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James River Insurance Company, An Ohio v. Rv Tomlinson Construction

May 8, 2013

JAMES RIVER INSURANCE COMPANY, AN OHIO CORPORATION, PLAINTIFF,
v.
RV TOMLINSON CONSTRUCTION, INC., A CALIFORNIA CORPORATION; TOMLINSON & SON CONSTRUCTION, INC., A CALIFORNIA CORPORATION; DEANNA DAILEY, A CALIFORNIA CITIZEN; NAXOS INSURANCE COMPANY, A DELAWARE CORPORATION; GEMINI INSURANCE COMPANY, A DELAWARE CORPORATION; AND LANDMARK AMERICAN INSURANCE COMPANY, AN OKLAHOMA CORPORATION, DEFENDANTS.



MEMORANDUM AND ORDER RE: MOTION TO STAY

Plaintiff James River Insurance Company ("JRIC") brought this action against defendants RV Tomlinson Construction, Inc., Tomlinson & Son Construction, Inc. (together, "Tomlinson"), Deanna Dailey, Naxos Insurance Company ("Naxos"), Gemini Insurance Company ("Gemini"), and Landmark American Insurance Company ("Landmark") for declaratory relief arising out of its defense of Tomlinson in an underlying lawsuit. Presently before the court is Tomlinson's motion to stay this action until termination of the underlying suit. (Docket No. 16.)

I. Factual and Procedural Background Deanna Dailey, a resident of the Pagoda Gardens Apartments in Yuba City, developed pulmonary disease. (Compl. ¶¶ 11-12 (Docket No. 1).) In a civil suit filed in state court in 2011 (the "Dailey Action"), she alleged that various defendants allowed pigeons to roost in and around air conditioning units mounted on the roof of her apartment building, which resulted in pigeon feathers and fecal particles migrating into the ventilation system of her apartment and causing her injuries. (Id. ¶ 12.) She brings a single cause of action for "Personal Injury/Negligence/Premises Liability." (Id.)

Tomlinson was added to the Dailey Action in April 2012 and Dailey alleged that Tomlinson was responsible for maintenance of the roof of her apartment building during her tenancy. (Id. ¶ 13.) Tomlinson tendered defense of the Dailey Action to plaintiff, Naxos, and Gemini.*fn1 (Id. ¶ 14.) The three insurers agreed to defend Tomlinson under their respective reservations of rights. (Id.)

On January 24, 2013, plaintiff filed an action for declaratory relief in this court, alleging that it had no duties to defend or indemnify Tomlinson pursuant to two Comprehensive General Liability Policies it issued to Tomlinson: Policy Number 00032118-0, having a term of June 2008 through June 2009 ("2008 Policy") and Policy Number 00032118-1, having a term of June 2009 through June 2010 ("2009 Policy") (collectively, the "Policies"). (Compl. Exs. A, B (Docket Nos. 1-1, 1-2).) Plaintiff alleges that there is no coverage or potential for coverage as to any claims arising in the Dailey Action based on four applicable exclusions in the Policies: Occupational Disease Exclusion, Absolute Pollution Exclusion, Claims in Progress Exclusion, and Fungi or Bacteria Exclusion. (Compl. ¶ 17.)

Plaintiff seeks a declaration that it has no duty to defend Tomlinson; that Naxos, Gemini, and Landmark have no right of equitable contribution or equitable subrogation against it for their defense of Tomlinson; and that it is equitably entitled to recover the attorney's fees and costs expended in defense of the Dailey Action. (Id. ¶ 20.) Plaintiff additionally seeks a declaration that it has no duty to indemnify Tomlinson and that Naxos, Gemini, and Landmark have no right of equitable contribution or equitable subrogation against it for their indemnification of Tomlinson. (Id. ¶ 25.)

Tomlinson now moves to stay this action pending resolution of various factual determinations in the Dailey Action. (Docket No. 16.) Naxos filed a statement of non-opposition. (Docket No. 22.) Plaintiff opposes the motion. (Docket No. 23.)

II. Legal Standard

Under the Declaratory Judgment Act, 28 U.S.C. § 2201, district courts have "unique and substantial discretion" in determining whether to decide declaratory relief actions. Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995); see id. at 288 ("Consistent with the nonobligatory nature of the remedy, a district court is authorized, in the sound exercise of its discretion, to stay or to dismiss an action seeking a declaratory judgment before trial or after all arguments have drawn to a close."). "Of course, this discretion is not unfettered." Gov't Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998). Guidance for the district court's exercise of authority is propounded "in Brillhart v. Excess Insurance Co. of America, 316 U.S. 491 (1942), and its progeny." Id. "The Brillhart factors remain the philosophic touchstone for the district court. The district court should avoid needless determination of state law issues; it should discourage litigants from filing declaratory actions as a means of forum shopping; and it should avoid duplicative litigation." Id. at 1225. "However, there is no presumption in favor of abstention in declaratory actions generally, nor in insurance coverage cases specifically." Id.

III. Discussion

A. Needless Determination of State Law A district court should avoid a "needless decision of state law." Id. This factor relates to unsettled issues of state law, not unsettled issues of fact in the specific action. Cont'l Cas. Co. v. Robsac Indus., 947 F.2d 1367, 1371 (9th Cir. 1991), overruled on other grounds by Dizol,133 F.3d at 1224-25.

A stay is warranted where "[t]he precise state law issues at stake in the present case are the subject of a parallel proceeding in state court." Id.

This action presents issues involving California insurance coverage law. Specifically, it requires the determination of whether certain exclusions in the Policies apply to preclude coverage. The state law at issue is not being litigated in the underlying Dailey action, a civil suit for negligence by a resident of the building serviced by Tomlinson. While this action requires interpretation of the Policies, no coverage questions are raised in the Dailey action lawsuit and the court's determination of those issues would be original rather than repetitive. Thus, this factor does not weigh in favor staying the action.

B. Forum Shopping

The Ninth Circuit has said that this ...


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