will be pressing, at least in part, a roughly similar theme when it litigates the "failure to disclose" theory: that Callan's people were well aware of the likely litigation and decided self-consciously not to disclose it. While the object of the alleged deceit is different (First State instead of KPERS), and while the time frames may appear not to overlap, it is not clear that some evidence about the state of Callan's self-consciousness in its dealings with KPERS would be irrelevant to determining the state of Callan's mind in its dealings with First State.
Nor is it as clear as First State contends that there is no evidentiary connection between the "failure to disclose" theory and the underlying litigation in Kansas. It is at least possible that exploring Callan's knowledge of possible claims against it by KPERS will require some exploration both of Callan's dealings with KPERS and Callan's knowledge of both what KPERS knew and what KPERS felt about those dealings.
Moreover, the Karussos opinion makes it quite clear that decisions about whether to retain jurisdiction over claims in this kind of setting should not be dictated by the extent of the overlap between the proposed federal court matter and the related state court proceedings. In fact, by insisting that there is a presumption that jurisdiction should be declined in insurance coverage cases generally, and by stating clearly that "Hungerford applies whether or not there is a similarity of issues," the Court of Appeals seems to have relegated this factor to a modest (perhaps at best) analytical role. In other words, it appears that the other policy considerations that underlie the Karussos rule are sufficient, in the mind of the Court of Appeals, to compel the conclusion that even a strong possibility that there might be little evidentiary overlap between the federal and the state proceedings does not, by itself, constitute an exceptional circumstance justifying retention of jurisdiction.
First State's other proffered bases for a finding of exceptional circumstances are not persuasive. I do have a concern about forum shopping in this kind of case, especially after Judge Weigel dismissed two of the three alleged bases for denying liability but the carrier pressed to keep the one remaining theory here instead of consolidating it with the other two theories in one state court proceeding. It is clear that a California court is the most appropriate forum to adjudicate the issues on which First State's request for relief turns.
Moreover, as noted above, retaining jurisdiction over the one claim left here by Judge Weigel clearly would create a substantial risk of wasting both party and judicial resources: if First State were not to prevail in this court on that claim, it would proceed with yet another suit in state court on the two other alleged bases for denying coverage. Pressing forward with all three bases in one action would be less wasteful. Only one judge and clerk would be required to learn the case, and the inevitable redundancy in party preparation and presentation, even if not huge, would be avoided altogether. Finally, we promote comity when we defer to state courts on matters of state law, even if (as First State unpersuasively argues) those matters would not be classified as involving "coverage".
For the reasons set forth above, First State has failed to meet is burden of showing that there are in this case "exceptional circumstances" that would justify departing from the general rule that federal courts should decline jurisdiction over disputes between insurance companies and their insureds in which the rule of decision will be provided by state law. Because First State has failed to meet its burden, I hereby ORDER that the one remaining claim by First State be DISMISSED.
In entering this Order, I am assuming that Callan will promptly dismiss its related counterclaim for bad faith. Should Callan fail to do so, there might be a need to revisit the decision I have announced here.
IT IS SO ORDERED.
DATED: February 2, 1996
Wayne D. Brazil
United States Magistrate Judge