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Sentry Insurance A Mutual Co. v. McCormick

United States District Court, N.D. Oklahoma

March 27, 2017

(1) SENTRY INSURANCE A MUTUAL COMPANY, a Wisconsin Corporation, Plaintiff,
v.
(2) JOSEPH A. MCCORMICK, Special Administrator of the ESTATE OF CRYSTAL LOPEZ, Defendant, and (3) MICHAEL ALLEN MCELWRATH; (4) DANA STARR LANDING, Administrator of the ESTATE OF GEORGE VERNON LANDING, JR.; (5) DYLAN BURK; (6) ROBERT PREBLE; (7) INVENTIV COMMERCIAL SERVICE, L.L.C.; (8) INVENTIV HEALTH, INC.; and (9) INVENTIV HEALTH CLINICAL SRS, LLC., Interested Parties/ Defendants.

          OPINION AND ORDER

         Before the Court are (1) Defendant Joseph A. McCormick's Motion to Dismiss or to Stay Proceedings (Doc. No. 16) and (2) Interested Party/Defendant Michael Allen McElwrath's Motion to Dismiss (Doc. No. 17). After consideration of the briefs, and for the reasons stated below, the Motions to Dismiss are GRANTED.

         BACKGROUND

         Plaintiff Sentry Insurance A Mutual Company (“Sentry”) filed this declaratory judgment action in this Court against the Special Administrator of the Estate of Crystal Lopez, Joseph A. McCormick (“McCormick”). Sentry lists seven additional parties as “Interested Parties/Defendants, ” including Michael Allen McElwrath (“McElwrath”). Sentry seeks a declaratory judgment pursuant to 28 U.S.C. §§ 2201-2202 and Federal Rule of Civil Procedure 57 regarding the existence of coverage and its duty to pay damages arising out of an automobile accident.

         According to the Complaint, on July 31, 2015, Crystal Lopez (“Lopez”), an employee of inVentiv Commercial Services, LLC (“inVentiv”), was driving a car owned by inVentiv. (Doc. No. 2, ¶¶ 12-14). Sentry was the insurance carrier for inVentiv at the time. (Id. ¶ 13). Prior to the accident, Lopez had consumed alcoholic drinks and was on a weight loss medication that warned against mixing it with alcohol. (Id. ¶ 17). As Lopez drove the wrong way on the Will Rogers Turnpike, she collided head-on with a truck driven by George Landing, Jr. (“Landing”), killing both of them. (Id. ¶ 12). Another vehicle occupied by McElwrath, Dylan Burk, and Robert Preble was also involved in the accident, and all three were injured as a result. (Id.).

         Lopez's use of the vehicle in question was subject to a Fleet Management Policy, which prohibited Lopez from driving the vehicle while her ability or alertness was impaired, including by intoxication from alcohol or drugs. (Id. ¶¶ 14-15). Lopez had agreed to be bound by the Fleet Management Policy when inVentiv provided her with the subject vehicle. (Id. ¶ 16). By driving while intoxicated, Lopez allegedly violated inVentiv's policy and was not a permissive user of the vehicle. (Id. ¶ 21).

         Following the accident, McElwrath filed a Petition in Tulsa County District Court against the Estate of Crystal Lopez seeking damages for injuries arising out of the accident, McElwrath v. McCormick, Special Administrator of the Estate of Crystal Lopez; inVentiv Health Clinical SRS, LLC; and inVentiv Commercial Services, LLC., Case No. CJ-2015-3328 (the “McElwrath Lawsuit”). (Id. ¶ 22). McElwrath asserts claims of gross negligence and punitive damages against the Estate of Crystal Lopez, and a respondeat superior claim against inVentiv. (Id.). The Estate of George Landing, Jr. has also filed a Petition in Tulsa County District Court against the Estate of Crystal Lopez and others seeking damages for Landing's wrongful death, Landing v. Inventiv Commercial Services, LLC, InVentiv Health, Inc., Aeterna Zentaris, Inc., and the Estate of Crystal Lopez, Case No. CJ-2015-4675 (the “Landing Lawsuit”). (Id. ¶ 24). The Estate of George Landing, Jr. asserts claims for negligence and punitive damages against the Estate of Crystal Lopez, and alleges inVentiv and inVentiv Health, Inc. knew or should have known that Lopez would likely drive her vehicle while intoxicated but failed to take reasonable action to prevent that risk. (Id.). Sentry is providing a defense to Lopez and the inVentiv entities in both the McElwrath and Landing Lawsuits, under a reservation of rights. (Id. ¶¶ 23, 25). McElwrath, Burk, and Preble have also filed workers' compensation claims as a result of the accident, and inVentiv's workers' compensation insurer sent a notice of subrogation to Sentry for any payments made to those individuals. (Id. ¶ 26).

         In this declaratory judgment action, Sentry contends it has no duty to indemnify for the damages claimed against Crystal Lopez in either of the state court lawsuits, because Lopez violated inVentiv's policy against operating a vehicle while intoxicated, inVentiv had no knowledge that Lopez drove the company car while intoxicated, and Lopez was not acting within the scope of permission or authorization from inVentiv at the time of the accident. Sentry alleges it did not assume the risk of covering injuries resulting from an inVentiv employee violating company policy. Sentry seeks a judicial declaration “of the rights, duties and obligations of Sentry concerning its duties, if any, to indemnify in relation to the various claims asserted against Lopez.” (Doc. No. 2, ¶ 37).

         Defendant McCormick has now moved to dismiss Sentry's declaratory judgment action, asking the Court either to decline to exercise jurisdiction or to dismiss for lack of subject matter jurisdiction. (Doc. No. 16). In the alternative, McCormick asks the Court to stay proceedings in this case until pertinent issues in the Tulsa County cases have been resolved. Interested Party/Defendant McElwrath also has moved to dismiss, joining McCormick's arguments and separately arguing Sentry fails to raise a viable claim with respect to McElwrath. (Doc. No. 17). The motions are now fully briefed and ripe for review.

         DISCUSSION

         McCormick contends the Court should decline to exercise its jurisdiction over Sentry's declaratory judgment action.[1] McCormick argues this case presents the same material issue of facts that are currently before the Tulsa County District Court in the Landing and McElwrath Lawsuits: Was Crystal Lopez operating the subject inVentiv vehicle with inVentiv's permission and within the course and scope of her employment by inVentiv? McCormick argues Sentry has created a duplicate, parallel proceeding in the form of this later-filed declaratory judgment action, which locks the Court in a “judicial race to judgment.” (Doc. No. 16, at 6). Sentry disagrees with McCormick's position and asks the Court to retain jurisdiction over this case.

         I. Standard of Review

         The Declaratory Judgment Act “confers upon courts the power, but not the duty, to hear claims for declaratory judgment.” Mid-Continent Cas. Co. v. Vill. at Deer Creek Homeowners Ass'n, 685 F.3d 977, 980 (10th Cir. 2012) (citing Wilton v. Seven Falls Co., 515 U.S. 277, 286-87 (1995)); Pub. Affairs Assoc., Inc. v. Rickover, 369 U.S. 111, 112 (1962)). Therefore, whether to entertain a declaratory judgment action is a matter committed to the trial court's sound discretion. Kunkel v. Cont'l Cas. Co., 866 F.2d 1269, 1274 (10th Cir. 1989) (citing Alabama State Fed'n of Labor v. McAdory, 325 U.S. 450, 462 (1945)). When a parallel case is pending in state court, “[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 state court presenting the same issues, not governed by federal law, between the same parties.” Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 495 (1942).

         When deciding whether to hear a declaratory judgment action, the court should weigh the following factors: (1) whether a declaratory action would settle the controversy; (2) whether it 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 to res judicata”; (4) whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and (5) whether there is an alternative remedy which is better or more effective. St. Paul Fire & Marine Ins. Co. v. Runyon, 53 F.3d 1167, 1169 (10th Cir. 1995) (citing State Farm Fire & Cas. Co. v. Mhoon, 31 F.3d 979, 983 (10th Cir. 1994)). The Court will refer to these five factors as the “Mhoon factors.”

         II. ...


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