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NATIONWIDE MUT. FIRE INS. CO. v. CASSEL

September 27, 1994

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Plaintiff
v.
DORIS A. CASSEL; RANDALL L. CASSEL; JAMES E. JOHNMAN, SR.; KAREN E. JOHNMAN, JR., individually; JAMES E. JOHNMAN, JR., a minor, by JAMES E. JOHNMAN, SR. and KAREN L. JOHNMAN, his parents and natural guardians; Defendants



The opinion of the court was delivered by: WILLIAM W. CALDWELL

 I. Introduction.

 This is a diversity action controlled by Pennsylvania law. The plaintiff is Nationwide Mutual Fire Insurance Co. ("Nationwide"). The defendants are Randall L. Cassel and Doris A Cassel, husband and wife, its insureds under a homeowners policy; James E. Johnman, Sr. and Karen L. Johnman, husband and wife; and James E. Johnman, Jr., their minor child. Nationwide seeks a declaratory judgment that its policy does not cover Randall L. Cassel for his sexual abuse of the minor Johnman.

 We are considering the Johnman defendants' motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), requesting dismissal of the action or, in the alternative, a stay of proceedings. They base their motion primarily on the ground that the coverage issue is unsettled under Pennsylvania law and that we should therefore leave the issue to the state courts.

 II. Background.

 On May 12, 1994, Nationwide filed its complaint, alleging that it issued a homeowner's policy to the Cassels in 1987, covering them for damages they are legally obligated to pay for bodily injury to others but excluding payment for injury "expected or intended by the insured." (complaint, PP 9-13). Despite the exclusion, the Johnman parents are seeking to recover under the policy for Randall Cassel's sexual abuse of the minor Johnman. (Id., P 17). This abuse started about January of 1990, (id., P 14), and the minor eventually reported it to the police about April 26, 1993. (Id.).1 Nationwide seeks declaratory relief under Wiley v. State Farm Fire & Casualty Co., 995 F.2d 457 (3rd Cir. 1993), in which the Third Circuit predicted that the Pennsylvania Supreme Court, in accord with the majority rule, would decide that there is no coverage for sexual assault of a minor under a policy excluding the insurance company's liability for intentional acts.

 On July 15, 1994, about two months after Nationwide's action, the Johnmans filed suit in the Court of Common Pleas of Dauphin County, Pennsylvania. In count I of the complaint the minor Johnman seeks damages against Randall Cassel for emotional injuries based on Cassel's "negligent failure to seek and obtain professional treatment" for his pedophilia. (state court complaint, PP 13 and 14), attached as an exhibit to the Johnman's motion). In count II the Johnman parents seek damages against Randall Cassel for money spent on psychological services for the entire family, also based on Cassel's "negligent failure to seek and obtain professional treatment" for his pedophilia. (Id., PP 16 and 18). In count III all of the Johnmans seek a declaratory judgment against Nationwide and the Cassels that Nationwide's policy covers Randall Cassel's conduct.

 III. Discussion.

 Under the Declaratory Judgment Act, 28 U.S.C. § 2201, federal courts have the discretion to issue declaratory judgments in cases within their subject matter jurisdiction. United States v. Commonwealth of Pennsylvania, Department of Environmental Resources, 923 F.2d 1071 (3rd Cir. 1991). When exercising that discretion, the Third Circuit has said that courts should consider the following factors:

 
(1) the likelihood that the declaration will resolve the uncertainty of obligation which gave rise to the controversy; 2) the convenience of the parties; (3) the public interest in a settlement of the uncertainty of obligation; and (4) the availability and relative convenience of other remedies.

 Terra Nova Insurance Co., Ltd. v. 900 Bar, Inc., 887 F.2d 1213, 1224 (3rd Cir. 1989) (quoted case omitted).

 This is not a mandatory check list, and when some of these factors are absent in a particular case, they can be ignored. See Commonwealth of Pennsylvania, Department of Environmental Resources, supra, 923 F.2d at 1077 n. 9. The Third Circuit has also noted that the court should "prevent the use of the declaratory action as a method of procedural fencing, or as a means to provide another forum in a race for res judicata." Terra Nova, 887 F.2d at 1225.

 More specific to the case at bar, the Supreme Court has said that, in a suit not governed by federal law, the court should consider whether a state court suit between the same parties presents the same issues and whether they could be better settled in that court. See Brillhart v. Excess Insurance Co., 316 U.S. 491, 62 S. Ct. 1173, 86 L. Ed. 1620 (1942).

 In moving to dismiss, the Johnmans concentrate on the Brillhart factors. They point out that their state court action involves the same parties and, because of the declaratory judgment count, the same issues. Crucially, those issues are unsettled under state law. Under these circumstances, they argue that the better forum is the common pleas court because federal courts should allow state courts to determine the substance of state law. They cite in their support Zurich Insurance Co. v. Alvarez, 669 F. Supp. 307 (C.D. Cal. 1987) (refusing to grant declaratory relief to the plaintiff insurance ...


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