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Lumbermens Mutual Casualty Insurance Co. v. Peirce

April 17, 2009


The opinion of the court was delivered by: Donetta W. Ambrose Chief Judge, U.S. District Court



In this civil action, Plaintiff Lumbermens Mutual Casualty Company ("Lumbermens") seeks a declaratory judgment with respect to its insurance obligations to the Peirce Defendants,*fn1 regarding a lawsuit pending against Defendants in the United States District Court for the Northern District of West Virginia.

In the lawsuit for which coverage is at issue, CSX Transportation, Inc. ("CSX") asserts that the Defendants acted improperly with respect to the filing and prosecution of asbestos claims in West Virginia. According to Plaintiff's description, judgment was granted in the Peirce Defendants' favor on claims sounding in negligence; remaining claims sound in fraud under RICO or the common law. Accordingly, Plaintiff, pointing to a policy exclusion for final adjudications or judgments of "illegal, dishonest, fraudulent, criminal, or malicious" conduct, now seeks a declaration that it will not be liable for any damages that may ultimately be imposed on the Peirce Defendants in the West Virginia litigation.

Presently before the Court is Defendants' Motion to dismiss, or in the alternative, to transfer the case to the Northern District of West Virginia. For the following reasons, the Motion will be granted.


A. Venue - 28 U.S.C. § 1391(a)

According to 28 U.S.C. § 1391(a)(2), venue is proper in a district in which a substantial part of the events or omissions giving rise to the claim occurred. There is legal support for the proposition that, in a declaratory action such as this one, venue may lie where the events occurred in the underlying lawsuit for which coverage is sought; and also that venue may lie where the events relating to the insurance policy at issue occurred. See Clarendon Nat'l Ins. Co. v. T.M.I. Enters., LLC, 07-1637, 2008 U.S. Dist. LEXIS 62114 (W.D. La. Aug. 14, 2008). It is notable that "[m]ere contacts with the venue in question are not sufficient to satisfy § 1391(a)(2); it is necessary that the events contributed to the creation of the specific claim at issue."*fn2 Essex Ins. Co. v. MDRB Corp, No. DKC 2006-0326, 2006 U.S. Dist. LEXIS 53241, at *11 (D. Md. June 7, 2006). The burden of proving improper venue is on the defendant. TJF Assocs. v. Kenneth J. Rotman & Allianex, L.L.C., No. 05-705, 2005 U.S. Dist. LEXIS 11943, at *3 (E.D. Pa. June 17, 2005).

In their Motion, Defendants focus on the fact that this litigation relies on Plaintiff's obligations specifically regarding the West Virginia case. In contrast, Plaintiff suggests that the pertinent issues in a coverage suit surround the contractual relationship between insured and insurer -- i.e., the locales of negotiation, issuance, execution, and payment of the policy. It is true that an insurer's coverage obligations regarding an underlying lawsuit might, in some situations, have little to do with the events or omissions giving rise to that lawsuit. For example, coverage litigation might turn on the parties' understanding of a policy term; the parties' verbal communications; issues surrounding an insurer's reasons for denying coverage; or whether nonpayment or other conduct by the insured affected the validity of a policy. Cf. St. Paul Fire & Marine Ins. Co. v. Brother Int'l Corp., No. 05 C 5484, 2006 U.S. Dist. LEXIS 39952, at **9-10 (E.D. Ill. June 1, 2006).

In such cases, details of the underlying car accident, for example, might not constitute a substantial part of the acts or omissions giving rise to the question of the insured's entitlement to coverage. It would be facile, however, to suggest that any action for a declaratory judgment of insurance coverage necessarily arises from the facts related to the insurance contract. Instead, the inquiry must focus on the statutory language of Section 1391(a), and therefore on the nature of the events and omissions giving rise to the particular claim at issue. With the statutory language at the forefront, it is clear that there are cases in which the pertinent events and omissions are closely tied to an underlying lawsuit, rather than to the formation or execution of the insurance policy itself.

Indeed, the facts of this case provide a ready example. Plaintiff proffers three facts purporting to connect Western Pennsylvania and this litigation: the Pierce Defendants' mailing address here, and the consequent fact that the policy was issued to the law firm at that address, and became effective at that address. These facts, except in the most basic sense, simply did not "give rise" to the Plaintiff's claim in this litigation.*fn3 The negotiation, execution, formation, issuance, and payment of the Lumbermens insurance policy are not at issue here, in any significant respect. Instead, at issue is whether liability in the underlying West Virginia action will be excluded from coverage -- in other words, this particular declaratory judgment action depends on the application of policy language to the claims and events alleged in the West Virginia litigation, and the events unfolding in that litigation itself.*fn4

Plaintiff proffers, primarily, two cases in support of its choice of venue. In the first of these, Harleysville Ins. Co. v. Clark, No. 05-5566, 2006 U.S. Dist. LEXIS 97152 (D.N.J. July 21, 2006), the court found that venue was proper in New Jersey because "a substantial part of the events giving rise to the coverage dispute -- including the negotiation, payment, and issuance of the policy" occurred in New Jersey. The court did not, however, discuss the nature of the coverage dispute, or the nexus between the dispute and the contractual facts. Accordingly, the case is unpersuasive for present purposes.*fn5 In the second, Resource Bank v. Progressive Cas. Ins. Co., 2007 U.S. Dist. LEXIS 2980 (E.D. Pa. Jan. 11, 2007), the court transferred venue to Virginia because -- in addition to the issuance of the policy there, the Plaintiff's residence there, and the application of Virginia law-- the action was related to another case being litigated in Virginia, and the connection between the action and the transferor district was tenuous. In the present case, the Plaintiff does not reside here, this forum's connection to the action is tenuous, and this action is related to litigation in West Virginia. Resource Bank points away from, rather than toward, retaining venue in Pennsylvania.

For all of these reasons, venue is not proper in this district, and transfer would be appropriate under 28 U.S.C. ยง 1406(a), which permits me to transfer a case "to any district or division in which it could have been brought." Plaintiff asserts that venue may have been proper in West Virginia when there were factual questions surrounding coverage of negligence claims, which might require special interrogatories to the jury; now, however, it argues that venue is no longer proper in that forum. Plaintiff, however, draws no persuasive distinction between the underlying action then and now, other than its own assessment that the action no longer contains any claims that may be covered by the policy. As discussed above, it remains that substantial events giving rise to Plaintiff's declaratory judgment claim occurred, and are occurring, in the ...

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