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Mid-Century Insurance Co. v. Rick's Auto Body, Inc.

United States District Court, D. Montana, Missoula Division

October 30, 2017

MID-CENTURY INSURANCE COMPANY, a member company of FARMER'S INSURANCE GROUP OF COMPANIES, Plaintiff,
v.
RICK'S AUTO BODY, INC., and AARON HALL, Individually and as Personal Representative of the Estate of Bruce Hall, Defendants. RICK'S AUTO BODY, INC., Counter-Claimant,
v.
MID-CENTURY INSURANCE COMPANY and TRUCK INSURANCE EXCHANGE, member companies of FARMER'S INSURANCE GROUP OF COMPANIES, Counter-Defendants.

          ORDER

          Dana L. Christensen, Chief Judge United States District Court

         Before the Court is a motion to stay or dismiss without prejudice filed by both Defendants, Rick's Auto Body, Inc. ("Rick's") and Aaron Hall ("Hall"). Defendants ask the Court to stay any coverage determination pending more factual development in the Underlying Action, or in the alternative, to dismiss the Complaint without prejudice.

         Having read the parties briefs and documents presented, the Court denies Defendants' motions for the reasons stated below.

         Because the parties are familiar with the facts of this case, they will only be recited as necessary to understand this Order.

         BACKGROUND

         Bruce Hall, an auto body repair worker, was injured when static electricity ignited vapor fumes in the distillation room where he was working. He was badly burned and died the following day. Subsequently Aaron Hall, Bruce Hall's son, filed a complaint in the Fourth Judicial District of Montana alleging emotional distress in his own right and seeking punitive damages against Rick's. Rick's is insured under a Garage Policy with Mid-Century Insurance Company ("Mid-Century"), which allegedly precludes coverage for any injuries also covered under Montana's Workers' Compensation Act or any "bodily injury" to a child of an injured employee arising from a workplace accident. Additionally, Mid-Century alleges that there is no coverage under the policy for punitive damages. After Rick's received service of the complaint, it tendered the claim to Mid-Century. Mid-Century sent Rick's a reservation of rights letter, and this action followed.

         DISCUSSION

         The Declaratory Judgment Act is permissive; "a federal court may declare the rights and other legal relations of any interested party" involving a case of "actual controversy within its jurisdiction." 28 U.S.C. § 2201(a). The United States Supreme Court has found that the Declaratory Judgment Act is procedural in nature, and thus "does not extend the jurisdiction of the federal courts." Medtronic, Inc. v. Mirowski Fam. Ventures, LLC, 134 S.Ct. 843, 848 (2014) (citing Shelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671 (1950) (internal marks omitted); see also Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 240 (1937) ("[T]he operation of the Declaratory Judgment Act is procedural only."). Rather, cases brought pursuant to the Act must satisfy "both constitutional and prudential concerns." Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1222 (9th Cir. 1998) (en banc). Thus, petitioners seeking declaratory relief must satisfy the "case or controversy" clause under Article III, section 2 of the United States Constitution, as well as statutory jurisdictional requirements. Dizol, 133 F.3dat 1222-1223 (citations omitted).

         Here, the Court finds that both of these prerequisites under the Act are met. First, the Ninth Circuit has "consistently held that a dispute between an insurer and its insureds over the duties imposed by an insurance contract satisfies Article Ill's case and controversy requirement." Id. at 1222 n.2. Second, the parties do not dispute, and the Court agrees, that diversity subject matter jurisdiction exists in this case because the parties are diverse and the amount in controversy exceeds $75, 000. See 28 U.S.C. § 1332.

         However, even though diversity jurisdiction is not in dispute, a federal court may decline to exercise jurisdiction under the Declaratory Judgment Act under certain circumstances. See Snodgrass v. Provident Life and Ace. Ins. Co., 147 F.3d 1163, 1166 (9th Cir. 1998) ("Under the Declaratory Judgment Act, a district court may decline to exercise jurisdiction over a declaratory action even though subject matter jurisdiction is otherwise proper."); see also Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995) ("By the Declaratory Judgment Act, Congress sought to place a remedial arrow in the district court's quiver; it created an opportunity, rather than a duty, to grant a new form of relief to qualifying litigants.").

         These "prudential concerns" were developed more fully by the Supreme Court, first in Brillhart v. Excess Ins. Co., then in Wilton v. Seven Falls Co., and their progeny. 316 U.S. 491 (1942); 515 U.S. 277 (1995). Taken together, the two Supreme Court cases proscribe circumstances under which a federal court should exercise its jurisdiction. While the Ninth Circuit has added additional considerations[1], it is the three Brillhart factors that remain the "philosophic touchstone" of the Wilton/Brillhart analysis. R.R. St. & Co. v. Transport Ins. Co., 656 F.3d 966, 975 (9th Cir. 2011).

         The Brillhart factors instruct a district court to decline jurisdiction (1) to avoid "needless determination of state law issues, " (2) discourage "forum shopping, " and (3) to avoid "duplicative litigation." See Id. (citing Brillhart, 316 U.S. at 289-290). A presumption in favor of dismissal arises when the federal action involves the same issues and parties. Dizol, 133 F.3d at 1225.

         First, the Court notes that no presumption arises here as Mid-Century is not a party in the Underlying Action. Nor does the Underlying Action raise the same questions of policy coverage. The Underlying Action alleges only two claims against Rick's: the emotional distress and punitive damages claims. Rick's answered the claim by bringing a motion to dismiss under Montana Rule of Civil Procedure 12(b)(6), which the state district court granted. Though Hall has appealed this case arguing that the Workers' Compensation exclusivity provision violates the Montana Constitution, that issue is not before this Court.

         Though no presumption arises, the Ninth Circuit has broadly interpreted what constitutes a "parallel action." American Nat'l Fire Ins. Co. v. Hungerford, 53 F.3d 1012, 1017 (9th Cir. 1995); Employers Reinsurance Corp. v. Karrusos,65 F.3d 796, 800 (9th Cir. 1995), both overruled on other grounds by Dizol, 133 F.3d 1220. The Wilton/Brillhart factors are implicated when a related action rests on the same factual circumstances. Hungerford, 53 F.3d at 1017. Here, the two cases are undoubtably related as both involve the same operative facts: Bruce Hall's injury sustained in the distillation room and Hall's subsequent ...


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