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Everest National Insurance Co. v. USAA Casualty Insurance Co.

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

January 22, 2018




         Plaintiff Everest National Insurance Company (“Everest”) is litigating the same issues presented here in a related state lawsuit pending in Wayne County Circuit Court. Defendant USAA Casualty Insurance Company (“USAA”) moves for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(1) under the Brillhart or the Colorado River abstention doctrines. Because the same issue is pending in a previously filed state lawsuit, interests of comity and the wise use of judicial resources require that this court abstain and stay this lawsuit. Oral argument had been scheduled, but upon review of the parties' submissions, the court determines that oral argument is not necessary pursuant to Local Rule 7.1(f)(2).

         I. Background

         On October 7, 2016, the underlying insured in this action, Gregory Graham, III, was involved in a serious motor vehicle accident when he was the passenger in a 2003 Ford Explorer. The automobile collided with a cement barrier on the highway resulting in severe injuries including brain injury. The automobile was insured by Defendant USAA. Graham was the resident relative of his mother, Lakisha Johnson, who owned an automobile insured by Plaintiff Everest. Since Graham claimed no-fault personal injury protection (“PIP”) benefits as a result of the accident, Everest has paid benefits to Graham in excess of $100, 000. In December, 2016, Graham's mother and guardian filed a lawsuit in Wayne County Circuit Court asserting a negligence claim against the driver of the vehicle, Dontae D. Jackson, an owner's liability claim against the owner of the vehicle, Stephanie Hall, and a breach of contract action against Everest for the failure to pay first party PIP no-fault benefits. Less than a month after the lawsuit was filed, Graham's guardian amended the Complaint to name USAA as a named defendant in the event that Everest is not liable to pay first party PIP benefits. In her second amended complaint, Graham's guardian also added a claim for declaratory relief seeking a determination as to which insurance company, Everest or USAA, is obligated under Michigan law to pay first party PIP benefits. Everest did not remove on the basis of diversity but continued to litigate in state court.

         Graham's guardian then filed a motion for declaratory judgment in state court seeking a determination of the priority between Everest and USAA. In response, Everest filed a motion for summary disposition on the basis that Johnson lied on her policy application by denying that she owned two other uninsured vehicles, thus voiding her policy. In February, 2017, the state court ordered Everest to pay certain medical bills and reserved on the issue of coverage and priorities. Based on the dispute over coverage, the state circuit court ordered that the Michigan Automobile Insurance Placement Facility (“MAIPF”) be added as a party to the state court action and assign an insurer to begin to pay Graham's no-fault benefits. Graham's guardian did so and filed a second amended complaint on March 8, 2017. Titan Insurance Company was substituted for MAIPF on May 12, 2017.

         Graham's third party liability claims against the driver and owner of the vehicle were dismissed by stipulation on August 3, 2017. Only the priority dispute and related issues remain pending in the state suit. On September 14, 2017, Wayne County Circuit Court Judge Lita Masini Popke, denied Everest's motion for summary disposition. Judge Popke also denied Everest's motion to stay the matter pending an appeal of the denial of its summary disposition motion. Case evaluation in the state action is scheduled to occur in January, 2018.

         Shortly after losing on its motion for summary disposition, on September 20, 2017, Everest filed the instant diversity lawsuit seeking declaratory judgment on the priority issue and related claims. In its original Complaint, Count I sought a declaratory judgment that USAA stands in a higher priority than Everest for payment of no-fault benefits to Graham pursuant to M.C.L. § 500.3114(a); Count II sought recoupment of all monies paid by Everest under the theory that USAA occupies the highest priority position under the No-Fault Act; Count III sought equitable subrogation; and Count IV sought common law indemnity. Recovery pursuant to all counts of the Complaint requires a ruling that USAA has higher priority under the No-Fault Act than Everest.

         On October 23, 2017, USAA filed a motion to dismiss based on Brillhart abstention, which governs declaratory judgment actions, or Colorado River abstention, which governs abstention in the face of parallel state proceedings. In response, on November 6, 2017, Everest filed an Amended Complaint deleting the declaratory judgment claim, but retaining the recoupment, equitable subrogation, and common law indemnity claims as pled in the original Complaint. All of the remaining claims require a determination that USAA stands in higher priority than Everest for payment of no-fault benefits in order for Everest to prevail. Everest filed a response to the motion to dismiss, stating Brillhart abstention cannot apply because it is no longer seeking declaratory judgment relief, and arguing that Colorado River abstention does not apply because there are allegedly no parallel proceedings.

         II. Analysis

         A. Brillhart Abstention

         The court first considers whether this matter should be dismissed under the Brillhart abstention doctrine because Plaintiff seeks declaratory judgment relief for the same matter pending in state court. Plaintiff's decision to delete its declaratory judgment claim in response to Defendant's motion to dismiss does not alter the court's decision here as the remaining subrogation and indemnity claims involve the same issue of priority in coverage set forth in the declaratory judgment count. In other words, the court's decision on the remaining claims requires the same analysis as the dismissed declaratory judgment claim. As such, the court will reject Plaintiff's invitation to elevate form over substance, and will consider whether Brillhart abstention is warranted here despite Plaintiff's attempt to use the Amended Complaint to seek to end run around that doctrine.

         The Declaratory Judgment Act provides a district court with discretion to exercise jurisdiction over a declaratory action and provides:

(a) 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. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

28 U.S.C. § 2201 (emphasis added). The Supreme Court has held that it may be appropriate for federal courts to abstain from deciding declaratory judgment actions where the same issue is pending in state court. Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942). Specifically, the Court has noted that “[o]rdinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same ...

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