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Hutchinson Group, Ltd. v. American International Specialty Lines Insurance Co.

June 5, 2006

THE HUTCHINSON GROUP, LTD., PLAINTIFF,
v.
AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Judge Thomas M. Hardiman

OPINION

I. Introduction

This insurance coverage action began when Plaintiff The Hutchinson Group, LTD (Hutchinson) filed a Complaint alleging breach of contract and bad faith against its insurer, Defendant American International Specialty Lines Insurance Company (AISLIC), in the Court of Common Pleas of Westmoreland County. After AISLIC removed the case to this Court on December 19, 2005, Plaintiff timely filed a Motion to Remand, which is the subject of this Opinion. For the reasons that follow, the Motion will be denied.

II. Facts

In October of 2002, Hutchinson was hired by First Commonwealth Bank (First Commonwealth) to conduct a geophysical study to determine whether storage tanks were located on a site in Ebensburg, Cambria County, Pennsylvania that had previously been used as a gas station (the Property). On October 15, 2002, Hutchinson examined the Property. One week later, Hutchinson referenced maps of the Property that did not identify any underground tanks and reported that it did not find any storage tanks during its inspection. Over two years later, in November of 2004, while First Commonwealth was excavating the Property to construct a branch office, it allegedly discovered an underground storage tank and soil contaminated by leakage from the tank near the western corner of the Property. On July 19, 2005, First Commonwealth sued Hutchinson in the Allegheny County Court of Common Pleas, alleging breach of contract, breach of implied warranty, negligence and professional negligence.

Hutchinson is insured by AISLIC pursuant to Policy No. 9353794, which includes professional liability coverage on a claims made basis retroactive to April 23, 2004. On September 22, 2005, AISLIC notified Hutchinson of its decision to deny coverage in the case brought by First Commonwealth. AISLIC claimed that it did not provide coverage because Hutchinson's alleged negligent acts occurred prior to the retroactive date and because the geophysical survey was not an environmental impact study. On November 14, 2005, Hutchinson filed a Complaint against AISLIC in the Westmoreland County Court of Common Pleas alleging that it is entitled to a defense and indemnification in the First Commonwealth case pending in the Allegheny County Court of Common Pleas. AISLIC then removed the matter here and Hutchinson filed a motion to remand, citing the decision of the Third Circuit Court of Appeals in State Auto Insurance Company v. Summy, 234 F.3d 131 (3d Cir. 2000).

III. Standard of Review

A defendant that removes a case to federal court bears the burden of establishing federal jurisdiction. See Pullman Co. v. Jenkins, 305 U.S. 534 (1939); Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990). In considering whether to remand, "[b]ecause lack of jurisdiction would make any decree in the case void and continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts should be resolved in favor of remand." Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1995); see also Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996). If there is any doubt as to whether federal jurisdiction lies, the case should not be removed to federal court. Brown, 75 F.3d at 865 (citing Boyer, 913 F.2d at 111; Abels, 770 F.2d at 29). When the basis of removal is federal question jurisdiction, the propriety of the removal rests on whether plaintiff's well-pleaded complaint raises claims that arise under federal law. Caterpillar, 482 U.S. at 392.

IV. Analysis

As the Supreme Court noted recently: "In Cohens v. Virginia, Chief Justice Marshall famously cautioned: 'It is most true that this Court will not take jurisdiction if it should not: but it is equally true, that it must take jurisdiction, if it should . . . . We have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given.'" Vickie Lynn Marshall v. E. Pierce Marshall, 547 U.S. ___ (2006) (internal citations omitted). The Court of Appeals for the Third Circuit similarly recognized that "it is axiomatic that federal courts have a virtually unflagging obligation to exercise the jurisdiction given them by Congress." Ryan v. Johnson, 115 F.3d 193, 195 (3d Cir. 1997). As the Supreme Court made clear in Colorado River Water Conservation Dist. v. United States,424 U.S. 800 (1976):

Abstention from the exercise of federal jurisdiction is the exception, not the rule. The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest.

Id. at 813 (internal citations omitted).

The Supreme Court in Colorado River noted three general categories of cases in which federal courts should abstain from exercising jurisdiction. First, "abstention is appropriate in cases presenting a federal constitutional issue which might be mooted or presented in a different posture by a state court determination of pertinent state law." Id. at 814 (internal citations omitted). "Abstention is also appropriate where there have been presented difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar." Id. Finally, "abstention is appropriate where, absent bad faith, harassment, or a patently invalid state statute, federal jurisdiction has been invoked for the purpose of restraining state criminal proceedings." Id. at 815.

In addition to the foregoing three types of cases, the Supreme Court indicated prudential considerations that should guide courts in determining when abstention is proper. Id. The Court of Appeals for the Third Circuit summarized those factors: "(1) whether the state court assumed in rem jurisdiction over property; (2) the inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; and (4) the order in which jurisdiction was obtained by the concurrent forums." Johnson 115 F.3d at 196. At the same time, the Third Circuit recognized ...


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