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Tower National Insurance Co. v. Dixie Motors

United States District Court, E.D. Louisiana

May 21, 2015



IVAN L.R. LEMELLE, District Judge.

This action arises out of an insurance coverage dispute. Tower National Insurance Company ("Tower National") issued to Dixie Motors LLC d/b/a Dixie RV Superstores ("Dixie Motors") an insurance policy, effective from May 12, 2013 to May 12, 2014. ("Policy").[1] On June 17, 2014, a petition for monetary damages was filed in state court by Thomas A. Anzalone for injuries sustained on or about August 11, 2013 while on a sailing vacation in the Bahamas, when Gregory A. Lala ("Lala"), the owner of Dixie Motors negligently caused a golf cart to tip over.[2] ("underlying lawsuit"). The petition asserts claims against Tower National and alleges that the company had in full force and effect a policy of liability insurance, insuring Dixie Motors and Lala for the types and kinds of liability asserted in the petition.[3]

Tower National filed the instant diversity action seeking declaratory judgment pursuant to the Declaratory Judgment Act, 28 U.S.C. ยง 2201, that there is no coverage under the Policy for either Dixie or Lala resulting from Lala's operation of a golf cart in the Bahamas. Tower National moves the Court for summary judgment that the liability insurer owes no duty to defend or indemnify Dixie Motors or its employee (Lala), in connection with the underlying lawsuit.[4] Defendants, Dixie Motors and Lala, have filed a response, arguing in part, that Tower National's declaratory judgment action is not fully ripe as the issue of the defendants' liability in the underlying state court lawsuit has not been resolved. Defendants also move the Court to dismiss or stay this action on the grounds of abstention, due to "parallel state proceedings."

The questions presented are several. First, the Court must determine whether the claims in this declaratory judgment action are justiciable. Second, the Court must determine how to exercise its broad discretion to decide, stay, or dismiss this action. Finally, if the Court finds that any claims are justiciable, that it has authority to grant declaratory relief, the Court must then determine whether under Louisiana law, Tower National is entitled to summary judgment on the duty to defend and duty to indemnify claims.


a. Justiciability

Tower National seeks summary judgment in this declaratory judgment action that it has no duty to defend or indemnify Dixie Motors and Lala in the underlying lawsuit under the terms of the Policy. A federal court may not issue a declaratory judgment unless there exists an actual case or controversy. Am. States Ins. Co. v. Bailey, 133 F.3d 363, 369 (5th Cir. 1998). In a diversity action, the Court must apply the substantive law of the forum state, as interpreted by the state's highest court. See Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 399 (5th Cir. 2008). Because the Policy was delivered in Louisiana, the Court interprets the Policy applying Louisiana substantive law.[5] See Thermo Terratech v. GDC Enviro-Solutions, Inc., 265 F.3d 329, 334 (5th Cir. 2001).

Under Louisiana law, an insurer's duty to defend is broader than its duty to indemnify. See Elliott v. Cont'l Cas. Co., 949 So.2d 1247, 1250 (La. 2007) (citing Steptore v. Masco Constr. Co., Inc., 643 So.2d 1213, 1218 (La. 1994)). Because the duty to defend does not depend on the outcome of the underlying law suit but rather upon the allegations in the pleadings, a duty to defend claim is ripe, and presents an actual case or controversy when the underlying suit is filed. See e.g. W. Heritage Ins. Co. v. River Entm't, 998 F.2d 311, 312-13 (5th Cir. 1993); Elliott v. Cont'l Cas. Co., 949 So.2d 1247, 1250 (La. 2007) (citing Steptore v. Masco Const. Co., Inc., 643 So.2d 1213, 1218 (La. 1994). Therefore, Tower National's duty to defend claim is ripe and is determined solely by comparing the pleadings against the insured with the insurance policy. See Suire v. Lafayette City-Parish Consol. Gov't, 907 So.2d 37, 52 (La. 2005).

Under Louisiana law, in general, an insurer's duty to indemnify cannot be determined until after the underlying suit has been resolved and the insured is found liable. Allstate Insurance Co. v. Employers Liability Assurance Corp., 445 F.2d 1278, 1281 (5th Cir. 1971); American Fidelity & Casualty Co. v. Pennsylvania Threshermen & Farmers' Mutual Cas. Insurance Co., 280 F.2d 453 (5th Cir. 1950); see Quinlan v. Liberty Bank & Trust Co., 575 So.2d 336, 348-49 (La. 1990); Mossy Motors Inc. v. Cameras Am., 898 So.2d 602, 607 (La.App. 4 Cir. 2005). However, if "the same reasons that negate the duty to defend likewise negate any possibility the insurer will ever have a duty to indemnify, " the issue is properly addressed. Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 529 (5th Cir. 2004)(applying Texas law). As this question of justiciability may turn on conclusions reached on the duty to defend claim, the Court leaves this narrow issue for resolution below.

b. Discretion to Exercise Jurisdiction

The Court next addresses whether it should abstain from ruling on the duty to defend and indemnity claims. The parties differ on the abstention standard to be applied. Defendants move the Court to dismiss or stay pursuant to the doctrinal standard enunciated in Brillhart v. Excess Ins. Co. of America, 316 U.S. 491 (1942). Plaintiff contends the proper (and more stringent) standard is that set forth in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). The Court agrees with the latter.

The Brillhart standard applies to a court's determination on whether to dismiss a declaratory judgment action. Orrix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000). However, "it is well settled in this circuit, that a declaratory action that also seeks coercive relief is analyzed under the Colorado River standard." New England Ins. Co. v. Barnett, 561 F.3d 392, 397 (5th Cir. 2009). "[W]hen an action contains any claim for coercive relief, " including counterclaims, Colorado River applies. Id. [6]

Here, Plaintiff's complaint presents a declaratory judgment action. Defendants' answer claims that "the plaintiff has arbitrarily and capriciously failed to consider the aforementioned insurance policy endorsement which unambiguously extends coverage, " and seeks "all applicable damages, attorney's fees...."[7] The inclusion of a request for coercive relief in the form of damages and attorney's fees "indisputably removes this suit from the ambit of a declaratory judgment action." Id. at 395 (quoting Southwind Aviation, Inc. v. Bergen Aviation, Inc., 23 F.3d 948, 950 (5th Cir. 1994)(per curiam)). Thus, Colorado River abstention doctrine, rather than Brillhart abstention doctrine, governs the Court's abstention determination.

Under the Colorado River doctrine, "the district court's discretion to dismiss is narrowly circumscribed' and is governed by a broader exceptional circumstances standard." Barnett, 561 F.3d at 394-95. The doctrine applies when parallel state and federal proceedings exist. See Black Sea Inv., Ltd. v. United Heritage Corp., 204 F.3d 647, 649 (5th Cir. 2000).

For a court to abstain from exercising jurisdiction under the Colorado River doctrine, it first must find that the federal and state court actions are "parallel." Hartford Accident & Indem. Co. v. Costa Lines Cargo Servs., Inc., 903 F.2d 352, 360 5th Cir. 1990). Actions are parallel when the same parties are litigating the same issues. See Republicbank Dallas, Nat'l Ass'n v. McIntosh, 828 F.2d 1120, 1121 (5th Cir. 1987). Tower argues that because the state court action does not encompass defendants' counterclaim asserted here, the two actions are not parallel.

The underlying state action is brought by Anzalone against Dixie Motors, Lala, State Farm, and Tower to compensate Anzalone for damages, including medical expenses and lost wages.[8] This declaratory judgment action is brought by Tower against Dixie Motors and Lala to determine whether Tower has a duty to defend or indemnify in connection with the underlying lawsuit.[9] Certainly, the declaratory judgment claim is a subset of the state court litigation; however, the two actions do not involve the exact same parties and issues, and are not parallel. Republic Ins. Co. v. Housing Authority of New Orleans, No. 08-4748, 2012 WL 5384661, at *6 (E.D. La. Nov. 1, 2012). The counterclaim in the instant declaratory judgment action presents an additional insurance contract claim, and the action does not involve Anzalone or State Farm.

Even assuming perfect symmetry is not essential for abstention, the Court applies the Colorado River abstention factors to the federal and state actions in this matter, and concludes that abstention is not required in this case.

i. Assumption by Either Court of Jurisdiction Over a Res

Neither this Court nor the state court has assumed jurisdiction over any res or property in this case. The absence of this factor, weighs against abstention. Murphy v. Uncle Ben's, Inc., 168 F.3d 734, 738 (5th Cir. 1999)(quoting Colo. River, 424 U.S. at 813).

ii. The Relative Inconvenience of the Forums

Both the federal and state proceedings are located in southeastern Louisiana. Therefore, neither forum is more or less convenient than the other. The absence of this factor weighs against abstention. Id.

iii. The Avoidance of Piecemeal Litigation

The overlap of issues between the federal and state court actions is duplicative. "The prevention of duplicative litigation is not a factor to be considered in an abstention determination." Evanston Ins. Co. v. Jimco, Inc., 844 F.2d 1185, 1192 (5th Cir. 1988)(citing Colo. River, 424 U.S. at 817). "[D]uplicative litigation, wasteful though it may be, is a necessary cost of our nation's maintenance of two separate and distinct judicial systems possessed of frequently overlapping jurisdiction." Black Sea Inv., Ltd. v. United Heritage Corp., 204 F.3d 647, 650 (5th Cir. 2000).

The real concern here is the danger of inconsistent rulings with respect to a piece of property. Id. at 650-21. When, as here, no court has assumed jurisdiction over a disputed res, there is no such ...

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