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Liberty Mutual Insurance Co. v. Estate of Bobzien

United States District Court, W.D. Kentucky, Louisville

March 28, 2019

LIBERTY MUTUAL INSURANCE COMPANY, et al. PLAINTIFFS
v.
THE ESTATE OF HUGO J. BOBZIEN, JR. By and through his personal Representative and Administratrix, THERESA B. HART, et al. DEFENDANT

          MEMORANDUM OPINION

          Charles R. Simpson III Senior Judge United States District Court

         This matter is before the court for consideration of cross-motions for summary judgment in this declaratory judgment action. The plaintiffs, Liberty Mutual Insurance Company, Liberty Insurance Corporation, Liberty Mutual Fire Insurance Company, and LM Insurance Corporation (collectively herein “Liberty” or the “Liberty entities”), contend that there is diversity of citizenship between the parties and the amount in controversy exceeds $75, 000.00 excluding interest and costs, satisfying the requirement that independent subject matter jurisdiction exist for this court to “declare the rights and other legal relations” of the parties. 28 U.S.C. § 2201(a); Brotherhood Mut. Ins. Co. v. United Apostolic Lighthouse, Inc., 200 F.Supp.2d 689, 691 (E.D.Ky. 2002). The defendants, the Estate of Hugo J. Bobzien, Jr. (“Hugo's Estate, ” “Hugo, ” or the “father” herein, as appropriate) and Michael J. Bobzien (“Michael” or the “son” herein), do not challenge the assertion of subject matter jurisdiction.

         The Liberty entities are each alleged to be organized under the laws of states other than Kentucky and to have principal places of business outside the Commonwealth. Complaint, DN 1, pp. 2, PageID #2. They are all licensed to do business in Kentucky. Hugo's Estate is capable of being sued by and through its Administratrix, Theresa B. Hart, who is a citizen of Kentucky. Michael is a citizen of the state of Florida and the plaintiff in the underlying lawsuit brought in the Jefferson County, Kentucky, Circuit Court. The court thus finds that there is complete diversity between the parties. The allegation that the amount in controversy exceeds $75, 000.00 is unchallenged and will therefore be accepted for purposes of finding that this court has subject matter jurisdiction over this matter. We note that the allegations in the underlying state court complaint claim Michael suffered numerous and significant bodily injuries which could yield a damage award in excess of $75, 000.00.

         Upon a finding of subject matter jurisdiction, the court must determine, in its discretion, whether the case is an appropriate one for declaratory relief under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, et seq. The principal considerations in making this determination are (1) whether the judgment would settle the controversy; (2) whether the declaratory action would serve a useful purpose in clarifying the legal relations in issue; (3) whether the declaratory remedy is being used merely for purposes of “procedural fencing” or “to provide an arena for a race for res judicata”; (4) whether the use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and (5) whether there is an alternative remedy that is better or more effective. Am. Home Assurance Co. v. Evans, 791 F.2d 61, 63 (6th Cir. 1986)(citing Grand Trunk Western R.R. v. Consolidated Rail Corp., 746 F.2d 323, 326 (6th Cir. 1984)). The parties are in agreement that the court should exercise its discretion to render a declaratory judgment. For the reasons set forth below, the court will entertain the summary judgment arguments and render a declaratory judgment in this case.

         A. Undisputed Facts[1] - State Court Litigation

         Michael was born in 1958 and is the biological son of Hugo. Michael resided in his father's household under his father's care, control and dominion, from birth until he reached the age of majority in approximately 1976. In the FAC, Michael recites the following events:

From the date of his birth until he reached the age of majority, [Michael] was repeatedly, forcibly, knowingly, intentionally, wantonly, chronically, recklessly, grossly negligently and/or negligently exposed and subjected to [his father's] hazardous cigarette smoke while he necessarily lived at his childhood residence under the exclusive control and dominion of [his father], primarily in this county.
As a direct, natural and foreseeable result of [Hugo's] decisions to repeatedly, forcibly, knowingly, intentionally, wantonly, chronically, recklessly, grossly negligently and/or negligently expose and subject [Michael] to his hazardous cigarette smoke, and as a substantial factor and proximate cause of such decisions, [Michael] has recently, and within one year from commencement of this action, been caused to develop chronic obstructive pulmonary disease, osteopenia (with 2 chronic compression fractures of his L2 and T2 vertebrae, osteoarthritis in hips and knees, chronic back pain and/or degenerative disc disease, cataracts, past and future medical costs, past and future pain and suffering, past and future loss of enjoyment of life, permanent impairment of the power to labor and earn money, loss of future life expectancy, past and future inconvenience and other serious injuries and harms.
The conduct of [Hugo] as herein alleged was committed intentionally, knowingly, wantonly, recklessly and/or with gross negligence.

         Hugo died on March 30, 2016. After his father's death, Michael filed claims for bodily injury in the probate action, but his claims were disallowed. He then filed a state court action [Civ. Action No. 17-CI-002751] containing the above factual allegations and presenting three claims for relief: negligence, negligence per se, and premises liability. Each claim articulates a duty owed by the father to the son: a common law duty owed by Hugo to exercise ordinary care for the protection of his son (negligence); a statutory duty owed by Hugo to exercise ordinary care for the protection of his son (negligence per se); and a duty owed by Hugo to exercise ordinary care to make his property reasonably safe for invitees, including his then minor son (premises liability).

         The claims are identically written, with the exception of the particular duty to which the claim refers. Representative of the claims, Count 1 - Negligence alleges:

At all times relevant, [Hugo] had a common law duty to exercise ordinary care for the protection of his son, [Michael], which included the duty to refrain from repeatedly, forcibly, knowingly, intentionally, wantonly, chronically, recklessly, grossly negligently and/or negligently exposing and subjecting his minor son, the Plaintiff, to unsafe, dangerous, neglectful, abusive and/or harmful conditions, including his hazardous cigarette smoke.
At all times relevant, [Hugo] breached the foregoing common law duty by repeatedly, forcibly, knowingly, intentionally, wantonly, chronically, recklessly, grossly negligently and/or negligently exposing and subjecting his son to his hazardous cigarette smoke.
As a direct, natural, foreseeable, factual and proximate cause of [Hugo's] breaches of the foregoing common law duty, [Michael] has been seriously injured and harmed as herein previously alleged.
The conduct of [Hugo] as herein alleged was undertaken intentionally, knowingly, wantonly, recklessly and/or with gross negligence, thereby entitling [Michael] to an award of punitive damages.

DN 23-2. Michael's illnesses and conditions allegedly resulted from his childhood exposure to secondhand smoke. The FAC frames the claims to allege breaches of duty as a result of Hugo's decisions to expose his son to that hazardous condition. Hugo's Estate has answered and denied these claims. The state action is ongoing.

         Hugo's Estate provided notice of the suit to the Liberty entities. They are defending the state court action under a reservation of rights while seeking a declaration from this court that they have no obligation to indemnify or further defend Hugo's Estate under any of the policies issued to Hugo.

         B. Exercise of Jurisdiction - Considerations

         The parties assert that adjudicating the coverage issues “by comparing the allegations in the underlying complaint with the terms of the insurance policy”[2] will not require any fact-finding. The question as to the obligations, if any, of the insurer to the insured are generally matters of law, and thus may be decided by this court. Cincinnati Ins. Co. v. Motorist Mutual Ins. Co., 306 S.W.3d 69, 73 (Ky. 2010).

         A declaration of “no coverage” would clearly settle the dispute as between the Liberty entities and Hugo's Estate. So, too, would a finding in favor of Hugo's Estate[3] that the grounds articulated by the Liberty entities do not constitute an impediment to the Estate's demand for a defense and indemnification. In the event the court were to conclude that one or more of Michael's claims “potentially, possibly or might come within the coverage of the policy, ”[4] the Liberty entities' duty to defend would be clear with respect to all of Michael's claims in the state court suit. James Graham Brown Found., 814 S.W.2d at 279-80; Martin County Coal Corp. v. Universal Underwriters Ins. Servs., 792 F.Supp.2d 598 F.3d 257 (6th Cir. 2010)(the duty to defend applies to all claims, once duty is triggered). Of course, this court cannot find that indemnity is owed to Hugo's Estate. If the policy terms are not preclusive, any obligation to indemnify would flow from the state court action. The parties recognize this and seek only a determination whether any of the policy terms preclude indemnity and relieve the Liberty entities of the duty to defend.

         Therefore, this action serves a useful purpose in clarifying the legal relations between insurer and insured. A declaratory judgment in this regard would not encroach upon the state court's functions.

         There is no question of “procedural fencing here” or a “race for res judicata.” The Liberty entities simply wish to know whether they must remain engaged. The fleche[5] has occurred in the state court action. The matter before this court is no feint, [6] but rather a parry[7] from which the Liberty entities can discern their obligations to their insured.

         There are no novel questions of state law raised in this declaratory action. There is sufficient Kentucky case law from which we can readily discern the principles upon which our analysis must be based, as well as the policy considerations undergirding those state court decisions. Further, the issues of coverage are not dependent upon any resolution of facts in the state court. Thus, we conclude that state court would be no better equipped than this court to decide the questions before us.

         The court also concludes that there is no alternative to this declaratory action which is superior to the declaratory judgment process. The Liberty entities could file a declaratory action in the state court, either separately or by intervention in the state case, or wait and file an indemnity action after the liability question has been determined in the state court action. Neither option offers any advantage over the declaratory relief sought presently in this forum. See Scottsdale Ins. Co. v. Flowers, 513 F.3d 546 (6th Cir. 2008).

         Having found that the Grand Trunk factors militate in favor of the request by both parties that we endeavor to render a declaratory judgment herein, we proceed to consider the cross-motions for summary judgment.

         C. Undisputed Facts and Michael's Contentions - Declaratory Judgment Action

         1. The Policies

         There are five insurance policies[8] in issue in this litigation. Three are homeowners' policies, one is a condominium policy, [9] and one is a personal excess liability policy. The following policies were issued to Hugo in Kentucky as follows:

(1) Liberty Mutual Fire Insurance Company issued a homeowners' policy for the residence located at 2602 Cave Spring Place, Louisville, Kentucky, for successive periods beginning March 31, 2003 and ending March 31, 2011. (Policy No. H3228143799190).
(2) LM Insurance Corporation issued a condominium policy for the residence located at 727 Savoy Road, Louisville Kentucky, for continuing and successive periods beginning on March 31, 2011 and ending March 31, 2018. (Policy No. H6528149649140).
(3) Liberty Mutual Fire Insurance Company issued homeowners' policies for the residence located at 362 Sandy Beach Road, McDaniels, Kentucky, for successive periods beginning October 31, 2003 and ending October 31, 2006. (Policy Nos. H3228193162400 and H3228193162401).
(4) Liberty Insurance Corporation issued a homeowners' policy for the residence located 1045 Sandy Beach Lane, McDaniels, Kentucky, for successive periods beginning on September 15, 2010 and ending September 15, 2017. (Policy No. H3728145310740).
(5) Liberty Mutual Insurance Company issued a personal excess liability insurance policy for successive periods beginning September 13, 2003 and ending September 13, 2017. (Policy No. LJ128146130990).

         (collectively the “Liberty policies” or the “policies” herein).

         All of the homeowners' policies contain personal liability coverage provisions, various exclusions, and a set of definitions which are virtually identical. We quote the language in the Cave Spring Place policy, in pertinent part, as representative:

         Section II - Liability Coverages Coverage

         E - Personal Liability

         If a claim is made or a suit is brought against an “insured” for damages because of “bodily injury”…caused by an “occurrence” to which this coverage applies, we will:

         1. Pay up to our limit of liability for the damages for which the “insured” is legally liable… and

         2. Provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent…

         Section II - Exclusions

         1. Coverage E - Personal Liability…do[es] not apply to “bodily injury”: …

         k. Arising out of sexual molestation, corporal punishment or physical or mental abuse…

         2. Coverage E - Personal Liability, does not apply to: …

         f. “Bodily injury” to you or an “insured” within the meaning of …“insured” as defined.

         Sections I and II - Conditions

         1. Policy Period. This policy applies only to…“bodily injury”…in Section II, which occurs during the policy period.

         Definitions

         …[C]ertain words and phrases are defined as follows:

         1. “Bodily injury” means bodily harm, sickness or disease…

         3. “Insured” means you and residents of your household who are…your relatives…

         5. “Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in… “Bodily injury”…

         The excess liability policy provides, in pertinent part:

         II. Coverage - Personal Excess Liability

         We will pay all sums in excess of the retained limit and up to our limit of liability for damages because of personal injury…to which this policy applies and for which the insured is legally liable.

         Exclusions

         This policy does not apply to personal injury

         a. Which is intended by the insured.

         This policy also does not apply to:

         h. personal injury to any insured.

         V. Conditions

         1. Policy Period

         This policy applies only to personal injury…which occurs during the policy period…

         5. Loss Payable - Other Insurance

         This policy applies only to damages in excess of the retained limit for an occurrence. If collectible insurance with any other insurer is available for a loss also covered by this policy, this policy will be excess and will not contribute with such other insurance.

         An additional exclusion was added by addendum to the policy's Section II. Coverage - Personal Excess Liability; Exclusions:

         This policy also does not apply to:

         1. Personal injury…arising out of sexual molestation, corporal punishment or physical or mental abuse, including failure to detect, prevent, stop or report such molestation, punishment or abuse by others.

         The Definitions state, in pertinent part:

         I. Definitions

         …3. “insured” ...


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