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NIC Insurance Co. v. PJP Consulting

October 22, 2010


The opinion of the court was delivered by: Surrick, J.


Presently before the Court are Defendant Dzarnyi Pukuma's Motion to Dismiss Plaintiff's Complaint Pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure and the Declaratory Judgment Act, 28 U.S.C. § 2201 (ECF No. 14), and Plaintiff NIC Insurance Company's Cross-Motion for Summary Judgment Pursuant to Fed. R. Civ. P. 56 (ECF No. 20). For the following reasons, Defendant's Motion to Dismiss will be granted. Plaintiff's Cross-Motion for Summary Judgment will be dismissed as moot.


NIC Insurance Company ("NIC") filed this action against PJP Consulting, LLC, t/a Cavanaugh's River Deck ("Cavanaugh's"), and Dzarnyi Pukuma ("Pukuma"), seeking a declaration pursuant to 28 U.S.C. § 2201 that its obligation to defend Cavanaugh's against a lawsuit filed by Pukuma in the Philadelphia Court of Common Pleas is limited to the $50,000 of coverage provided under the Assault and Battery Limits of Liability Endorsement in the insurance policy NIC issued to Cavanaugh's. In addition, NIC seeks a declaration that its obligation to indemnify Cavanaugh's against any judgment in Pukuma's favor is limited to the $50,000 Assault and Battery Limits of Liability Endorsement, and that this $50,000 limit is eroded by legal fees and other expenses related to Cavanaugh's claim for indemnity.

On September 4, 2006, Pukuma was attacked by four visibly intoxicated patrons at Cavanaugh's River Deck, a bar located on the Delaware River waterfront.(Def.'s Mot. Dismiss Ex. A ¶¶ 8-17, ECF No. 15.) The initial altercation occurred inside Cavanaugh's, where Pukuma's attackers beat him, struck him in the head with a bottle, and slashed his face with a knife. (Id. ¶¶ 10-12.) Bouncers employed by Cavanaugh's restrained Pukuma and his assailants. (Id. ¶ 13.) The bouncers removed the four attackers from the bar but did not call the police. (Id. ¶ 14.) Instead, the bouncers removed a still-dazed Pukuma from the bar while his attackers were still outside the bar. (Id. ¶ 15.) Once Pukuma was outside, and while he was being restrained by Cavanaugh's bouncers, the four assailants again attacked Pukuma, stabbing him in the chest.(Id. ¶¶ 15-17.) Pukuma suffered various injuries from the two altercations, including a collapsed lung from the stab wound. (Id. ¶ 21.) The four assailants fled and were never apprehended. (Id. ¶¶ 15-17.)

Pukuma filed suit against Cavanaugh's in the Court of Common Pleas on March 7, 2008. An amended complaint was filed on October 1, 2008. (Compl. ¶ 13, ECF No. 1.) The amended complaint alleges that it was Cavanaugh's negligence that allowed the four assailants to injure Pukuma. (Def.'s Mot. Dismiss Ex. A ¶¶ 29-31.) On March 2, 2009, Cavanaugh's insurer, NIC, filed this declaratory judgment action against Cavanaugh's and Pukuma. NIC's Complaint alleges that the liability insurance policy that NIC issued to Cavanaugh's (the "Policy") contains a $1 million per occurrence limitation on liability. (Id. ¶ 13.) However, the Policy contains an Assault and Battery Limits of Liability Endorsement that limits to $50,000 NIC's liability for any injuries arising out of an assault and battery. (Id. ¶¶ 22-23.) The Policy also contains a "defense within limits" ("DWL") provision that reduces the amount of coverage that is available to indemnify Cavanaugh's by the expenses NIC incurs in defending Cavanaugh's. (Id. ¶¶ 34-39.) Thus, if NIC incurs $20,000 in legal fees and expenses defending Cavanaugh's against Pukuma's claim, its liability limits would be reduced to $980,000 per occurrence for general liability or $30,000 for injuries arising out of an assault and battery. NIC alleges that once Cavanaugh's legal fees and expenses exhaust the applicable limits of liability, NIC has no further obligation to defend or indemnify Cavanaugh's. (Id. ¶ 39.) NIC therefore seeks a declaration (1) that NIC's obligation to defend and indemnify Cavanaugh's is limited to $50,000, as set forth in the Assault and Battery Limits of Liability Endorsement; (2) that this $50,000 limit of liability is reduced by the expenses NIC incurs on Cavanaugh's behalf; (3) that NIC has no further obligation to defend or indemnify Cavanaugh's upon exhaustion of the $50,000 limit of liability by the payment of expenses, a judgment, or settlement on behalf of Cavanaugh's; and (4) that upon exhaustion of the $50,000 limit of liability, NIC will be permitted to withdraw from Cavanaugh's defense. (Id.)

After NIC filed the Complaint in this Court, Pukuma sought leave to amend his complaint in state court in order to augment his negligence claims against NIC. (See generally Compl. Ex. A.) Before deciding Pukuma's motion for leave to amend his complaint, however, the Court of Common Pleas stayed the action pending our determination of the coverage issues NIC presents here. (Def.'s Mot. to Dismiss 3.)

Pukuma filed the instant motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), arguing that we should decline to exercise jurisdiction over NIC's declaratory judgment action and permit the state-court action to go forward. (Def.'s Mot. to Dismiss 3-21.) NIC responded to Pukuma's motion to dismiss and submitted a cross-motion for summary judgment. (See Pl.'s Mot. for Summ. J., ECF No. 21.)


The Declaratory Judgment Act provides that "[i]n 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 . . . ."

28 U.S.C. § 2201(a) (emphasis added). The Supreme Court has recognized that the permissive language of the Declaratory Judgment Act gives district courts "unique and substantial discretion in deciding whether to declare the rights of litigants." Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). Thus, "a district court is authorized, in the sound exercise of its discretion, to stay or to dismiss an action seeking a declaratory judgment . . . ." Id. at 288.

The Supreme Court has stated that in deciding whether to exercise jurisdiction over a declaratory judgment action, district courts "should ascertain whether the questions in controversy between the parties to the federal suit . . . can better be settled in the proceeding pending in the state court." Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942). The Third Circuit Court of Appeals has articulated four factors that district courts should consider in exercise of their discretion in declaratory judgment actions. Those factors are (1) the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy; (2) the convenience of the parties; (3) the public interest in settlement of the uncertainty of the obligation; and (4) the availability and relative convenience of other remedies. Scottsdale Ins. Co. v. Broaddus, No. 08-3241, 2009 WL 349697, at *2 (E.D. Pa. Feb. 11, 2009) (citing United States v. Dep't of Envtl. Res., 923 F.2d 1071, 1075 (3d Cir. 1991)). Moreover, the Third Circuit has provided three additional considerations for determining whether to exercise jurisdiction over insurance-coverage declaratory judgment actions: (1) a general policy of restraint when the same issues are pending in state court; (2) an inherent conflict of interest between an insurer's duty to defend in 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. State Auto Ins. Cos. v. Summy, 234 F.3d 131, 134 (3d Cir. 2000) (citing Dep't of Envtl. Res., 923 F.2d at 1075-76). Finally, district courts should "give serious consideration to the fact that they do not establish state law, but are limited to predicting it. This is especially important in insurance coverage cases . . . ." Id. at 135. Thus, "where the applicable state law is uncertain or undetermined, district courts should be particularly reluctant to entertain declaratory judgment actions." Id.


Pukuma argues that this action is duplicative of the state-court action and that significantly more factual development is necessary in the state-court action before issues of insurance coverage can be decided. (Def.'s Mot. to Dismiss 15-16.) NIC contends that Pukuma's arguments as to why we should decline to hear this declaratory judgment action are "simply ...

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