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Geico Indemnity Co. v. Crawford

United States District Court, Sixth Circuit

January 14, 2014

ZACHARY I. CRAWFORD, et al., Defendants.


DANNY C. REEVES, District Judge.

Plaintiff GEICO Indemnity Company filed this action seeking a declaration of its rights under a policy of insurance pursuant to 28 U.S.C. § 2201. [Record No. 1] The matter is pending for consideration of Defendants Devan Wiedeman's and Gregory Collins' Motions to Dismiss. [Record Nos. 15, 19] GEICO opposes the motion. [Record No. 22] For the reasons discussed below, the defendants' motions to dismiss will be denied.


This action arises out a motor vehicle accident occurring on May 12, 2013, in Madison County, Kentucky. [Record No. 1, p. 5] At the time of the accident, Defendant Zachary Crawford was driving a 2002 Jeep Grand Cherokee Limited ("Jeep") owned by Defendant Linda Bellaw, while Defendant Wiedeman was a passenger in the vehicle. Defendant Collins was driving another automobile involved in the accident. [Record Nos. 16, pp. 3-4, 20-1] Defendants Wiedeman and Collins allegedly sustained severe injuries because of the accident. [Record Nos. 15-2, p. 2, 19-2, p. 2]

Wiedeman and Collins sued Crawford in state court, alleging that Crawford caused the accident and their resulting injuries. [Record Nos. 15-3, 19-2] At the time of the accident, Crawford was insured by Defendant Hamilton Mutual Insurance Company. [Record No 1, p. 7] Defendant Linda Bellaw was insured by GEICO as the named insured. [Record No. 1-1, pp. 3, 5] The policy contains language allowing coverage for permissive users. It provides:

[A]ny other person who is using the auto with your permission [will be covered] but only if such a person is not insured by any other vehicle liability insurance policy, a self-insurance liability program, or a liability bond while using the auto.

[ Id., p. 4]

Linda Bellaw's daughter, Defendant Jennifer Bellaw, was listed as an additional driver and the Jeep is listed as a covered vehicle in the policy.[1] [ Id., p. 5] The defendants contend that Jennifer Bellaw was a resident of Kentucky for five years and that the Jeep was principally located in Kentucky during that period. [Record No. 16, p. 3] GEICO initiated this action on July 24, 2013. [Record No. 1] It seeks a declaration that it has no duty to defend or indemnify Crawford for any liability claims against him arising from the accident. [Record No. 1, p. 8] The defendants claim that Crawford is covered under the permissive driver clause of the policy.


The defendants assert that the Court should decline to exercise jurisdiction because it would be more appropriate for the state court to decide the issues in this litigation. [ See Record Nos. 15, 19.] The Federal Declaratory Judgment Act allows federal courts to declare the rights of parties regarding any actual controversy within its jurisdiction. 28 U.S.C. § 2201(a). The Supreme Court has stated that, when a simultaneous state court claim has been filed, a district court has the ability to hear an action under the Declaratory Judgment Act but it is not compelled to exercise jurisdiction. Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494-95 (1942). However, the mere existence of a state court proceeding is not determinative. Allstate Ins. Co. v. Green, 825 F.2d 1061, 1067 (6th Cir. 1987). The act confers on federal 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).

The defendants claim that the Court should decline to exercise jurisdiction under the reasoning of Bituminous Casualty Corporation v. J&L Lumber Company, Inc., 373 F.3d 807, 812-13 (6th Cir. 2004), and Grange Mutual Casualty Co. v. Safeco Insurance Company Of America, 565 F.Supp.2d 779 (E.D. Ky. 2008). GEICO argues that the defendants' reliance on these decisions is misplaced. Instead, it asserts that the multi-factor test and holding set out in Grand Trunk Western Railroad Co. v. Consolidated Rail Corporation, 746 F.2d 323, 326 (6th Cir. 1984), supports the exercise of jurisdiction over the claims asserted.

While the Sixth Circuit has held that district courts do not abuse their discretion by exercising declaratory jurisdiction regarding insurance matters, it has indicated numerous times that state courts are preferred venues due to their ability to handle ancillary indemnity issues that may arise. See Travelers Indem. Co, v. Bowling Green Prof'l Assoc., PLC, 495 F.3d 266, 273 (6th Cir. 2007) ("[W]e have held on a number of occasions that a district court should stay or dismiss complaints filed by insurance companies seeking a declaratory judgment as to their underlying state court lawsuits.); Manley, Bennet, McDonald & Co. v. St. Paul Fire & Marine Ins. Co., 791 F.2d 460, 463 (6th Cir. 2004) (holding that declaratory judgment actions that seek an advance opinion on issues of indemnity are seldom helpful in resolving the underlying state action); Bituminous Casualty, 373 F.3d at 816-17 (questioning the need for declaratory judgment actions when the question is one of state law and there is no suggestion that the state court is not able to define its own law in a fair way). Such an approach is reasonable because federal courts are rarely in a better position to resolve issues of state insurance laws that are tied to state policy. Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 561 (6th Cir. 2008) (holding that questions about state insurance law "implicate... important state policies").

The Sixth Circuit has generally considered five factors in determining whether a court should exercise jurisdiction in such matters. These ...

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