United States District Court, E.D. Kentucky, Northern Division, Covington
MEMORANDUM OPINION AND ORDER
L. Bunning United States District Judge.
Brit UW Limited (“Brit”), for and on behalf of
Lloyd's Syndicate 2987, an insurance company, commenced
this declaratory-judgment action against Defendants Denver
Smith, Loretta Smith, Fat Boy's Dream LLC
(“FBD”), Justin Foster, Eliminator Custom Boats
Inc. (“Eliminator”), Brunswick Corporation
(“Brunswick”), the Estate of Ronald Parker, Roger
Lewis, and Carol Martin. (Doc. # 1). FBD is one of several
defendants currently being sued in Mason County Circuit Court
in connection with a fatal boating accident that occurred in
Maysville, Kentucky. See Lewis v. Foster, No.
18-CI-40 (underlying state-court action). Brit seeks a
determination that, pursuant to its insurance contract with
FBD, it has no duty to defend or indemnify FBD against
damages it may be liable for in the state-court lawsuit.
(Doc. # 1). After Brit filed its Complaint seeking a
declaratory judgment (Doc. # 1), the Court issued an order to
show cause why the Court should take jurisdiction. (Doc. #
31). Both sides having submitted briefs, see (Docs.
# 32, 35, 36, 37, and 38), and the time for filing of a
response having expired, the matter is now ripe for the
Court's review. For the reasons set forth below, the
Court declines to exercise its jurisdiction
over Brit's declaratory-judgment suit.
FACTUAL AND PROCEDURAL BACKGROUND
The State-Court Action
August 19, 2017, Justin Foster was operating a speedboat on
the Ohio River as part of a charity boating event sponsored
by a local restaurant called Fat Boy's Dream
(“FBD"). (Doc. # 1 ¶ 17). Foster lost control
of the speedboat during the event, and he and his passenger,
Ronald Parker, were ejected from the vessel. The speedboat
then crashed into a nearby pontoon boat operated by Roger
Lewis and Carol Martin. Id. ¶ 18. Parker died
as a result of the accident, while Lewis suffered a serious
leg injury, and Martin continues to suffer from
Post-Traumatic Stress Disorder. Id. ¶¶ 18,
and Martin-the owners of the pontoon boat-filed a tort action
on February 7, 2018 in Mason County Circuit Court, bringing
negligence claims against Foster and against Parker's
estate for failure to properly maintain and operate
Foster's speedboat. Id. ¶¶ 21, 26.
They also brought negligence and products-liability claims
against Eliminator, the designer of Foster's speedboat,
and against Brunswick, the designer of the stern drives on
Foster's speedboat. Id. ¶¶ 23, 24.
Finally, Lewis and Martin sued FBD and its owners Denver and
Loretta Smith, for allegedly failing to exercise ordinary
care in planning and overseeing the boating event.
Id. ¶ 27. Ronald Parker's estate then filed
a crossclaim against FBD, also alleging negligence in
sponsoring and planning the boating event. Id.
¶ 29. Defendant Eliminator removed the case to the
Eastern District of Kentucky. Lewis v. Foster, No.
2:18-cv-60-DLB-CJS (E.D. Ky. 2018), ECF No. 1. Shortly
thereafter, several parties moved to remand the case back to
state court. Lewis v. Foster, No. 2:18-cv-60-DLB-CJS
(E.D. Ky. 2018), ECF Nos. 9, 10, and 11. The Court granted
those motions on September 5, 2018 and remanded the case back
to Mason County Circuit Court. Lewis v. Foster, No.
2:18-cv-60-DLB-CJS, 2018 WL 4224445 (E.D. Ky. Sept. 5, 2018).
issued a general liability policy to FBD, which was in effect
from June 28, 2017 until June 28, 2018. (Doc. # 1 ¶ 30).
Pursuant to this policy, Brit is defending FBD in the
state-court action under a reservation of rights that
includes the right to deny that it owes FBD “any
defense or indemnity obligations with respect to the claims
set forth in the [state-court action] or under the
Policy.” Id. ¶ 42.
which is not a party to the state-court action, filed the
instant declaratory-judgment action on June 29, 2018, naming
as Defendants all parties who might have an interest in the
outcome of the insurance-coverage issue, including the
insureds (Denver and Loretta Smith d/b/a Fat Boy's
Dream), the tort plaintiffs (Roger Lewis and Carol Martin),
and the tort defendants (Justin Foster, Eliminator,
Brunswick, and the Estate of Ronald Parker). (Doc. # 1).
Brit's Complaint alleges that it has no duty to defend or
indemnify Denver and Loretta Smith and/or FBD in connection
with any of the claims stemming from the August 19, 2017
boating accident. Id. ¶¶ 44-48.
Specifically, Brit alleges that the policy it issued to FBD
applies only to risks associated with its restaurant, liquor
sales, and gasoline stations, none of which relate to the
August 19, 2017 boating event. Id. ¶ 45.
Furthermore, Brit claims that even if coverage for the
boating event were available under the policy, certain
exclusions apply which eliminate Brit's coverage
obligation. Brit relies on the exclusions relating to
“Athletics or Sports Participants” as well as
bodily injury or property damage “arising out of the
ownership, maintenance, use or entrustment to others of any
watercraft owned or operated by or rented or loaned to
[FBD].” Id. ¶ 35.
requests that the Court declare it not liable under the
policy issued to FBD for any judgment entered in the
state-court action and that it is “not obligated in any
manner to defend or indemnify Denver & Loretta Smith
d/b/a Fat Boy's Dream LLC” in the state-court
action. (Doc. # 1 at 11).
Roger Lewis and Carol Martin (Plaintiffs in the state-court
action) filed an Answer and Counterclaim, asserting that
Brit's policy issued to FBD does in fact cover damages
stemming from the August 19, 2017 boating accident and that
no exclusions apply. (Doc. # 9). The Estate of Ronald Parker
and Brunswick have also filed Answers. (Docs. # 10 and 11).
The Court subsequently ordered briefing on the question of
whether it should exercise jurisdiction to hear the
declaratory-judgment action. (Doc. # 31). The Court has
received responses from the Estate of Ronald Parker, Roger
Lewis and Carol Martin, FBD, and Brit. (Docs. # 32, 35, 36,
37, and 38). As alluded to in its show-cause Order (Doc. # 31
at 1), the Court has diversity jurisdiction over this
Standard of Review
Declaratory Judgment Act provides, “[i]n a case of
actual controversy within its jurisdiction . . . any court of
the United States, upon the filing of an appropriate
pleading, may declare the rights and other legal
relations of any interested party seeking such declaration,
whether or not further relief is or could be sought.”
28 U.S.C. § 2201(a)(emphasis added). In situations where
there is a simultaneous state-court action between the
insured and an alleged tort victim, the federal court is not
obliged to entertain an action under the Declaratory Judgment
Act. Brillhart v. Excess Ins. Co. of Am., 316 U.S.
491, 494-95 (1942); Bituminous Cas. Corp. v. J & L
Lumber Co., Inc., 373 F.3d 807, 812 (6th Cir. 2004).
Consequently, the Act “confer[s] 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); accord Western
World Ins. Co. v. Hoey, 773 F.3d 755, 758 (6th Cir.
guide the exercise of this discretion, the Sixth Circuit has
identified five factors for district courts to consider.
Hoey, 773 F.3d at 759. These factors, first
introduced in the case Grand Trunk Western Railroad Co.
v. Consolidated Rail Corp., 746 F.2d 323, 326 (6th Cir.
1984), are as follows:
(1) whether the declaratory action would settle the
(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
the purpose of “procedural fencing” or “to
provide an arena 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; ...