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Mesa Underwriters Specialty Insurance Co. v. Marquez

United States District Court, N.D. Oklahoma

July 13, 2017




         I. Background

         In this diversity action, the plaintiff, Mesa Underwriters Specialty Insurance Company (Mesa), seeks a declaratory judgment, pursuant to 28 U.S.C. § 2201, concerning insurance coverage issues. According to the Complaint, the insurance contract at the center of this action is a commercial general liability policy (the Policy), which was issued to Victor R. and Suezette Marquez d/b/a Psycho Path and was effective from September 25, 2015 to November 15, 2015. Mesa alleges that coverage under the Policy does not exist or is excluded in relation to the injuries and death of Bradyn L. McClain (Bradyn).

         Bradyn was fatally injured in an accident on October 31, 2015 while at a haunted house allegedly operated by Victor and Suezette Marquez d/b/a Psycho Path. Bradyn's mother, defendant Lisa McClain, individually and as the special administrator of her son's estate, brought an action against the Marquezes and Psycho Path in state court. That case is pending in Tulsa County District Court and is styled Lisa McClain, individually and as Special Administrator of the Estate of Bradyn L. McClain, a minor v. Psycho Path, LLC, an Oklahoma limited liability company, and Victor R. Marquez and Suzette Marquez, individually, Case No. CJ-2015-4565. There, Ms. McClain seeks damages for her son's injuries and death.

         In this Court, Mesa seeks a declaration that no coverage exists under the Policy in relation to the liability alleged by Ms. McClain in the state court litigation and otherwise with respect to the incident which resulted in Bradyn's death. All defendants move to dismiss this action. (See Doc. 11, 16).

         II. Discussion

         A. The Marquezes and Psycho Path

         The Declaratory Judgment Act provides that, “[i]n 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.” 28 U.S.C. § 2201. The Act authorizes federal courts to make declarations of rights, but it does not impose a duty to do so. Public Affairs Assoc., Inc. v. Rickover, 369 U.S. 111, 112 (1962). Whether to entertain a declaratory judgment action is a matter of discretion of the trial court. Alabama State Fed'n of Labor v. McAdory, 325 U.S. 450, 462 (1945).

         The Marquezes and Psycho Path argue that the Court should not exercise jurisdiction in this declaratory judgment action because the issues involved in the case at hand are the same as issues in the state action. (Doc. 16 at 3). The Court disagrees. The issues in this case are different than those involved in the state action. In this case, the dispute is whether Mesa is responsible under its insurance Policy to cover the state court defendants' liability, if any, in the state court action. That issue depends on the contract of insurance between Mesa and the Marquezes, d/b/a Psycho Path. Mesa is not a party to the state action, and the ultimate issue there is whether the defendants in that case are liable for the injuries and death of Bradyn. Although the actions involve similar circumstances, they do not involve identical issues, and whether the Policy provides coverage for any liability in the underlying suit will not necessarily be determined in the state court action.

         Courts have often been willing to exercise jurisdiction to decide questions relating to the existence of coverage under an insurance policy, even if the issue is ultimately contingent on whether the insured party is found liable in the separate action. See, e.g., Allendale Mut. Ins. Co. v. Kaiser Engineers, 804 F.2d 592, 594 (10th Cir. 1986). For example, “[i]nsurers often seek declaratory judgment in federal court (assuming jurisdiction is appropriate) on whether they have a duty to defend an insured under the terms of a liability policy.” Automax Hyundai South, L.L.C. v. Zurich American Ins. Co., 720 F.3d 798, 810 n. 3 (10th Cir. 2013). A declaratory judgment may also be appropriate to determine an insurer's prospective responsibility or duty under a policy, and declaratory judgment jurisdiction should not be refused merely because of the pendency of another suit, if the controversy between the parties will not necessarily be determined in that suit. See Western Cas. and Sur. Co. v. Teel, 391 F.2d 764, 766 (10th Cir. 1968).

         The Tenth Circuit has enumerated five factors a district court should consider in determining whether to exercise jurisdiction under the Declaratory Judgment Act:

[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.

State Farm Ins. & Cas. Co. v. Mhoon, 31 F.3d 979, 983 (10th Cir. 1994).

         Considering the Mhoon factors, the Court finds it appropriate to exercise jurisdiction over this declaratory judgment action. This case will not resolve Ms. McClain's claims in state court, but it will clarify the legal relations between Mesa and the defendants in the state court action and will settle the dispute regarding coverage under the Policy. The Marquezes and Psycho Path agree that the “single question to be answered [in this case] is the interpretation of a contract.” (Doc. 16 at 5). In contrast, the issue in the pending state action is whether the Marquezes and Psycho Path are liable for Bradyn's injuries and death. Thus, Mesa does not seem to be seeking declaratory action for purposes of “procedural fencing” or racing to res judicata; the issues are ...

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