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Nationwide Mutual Fire Insurance Co. v. Carter

United States District Court, S.D. West Virginia, Charleston Division

June 9, 2017




         Pending before the Court is Defendants Theodore and Rebecca Carter's (the “Carters”) Motion to Dismiss or Stay (ECF No. 4). For the foregoing reasons, the Court GRANTS the Carters' Motion to Dismiss or Stay and DISMISSES Nationwide's Complaint for Declaratory Relief (ECF No. 1).

         I. BACKGROUND

         On April 28, 2015, Plaintiff Nationwide Mutual Fire Insurance Company (“Nationwide”) initiated this action by filing a complaint for declaratory relief before this Court. (ECF No. 1.) In that complaint, Nationwide seeks a declaration that, based on certain exclusions contained in a homeowner's insurance policy issued by Nationwide to Theodore and Rebecca Carter (the “Carters”), it is not required to provide coverage pursuant to that policy for losses resulting from the destruction of the Carters' home. Although the underlying facts are disputed both in this case and in other litigation currently pending in state court, this declaratory judgment action has its genesis in the collapse of an Engineered Material Arresting System at Yeager Airport in Charleston, West Virginia in March 2015. The Carters owned a home located in close proximity to the airport that was, through a series of contested events, eventually destroyed in the days following the collapse. Apparently anticipating a dispute over the extent to which it would have to cover the Carters' losses, Nationwide filed the instant action specifically asking this Court to declare that Nationwide is not required to provide any coverage based on two exclusions contained in the operative policy: (1) a provision excluding coverage where the loss at issue is caused by “government acts, ” and (2) a similar exclusion applicable to losses caused by “earth movement.” (ECF No. 1-1 (Nationwide Insurance Policy) at 21-22.) As to each exclusion, the policy provides that a loss will not be covered so long as the listed exclusionary event “is the pre-eminent or efficient proximate cause even if another peril or event contributed concurrently or in any sequence to cause the loss.”[1] (Id. at 21.)

         Shortly thereafter, on June 1, 2015, the Carters began pursuing their own claims for compensation based on the collapse, the events leading up to and following that collapse, and the loss of their home. First, before this Court, they responded to Plaintiff's Complaint and asserted several counterclaims[2] based on Nationwide's refusal to cover the losses associated with the destruction of their home, its methods in doing so, and its filing of the current action without prior consultation with the Carters. (ECF No. 5.) Second, they initiated a separate action in the Circuit Court of Kanawha County, West Virginia. (ECF No. 4-1 (State Court Complaint)). That action, in addition to asserting various tort claims against the parties alleged to be responsible for the collapse and subsequent destruction of the Carters' home, sets forth affirmative claims against Nationwide that exactly mirror the counterclaims asserted in this federal action. Further, it seeks a declaration-with respect to the same insurance policy under which Nationwide seeks a declaration before this Court relieving any coverage obligation-that Nationwide is legally obligated to provide the Carters with insurance benefits based on their losses. (Id. at 22.)

         In light of the filing of that state court complaint, on June 1, 2015, the Carters filed their Motion asking this Court to either dismiss or stay the present federal declaratory judgment action in deference to the parallel state proceeding involving both the insurance dispute at issue here as well as larger issues regarding the Carters' ultimate entitlement to compensation. (ECF No. 4.) That motion is premised on the abstention doctrine, unique to declaratory judgment actions, announced by the Supreme Court in Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942) and Wilton v. Seven Falls Co., 515 U.S. 277 (1995). Nationwide filed a Response (ECF No. 8) on June 15, 2015, and the Carters filed a Reply Memorandum on June 22, 2015. The Motion is now fully briefed and ripe for adjudication.[3]


         The Federal Declaratory Judgment Act provides that, “In a case of actual controversy within its jurisdiction, ” the district court “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 district court has “unique and substantial discretion in deciding whether to declare the rights of litigants.” Wilton, 515 U.S. at 286.[4] However, the Fourth Circuit held that this discretion is not without limits and that:

[A] district court may not refuse to entertain a declaratory judgment action out of “whim or personal disinclination, ” [Public Affairs Assoc., Inc. v.] Rickover, 369 U.S. at 112, but may do so only for “good cause.” Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 324 (4th Cir. 1937).

Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 375 (4th Cir. 1994). The Court further held that a federal district court should entertain a declaratory judgment action within its jurisdiction if it finds that the declaratory relief sought will: (1) serve the useful purpose of clarifying and settling the legal relations in issue; and (2) terminate and afford relief from the controversy giving rise to the proceeding. Id. at 375; Quarles, 92 F.2d at 325. “[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 should not be used to “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.” Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 256-57 (4th Cir. 1996) (quoting 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.'” Id. at 257 (quoting Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942)). The Fourth Circuit has recognized that 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, 15 F.3d at 377 (citing Brillhart, 316 U.S. at 495).

         The Fourth Circuit announced four factors for district courts to consider in deciding whether or not to entertain a declaratory action in the face of a corresponding state proceeding:

(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 ...

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