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Nationwide Mutual Insurance Co. v. N & B Enterprises, Inc.

United States District Court, M.D. Pennsylvania

April 14, 2015

N & B ENTERPRISES, INC.; MARY HOWELLS, as Administratrix of the Estate of CAROL ANN MIKOLS; and RT ENVIRONMENTAL, Defendants


JAMES M. MUNLEY, District Judge.

Before the court is Plaintiff Nationwide Mutual Insurance Company, as successor by merger to Harleysville Mutual Insurance Company's (hereinafter "plaintiff" or "Nationwide") declaratory judgment complaint. Plaintiff seeks a declaration that it is not obligated to defend or indemnify Defendant N & B Enterprises in a lawsuit brought by Defendant Mary Howells in the Court of Common Pleas of Luzerne County, Pennsylvania. Additionally, Nationwide seeks a declaration that it is not liable for any punitive damages that N & B may be found liable for. After a review of this matter, we will decline to exercise jurisdiction and dismiss the case sua sponte.


The instant case has its genesis in an underlying Luzerne County Court of Common Pleas lawsuit (hereinafter "underlying action"). In the underlying action, Mary Howells, as administratrix of the Estate of Carol Ann Mikols, sued Susquehanna Rivers Shores, LLC alleging their negligence caused Mikols' death. (See Doc. 4, Compl. in the underlying action). Susquehanna River Shores, LLC filed a joinder complaint in the underlying action against RT Environmental Services, Inc. and Borton-Lawson Services, Inc. (Doc. 4-1). RT Environmental then joined N&B Enterprises (hereinafter "N&B") as an additional defendant in the underlying action. (Doc. 4-2).

Harleysville Insurance insured N&B with a commercial general liability insurance ("CGL") policy. (Doc. 1, Compl. ¶ 27). Plaintiff, the successor by merger to Harleysville, claims that the CGL policy does not apply to liability or defense of the underlying action. Thus, plaintiff filed the instant declaratory action under the Federal Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a declaration that it is not required to indemnify or defend the underlying action.


The court has jurisdiction pursuant to the diversity statute, 28 U.S.C. § 1332. Nationwide is a mutual insurance company organized and existing under the laws of the state of Ohio, with its principal place of business located at One Nationwide Plaza, Columbus Ohio. (Doc. 1, Compl. ¶ 1). Defendant N & B Enterprises, Inc. is a Pennsylvania corporation with its principal place of business in West Wyoming, Pennsylvania. (Id. ¶ 3). Defendant Mary Howells resides at 1034 Mount Zion road, Harding, Luzerne County, Pennsylvania. (Id. ¶ 4). RT Environmental is a corporation organized and existing under the laws of the state of Delaware with its principal place of business in King of Prussia, Pennsylvania. (Id. ¶ 6). The amount in controversy exceeds $75, 000.00. (Id. ¶ 9).


Generally, in diversity cases, we apply the law of Pennsylvania. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938)). However, "federal courts are to apply state substantive law and federal procedural law." Hanna v. Plumer, 380 U.S. 460, 465 (1965). The instant case is before the court in the form of a declaratory judgment action, and federal courts have concluded that declaratory judgment actions are procedural rather than substantive. See Fischer & Porter Co. v. Moorco Int'l Inc., 869 F.Supp. 323, 326 (E.D. Pa. 1994) (holding that "[c]ase law indicates that the [Declaratory Judgment] Act is procedural in nature, and therefore federal law, not state law, governs whether claims may be heard under it."); Farmers Alliance Mut. Ins. Co. v. Jones, 570 F.2d 1384, 1386 (10th Cir.1978) (holding that the [Declaratory Judgment] Act involves procedural remedies and not substantive rights.... The Act does not create substantive rights for parties; it merely provides another procedure whereby parties may obtain judicial relief."). As a result, the court here would apply substantive Pennsylvania law in interpreting the insurance contract, but the procedural strictures of the Federal Declaratory Judgment Act, 28 U.S.C. § 2201. See Fischer & Porter, 869 F.Supp. at 326.

Under the Declaratory Judgment Act, "[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); see also Reifer v. Westport Ins. Corp., 751 F.3d 129 (3d Cir. 2014). The United States Supreme Court has explained that "[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." Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). The Supreme Court has emphasized that district courts are under no compulsion to exercise this discretionary jurisdiction. Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494-95 (1942). "Rather than being subject to the normal principle that federal courts should adjudicate claims within their jurisdiction, ' district courts exercising DJA discretion are governed by considerations of practicality and wise judicial administration.'" Reifer at 139 (quoting Wilton at 288).

A court's decision to exercise its discretion to hear an action under the Declaratory Judgment Act "requires some inquiry into the scope of the state court proceeding, the nature of defenses available there, and whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding." Sate Auto Ins. Co. v. Summy, 234 F.3d 131, 133 (3d Cir. 2001). Further, "[a] federal court should also decline to exercise its discretionary jurisdiction when doing so would promote judicial economy by avoiding duplicative and piecemeal litigation." Id. at 135. These considerations are especially important because "district courts should give serious consideration to the fact that they do not establish state law, but are limited to predicting it." Id. A court may sua sponte exercise its discretion not to hear a declaratory judgment action. See id. at 136.

"Due to the high volume of declaratory judgment actions filed by insurance companies and their insureds, the Third Circuit has warned that [t]he desire of insurance companies and their insureds to receive declarations in federal court on matters of purely state law has no special call on the federal forum.'" Nationwide Agribusiness Ins. Co. v. Sheriff, 2015 WL 365679, at *1 (M.D. Pa. Jan. 27, 2015) (quoting Summy, 234 F.3d at 136). To this end, the Third Circuit enumerated the following eight factors to guide district courts in exercising its declaratory judgment action discretion:

(1) the likelihood that a federal court declaration will resolve the uncertainty of obligation which ...

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