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Brethren Mutual Insurance Co. v. Head's Up

January 28, 2010

BRETHREN MUTUAL INSURANCE COMPANY, PLAINTIFF
v.
HEAD'S UP, INC. D/B/A LAMP POST INN, SUSAN MENGES, ADMINISTRATRIX OF THE ESTATE OF MORGAN E. LONG, DECEASED; AND, GLENN E. RUDY, ADMINISTRATOR OF THE ESTATE OF CRYSTAL F. RUDY,DECEASED, DEFENDANTS



The opinion of the court was delivered by: Judge Sylvia H. Rambo

MEMORANDUM

This action was brought by Plaintiff Brethren Mutual Insurance Company, ("BMIC"), pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202. BMIC seeks a declaratory judgment that a policy of insurance between it and Defendant Head's Up, Inc. d/b/a Lamp Post Inn ("Head's Up") does not provide coverage to Head's Up for the injuries suffered and damages claimed by Defendants Susan Menges, Administratrix of the Estate of Morgan E. Long, Deceased ("Estate of Morgan Long"), and Glenn R. Rudy, Administrator of the Estate of Crystal F. Rudy, Deceased ("Estate of Crystal Rudy") (collectively "the Estate Defendants"). BMIC also seeks a declaratory judgment that it has no duty to defend or indemnify Head's Up in the separate lawsuits brought by the Estate Defendants in state court. Before the court are separate motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) by each of the Defendants. (Docs. 6, 11, 17.) For the reasons that follow, the court will grant each motion, decline to exercise its jurisdiction, and dismiss this case in its entirety.

I. Background

In November 2007, Morgan Long and Crystal Rudy were killed in a two-car automobile accident. The driver of the other vehicle was Roseanna Thompson, who also died from injuries suffered in the crash. At the time of the accident, Ms. Thompson's blood alcohol level was in excess of the legal limit.

On August 7, 2008, Defendant Estate of Crystal Rudy filed a lawsuit against Head's Up in the Court of Common Pleas of Dauphin County seeking damages for the death of Crystal Rudy.*fn1 On August 17, 2009, an amended complaint was filed in that action. On June 15, 2009, Defendant Estate of Morgan Long filed a lawsuit against Head's Up in the Court of Common Pleas of Dauphin County seeking damages for the death of Morgan Long.*fn2 These complaints were consolidated by the Dauphin County Court of Common Pleas on August 17, 2009. Although the causes of action differ slightly in both of the underlying lawsuits, both lawsuits assert that Head's Up is liable for the deaths of Crystal Rudy and Morgan Long because it knowingly served alcohol to Roseanna Thompson at a time when she was visibly intoxicated.

BMIC is the insurer of Head's Up, and agreed to represent Head's Up in the underlying actions under a reservation of rights based on the terms, conditions, and exclusions of the insurance policy. On August 12, 2009, BMIC filed the instant case seeking a declaratory judgment that it has no duty to defend or provide indemnity to Head's Up in either of the state court lawsuits. Specifically, BMIC points to certain exclusions in the policy of insurance between it and Head's Up that exclude both the duty to defend and the duty to indemnify for any "'[b]odily injury' . . . for which any insured may be held liable by reason of . . . [c]ausing or contributing to the intoxication of any person; . . . [or] [t]he furnishing of alcoholic beverages to a person . . . under the influence of alcohol."*fn3 (Doc. 1, Compl., ¶ 19.)

Defendants in this action-Head's Up and the Estate Defendants-have each filed a motion asking the court to decline to exercise jurisdiction over this case.

II. Legal Standard

The Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202, vests federal courts with jurisdiction to "declare the rights and other legal relations of any interested party seeking such declaration." State Auto Ins. Cos. v. Summy, 234 F.3d 131, 133 (3d Cir. 2000). In relevant part, the Declaratory Judgment Act provides:

In 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. Any such declaration shall have the full force and effect of a final judgment or decree and shall be reviewable as such. 28 U.S.C. § 2201 (emphasis added).

The Supreme Court has characterized the Declaratory Judgment Act as "an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant." Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995) (internal quotations omitted) (citations omitted). Thus, district courts "wield broad and selective discretion" in determining whether to entertain a declaratory judgment action, State Farm Mut. Auto Ins. Co. v. Lavanture, 2006 WL 1344051, at *2 (M.D. Pa. May 16, 2006)(Rambo, J.), and although vested with jurisdiction by the Declaratory Judgment Act, the courts are under "no compulsion to exercise that jurisdiction," Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 494 (1942). To the contrary, the courts should decline to grant declaratory relief when such relief "would impinge on a state proceeding ... [or] result in a conflict between the decisions of state and federal courts." Travelers Ins. Co. v. Davis, 490 F.2d 536, 544 (3d Cir. 1974). In other words, the federal courts should not permit a declaratory judgment action to be used as a "method of procedural fencing, or as a means to provide another forum in a race for res judicata." Terra Nova Ins. Co. v. 900 Bar, Inc., 887 F.2d 1213, 1225 (3d Cir. 1989).

In State Auto Ins. Cos. v. Summy, 234 F.3d 131 (3d Cir. 2000), the Third Circuit set out guidelines for the court to use in deciding whether to exercise its diversity jurisdiction in declaratory judgment actions. First, the Summy court listed the following non-exhaustive factors for the court to consider in the context of insurance policies:

(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; and (3) avoidance of duplicative litigation. 234 F.3d at 134.

Second, the Summy court restated some overarching themes that the Supreme Court has articulated in determining when district courts should assert jurisdiction: (1) "in the declaratory judgment context, the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration," id. at 134 (quoting Wilton, 515 U.S. at 288); and (2) "gratuitous interference with the orderly and comprehensive disposition of a state court should be avoided," id. at 133 (quoting Wilton, 515 U.S. at 495). As a final note, the Third Circuit warned that "the desire of insurance companies and their insured to receive declaration in federal court on matters of purely state law has no special ...


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