Allstate Property and Casualty Insurance Company v. Cogar et al
Filing
24
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS AND DISMISSING CASE WITHOUT PREJUDICE: It is ORDERED that Defendants' 7 , 8 , 10 , and 11 Motions to Dismiss are granted; this action is dismissed without prejudice and stricken from the docket. The Clerk shall enter a separate judgment order. Signed by District Judge Irene M. Keeley on 5/13/13. (cnd)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
ALLSTATE PROPERTY AND
CASUALTY INSURANCE COMPANY,
Plaintiff,
v.
//
CIVIL ACTION NO. 1:12CV175
(Judge Keeley)
NATHAN COGAR, KENNETH
JACKSON, ROXIE L. SIRBAUGH,
RITA UTT, SERIOUS DIESEL,
LLC, and MARIO ORELLANA,
Defendants
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
Allstate Property and Casualty Insurance Company (“Allstate”)
brought this declaratory judgment action, seeking a determination
of the parties’ rights and responsibilities under an insurance
policy issued to Nathan Cogar (“Cogar”). Pending before the Court
are four motions to dismiss from 1) Cogar and Serious Diesel, LLC
(“Serious Diesel”) (dkt. no. 11), 2) Roxie L. Sirbaugh (“Sirbaugh”)
(dkt. no. 7), 3) Cogar (dkt. no. 8), and 4) Kenneth Jackson
(“Jackson”) (dkt. no. 10). For the reasons that follow, the Court
GRANTS the defendants’ motions and DISMISSES this case WITHOUT
PREJUDICE.
I.
A.
Cogar is the owner and operator of Serious Diesel, a vehicle
repair and service business. According to Allstate’s complaint, on
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
June 16, 2011, Sirbaugh was operating a 1997 Chevrolet Blazer
traveling north on West Virginia State Route 92. (Dkt. No. 1 at 2).
Cogar, who was operating a 2005 Chevrolet Silverado owned by
Jackson, allegedly turned in front of Sirbaugh’s vehicle, causing
Sirbaugh to cross the center of the roadway and strike a 2000 Ford
Explorer owned and operated by Rita Utt (“Utt”). Id. at 2-3. The
collision allegedly caused Utt’s vehicle to be pushed backward into
a
1998
Kenworth
truck
owned
and
operated
by
Mario
Orellana
(“Orellana”). Id. at 3.
According
to
Allstate’s
complaint,
on
the
date
of
the
accident, Cogar was insured under an Allstate auto policy, Policy
No. 9 28 981961 11/03 (the “Policy”), effective May 3, 2011, to
November 3, 2011. Id. at 3. Allstate alleges that, at the time of
the
collision,
Cogar
was
operating
Jackson’s
vehicle
in
his
capacity as owner and operator of Serious Diesel for the purpose of
repairing the vehicle. Id. at 3. Similarly, Cogar states that at
the time of the accident he was “test-driving the vehicle with the
permission of Jackson in his capacity as the owner and operator of
Serious Diesel, LLC.” (Dkt. No. 9 at 1).
Cogar tendered a claim to Allstate immediately after the
June 16, 2011 accident, and, in a letter dated June 22, 2011,
2
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
Allstate denied coverage based on the business operations exclusion
in Cogar’s Policy. (Dkt. No. 9-1 at 2).
B.
In or around September 2012,1 Sirbaugh filed suit against
Cogar, Jackson, and Serious Diesel in the Circuit Court of Preston
County, West Virginia, to recover for the damages she suffered as
a result of the accident on June 16, 2011. Neither Utt nor Orellana
is named as a party to Sirbaugh’s suit.
On November 21, 2012, Allstate advised Cogar that, although
his Policy did not cover the accident, it would nevertheless
provide him with a “courtesy defense” subject to a full reservation
of rights. (Dkt. No. 9-2 at 5). Then, on December 3, 2012, Allstate
filed this declaratory judgment action, seeking the following
declarations:
1.
“That the Allstate Policy does not extend to provide
coverage for the defense or indemnification of Cogar for
those claims arising from the June 16, 2011 motor vehicle
accident”; and
1
The briefs provide different dates for the filing of the
state court action: “on September 26, 2012" (Dkt. No. 9 at 1); “on
October 24, 2012" (Dkt. No. 13 at 2); “on or about September 24,
2012" (Dkt. No. 18 at 2); and “on or around September of 2012"
(Dkt. No. 20 at 6). No party has attached Sirbaugh’s complaint as
an exhibit in this case.
3
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
2.
“That Allstate has no duty to defend or indemnify Cogar
or any other entity as to those claims arising from the
June 16, 2011 motor vehicle accident.”
(Dkt. No. 1 at 6).
Subsequently, on January 8, 2013, Cogar and Serious Diesel
filed a motion in the Preston County proceeding seeking leave to
file a third-party complaint against Allstate (dkt. no. 9-3), which
Special Judge Larry Starcher granted on January 14, 2013. (Dkt. No.
20-1 at 2).
The third-party complaint in state court seeks the following
declarations:
1.
“That the Policy does extend to provide coverage for the
defense and indemnification of Nathan Cogar for all
claims arising from the June 16, 2011 motor vehicle
accident”;
2.
“That Allstate has a duty to defend and indemnify Nathan
Cogar for all claims arising from the June 16, 2011 motor
vehicle accident”; and
3.
“That Allstate has a duty to pay all attorney fees and
costs which Nathan Cogar has incurred as a result of
Allstate’s failure to defend Nathan Cogar.”
(Dkt. No. 9-3 at 9).
The
defendants
contend
that
this
Court
should
dismiss
Allstate’s declaratory action or issue a stay pending determination
of the insurance coverage issues in the parallel state court
proceeding.
4
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
C.
According to Allstate’s complaint, on June 16, 2011, the date
of the accident, the Policy “insured a 2006 Ford F250 truck, with
liability
limits
of
$100,000
per
person
and
$300,000
per
occurrence.” (Dkt. No. 1 at 3). Id. In pertinent part, the Policy
provides:
We will pay those damages which an insured person is
legally obligated to pay because of:
1.
bodily injury sustained by any person; and
2.
property damage.
Under these coverages, your policy protects an insured
person from liability for damages arising out of the
ownership, maintenance or use, loading or unloading of an
insured auto.
We will defend an insured person sued as the result of a
covered auto accident, even if the suit is groundless or
false. We will choose the counsel. We may settle any
claim or suit if we believe it is proper. We will not
defend an insured person sued for damages arising out of
bodily injury or property damage which is not covered by
this policy.
***
Insured Persons
1. While using your insured auto:
a)
you,
b)
any resident relative, and
c)
any other licensed driver using it with your
permission.
5
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
2. While using a non-owned auto:
a)
you, and
b)
any
resident
relative
using
passenger auto or utility auto.
The use of a non-owned
owner’s permission.
auto
a private
must be with the
***
Insured Autos
***
4.
A non-owned auto used by you or a resident relative
with the owner’s permission. This auto must not be
available or furnished for the regular use of an
insured person.
***
Definitions
1.
We, Us, or Our means the company shown on the
Policy Declarations of the policy.
2.
Auto means a land motor vehicle with at least four
wheels designed for use on public roads.
3.
Bodily Injury means
disease or death.
bodily
injury, sickness,
***
6.
You or Your means the resident policyholder named
on the Policy Declarations and that policyholder’s
resident spouse.
***
Exclusions – What is not covered
6
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
We will not pay for any damages an insured person is
legally obligated to pay because of:
***
2. bodily injury or property damage arising out of auto
business operations such as repairing, servicing,
testing, washing, parking, storing, or selling of
autos. However, coverage does apply to you, resident
relatives, partners or employees of the partnership
of you or a resident relative when using your insured
auto.
(Dkt. No. 9-4 at 8-10).
The final paragraph of the preceding excerpt is what is
generally known as a “business operations exclusion.” The parties
dispute whether, based on this exclusion, the Policy covers the
June 16, 2011 accident.
II.
The Federal Declaratory Judgment Act provides that district
courts “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). This power is
discretionary,
and
the
Fourth
Circuit
has
explained
that
“a
declaratory judgment action is appropriate ‘when the judgment will
serve a useful purpose in clarifying and settling the legal
relations in issue, and . . . when it will terminate and afford
7
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
relief from the uncertainty, insecurity, and controversy giving
rise to the proceeding.’” Centennial Life Ins. Co. v. Poston, 88
F.3d 255, 256 (4th Cir. 1996) (quoting Aetna Cas. & Sur. Co. v.
Quarles, 92 F.2d 321, 325 (4th Cir. 1937)). “[A] declaration of
parties’ rights under an insurance policy is an appropriate use of
the declaratory judgment mechanism.” United Capitol Ins. Co. v.
Kapiloff, 155 F.3d 488, 494 (4th Cir. 1998).
However, a declaratory judgment action “should not be used ‘to
try a controversy by piecemeal, or to try particular issues without
settling the entire controversy, or to interfere with an action
which has already been instituted.’” Id. at 256-57 (citing Quarles,
92 F.2d at 325). “When a related state proceeding is underway, a
court considering a declaratory judgment action should specifically
consider whether the controversy ‘can better be settled in the
proceeding pending in state court.’” Centennial Life, 88 F.3d at
257 (citing Brillhart v. Excess Ins. Co., 316 U.S. 491, 495
(1942)). “[A] federal court should ‘[o]rdinarily’ decline, for
reasons of efficiency and comity, to grant declaratory relief
‘where another suit is pending in a state court presenting the same
issues, not governed by federal law, between the same parties.’”
Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 377 (4th
8
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
Cir. 1994), overruled on other grounds by Wilton v. Seven Falls
Co., 515 U.S. 277 (1995) (quoting Brillhart, 316 U.S. at 495).
In making its determination, the Court should consider “the
nature and scope of the state proceeding,” whether all parties’
claims can be satisfactorily adjudicated in that proceeding, and
“‘the same considerations of federalism, efficiency, and comity
that traditionally inform a federal court’s discretionary decision
whether to abstain from exercising jurisdiction over state-law
claims in the face of parallel litigation in the state courts.’”
Centennial Life, 88 F.3d at 257 (quoting Nautilus, 15 F.3d at 376).
In Nautilus, the Fourth Circuit established four factors for
district courts to consider:
(1)
“the strength of the state’s interest in having the
issues raised in the federal declaratory action
decided in the state courts”;
(2)
“whether the issues raised in the federal action
can more efficiently be resolved in the court in
which the state action is pending”;
(3)
“whether permitting the federal action to go
forward would result in unnecessary entanglement
between the federal and state court systems,
because of the presence of overlapping issues of
fact or law”; and
(4)
“whether the declaratory judgment action is being
used merely as a device for procedural fencing that is, to provide another forum in a race for res
judicata or to achieve a federal hearing in a case
otherwise not removable.”
9
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
Nautilus, 15 F.3d at 377 (citations and internal quotation marks
omitted). A district court has “wide discretion” in applying these
factors, but “[i]n the declaratory judgment context, the normal
principle that federal courts should adjudicate claims within their
jurisdiction yields to considerations of practicality and wise
judicial administration.” Centennial Life, 88 F.3d at 257 (citing
Wilton, 515 U.S. at 288).
A federal court may decline to exercise jurisdiction over a
declaratory judgment action whether or not a parallel state court
proceeding is pending. Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co.,
139 F.3d 419, 423 (4th Cir. 1998). A state court action’s existence
or nonexistence, though not dispositive, is a significant factor
alongside “considerations of federalism, efficiency, comity, and
procedural ‘fencing.’” Id.
III.
A review of the four factors from Nautilus counsels in favor of
dismissing Allstate’s declaratory judgment action.
A.
The first
factor, the strength of the state’s interest in
having the issues decided in state court, weighs in favor of
abstention “when the questions of state law involved are difficult,
10
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
complex,
or
unsettled,”
not
when
they
involve
“the
routine
application of settled principles of law to particular disputed
facts.” Nautilus, 15 F.3d at 377-378. Where West Virginia has
already considered analogous issues, the state’s interest in having
the issue decided in state court is lessened. Continental Casualty
Co. v. Fuscardo, 35 F.3d 963, 967 (4th Cir. 1994). Notably,
however, “even if the issues of state law . . . are not ‘close’,
‘problematic’, or ‘difficult’, the fact that they are controlled by
West Virginia law [can] weigh[] in favor of deference to the state
action . . . ‘when considered in conjunction with the other
Nautilus factors.’” State Farm Fire & Cas. Co. v. Kirby, 919 F.
Supp. 939, 943 (N.D.W. Va. 1996) (quoting Continental Casualty Co.,
35 F.3d at 967).
Under West Virginia law, the language in an insurance policy
is to be “given its plain, ordinary meaning.” Syl. Pt. 1, W. Va.
Fire & Cas. Co. v. Stanley, 602 S.E.2d 483 (W. Va. 2004) (internal
quotation marks and citation omitted). “Where the provisions of an
insurance policy contract are clear and unambiguous, they are not
subject to judicial construction or interpretation, but full effect
will be given to the plain meaning intended.” Id. at Syl. Pt. 2
(internal quotation marks and citation omitted). Conversely, when
an insurance policy provision’s language “is reasonably susceptible
11
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
of two different meanings or is of such doubtful meaning that
reasonable minds might be uncertain or disagree as to its meaning,
it is ambiguous.” Id. at Syl. Pt. 3 (internal quotation marks and
citation omitted). “[W]hether a contract is ambiguous is a question
of law to be determined by the court,” id., and “ambiguous terms in
insurance contracts are to be strictly construed against the
insurance company and in favor of the insured.” Id. at 489.
West Virginia law is clear that exclusions must be strictly
construed against the insurer. “Where the policy language involved
is exclusionary, it will be strictly construed against the insurer
in order that the purpose of providing indemnity not be defeated.”
Syl. pt. 8, Nat’l Union Fire Ins. Co. of Pittsburgh v. Miller, 724
S.E.2d 343 (W. Va. 2012) (citations omitted). “An insurer wishing
to avoid liability on a policy purporting to give general or
comprehensive coverage must make exclusionary clauses conspicuous,
plain, and clear, placing them in such a fashion as to make obvious
their relationship to other policy terms, and must bring such
provisions to the attention of the insured.” Russell v. Bush &
Burchett, Inc.,
559 S.E.2d 36, 42 (W. Va. 2001) (emphasis added).
“‘An insurance company seeking to avoid liability through the
operation of an exclusion has the burden of proving the facts
necessary to the operation of that exclusion.’” Ayersman v. W. Va.
12
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
Div. of Envtl. Prot., 542 S.E.2d 58 (W. Va. 2000) (citing Syl. pt.
7, National Mut. Ins. Co. v. McMahon & Sons, Inc., 356 S.E.2d 488
(W. Va. 1987)).
Here, Allstate argues that the language in its business
operations exclusion is unambiguous and thus involves only the
routine
application
of
settled
West
Virginia
law
regarding
insurance policy interpretation. (Dkt. No. 18 at 6). According to
Allstate, Cogar’s operation of an auto belonging to Jackson for the
purpose of repairing the auto fits neatly within the four corner of
the
exclusion,
precluding
coverage
for
the
accident.
The
defendants, on the other hand, argue that an ambiguity exists as to
the business operations exclusion’s exception, which provides
coverage for use of “your insured auto.” (Dkt. No. 9-4 at 10).
Cogar maintains that he falls within the exception to the business
operations exclusion because he was driving Jackson’s vehicle with
Jackson’s
permission,
i.e.,
driving
“your
insured
auto.”
Id.
(emphasis added).
Although the Policy defines “[a]uto” and “[y]ou or [y]our,” it
does not provide a separate definition of “your insured auto,” nor
does it anywhere indicate what that phrase means. Id. Thus, it is
not clear under the Policy that “your insured auto” necessarily
refers to an auto “you” own. Because of this lack of clarity, the
13
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
phrase “your insured auto” could refer to any one of the many
vehicles falling under the category of “[i]nsured [a]utos” –
including a non-owned auto used with permission. Id. at 9.
Indeed, other jurisdictions have interpreted the phrase “your
insured auto” to include autos in addition to those actually owned
by the insured. See, e.g., Nationwide Mut. Ins. Co. v. Allstate
Ins. Co., 630 N.Y.S.2d 591, 593 (N.Y. App. Div. 1995) (where “your
insured auto” was not defined in policy, court added policy
definitions of “your” and “insured auto” together to hold “your
insured auto” included both owned and loaner autos). Inasmuch as
the phrase “your insured auto” is “reasonably susceptible of two
different meanings” and “reasonable minds might be uncertain or
disagree as to its meaning,” it is ambiguous. See Syl. Pt. 3,
Stanley, 602 S.E.2d 483.
Moreover, the question of the effect of a business operations
exclusion and its exception in the liability provisions of an
automobile insurance policy is unresolved in West Virginia. See
Carney v. Erie Insurance Co., 434 S.E.2d 374 (W. Va. 1993). Carney
determined the effect of a business operations exclusion in the
context
of
liability
the
medical
insurance
payments
policy.
provision
Although
the
of
an
exclusion
automobile
at
issue
precluded coverage, Carney did not address the effect of a business
14
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
operations exclusion in a liability provision, or the particular
exception to that exclusion in dispute here. 434 S.E.2d at 379.
Furthermore, the court in Carney specifically noted that the
medical
payments
provision
“is
separate
from
the
liability
provisions of the policy and is akin to a personal injury accident
policy.” Id. at 377.
Given West Virginia’s clear precedent that exclusions must be
strictly construed against the insurer, West Virginia has a strong
interest in answering the question left open in Carney, namely, the
effect
of
a
business
operations
exclusion
in
the
liability
provisions of an automobile insurance policy, as well as the effect
of an exception for “your insured auto.” See, e.g., Nautilus Ins.
Co. V. Maynard, No. 2:07-00105, 2007 WL 2963774, at *3 (S.D. W. Va.
Oct. 9, 2007) (“[T]he state’s interest is stronger in questions of
insurance law.” (quoting First Fin. Ins. Co. v. Crossroads Lounge,
Inc., 140 F.Supp.2d 686, 694 (S.D. W. Va. 2001)).
Because the phrase “your insured auto” in Allstate’s policy is
ambiguous,
it
is
unclear
whether
Cogar’s
permissive
use
of
Jackson’s auto falls under the business operations exclusion to
coverage (in which case Cogar would not be covered) or under the
exception to that exclusion (in which case Cogar would be covered).
Since West Virginia has yet to determine the application of this
15
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
type of exclusion and exception in the context of an automobile
liability policy, it has a strong interest in having its courts
decide this issue. This factor, therefore, weighs heavily in favor
of abstention.
B.
The second Nautilus factor, efficiency, turns on whether the
issues can better be resolved in the court in which the state
action is pending. Nautilus, 15 F.3d at 378–79. “The relevant
question
is
whether
considerations
of
judicial
economy
favor
dismissal of the federal action.” Kirby, 919 F. Supp. at 943-44.
The Fourth Circuit has stated that,
In deciding whether to entertain a declaratory judgment
action, a federal court should analyze whether its
resolution of the declaratory action will settle all
aspects of the legal controversy. This court has long
recognized that it makes no sense as a matter of judicial
economy for a federal court to entertain a declaratory
action when the result would be to “try a particular
controversy by piecemeal, or to try particular issues
without settling the entire controversy.”
Mitcheson v. Harris, 955 F.2d 235, 239 (4th Cir. 1992) (quoting
Quarles, 92 F.2d at 325).
In the case at hand, Allstate has been made a third-party
defendant in the underlying state court proceeding. The state
action therefore raises the same coverage questions presented here,
16
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
as well as the underlying liability issues not present in this
action, all of which suggest that the state action would be the
more efficient venue for resolving the rights of all interested
parties. See, e.g., Christian v. Sizemore, 383 S.E.2d 810, 814 (W.
Va. 1989). Allstate’s only counter-argument to this is that Utt and
Orellana are not named in the state action, and “are necessary
parties to the determination of coverage issues presented in this
[federal] action.” (Dkt. No. 18 at 6-7). This argument, however, is
a red herring.
It is undisputed that Utt and Orellana have made no claim - nor
have they exhibited any intention of making a claim - for damages
arising from the subject accident. They have never responded to
Allstate’s suit, nor have they so much as entered an appearance in
this case. Allstate, for its part, has provided no legal authority
for the proposition that such clearly disinterested parties are
“necessary” to the determination of the pending coverage issues.2
2
The Court was similarly unable to find authority in support
of the proposition that persons allegedly injured by, but who have
not brought claims against, an insured are necessary parties to a
declaratory judgment action brought by the insurer against the
insured on coverage issues. The Third Circuit has rejected an
analogous claim. See Liberty Mut. Ins. Co. v. Treesdale, Inc., 419
F.3d 216 (3d Cir. 2005) (movants allegedly injured by insured were
not necessary parties required under Fed. R. Civ. P. 19(a)(2) to be
joined in declaratory judgment action “because their interest [did]
not ‘relate[] to the subject of the action’” and because they had
17
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
Accordingly, as there is no legal or factual support for Allstate’s
position, the absence of Utt and Orellana in the state action has
no effect on the weighing of the efficiency factor.
After examining the scope of the pending state proceedings, the
Court is satisfied that the claims of all parties with an interest
in this action can adequately be adjudicated in the state action.
See Nautilus, 15 F.3d at 378-79. Indeed, the liability issues were
pending in the state court case for several months before Allstate
filed this federal case; that court thus is familiar with the
issues in the litigation. Therefore, to the extent that the
coverage
claims
in
both
the
state
and
federal
actions
are
substantively identical, this factor tips slightly in favor of
abstention. See Motorists Mut. Ins. Co. v. Frazier, 623 F. Supp. 2d
727, 733 (S.D. W. Va. 2009) (where the state court action and
federal declaratory judgment action mirror each other, the second
Nautilus factor tilts in favor of dismissal); see also Mitcheson v.
no legally protected interest in the action). The Fifth and
Eleventh Circuits have held that persons seeking damages from an
insured are necessary parties to a declaratory judgment action
regarding coverage issues brought by an insurer against an insured
under Rule 19(b). Ranger Ins. Co. v. United Housing of New Mexico,
Inc., 488 F.2d 682 (5th Cir. 1974) (finding that those with claims
against insured may be prejudiced and that there is a public
interest in efficient, nonrepetitive litigation); American Safety
Cas. Ins. Co. v. Condor Assoc., Ltd., 129 F. App’x 540 (11th Cir.
2005) (following Ranger, 488 F.2d 682).
18
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
Harris, 955 F.2d 235, 239 (4th Cir. 1992) (“While inefficiencies
can of course occur within a single court system, the prospects for
coordinated management and alleviation of abrasion are greater when
the litigation is handled under one jurisdictional roof.”).
C.
Whether
the
third
Nautilus
factor,
federal
and
state
entanglement, weighs in favor of abstention hinges on whether
permitting the action to go forward would result in unnecessary
“entanglement” between the federal and state court systems due to
the presence of overlapping issues of fact or law. In Mitcheson,
the Fourth Circuit held that dismissal of the declaratory judgment
action was appropriate because overlapping issues of fact and law
would
“‘frustrate
the
orderly
progress’
of
the
state
court
proceedings by leaving the state court with some parts of a case
foreclosed from further examination but still other parts in need
of full scale resolution.” 955 F.2d at 239 (citation omitted).
Here, there is an overlapping - and unsettled - question of
law, namely, how West Virginia law applies business operations
exclusions and their exceptions in automobile liability policies.
The resolution of this question will determine whether the Policy
covers the June 16, 2011 accident at issue in the state court
19
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
litigation. “[S]ince both actions raise[] the same core issues of
law and fact, and both actions aim[] at determining the rights of
the parties under the insurance policy, potential entanglement
between the state and federal courts [i]s a genuine possibility.”
Kapiloff, 155 F.3d at 494; see also Fuscardo, 35 F.3d at 968 (where
same declaratory judgment issue between insurer and claimant in
both state and federal cases, abstention was proper). Indeed, given
the absolute identity of the coverage issues, retention of federal
jurisdiction
could
frustrate
portions
of
the
state
court
proceedings. See Mitcheson, 955 F.2d at 239. This factor thus also
weighs slightly in favor of abstention.
D.
The final Nautilus factor, procedural fencing, is largely
neutral. Under this factor, the Court must consider “whether the
declaratory judgment action is being used merely as a device for
‘procedural fencing’ — that is, ‘to provide another forum in a race
for res judicata’ or ‘to achiev[e] a federal hearing in a case
otherwise not removable.’” Nautilus, 15 F.3d at 377 (internal
citation omitted). The Fourth Circuit has stated that procedural
fencing exists where “a party has raced to federal court in an
effort to get certain issues that are already pending before the
20
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
state courts resolved first in a more favorable forum.” Great Am.
Ins. Co. v. Gross, 468 F.3d 199, 212 (4th Cir. 2006). But even when
the parallel state court action is filed before the federal
declaratory
judgment
action,
courts
will
not
generally
find
procedural fencing without some further evidence of forum shopping.
See, e.g., First Fin. Ins. Co. v. Crossroads Lounge, 140 F. Supp.
2d 686 (S.D. W. Va. 2001).
Based on the timeline of events, it is apparent that both
Allstate and the defendants have engaged in some forum shopping.
The accident took place on June 16, 2011, and Allstate denied
Cogar’s claim on June 22, 2011. (Dkt. No. 9-1 at 2). Sirbaugh filed
suit in state court sometime in or around September 2012. On
November 21, 2012, Allstate agreed to provide Cogar with a courtesy
defense in Sirbaugh’s suit, subject to a full reservation of
rights. (Dkt. No. 9-2 at 2, 5). Subsequently, it filed this
declaratory judgment action on December 3, 2012 (Dkt. No. 1 at 1).
On January 8, 2013, Cogar and Serious Diesel filed a motion for
leave to file a third-party complaint against Allstate, which the
state court granted. (Dkt. No. 9-3).
As is apparent from this timeline, both Cogar and Allstate
waited to file their complaints for reasons that likely include
procedural fencing. Cogar could have filed a third-party complaint
21
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
against
Allstate
shortly
after
Sirbaugh
filed
her
complaint.
Instead, he waited until after Allstate filed its complaint for
declaratory relief. Allstate, moreover, did not file the instant
case until December 3, 2012, despite becoming aware of Cogar’s
demand for coverage a year and a half earlier, in June 2011.
Further, although it was inevitable that coverage issues would
arise in Sirbaugh’s state action, Allstate nevertheless waited
several
months
after
that
case
was
filed
before
filing
its
declaratory action in federal court.
This Court has previously held that where both parties have
engaged in procedural fencing the fourth Nautilus factor “does not
favor either party.” State Farm Mut. Auto. Ins. Co. v. Shingleton,
2007 WL 3348462, *5 (N.D. W. Va. Nov. 8, 2007). Accordingly, this
factor weighs neither for nor against abstention in this case.
VI.
On balance, the Nautilus factors tip in favor of dismissal of
Allstate’s claim for declaratory relief. The Court:
1.
GRANTS the defendants’ Motions to Dismiss (dkt. nos. 7,
8, 10, 11); and
2.
DISMISSES this action WITHOUT PREJUDICE and orders that
it be STRICKEN from the docket of this Court.
22
ALLSTATE v. COGAR
1:12CV175
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’
MOTIONS TO DISMISS [DKT. NOS. 7, 8, 10, 11]
AND DISMISSING CASE WITHOUT PREJUDICE
Pursuant to Fed. R. Civ. P. 58, the Court DIRECTS the Clerk of
Court to enter a separate judgment order and to transmit copies of
both orders to counsel of record.
It is so ORDERED.
Dated: May 13, 2013
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
23
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?