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State Farm Mutual Automobile Insurance Co. v. Mauricio

United States District Court, E.D. Michigan, Southern Division

January 2, 2018

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff,
v.
RACHEL ELENA MAURICIO, Defendant.

          OPINION AND ORDER DISMISSING CASE WITHOUT PREJUDICE

          DAVID M. LAWSON UNITED STATES DISTRICT JUDGE

         Honorable David M. Lawson Plaintiff State Farm Mutual Automobile Insurance Company filed the present action seeking a declaratory judgment on whether it is obligated to defend Rachel Elena Mauricio in a lawsuit brought by individuals who are not parties to this case under a personal automobile insurance policy issued to Mauricio's mother, Carmen Orozco. The complaint states that those individuals filed an action against Mauricio and others in the Wayne County, Michigan circuit court to recover wrongful death damages and damages for injuries the individuals suffered as a result of being struck by a motor vehicle driven by Antonio Dwayne Foster, to whom Mauricio had entrusted her vehicle. This Court has discretion whether to exercise jurisdiction in declaratory judgment actions, and because all the pertinent factors relating to the exercise of that discretion were not addressed in the plaintiff's complaint, the Court ordered the plaintiff to show cause why the case should not be dismissed without prejudice.

         State Farm responded to the show cause order. It argued that a declaratory judgment in the present lawsuit would not be inconsistent with any ruling issued by the state court because the issue of Mauricio's policy coverage is not before that court, and that this action would clarify the legal relationship between State Farm and its insured. State Farm contends that there is no evidence the declaratory remedy is being used for procedural fencing, retaining jurisdiction would not increase friction between the state and federal courts, and there is no alternative remedy which is better or more effective.

         The Court sees things differently, however, because the plaintiffs in the underlying litigation may be prejudiced by a factual determination in this case that limits State Farm's exposure in the event Mauricio is found liable. Because of the danger of inconsistent results, and because other factors favor the refusal of declaratory judgment jurisdiction, the Court will dismiss the case without prejudice.

         I.

         According to State Farm's complaint, the accident occurred on March 8, 2015. Antonio Dwayne Foster was driving Mauricio's 2015 Nissan Pathfinder when he failed to yield to oncoming traffic and collided with a vehicle occupied by Carnell Alexander, Jr. and Schaelin Marie Gibas. Alexander was killed, and Gibas sustained severe injuries. At the time of the accident, the Nissan Pathfinder was a leased, temporary substitute vehicle subject to a State Farm automobile policy issued to Mauricio's mother, Carmen Orozco. The ensuing wrongful death and negligence lawsuit named Mauricio as one of the defendants, alleging that she entrusted her vehicle to Foster, despite knowing that he was intoxicated, which proximately caused Alexander's death and Gibas' injuries. The state court suit also named as defendants Foster and Ean Holdings, LLC - the owner of the leased vehicle - seeking tort damages against them. The state court plaintiffs also named Allstate Property and Casualty Insurance as a defendant, seeking first-party no fault benefits against it.

         In this case, State Farm asks this Court to absolve it of any obligation to indemnify or defend Mauricio because 1) the accident occurred after the policy was cancelled by State Farm, and 2) even if the policy had not been cancelled, the 2015 Nissan Pathfinder is not a covered automobile as defined by the policy. The state court complaint noted that State Farm already has denied that coverage was in place at the time of the accident. In the event judgment is entered against Mauricio, whether Mauricio's vehicle was covered by the policy is an issue that must be addressed in both cases.

         II.

         Although the federal courts have a “virtually unflagging obligation . . . to exercise the jurisdiction given them, ” Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976), the exercise of jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), is not mandatory, Brillhart v. Excess Ins. Co., 316 U.S. 491, 494 (1942), and at times the better exercise of discretion favors abstention. “‘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.'” Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 969 (6th Cir. 2000) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)). Abstaining from that opportunity generally “rest[s] on considerations of ‘[w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.'” Colorado River, 424 U.S. at 817 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183 (1952)). Declining jurisdiction is always a sensible option to consider in declaratory judgment actions seeking an opinion on insurance coverage that could impact litigation pending in another court, for although there is no per se rule prohibiting such actions in federal court, see Allstate Ins. Co. v. Green, 825 F.2d 1061, 1066 (6th Cir. 1987), “[s]uch actions . . . should normally be filed, if at all, in the court that has jurisdiction over the litigation which gives rise to the indemnity problem.” Bituminous Cas. Corp. v. J & L Lumber Co., Inc., 373 F.3d 807, 812 (6th Cir. 2004) (quoting Manley, Bennett, McDonald & Co. v. St. Paul Fire & Marine Ins. Co., 791 F.2d 460, 463 (6th Cir. 1986)). The Court has discretion to decline jurisdiction over a declaratory judgment action even where the parties are diverse and the amount in controversy meets the threshold. Omaha Property and Cas. Ins. Co. v. Johnson, 923 F.2d 446, 447 (6th Cir. 1991) (“We have repeatedly held in these insurance coverage diversity cases that the Declaratory Judgment Act grants the district courts a discretion to entertain such cases . . . .”).

         To assist district courts in determining whether to proceed with such actions, the Sixth Circuit in Bituminous Casualty Corporation cataloged five factors that it drew from its earlier precedents:

(1) whether the judgment would settle the controversy;
(2) whether the declaratory judgment 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 action would increase the friction between our federal and state courts and improperly ...

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