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COMMERCIAL CASUALTY INSURANCE COMPANY OF GA. v. KINANN

June 4, 2003

COMMERCIAL CASUALTY INSURANCE COMPANY OF GEORGIA, DBA ENVIRONMENTAL AND CASUALTY INSURANCE COMPANY, PLAINTIFF,
v.
ROBERT KINANN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Charles R. Breyer, United States District Judge

MEMORANDUM AND ORDER

This declaratory judgment action arises out of a policy insuring a general contractor. Defendants now move the Court to decline to exercise its jurisdiction over the declaratory judgment action or, in the alternative, dismiss those defendants as to whom there is no case controversy. After carefully considering the papers filed by the parties, and having had the benefit of oral argument, the Court declines to exercise its jurisdiction and dismisses this action without prejudice.

BACKGROUND

In July 2000 a married couple, the Browns, entered into a contract with Kinnan Associates Contracting, Inc. ("Kinnan Inc.") to construct a new home in San Anselmo. According to the Browns' state court complaint, Kinnan Inc. then subcontracted the entire j to another person. Kinnan Inc. subsequently fired the subcontractor for various reasons. Shortly thereafter, in October 2001, the Browns' almost-completed home was destroyed by fire.

In May 2001, before the fire, defendant Robert Kinnan obtained a general liability insurance policy from plaintiff through Marcillac Insurance Agency. After the fire, and after the Browns made a demand upon Kinnan, Kinnan tendered the demand to plaintiff insurer. January 2002, the insurer denied coverage on the ground that the construction contract was between the Browns and Kinnan & Associates, Inc., a corporation, whereas the insurance policy only insured Robert Kinnan d/b/a Kinnan & Associates, a sole proprietorship. The insurer also rescinded the policy on the ground of a material misrepresentation: namely, that his application Kinnan had represented that he was a remodeler doing jobs averaging $15,000 and that he had not disclosed that he engaged in new construction.

In April 2002, the Browns sued various Kinnan entities in Marin County Superior COL for damage they suffered as a result of the fire. The defense of the complaint was tendered to plaintiff which again denied coverage.

On December 11, 2002, plaintiff filed this action for declaratory relief, breach of warranty, and rescission. Plaintiff seeks rescission of the insurance contract on the ground Robert Kinnan made a material representation. The breach of warranty claim arises from the same allegation. Plaintiff also seeks a judicial declaration that it has no duty to defend or indemnify the Brown lawsuit and, in particular, that it has no duty to defend defendants "for their alleged wrongs to others, punitive damage claims, claims of fraud and misrepresentation poor workmanship, financial loss unrelated to an occurrence or accident, and other matters the do not come within the insuring agreement of the policy or are specifically excluded from coverage." Complaint ¶ 18. Plaintiff names as defendants Robert Kinnan, Kinnan, Inc., Bay Area Contractor Referral, Inc. ("BACR"), Pamela Kinnan, Robert Shedrick Kinann, and the Browns.

Five days after plaintiff filed this action, Robert Kinnan, his wife, and Kinnan, Inc. filed lawsuit in Marin County Superior Court against plaintiff and the insurance broker. There is also pending in Marin Superior Court an action by Kinnan against the subcontractor arising from the Browns' ill-fated construction project.

THE PENDING MOTION

The Kinnan defendants move for a discretionary dismissal of this action on the ground that the Court should defer to their pending state court action which raises the same issues. In the alternative they contend that there is no case or controversy with respect to certain defendants.

DISCUSSION

A lawsuit seeking federal declaratory relief must present an actual case or controversy within the meaning of Article III. It must also fulfill statutory jurisdictional prerequisites. Even if a lawsuit fulfills both of those prerequisites, the district court must also be satisfied that entertaining the action is appropriate. See G.E.I.C.O. v. Dizol, 133 F.3d 1220, 1222-23 (9th Cir. 1998) (en banc). This last determination is discretionary. Id.

The Court has diversity jurisdiction of this lawsuit. Defendants argue that there is no case or controversy with respect to some defendants, and as to those that there is a sufficient ...


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