United States District Court, E.D. Pennsylvania
May 24, 2004.
THE SCULLY COMPANY, ET AL.
ONEBEACON INSURANCE COMPANY
The opinion of the court was delivered by: JOHN PADOVA, District Judge
AND NOW, this 24th day of May, 2004, upon consideration of
Defendants' "Motion for Partial Summary Judgment or in the Alternative
for a Partial Stay" (Docket No. 22) and Plaintiffs' response thereto,
IT IS HEREBY ORDERED that the Motion is GRANTED and
this matter is STAYED as to the duty to indemnify (referenced
in paragraphs 1, 24-27, 29-30, 32-33, 35, 37, 39, 42, 44, 46, and 51 of
the Complaint) pending final resolution of Manlove v. Philadelphia
Electric Co., et al., Court of Common Pleas of Philadelphia County,
September Term 2001, No. 3022, Williams, et al. v. Scully Co., et
al., Court of Common Pleas of Philadelphia County, April Term 2002,
No. 2239, and Whitaker, et al. v. Scully Co., et al., Court
of Common Pleas of Philadelphia County, March Term 2002, No. 547. IT
IS FURTHER ORDERED that this matter shall proceed as to the
remaining allegations in the Complaint.
Plaintiffs have brought this action seeking a declaration that coverage
is owed to the Scully Company and Village Green Associates, L.P., a/k/a
Village Green Apartments (collectively "Scully"), under a commercial
general liability policy and an umbrella policy issued to Coin Automated Laundry Equipment, Inc.
("CALECO") by OneBeacon Insurance Group ("OneBeacon"), for claims arising
from an explosion in building A of the Village Green Apartments on June
16, 2001. (Compl. ¶ 1.) The Complaint alleges the following facts.
Scully had entered into an agreement with CALECO on February 2, 2001,
whereby CALECO was provided space in the Village Green Apartments in
which to install and maintain coin operated washers, dryers and related
equipment. (Id. ¶ 9.) Their agreement required CALECO to
obtain liability insurance naming Scully as an additional insured.
(Id. ¶ 10.) CALECO obtained a comprehensive general
liability policy from OneBeacon having a policy period of July 1, 2000 to
July 1, 2001, with limits of liability of $1,000,000 per occurrence (the
"primary policy"). (Id. ¶ 11.) The primary policy had an
additional insured endorsement extending coverage to any organization
that CALECO "promised would be added as an additional insured for claims
arising out of CALECO's ongoing operations." (Id. ¶ 12.)
OneBeacon also issued an umbrella policy to CALECO having a policy period
of July 1, 2000 to July 1, 2001, and having limits of liability of
$9,000,000 per occurrence (the "umbrella policy"). (Id. ¶
14.) The umbrella policy provides excess coverage and includes as
insureds organizations for which "CALECO was obligated by contract to
provide additional insured status for claims arising out of CALECO's
operations." (Id. ¶ 15.) On June 16, 2001, there was an explosion in building A of the Village
Green Apartments that was caused when flood waters entered the laundry
room leased to CALECO, lifted the gas dryer off the floor, and broke the
gas pipe. (Id. ¶¶ 19.) Scully and CALECO are defendants in
three suits brought in the Court of Common Pleas of Philadelphia County
by the estates of six decedents and six surviving tenants arising out of
this explosion (the "Philadelphia Court of Common Pleas actions").
(Id. ¶¶ 20-22.) These cases are currently scheduled for
trial on October 4, 2004. (Defs.' Ex. B.)
Scully seeks a declaration that it is an additional insured under the
primary and umbrella policies and that it is entitled to a defense and
indemnity coverage under these polices for the claims asserted in the
Philadelphia Court of Common Pleas actions. (Id. ¶ 29.)
Scully also seeks damages for OneBeacon's breach of the insurance
contract and damages for OneBeacon's bad faith. (Id.)
II. LEGAL STANDARD
District courts have "broad discretion to decline to exercise
jurisdiction over declaratory judgment proceedings" brought during the
pendency of parallel state-court proceedings. Home Ins. Co. v.
Perlberger, 900 F. Supp. 768, 774 (E.D. Pa. 1995); see also
Wilton v. Seven Falls Company, 515 U.S. 277, 282 (1995) ("[D]istrict
courts possess discretion in determining whether and when to entertain an
action under the Declaratory Judgment Act, even when the suit otherwise
satisfies subject matter jurisdictional prerequisites.") (citing Billhart v. Excess Ins. Co. of
America, 316 U.S. 491 (1942)). The United States Court of Appeals
for the Third Circuit ("Third Circuit") has suggested that the following
factors are relevant and should be considered by district courts deciding
whether to hear declaratory judgment actions involving insurance coverage
1. A general policy of restraint when the same
issues are pending in a state court;
2. An inherent conflict of interest between an
insurer's duty to defend in a state court and its
attempt to characterize that suit in federal court
as falling within the scope of a policy exclusion;
3. Avoidance of duplicative litigation.
State Auto Insurance Companies v. Summy, 234 F.3d 131
(3d Cir. 2000) (quoting United States v. Com, of Pennsylvania,
Department of Environmental Resources, 923 F.2d 1071
, 1075-76 (3d
Cir. 1991)). In addition, a state's interest in determining issues of
state law "weighs against exercising jurisdiction in declaratory judgment
actions." State Automobile Mut. Ins. Co. v. Toure, No.Civ.A.
02-7986, 2003 WL 22100875, at *1 (E.D. Pa. Aug. 7, 2003) (citing
Summy, 234 F.3d at 136).
In this declaratory judgment action, Plaintiffs seek a declaration that
Scully is entitled to indemnity under the One Beacon policies as an
additional insured. The primary policy extends coverage to additional
insureds only with respect to "liability arising out of your ongoing
operations performed for that insured." (Pls.' Ex. A, Additional Insured
Endorsement.) The umbrella policy similarly limits coverage of additional insureds to
CALECO's "operations or facilities" it owns or uses. (Pls.' Ex. B at 5.)
OneBeacon maintains that it has no obligation to indemnify Scully in
the Philadelphia Court of Common Pleas actions unless the June 16, 2001
explosion resulted from CALECO's ongoing operations. OneBeacon further
argues that Plaintiffs' indemnity claim should be stayed because this
precise issue, whether the explosion resulted from CALECO's ongoing
operations, is an issue in the Philadelphia Court of Common Pleas
actions. Indeed, in a January 21, 2004 Memorandum of Law filed in this
action, Plaintiffs stated that "the complaints in the underlying actions
allege that the injuries arose from Caleco's operations." (Pls.' Mem. in
Support of Mot. for Judgment by Default at 8.) Thus, the Court finds that
the same issue is pending in both the state and federal court actions.
Consequently, consideration of the Summy factors compel the
Court to stay consideration of Plaintiffs' indemnity claim in the present
action. Moreover, there are no federal questions present in this action
and the requested relief would require the Court to apply only state law.
See Summy, 234 F.3d at 136 ("It follows that the state's
interest in resolving its own law must not be given short shrift simply
because one party . . . perceive[s] some advantage in the federal
forum. When the state law is firmly established, there would seem to be
even less reason for the parties to resort to the federal courts."). Accordingly, the Court will stay consideration
of OneBeacon's duty to indemnify Scully pending resolution of the
Philadelphia Court of Common Pleas actions. See Wilton, 515
U.S. at 288 n.2 ("[W]here the basis for declining to proceed is the
pendency of a state proceeding, a stay will often be the preferable
course, because it assures that the federal action can proceed without
risk of a time bar if the state case, for any reason, fails to resolve
the matter in controversy.").
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