation liabilities. What if those defenses failed? AXIS
purports to “reserve the right to raise all other terms and conditions [of the insurance policies] as
defenses to coverage for any claim.” This attempt to hedge against a final, definitive decision
determining AXIS’s obligations pushes this case—already of questionable maturity for judicial
resolution—clearly into the realm of unripeness. AXIS’s request for a declaratory judgment is
unripe and thus unready for determination by a United States District Court.
I.
BACKGROUND
In December of 2008 AXIS issued a first-layer excess blended liability insurance policy
to PNC. ECF No. 1 at 1–3, 5. Essentially, the AXIS policy provides up to $25,000,000 of
insurance coverage after a different insurance policy—issued by Houston Casualty Company—is
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exhausted. ECF No. 1 at 5. At issue in this case is whether AXIS will be required to pay any
portion of its policy coverage to PNC. AXIS says no, and that we should decide this right now;
PNC says yes, but that we may not need to decide the issues in this case at all. Underlying
PNC’s latter contention is the intersection of two related cases with the present action.
The first is the “Overdraft Litigation,” or The PNC Financial Services Group, Inc., et al.
v. Houston Casualty Company, et al., No. 2:13-cv-00331-CB-MPK (W.D. Pa.), pending before
the U.S. Court of Appeals for the Third Circuit at its Docket Nos. 15-1656, 15-1717. In the
Overdraft Litigation, PNC sought a declaratory judgment against AXIS and Houston Casualty
Company seeking to recover litigation and settlement liabilities from a different underlying case.
The district court required AXIS to pay PNC approximately $13,000,000 from the policy
coverage and both PNC and AXIS appealed that judgment to the Third Circuit. The parties
dispute what impact an appellate reversal would have on this case—PNC argues that a favorable
ruling would allow it to recover the full policy value, which would exhaust coverage and thus
moot the present case, ECF No. 24 at 7; AXIS argues that such a ruling would only result in a
remand to the district court to sort out further defenses. ECF No. 30 at 7. But it suffices for
present purposes to note that the Overdraft Litigation is still being litigated and may, at some
point, moot the issues presented in this case.
The second intersecting case is the “NPS Litigation,” or Jo Ann Howard & Assocs., P.C.
v. J. Douglas Cassity, et al., incl. PNC Bank, N.A., No. 09-1252 (E.D. Mo.). The present
declaratory judgment action seeks to determine whether AXIS must cover part of PNC’s final
liabilities from the NPS Litigation. ECF No. 1 at 13–14 In March of 2015, the jury in the NPS
Litigation found PNC liable for over $390 million in compensatory and punitive damages.
However, the execution of that judgment has been stayed until the district court in Missouri rules
2
on a host of post-trial motions and the appeals process is completed. See Jo Ann Howard &
Associates, P.C. v. Cassity, No. 4:09CV01252 ERW, 2015 WL 4478151, at *3 (E.D. Mo. July
21, 2015). Both parties acknowledge that these post-judgment and appellate remedies may
ultimately preclude AXIS from having to pay any amount in connection with the NPS
Litigation.1 That is, the parties acknowledge that the NPS Litigation may be resolved in such a
way as to make the resolution of the present case meaningless.
Procedurally, PNC has filed a Motion to Stay the proceedings here until these two
intersecting cases are resolved. This Court thinks a different issue is in play and has so advised
counsel twice—first in a telephone status conference, ECF No. 26, and then again at the oral
argument on PNC’s Motion to Stay. ECF No. 34. In AXIS’s Complaint, it included the
following “Reservation of Rights:”
The HCC Policy and the AXIS Policy contain terms, conditions, and
limitations on coverage that are relevant to the claim arising from the Underlying
Action but that are not implicated by this declaratory judgment action. Nothing in
this complaint should be construed as a waiver by AXIS of any coverage defenses
under the HCC Policy or the AXIS Policy, and AXIS reserves the right to raise all
other terms and conditions as defenses to coverage for any claim made under the
AXIS Policy, including the claim arising from the Underlying Action, as
appropriate.
ECF No. 1 at 19.2 This Reservation of Rights clause, coupled with the contingent nature of any
eventual liability arising, led the Court to conclude that the claim is potentially not ripe for
judicial action, and the Court so advised counsel on the referenced occasions.
Each party addressed the ripeness of the action in their briefs, but did not focus the whole
of their attention on this issue. Nonetheless, since ripeness affects a federal court’s jurisdictional
1
The Court expresses no judgment about the likelihood or merits of this result; merely that, as acknowledged by both
AXIS and PNC, it is a not insignificant possibility.
2
During both the status conference and at oral argument, counsel for AXIS advised the Court that it was not
currently aware of any other coverage defenses. That said, AXIS has also stuck by its guns, and its “Reservation of
Rights” remains in its Complaint in this case, and is therefore before the Court.
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power to hear a case or controversy before it, this Court concludes that it must dismiss AXIS’s
claims without prejudice, rather than staying the case to await future developments.
See
Pittsburgh Mack Sales & Serv., Inc. v. Int’l Union of Operating Engineers, Local Union No. 66,
580 F.3d 185, 190 (3d Cir. 2009) (“The ripeness doctrine determines whether a party has brought
an action prematurely, and counsels abstention until such time as a dispute is sufficiently
concrete to satisfy the constitutional and prudential requirements of the doctrine.” (internal
quotations omitted)); Peachlum v. City of York, Pennsylvania, 333 F.3d 429, 433 (3d Cir. 2003)
(“[C]onsiderations of ripeness are sufficiently important that the court is required to raise the
issue sua sponte even though the parties do not”). See also Nat’l Park Hospitality Ass’n v. Dep’t
of Interior, 538 U.S. 803, 808 (2003) (“The ripeness doctrine is drawn both from Article III
limitations on judicial power and from prudential reasons for refusing to exercise jurisdiction,
but, even in a case raising only prudential concerns, the question of ripeness may be considered
on a court’s own motion.” (internal citations and quotations omitted)).
II.
DECLARATORY JUDGMENT RIPENESS
The Third Circuit’s test for the ripeness in declaratory judgment actions comes from
Step-Saver Data Sys., Inc. v. Wyse Tech., 912 F.2d 643, 647-50 (3d Cir. 1990). To determine
whether a declaratory judgment action is ripe, the court must analyze (1) the “adversity of the
interest of the parties,” (2) “the conclusiveness of the judicial judgment,” and (3) the “practical
help, or utility, of that judgment.” Id. A defect in one or two of the categories may be sufficient
to find that a declaratory judgment claim is not ripe for judicial action. See PSA, LLC v.
Gonzales, 271 F. App’x 218, 220 (3d Cir. 2008) (holding that the case was not ripe where
sufficient adversity was established but conclusiveness and utility were not); Home Ins. Co. v.
Perlberger, 900 F. Supp. 768, 772 (E.D. Pa. 1995) (finding the utility prong for ripeness met, but
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finding no need to determine the adversity prong, because “the ‘conclusiveness’ stage of the
ripeness analysis is determinative”).
A.
Adversity
“For there to be an actual controversy the defendant must be so situated that the parties
have adverse legal interests.” Step-Saver, 912 F.2d at 648. Relevant to this inquiry is the
likelihood of the alleged harm arising. A plaintiff “need not suffer a completed harm to establish
adversity of interest between the parties,” but to protect against a feared future event, a plaintiff
“must demonstrate that the probability of that future event occurring is real and substantial, of
sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Pittsburgh
Mack, 580 F.3d at 190 (citing Armstrong World Indus., Inc. v. Adams, 961 F.2d 405, 412 (3d
Cir.1992)).
Indeed, it is necessary that this substantial threat of harm “remain ‘real and
immediate’ throughout the course of the litigation.”
Presbytery of N.J. of the Orthodox
Presbyterian Church v. Florio, 40 F.3d 1454, 1468 (3d Cir.1994) (“Thus, where intervening
events remove the possibility of harm, the court must not address the now-speculative
controversy.”) As such, a “potential harm that is ‘contingent’ on a future event occurring will
likely not satisfy this prong of the ripeness test.” Pittsburgh Mack, 580 F.3d at 190.
Here, AXIS’s alleged injury rests upon a number of contingencies—specific dispositions
in the Overdraft Litigation and NPS Litigation that would give rise to AXIS’s potential
obligation to indemnify PNC. In Step-Saver the contingency was plain from the plaintiff’s
complaint: the request for relief was framed as an if-then statement, making it clear that the
plaintiff had only asked the court to “declare defendants liable if another court” reached a certain
result. Step-Saver, 912 F.2d at 648. AXIS’s Complaint here is not worded as such a strict
logical conditional, but the contingency is just as evident. AXIS’s Complaint here asks this
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Court to declare AXIS free from liability if the Overdraft Litigation and NPS Litigation are
decided in a way that leaves AXIS on the hook for part of PNC’s liability. Contrast, Pittsburgh
Mack, 580 F.3d at 191–92 (finding sufficient adversity where a defendant refused to indemnify
plaintiff for its liability because the liability “is not based on a contingency—it has already
received correspondence [that it is liable for the amount for which indemnity was alleged].”)
Other district courts in the Third Circuit have debated whether this type of contingency
renders parties non-adverse and claims unripe. See Evanston Ins. Co. v. Layne Thomas Builders,
Inc., 635 F.Supp.2d. 348, 353 (D. Del 2009) (“As a general matter, courts refrain from
adjudicating whether an insurer has duty to indemnify the insured until after the insured is found
liable for damages in an underlying action.”). For example, in Invensys Inc. v. Am. Mfg. Corp.,
2005 WL 600297, at *9 (E.D. Pa. Mar. 15, 2005) the court found adversity to be lacking where
the result of an underlying (and yet unresolved) litigation would determine whether the
defendant would be required to indemnify the plaintiff.
Likewise, in Home Ins. Co. v. Perlberger, 900 F. Supp. 768 (E.D. Pa. 1995) the court
noted—but did not hold—that “the adversity of the parties’ interests as to the duty to indemnify
will not be complete until after the resolution of [the underlying litigation], when it would be
clear whether” a claim for indemnity could be asserted. Id. at 773. See also See Pennsylvania
Am. Water Co. v. Trunov, No. 1:CV-12-0545, 2013 WL 2317790, at *3 (M.D. Pa. May 28, 2013)
(holding that adversity and conclusiveness were lacking where the declaratory relief sought was
“contingent on the resolution of liability in the underlying state court action”); Westport Ins.
Corp. v. Howell, 2005 WL 1124092, *1 (E.D.Pa. May 10, 2005) (holding adversity to be lacking
where “there has been no judgment or settlement on the underlying claim”).3
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In a number of other cases, courts have laid down firm proclamations to the effect that there is no adversity (and
thus no ripe claim) when the underlying action fixing liability has not concluded. See, e.g., Victoria Ins. Co. v.
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Of course, some other courts examining similar indemnity situations have found
sufficient adversity before a final determination of liability in the underlying claim.
For
example, in Legion Indem. Co. v. Carestate Ambulance, Inc., 152 F. Supp. 2d 707, 714 n.3 (E.D.
Pa. 2001) the court concluded that a declaratory judgment action concerning the amount of
indemnification on an underlying action was ripe because the request for declaratory relief was
not contingent upon facts that needed to be determined in the underlying action. And the court
explicitly distinguished Perlberger on this ground. Likewise, in Home Ins. Co. v. Powell, 1996
WL 269496, at *7 (E.D. Pa. May 20, 1996) summarily aff’d, 156 F.3d 1224 (3d Cir. 1998), the
court (again distinguishing Perlberger) concluded that the parties were sufficiently adverse
because “they have staked out opposing positions in the instant litigation, they have conflicting
financial interests with regard to the issues before this Court, and a declaratory judgment here
will likely have a significant effect on the settlement posture of the underlying litigation.”
Though Legion and Powell—like the cases in the preceding analysis—are similar to the
present case, this Court believes that the Overdraft Litigation and the NPS Litigation create
ample antecedent contingencies, such that the parties are not sufficiently adverse to create a ripe
action. More importantly, as noted below, even if the parties were sufficiently adverse, AXIS’s
claims lack the requisite conclusiveness and utility to warrant a ripe declaratory judgment action.
Mincin Insulation Servs., Inc., 2009 WL 90644, at *6 (W.D. Pa. Jan. 14, 2009) (“Since there is not yet a judgment in
the underlying action, there is not yet any adversity of interest with respect to [a] duty to indemnify”); Hartford Fire
Ins. Co. v. InterDigital Commc’ns Corp., 464 F. Supp. 2d 375, 378-79 (D. Del. 2006) (“As a general matter, courts
refrain from adjudicating whether an insurer has a duty to indemnify the insured until after the insured is found
liable for damages in the underlying action.”); Cincinnati Ins. Cos. v. Pestco, Inc., 374 F. Supp. 2d 451, 464–465
(W.D. Pa. 2004) (“[A] court entertaining a declaratory judgment action in an insurance coverage case should refrain
from determining the insurer’s duty to indemnify until the insured is found liable for damages in the underlying
action.”). In many of these cases, however, the insurer/indemnifier was also defending (or had a duty to defend) the
opposing party in the underlying litigation. Therefore, declaring judgment on the indemnification issues could
pervert the incentives of the insurer who would still have to defend the opposing party in the underlying litigation.
Though these cases do not always highlight this incentive problem in their analysis, the distinction sufficiently
distinguishes these cases from the present dispute. Still, the strong language used in these cases is informative. See
Victoria Ins., 2009 WL 90644, at *6; Hartford Fire Ins., 464 F. Supp. 2d at 378-79; Cincinnati Ins., 374 F.Supp.2d
at 464–465.
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B.
Conclusiveness
The second factor in the Step-Saver analysis scrutinizes how “conclusive” a judicial
judgment would be in a requested declaratory judgment action. The “conclusiveness” prong
examines two facets of a potential declaratory judgment. First, “whether the parties’ rights will
be definitively decided by a declaratory judgment.” Step-Saver, 912 F.2d at 649 n.9. See also
Armstrong World, 961 F.2d at 412 (this factor examines “the conclusivity that a declaratory
judgment would have on the legal relationship between the parties.”). Second, whether the case
rests upon a sufficiently solid factual foundation.
See NE Hub Partners, L.P. v. CNG
Transmission Corp., 239 F.3d 333, 344 (3d Cir. 2001). “Predominantly legal questions are
generally amenable to a conclusive determination in a preenforcement context”; however,
judgements that would be “based upon a hypothetical set of facts” stray towards the realm of
advisory opinions and thus favor a finding of unripeness. Pittsburgh Mack 580 F.3d at 190–91
(citing Presbytery of N.J., 40 F.3d at 1468).
Though this case is plainly based upon a “hypothetical set of facts”4 the claims do raise
predominantly legal inquiries.5 AXIS asks this Court to examine five asserted defenses in order
to determine whether, under the language of the insurance policies, certain underlying situations
absolve it from any duty to indemnify.6 But in fact, that is precisely the problem. AXIS’s claims
4
Namely: Assuming that PNC seeks indemnity for some or all of the liability arising from the NPS Litigation, do the
pled defenses provide a proper defense against any such coverage?
5
Of note, PNC implies that the claims are not predominantly legal. See ECF No. 31 at 11 (arguing that “[f]acts
relevant to AXIS’ claims—and PNC’s defenses to those claims—remain to be decided”).
6
Specifically, AXIS asks the Court to determine: (1) Count I – whether the NPS Litigation involves the same
subject matter as a number of cases listed in a 2012 Release agreement between PNC and AXIS; (2) Count II –
whether the NPS Litigation involves “Wrongful Act(s)” (as that policy term would be interpreted) committed before
or after PNC acquired a subsidiary company; (3) Count III – whether certain prior lawsuits and the NPS Litigation
constitute a “single claim” under the AXIS policy, such that the claim may have been first made before the policy
period; (4) Count IV – whether, under the terms of the policy, the NPS Litigation arises out of the same facts and
circumstances as certain prior litigations; and (5) Count V – whether the AXIS Policy covers claims against a
successor in interest, as PNC is claimed to be in the underlying litigation. ECF 1 at 14–19.
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require resolution of five discrete, isolated, and—by AXIS’s own admission—potentially
inconclusive points of law. Then, by virtue of the Reservation of Rights clause, a final decision
of this Court may well not “definitively [ ] decide the parties’ rights.” NE Hub Partners, 239
F.3d at 344.
Of course, if this Court found in AXIS’s favor as the case is now pled, that might
conclusively determine the parties rights; but Step-Saver counsels that a ripe declaratory
judgment should definitively decide the parties rights. See Step-Saver, 912 F.2d at 649 n.9.
Since AXIS purports to retain the “right to raise all other terms and conditions as defenses to
coverage,” the rights of the parties can only be conclusively determined now in one direction.
That is to say, if AXIS’s defenses take the day, the parties would know, conclusively, that AXIS
need not indemnify PNC for any NPS Litigation liability; but if PNC prevails at this juncture, the
parties’ legal relationship still would not be settled. In the latter case, one would know that these
five defenses do not absolve AXIS, but one would be unable to say whether any other coverage
defense allows AXIS to avoid indemnification.
Why?
Because AXIS has affirmatively
“reserved” its right to raise such a defense or defenses later on.
Consider again the contrast with Pittsburgh Mack.
In Pittsburgh Mack, the court
explained that the requested “declaratory judgment will be conclusive because it will establish
whether the [defendant] is obligated to indemnify or hold harmless [the plaintiff].” Pittsburgh
Mack, 580 F.3d at 192. As explained above, AXIS’s Complaint cannot do the same. Instead, it
can only conclusively establish whether AXIS is free from indemnifying PNC under the five
defenses now pled. No conclusive judgment would (or could) be rendered with respect to the
universe of potentially remaining defenses, and resolution of any such defenses would be subject
to another whole round of litigation. See Perlberger, 900 F.Supp at 773 (finding a requested
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declaratory judgment insufficiently conclusive and unripe where possible resolutions of the
underlying litigation and the requested declaratory judgment would require additional rounds of
litigation).
Finally, it is worth noting that Step-Saver also counseled against a finding of
conclusiveness when a requested declaratory judgment is based upon a “contingency.” See StepSaver, 912 F.2d at 648 (“[E]ven if we issued the requested declaration, the legal status of the
parties would not change (nor would it be clarified), because our declaration itself would be a
contingency.”).
As noted above, district courts split on whether an undecided underlying
litigation is, itself, a contingency that requires dismissal. Compare Legion Indem. Co. 152 F.
Supp. 2d at 714 n.3 (finding the case ripe because the plaintiffs “requests for declaratory relief
are not contingent upon facts that need to be determined in the underlying action” but rather “can
be determined from the plain language” of the complaint and the insurance policy) with Invensys
Inc., 2005 WL 600297, at *8 (finding the case unripe where “the declaration Plaintiff seeks is
based on the overriding contingency that liability in the underlying lawsuits will be imposed”).
Still, taken together with AXIS’s Reservation of Rights clause, this Court concludes that the
requested declaratory judgment would be insufficiently conclusive to be properly considered
“ripe.”
C.
Utility
The final prong of the Step-Saver ripeness test assesses the “practical help, or utility” that
the requested judgment would provide. This third step analyzes “whether the parties’ plans of
actions are likely to be affected by a declaratory judgment,” Step-Saver, 912 F.2d at 649 n.9, and
considers “the hardship to the parties of withholding judgment.” NE Hub Partners, 239 F.3d at
344–45.
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Of course, almost any judicial judgment affecting the rights of a party is useful, to some
degree, as a form of risk reduction. That is, a reduction in future uncertainty. However, to
render a requested declaratory judgment ripe—and to make the utility prong mean anything—the
action must achieve more than that minimum. See, e.g., Invensys Inc., 2005 WL 600297, at *8
(holding that resolution of a declaratory judgment action about “would not be of significant
practical help in ending the controversy between the parties,” because the defendant “would
continue to deny any duty to indemnify” under an alternative theory).
As such, this Court concludes that AXIS’s requested declaratory judgment is of
insufficient utility. First, as above, the utility of this action is limited by the fact that it could
result in an inconclusive judgment. If the Court were to find in favor of AXIS, PNC’s “future
plans of action” would be affected to the extent that PNC would (presumably) not be able to
pursue indemnification from AXIS.7 From AXIS’s standpoint, a definitive resolution of the risk
associated with up to $25,000,000 in liability would likely have some effect on subsequent
business decisions. However, if the Court were to find in favor of PNC now, the decision would
be of minimal utility; PNC would continue to request indemnification from AXIS, and AXIS
would seek to raise any additional coverage defenses against PNC. True, some uncertainty
would be resolved, but for the most part, the parties would be “in no better position to determine
what course of action to take . . . than they are now.” See Id. at *8.
Second, the hardship to AXIS of withholding judgment now is not excessive. Again,
withholding judgment (or rendering a judgment in this action against AXIS) would leave AXIS
with the risk of a liability in the future, but bearing risk is what insurance companies do. AXIS
will be in no worse position than it was when it entered into the insurance contracts in 2008.
AXIS also asserts the burden of monitoring the NPS Litigation in order to determine whether it
7
After the inevitable appeal, given that $25 million of coverage may be on the line.
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should associate in PNC’s defense of that case; however, the Court has no reason to believe that
these monitoring costs are so arduous or burdensome that they would drag the case back into the
realm of ripeness.
III.
DISCRETIONARY JURISDICTION
The Court believes that it does not have the power to hear this case because the claim is
not ripe. However, even if the Court could hear the case, it concludes that it should not exercise
its discretion to do so.
The Declaratory Judgment Act, 28 U.S.C. § 2201, states: “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.” Id. (emphasis added). As StepSaver explained, there is a “considerable amount of discretion” built into the Declaratory
Judgment Act. Step-Saver, 912 F.2d at 643. “Even when declaratory actions are ripe, the Act
only gives a court the power to make a declaration regarding ‘the rights and other legal relations
of any interested party seeking such declaration,’ 28 U.S.C. § 2201; it does not require that the
court exercise that power.” Id.
In Reifer v. Westport Ins. Corp., 751 F.3d 129 (3d Cir. 2014), the Third Circuit set out
eight factors that should guide the “sound and reasoned discretion” of a district court considering
not to exercise jurisdiction over a declaratory judgment action: “(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
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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 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.” Id. at
146.
Measuring the Reservation of Rights clause against these factors counsels against the
exercise of discretion over this action. Considering factor (1), this action may not resolve the
uncertainty of the obligation which gave rise to the controversy, because the uncertainty can only
be resolved if the court finds in favor of AXIS’s current defenses. As explained extensively
above, ruling that AXIS’s five pled defenses are unsuccessful would not resolve the
indemnification question; the uncertainty surrounding the indemnification obligation would still
remain. As to factor (2), it does not appear that either party would be materially inconvenienced.
AXIS obviously wants the issues to be decided now (or else they wouldn’t have filed the action
and contested PNC’s Motion to Stay) but this Court does not believe that AXIS would be
unfairly or unduly prejudiced by either waiting until the liability becomes certain or bringing all
of its possible defenses in one declaratory judgment action. The public interest is also a wash; it
does not appear that the public would have much of any interest in the expedited resolution of
these issues. Indeed, one might even argue that the exercise of judicial resources to reach a
potentially inconclusive judgment in piecemeal litigation is against the public interest. But see
Westfield Ins. Co. v. Icon Legacy Custom Modular Homes & Icon Legacy, No. 4:15-CV-00539,
2015 WL 4602262, at *3 (M.D. Pa. July 30, 2015) (finding “judicial economy” arguments not
“terribly compelling”). Factor (4) weighs in favor of declining to exercise jurisdiction. AXIS
could wait until the indemnification contingency is resolved or it could bring all of its coverage
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claims and defenses in one action to conclusively determine the parties’ relationship under the
insurance contracts. While from AXIS’s perspective it may be more convenient to take its shot
with the coverage defenses it has now asserted and (if unsuccessful on these five defenses) come
back for “Round Two” by asserting other “reserved” defenses, it is materially inconvenient for
PNC to have to litigate (and re-litigate) on such terms. Factor (6) weighs against an exercise of
jurisdiction as well. Though there is not a parallel pending state court proceeding here, the
Reservation of Rights clause may raise duplicative subsequent litigation if AXIS chooses to try
enforcing other defenses after the resolution of the present litigation.8
Still, this Court recognizes that Reifer placed emphasis on the existence of a pending
parallel proceeding. Though the absence of such a proceeding does not require the exercise of
jurisdiction, such an absence “militates significantly in favor of exercising jurisdiction.” Id. at
144. Indeed, many of the district courts tasked with applying Reifer have proceeded to hear
declaratory judgment actions when there is not a parallel pending state action See, 1100 Adams
St. Condo. Ass'n, Inc. v. Mt. Hawley Ins. Co., 2014 WL 5285466, at *4-5 (D.N.J. Oct. 15, 2014)
report and recommendation adopted sub nom. 1100 Adams St. Condo. Ass'n, Inc. v. Tarragon
Corp., 2014 WL 5762067 (D.N.J. Nov. 5, 2014) (claiming that Reifer instructs that “the issue of
parallel state court proceedings is paramount in determining whether to exercise jurisdiction
under the DJA”); Nationwide Prop. & Cas. Ins. Co. v. Shearer, 2015 WL 1186008, at *6 (W.D.
Pa. Mar. 13, 2015); BCB Bancorp. v. Progressive Cas. Ins. Co., 2014 WL 2434193, at *6 (D.N.J.
May 28, 2014). As noted, there is no such parallel state proceeding here.
8
It is rational for AXIS to bring this action in an effort to wipe the risk of its liability off of its balance sheet.
Indeed, it is also rational for AXIS to—if allowed—attempt to hedge its chances of success by bringing its claims
piecemeal. However, just because that approach may make good litigation sense for AXIS does not mean that it
makes good judicial sense for this Court.
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Nonetheless, this Court believers that the better course is to follow the lead of the court in
Cent. Transp., LLC v. Mainfreight, Inc., 2015 WL 620716, at *4 (E.D. Pa. Feb. 11, 2015)
(holding “that the lack of a pending parallel state proceeding is far outweighed by the factors as
analyzed above.”). Because of the uncertainty surrounding (1) whether there will ever be a PNC
liability AXIS is required to indemnify at all, and (2) the potential of future, similar litigation due
to AXIS’s Reservation of Rights clause, this Court does not believe that it should exercise any
discretionary jurisdiction over the declaratory judgment claims in AXIS’s Complaint.
IV.
CONCLUSION
The contingent nature of any liability that PNC could assert against AXIS puts this case
on uncertain jurisdictional footing. Adding AXIS’s Reservation of Rights clause to the mix
definitively tips that balance towards a lack of ripeness.
The Article III and prudential
requirements of ripeness, as defined by the Third Circuit’s Step-Saver test, are not met here.
Furthermore, even if the Court could properly hear this case, it would elect not to exercise its
discretionary declaratory judgment jurisdiction.
Therefore, this Court will dismiss AXIS’s
Complaint without prejudice.
An appropriate Order will issue.
s/ Mark R. Hornak
Mark R. Hornak
United States District Judge
Dated: September 29, 2015
cc: All counsel of record
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