Cincinnati Insurance Company v. Orten et al
MEMORANDUM OPINION OF THE COURT & ORDER: Pending before the court is a Joint Motion to Dismiss (Docket No. 43), filed by the defendants, Travis Orten, d/b/a Travis Orten Super Suds Car Wash & Launderette, Michael Forrester, William Miles, the Estat e of Jacob Ort, by and through his Administrator, Brenda Naliboff (Ort), and the Estate of Kendra Lee, by and through her Administrator, Sheila Lee (Lee), to which the plaintiff, Cincinnati Insurance Company (Cincinnati), has filed a response (Doc ket. No. 46). For the reasons discussed herein, the motion will be denied. Signed by District Judge Aleta A. Trauger on 10/30/17. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(am) Modified Text on 10/31/2017 (am).
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
CINCINATTI INSURANCE COMPANY,
TRAVIS ORTEN, d/b/a TRAVIS ORTEN
SUPER SUDS CAR WASH & LAUNDRETTE, )
MICHAEL FORRESTER, WILLIAM MILES, )
THE ESTATE OF JACOB ORT, by and
through his Administrator, BRENDA L.
NALIBOFF, and THE ESTATE OF KENDRA )
LEE, by and through her Administrator,
Case No. 3:17-cv-00036
Judge Aleta A. Trauger
MEMORANDUM & ORDER
Pending before the court is a Joint Motion to Dismiss (Docket No. 43), filed by the
defendants, Travis Orten, d/b/a Travis Orten Super Suds Car Wash & Launderette, Michael
Forrester, William Miles, the Estate of Jacob Ort, by and through his Administrator, Brenda
Naliboff (“Ort”), and the Estate of Kendra Lee, by and through her Administrator, Sheila Lee
(“Lee”), to which the plaintiff, Cincinnati Insurance Company (“Cincinnati”), has filed a
response (Docket. No. 46). For the reasons discussed herein, the motion will be denied.
FACTS & PROCEDURAL HISTORY
Cincinnati is an insurance company based and incorporated in Ohio. On June 23, 2015,
Cincinnati issued separate Business Auto and Commercial Umbrella Liability coverage policies
(the “Policies”) to Travis Orten Super Suds Car Wash, a Tennessee car wash business owned and
operated by Travis Orten. The Policies ran through June 23, 2016, and included coverage of an
automobile registered to Travis Orten Super Suds Car Wash. In relevant part, the Policies
provided coverage for the registered automobile as follows:
We will pay all sums an ‘insured’ legally must pay as damages because of
‘bodily injury’ or ‘property damage’ to which this insurance applies,
caused by an ‘accident’ and resulting from the ownership, maintenance or
use of a covered ‘auto’.
We will also pay all sums an ‘insured’ legally must pay as a ‘covered
pollution cost or expense’ to which this insurance applies, caused by an
‘accident’ and resulting from the ownership, maintenance or use of
covered ‘autos’. However, we will only pay for the ‘covered pollution cost
or expense’ if there is either ‘bodily injury’ or ‘property damage’ to which
this insurance applies that is caused by the same ‘accident’.
We have the right and duty to defend any ‘insured’ against a ‘suit’ asking
for such damages or a ‘covered pollution cost or expense’. However, we
have no duty to defend any ‘insured’ against a ‘suit’ seeking damages for
‘bodily injury’ or ‘property damage’ or a ‘covered pollution cost or
expense’ to which this insurance does not apply. We may investigate and
settle any claim or ‘suit’ as we consider appropriate. Our duty to defend or
settle ends when the Liability Coverage Limit of Insurance has been
exhausted by payment of judgments or settlements.
The Policies also provided commercial umbrella liability coverage as follows:
SECTION I – COVERAGE
A. Insuring Agreement
1. We will pay on behalf of the insured the ‘ultimate net loss’ which the
insured is legally obligated to pay as damages for ‘bodily injury’,
‘personal and advertising injury’ or ‘property damage’ to which this
a. Which is in excess of the ‘underlying insurance’; or
b. Which is either excluded or not insured by ‘underlying insurance’.
2. This insurance applies to ‘bodily injury’, ‘personal and advertising
injury’ or ‘property damage’ only if:
a. The ‘bodily injury’, ‘personal and advertising injury’ or ‘property
damage’ is caused by an ‘occurrence’ that takes place in the ‘coverage
b. The ‘bodily injury’ or ‘property damage’ occurs during the policy
period shown in the Declarations; or
c. The ‘personal and advertising injury’ results from an ‘occurrence’
that takes place during the policy period shown in the Declarations;
d. Prior to the ‘coverage term’ in which ‘bodily injury’ or ‘property
damage’ occurs, or a ‘personal and advertising injury’ offense is
committed, you did not know, per Paragraph 5. [sic] below, that the
‘bodily injury’ or ‘property damage’ had occurred or had begun to
occur, in whole or in part, or that the ‘personal and advertising injury’
offense had been committed or had begun to be committed, in whole
or in part.
For both the auto and umbrella coverage, the Policies provide exclusions for intentional or
Early in the morning of July 4, 2015, Orten—while driving the vehicle covered by the
Policies—was involved in a fatal car crash with a vehicle driven by Forrester, in which Ort, Lee,
and Miles were passengers. Ort and Lee died as a result of injuries sustained in the crash, and
Miles suffered non-fatal injuries. Soon thereafter, Orten submitted a claim to Cincinnati for
coverage of the crash. On July 15, 2016, Ort’s representative filed suit in Kentucky state court
against Orten and Forrester, alleging that their gross negligence caused the crash and seeking
associated damages. Later that month, a Kentucky grand jury indicted Orten on two counts of
murder and two counts of assault, amongst other charges, stemming from his role in the July 4,
2015 crash. On August 22, 2016, Cincinnati agreed to defend Orten in the civil action brought
by Ort’s representative, under a full Reservation of Rights. Cincinnati has retained counsel for
Orten and is currently providing a defense in that case. On October 24, 2016, Orten was
convicted by a Kentucky jury of two counts of reckless homicide, two counts of fourth degree
assault, and other associated charges. Criminal judgment was entered against him on January 6,
On January 10, 2017, Cincinnati filed this action seeking declaratory judgment that it has
no coverage obligation under the Policies for the claims made against Orten in the Ort complaint,
or for any other claims related to the July 4, 2015 crash. (Docket No. 1.) Cincinnati seeks
further declaration that it has no duty to indemnify Orten in the Ort action or in any other action
related to the July 4, 2015 crash and that it is entitled to withdraw from its defense of Orten
provided under Reservation of Rights. On January 25, 2017, Lee’s representative filed suit
against Orten and Forrester in Kentucky state court for damages related to Lee’s death. On
February 15, 2017, an Amended Complaint was filed in the Ort action, adding Cincinnati as a
defendant and seeking declaratory judgment from the state court that Cincinnati owes coverage
and a duty to indemnify Orten under the Policies for actions arising from the July 4, 2015 crash.
On March 31, 2017, Orten filed a crossclaim for a declaration of rights in the Ort lawsuit, also
seeking a declaration from the state court that the Policies require Cincinnati to cover and
indemnify Orten for actions arising from the July 4, 2015 crash. On April 20, 2017, Miles filed
suit against Orten, Forrester, and his personal insurance provider, seeking damages related to
injuries he sustained in the July 4, 2015 crash.
On July 15, 2017, the defendants moved to dismiss Cincinnati’s action in this court,
arguing that judicious considerations related to the ongoing, parallel litigation in Kentucky state
court counsel declination of jurisdiction here. (Docket No. 43.) On August 11, 2017, Cincinnati
filed a response. (Docket No. 46.) Cincinnati contends that the Kentucky state court litigation
does not preclude this court from determining its legal obligations to Orten under the Policies.
The Declaratory Judgment Act provides that, “[i]n 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.” 28 U.S.C. § 2201(a). “Since its inception,
the Declaratory Judgment Act has been understood to confer on federal courts unique and
substantial discretion in deciding whether to declare the rights of litigants.” Wilton v. Seven
Falls Co., 515 U.S. 277, 286 (1995); see also Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491
(1942). The Supreme Court has “repeatedly characterized the Declaratory Judgment Act as an
enabling Act, which confers discretion on the courts rather than an absolute right upon the
litigant.” Wilton, 515 U.S. at 287 (internal citations omitted). The Court has further explained
that the broad discretion given to district courts includes an alternative to dismissal; accordingly,
district courts may also enter a stay of the federal action, pending resolution of the state court
proceeding. Brillhart, 316 U.S. at 495; Wilton, 515 U.S. at 282–83 (discussing Brillhart and
appropriate inquiry for whether or not to enter a stay or to dismiss a declaratory judgment at the
outset). Accordingly, this court has broad discretion with respect to whether or not to exercise
jurisdiction over Cincinnati’s action or to otherwise stay the action during the pendency of the
underlying tort actions.
The Sixth Circuit has established guidelines for district courts deciding whether or not to
exercise discretionary jurisdiction over a declaratory relief action. “In determining the propriety
of entertaining a declaratory judgment action, competing state and federal interests weigh in the
balance, with courts particularly reluctant to entertain federal declaratory judgment actions
premised on diversity jurisdiction in the face of a previously-filed state-court action.” Adrian
Energy Assocs. v. Mich. Public Serv. Comm’n, 481 F.3d 414, 421 (6th Cir. 2007). In insurance
cases (like this one), the Sixth Circuit has frequently held that “declaratory judgment actions
seeking an advance opinion on indemnity issues are seldom helpful in resolving an ongoing
action in another court.” Manley, Bennett, McDonald & Co. v. St. Paul Fire & Marine Ins. Co.,
791 F.2d 460, 463 (6th Cir. 1986); see also Travelers Indem. Co. v. Bowling Green Prof.
Assocs., PLC, 495 F.3d 266, 273 (6th Cir. 2007). The Sixth Circuit has further “question[ed] the
need for declaratory judgments in federal courts when the question is one of state law and when
there is no suggestion that the state court is not in a position to define its own law in a fair and
impartial manner.” Bituminous Cas. Corp. v. J & L Lumber Co., Inc., 373 F.3d 807, 816–17 (6th
Cir. 2004). Accordingly, generally, “[s]uch actions ... should normally be filed, if at all, in the
court that has jurisdiction which gives rise to the indemnity problem. Otherwise confusing
problems of scheduling, orderly presentation of fact issues and res judicata are created.” Manley,
791 F.2d at 463; see also Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 967 (6th Cir. 2000).
However, there is no per se rule to prevent district courts from exercising jurisdiction over
declaratory judgment actions related to insurance relationships and relevant exceptions to
coverage. Roumph, 211 F.3d at 967; Allstate Ins. Co. v. Green, 825 F.2d 1061, 1066 (6th
Accordingly, courts routinely engage in detailed case-specific inquiries when deciding
whether or not to exercise jurisdiction over declaratory judgment actions such as this one. To
guide district courts in their decision-making, the Sixth Circuit has articulated five factors for
(1) whether the declaratory action would settle the controversy;
(2) whether the declaratory action would serve a useful purpose in clarifying the legal
relations at issue;
(3) whether the declaratory remedy is being used merely for the purpose of “procedural
fencing” or “to provide an arena for a race for res judicata;”
(4) whether the use of a declaratory judgment action would increase the friction between
our federal and state courts and improperly encroach on state jurisdiction; and
(5) whether there is an alternative remedy that is better or more effective.
Grand Trunk v. W. R.R. Co. v. Consol. Rail Corp., 746 F.2d 323, 326 (6th Cir. 1984).
The defendants ask that the court decline to exercise its discretionary jurisdiction over
this action. Specifically, they argue that, pursuant to the five factors of consideration articulated
by the Sixth Circuit in Grand Trunk, an exercise of jurisdiction would be inappropriate because
Kentucky law governs the core aspects of the dispute, and there remain critical, unresolved
factual determinations that are better left to the Kentucky state court. The court will analyze
each Grand Trunk factor individually as it applies to Cincinnati’s request for declaratory relief.
A. Will the declaratory action settle the controversy?
The Sixth Circuit has wavered on how to treat this factor in insurance cases. In
Scottsdale Ins. Co. v. Flowers, the court addressed its divergent approaches:
Two lines of precedent seem to have developed in our
jurisprudence regarding consideration of this first factor in the
context of an insurance company’s suit to determine its policy
liability. . . . The difference between these lines of cases appears to
rest on the competing policy considerations of consolidating
litigation into one court versus permitting a party to determine its
legal obligations as quickly as possible.
Scottsdale, 513 F.3d at 555 (internal citations omitted). The Scottsdale court noted that factual
considerations also helped explain the different lines of cases and concluded, on review, that the
district court had adequately resolved all controversies between the parties “because the only
controversy between them regarded the scope of the insurance policy.” This court finds that
approach persuasive. Although there are relevant factual distinctions between the instant case
and Scottsdale—for example, the plaintiff insurance company in that case was not a party to the
state court action, unlike Cincinnati—they do not render this court unable to resolve the issue of
what coverage, if any, Cincinnati owes to Orten under the Policies. As in Scottsdale, this is the
only live issue between Cincinnati and any of the defendants.
The court is also cognizant of the policy considerations in play. In this court’s
experience, the Kentucky state court is likely to focus on the liability disputes between the
parties before turning to the question of insurance coverage. This could substantially prolong
Cincinnati’s involvement in the litigation, costing time and resources that could be spared by a
more expeditious ruling from this court.
This case is distinguishable from Bituminous Cas. Corp. v. J & L Lumber Co., Inc. in two
significant ways. 373 F.3d 807 (6th Cir. 2004). First, in Bituminous, not all of the state court
defendants were made party to the federal declaratory judgment action. Id. at 814. Thus, unlike
in this case, the federal court’s ruling would not have been binding on all parties with
outstanding state court claims against the plaintiff insurance company. Second, the issue to be
resolved in Bituminous was “a fact-based, and [ ] very close, question of state law.” Id. at 813.
District courts are better situated to settle controversies between the parties when “the issue
involved [is] a legal, not a factual dispute, and thus. . . [does] not require the district court to
inquire into matters being developed through state court discovery.” Scottsdale, 513 F.3d at 557.
There is no fact-based dispute before the court in this case. A judgment has already been entered
in Kentucky criminal court, finding that Orten operated his vehicle recklessly in the July 4, 2015
crash. The only question this court faces is whether, as a matter of law, Cincinnati owes
coverage under the Policies for Orten’s reckless operation of his vehicle.
This court can resolve in a binding manner the legal issue of coverage between Cincinnati
and its insured. A ruling here could prevent unnecessary expense and effort on behalf of
Cincinnati in potentially drawn-out state court litigation. And there is no risk of conflicting
factual determinations between this court and the Kentucky state court. Thus, this factor weighs
in favor of exercising jurisdiction.
B. Will the declaratory action clarify the legal relations between the parties?
This factor is closely related to, and often considered in conjunction with, the first factor.
See Travelers Indem. Co. v. Bowling Green Prof. Assocs., PLC, 495 F.3d 266, 271 (6th Cir.
2007). “Indeed, it is almost always the case that if a declaratory judgment will settle the
controversy, then it will clarify the legal relations in issue.” Scottsdale, 513 F.3d at 557. In
Scottsdale, the Sixth Circuit settled a longstanding ambiguity as to how this factor should be
analyzed in insurance cases, finding that a federal district court should focus on the legal issue of
indemnity in determining whether it can clarify legal relations between the parties:
The requirement that the judgment clarify the legal relationships of
the parties is based upon our desire for the declaratory judgment to
provide a final resolution of the discrete dispute presented. While
the parties may have other tortious or contractual relationships to
clarify in state court, our concern in considering the second Grand
Trunk factor in such cases is with the ability of the federal
declaratory judgment to resolve, once and finally, the question of
the insurance indemnity obligation of the insurer. Thus, we focus
only on whether a federal declaratory judgment will clarify the
legal relationships presented to the district court.
Id. This court is appropriately situated to determine the issue of Cincinnati’s coverage
obligations under the Policies and can therefore clarify the legal relations between the parties.
Thus, this factor weighs in favor of exercising jurisdiction.
C. Is the declaratory remedy being used merely to “provide an arena for
The parties agree that Cincinnati did not file suit in this court for the purpose of
procedural fencing. Cincinnati filed this action within days of receiving notification of the
Kentucky criminal judgment against Orten. Cincinnati was not brought into the Kentucky state
court litigation until over a month after it had filed suit in this court. The Sixth Circuit has held
that, when no improper motive prompted the action in question, this factor is neutral. See
Travelers, 495 F.3d at 272. The court therefore will not consider this factor as favoring either
exercise or declination of jurisdiction.
D. Will the action increase friction between the federal and state courts?
With respect to the fourth Grand Trunk factor, the Sixth Circuit has offered three subfactors for consideration:
(1) whether the state court’s resolution of the underlying factual issues is important to an
informed resolution of the federal case;
(2) whether the trial court is in a better position to evaluate those factual issues than is the
federal court; and
(3) whether there is a close nexus between the underlying factual and legal issues and
state law and/or public policy, or whether federal common law or statutory law
dictates a resolution of the declaratory judgment action.
Id. at 271. As addressed with regard to the first factor, there are no outstanding factual issues for
the state court to decide which would bear upon this court’s resolution of Cincinnati’s
declaratory judgment action. In situations such as this, where “the liability issues being
determined in the state court proceeding [are] legally, [ ] not factually, distinct from the issues of
policy interpretation which are central to the federal declaratory judgment action[,]” the first two
sub-factors counsel in favor of the federal court exercising jurisdiction. See Allstate Ins. Co. v.
Green, 825 F.2d 1061, 1067 (6th Cir. 1987).
In analyzing the third sub-factor, the Sixth Circuit has found that state courts are
generally in a better position to evaluate insurance contracts. See Travelers, 495 F.3d at 273.
This is because “[t]he states regulate insurance companies for the protection of their residents,
and state courts are best situated to identify and enforce the public policies that form the
foundation of such regulation.” However, this presumption triggers only when state courts are
applying the public policies that inhere in their own state’s laws. To determine what law governs
the Policies, this court must apply Tennessee’s choice-of-law rules, which follow the law of lex
loci contractus in contract disputes. See Vantage Tech v. Cross, 17 S.W. 3d 637, 650 (Tenn. Ct.
App. 1999). Insurance contracts are “governed by the same rules of construction used to
interpret other contracts.” Travelers Indem. Co. of Am. v. Moore & Assocs., Inc., 216 S.W.3d
302, 305 (Tenn. 2007). Under lex loci contractus, “a contract is presumed to be governed by the
law of the jurisdiction in which it was executed absent a contrary intent.” Vantage Tech, 17
S.W. 3d at 637 (citing Ohio Cas. Ins. Co. v. Travelers Indem. Co., 493 S.W.2d 465, 467
(Tenn.1973)). Contrary intent is shown when:
the contract is to be performed in another state and the parties
envision performance in accordance with that state's laws. The
primary consideration to be made in determining whether the
exception applies is whether the contract was made “in good faith
with reference to the law of some other state,” or “with [a] view
to” the other state. The intent of the parties in this regard is to be
“gathered from the terms of the instruments and all of the attending
In re Estate of Davis, 184 S.W.3d 231, 234–35 (Tenn. Ct. App. 2004) (internal citations
omitted). This approach is consistent with the Restatement, which offers the following guidance
for insurance cases:
The validity of a contract of fire, surety or casualty insurance and
the rights created thereby are determined by the local law of the
state which the parties understood was to be the principal location
of the insured risk during the term of the policy, unless with
respect to the particular issue, some other state has a more
significant relationship ... to the transaction and the parties, in
which event the local law of the other state will be applied.
Restatement (Second) of Conflicts of Law § 193.
The record in this case demonstrates a clear understanding by the parties that the
principal location of the insured risk was Tennessee. The named insured on the Policies is
Orten’s business, which was located in Tennessee. The declarations page includes the Tennessee
address of Orten’s business. The only addresses listed in the schedule of locations in the Policies
are Tennessee addresses. The proof of insurance cards issued for the vehicle Orten was driving
in the July 4, 2015 crash list a Tennessee address for the automobile insurance policy. Tennessee
Uninsured Motorist Coverage was provided for the vehicle under the Policies. The vehicle itself
was registered in Tennessee. Taken together, the circumstances of the contractual arrangement
between Cincinnati and Orten’s business evince a “view to” Tennessee. The court thus finds that
Tennessee law governs the contract. Because the Kentucky state court does not have an interest
in identifying and applying the public policies of Tennessee law, the third sub-factor favors
exercise of jurisdiction. As a result, all three sub-factors, and consequently the fourth Grand
Trunk factor, support exercising jurisdiction.
E. Is there an alternative remedy which is better or more effective?
The Sixth Circuit rejects an overarching approach to the fifth Grand Trunk factor.
“[R]ather than applying a general rule, [ ] inquiry on this factor must be fact specific, involving
consideration of the whole package of options available to the federal declaratory plaintiff.”
Scottsdale, 513 F.3d at 562. A district court should “deny declaratory relief if an alternative
remedy is better or more effective.” Grand Trunk v. W. R.R. Co. v. Consol. Rail Corp., 746 F.2d
323, 326 (6th Cir. 1984).
The court sees no alternative remedy that is better or more effective. The Kentucky court
is not better situated than this court to resolve questions of Tennessee state law. And, as noted
previously, there are concerns that Cincinnati could be dragged along for a long and expensive
ride before the issue of its coverage obligations is determined in the state court litigation. The
Sixth Circuit has acknowledged similar concerns in past cases: “[W]e are not convinced that an
action for indemnity, instituted only after the insurance company has provided a defense which it
may not have been obligated to render, is in every case a ‘superior remedy.’” Green, 825 F.3d at
1067. Because Cincinnati has no superior options to this action, the court finds that the fifth
Grand Trunk factor supports an exercise of jurisdiction.
F. Balancing the factors
The Sixth Circuit has “never indicated how these Grand Trunk factors should be
balanced.” Scottsdale, 513 F.3d at 563. Nonetheless, it is evident that the balance in this case
tilts toward an exercise of jurisdiction. Having found that the four factors relevant to this dispute
all favor exercising jurisdiction, the court concludes that federal adjudication of Cincinnati’s
declaratory judgment action is appropriate.
For the foregoing reasons, the defendants’ Motion is DENIED.
It is so ORDERED.
Enter this 30th day of October 2017.
ALETA A. TRAUGER
United States District Judge
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