United States District Court, W.D. Kentucky, Louisville Division
AMENDED MEMORANDUM OPINION AND ORDER
Rebecca Grady Jennings, United States District Judge.
matter comes before the Court on Plaintiff's Motion for
Summary Judgment. [DE 26]. Briefing is complete. [DE 27; DE
28]. The Court issued a sua sponte order requesting
additional briefing on the exercise of discretionary
jurisdiction under the Declaratory Judgment Act. [DE 33]. The
parties filed the requested briefs and responses. [DE 34; DE
35; DE 36; DE 37]. The matter is ripe. For the reasons below,
the Court will exercise its discretionary jurisdiction to
entertain this declaratory judgment, and GRANT
Plaintiff's Motion for Summary Judgment [DE 26].
Rollerdrome, Inc. (“Greenwood”) operated a bingo
hall in Louisville. [DE 1 at 1-2, ¶ 3]. Stephanie Walker
(“Walker”), a Greenwood patron, filed suit in
Jefferson County Circuit Court alleging that Greenwood
negligently failed to install and maintain reasonable and
necessary safety features in its parking lot (the
“Kentucky suit”). [DE 15-3 at 167, ¶ 11].
According to the Complaint, Walker was in the bingo hall
parking lot one evening when “an unidentified man
approached her and shoved a firearm into her head, forcing
her over into the passenger seat as he drove the car away
from the parking lot [where he] proceeded to carjack, kidnap,
sexually assault, and sodomize [her].” [DE 15-3 at 167,
held a Commercial General Liability insurance policy (the
“Policy”) from The Burlington Insurance Company
(“TBIC”) for the period at issue. [DE 1 at 2,
¶ 6]. Greenwood notified TBIC of the Kentucky suit and
TBIC undertook Greenwood's defense under a reservation of
rights. Id. at 3, ¶¶ 13-14. TBIC then
brought this action, seeking a declaratory judgment that the
Kentucky suit cannot support liability for TBIC under the
Policy. Id. at 6, ¶ 24. TBIC moved for summary
judgment. [DE 26].
argues that it need not defend Greenwood under Coverage A
(“Bodily Injury”) and Coverage B (“Personal
and Advertising Injury”) because the Policy contained
an “Exclusion for Assault, Battery or Other Physical
Altercation” (the “Assault and Battery
Exclusion”), which precludes liability on TBIC's
part. [DE 26-1 at 201-11]. Greenwood, conversely, argues that
the Policy covers at least some claims in the Kentucky suit.
Greenwood asserts that coverage should not be denied even if
the Assault and Battery Exclusion applies, under the
doctrines of reasonable expectations and illusory coverage.
[DE 27 at 218-22].
addressing TBIC's summary judgment motion, the Court must
determine whether to exercise jurisdiction under the
Declaratory Judgment Act. TBIC moves the Court to retain
jurisdiction. [DE 34 at 250]. Greenwood moves the Court to
reject it. [DE 35 at 255].
DECLARATORY JUDGMENT ACT
the Declaratory Judgment Act, a federal court “may
declare the rights and other legal relations of any
interested party seeking such declaration.” 28 U.S.C.
§ 2201(a). While the Act authorizes district courts
to exercise jurisdiction, it does not mandate or impose a
duty to do so. Bituminous Cas. Corp. v. J & L Lumber
Co., Inc., 373 F.3d 807, 812 (6th Cir. 2004). The Act
confers on the “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).
court considers five factors (the “Grand Trunk
factors”) to determine whether the exercise of
Declaratory Judgment Act jurisdiction is appropriate.
Grand Trunk W.R.R. Co. v. Consol. Rail Co., 746 F.2d
323, 326 (6th Cir. 1984) (internal quotation marks omitted).
The Court must balance the five factors and “[t]he
relative weight of the underlying considerations of
efficiency, fairness, and federalism will depend on facts of
the case.” Id. at 563; W. World Ins. Co.
v. Hoey, 773 F.3d 755, 759 (6th Cir. 2014).
Whether the declaratory action would settle the controversy
and clarify the legal relations.
first two Grand Trunk factors assess “(1) whether the
declaratory action would settle the controversy” and
“(2) whether the declaratory action would serve a
useful purpose in clarifying the legal relations in
issue.” Grand Trunk, 746 F.2d at 326. Because
“it is almost always the case that if a declaratory
judgment will settle the controversy, . . . it will clarify
the legal relations in issue, ” the inquiries required
by these two factors often overlap substantially. United
Specialty Ins. Co. v. Cole's Place, Inc., 936 F.3d
386, 397 (6th Cir. 2019) (citing Flowers, 513 F.3d
at 557; Bituminous, 373 F.3d at 814; and
Northland Ins. Co. v. Stewart Title Guar. Co., 327 F.3d
448, 454 (6th Cir. 2003)).
are two lines of cases in the Sixth Circuit. Cole's
Place, Inc., 2018 WL 1914731 at *4 (citing
Flowers, 513 F.3d at 555). “One line of cases
approved of declaratory actions because they can
‘settle the insurance coverage controversy,' while
a second line of cases disapproved of declaratory actions
because while they ‘might clarify the legal
relationship between the insurer and the insured, they do not
settle the ultimate controversy.'” Id.
(quoting Flowers, 513 F.3d at 555).
parties agree this matter falls into the first line of cases
[DE 34 at 4; DE 35 at 2], that is, “a technical or
legal issue is [ ] at the heart of the coverage controversy,
and to the extent the facts of the underlying case matter,
they are undisputed.” Emplrs. Ins. Co., 2011
WL 2119360, at *6. It is undisputed that the plaintiff in the
Kentucky suit was assaulted in the bingo hall parking lot. It
is also undisputed that whether assault occurred is not
before the state court. Rather, the plaintiff in the Kentucky
suit has sued Greenwood for alleged failure to install and
maintain reasonable and necessary safety features. Thus, the
issue there is whether Greenwood negligently failed to
protect the patron plaintiffs, not (as in the present suit),
whether some claims in the Kentucky suit arose out of a
“carjacking and kidnapping.” [DE 15-3 at 167,
action, liability is established under the Personal and
Advertising Injury Coverage portion of the Policy because
kidnapping is a type of detention. This issue is not present
in the Kentucky suit, but only here between the insured and
insurer. As a result, this declaratory judgment action will
“settle the controversy, ” as it resolves the
dispute between the insurer and insured over who will pay for
the state-court litigation. See, e.g., W. World Ins. Co.
v. Hoey, 773 F.3d 755, 760-61 (6th Cir. 2014). The first
two factors therefore support jurisdiction.
Whether the declaratory remedy is being used merely for the
purpose of procedural fencing or to provide an arena for a
race for res judicata.
third factor considers “whether the use of the
declaratory judgment action is motivated by ‘procedural
fencing' or [is] likely to create a race for res
judicata.” Flowers, 513 F.3d at 558. The Sixth
Circuit seldom finds procedural fencing if the
declaratory-plaintiff filed after the start of litigation in
state court. Cole's Place, 936 F.3d at 399. The
Kentucky suit was filed on August 17, 2017. [DE 15-3]. This
action was filed on September 25, 2017. [DE 1]. “[W]hen
the plaintiff has filed his claim after the state court
litigation has begun, [the Sixth Circuit] ha[s] generally
given the plaintiff ‘the benefit of the doubt that no
improper motive fueled the filing of [the]
action.'” Id. (fourth alteration in
original) (quoting Bituminous, 373 F.3d at 814).
This factor supports jurisdiction.
Whether the use of a declaratory action would increase
friction between our federal and state courts and improperly
encroach upon state jurisdiction.
fourth Grand Trunk factor addresses “whether
accepting jurisdiction would increase friction between
federal and state courts” and is broken into three
sub-factors. Flowers, 513 F.3d at 559.
first sub-part “focuses on whether the state
court's resolution of the factual issues in the case is
necessary for the district court's resolution of the
declaratory judgment action.” Flowers, 513
F.3d at 560. As discussed above, any factual determinations
the Court may have to make about the Policy's Assault and
Battery Exclusion will not overlap with those at issue in the
Kentucky suit. The first sub-factor therefore supports
Whether the State Trial Court is in a Better Position to
Evaluate Those Factual Issues than is the Federal Court.
second sub-part examines “which court, federal or
state, is in a better position to resolve the issues in the
declaratory action.” Id. The Sixth Circuit has
“found that ‘issues of insurance contract
interpretation are questions of state law with which the
Kentucky state courts are more familiar and, therefore,
better able to resolve.'” Id. (quoting
Travelers Indemnity Co. v Bowling Green Prof.
Assoc., 495 F.3d 266, 273 (6th Cir. 2007)). The
questions that would arise here do not, however, do not
involve novel issues of Kentucky law. See Cole's
Place, 2018 WL 1914731, at *8.
whether TBIC has an obligation to Greenwood under the Policy
requires addressing whether a violent kidnapping by a
third-party qualifies as a “[f]alse arrest, detention
or imprisonment” under the Personal and Advertising
Injury Coverage clause; and, if so, whether the illusory
coverage doctrine prevents applying the exclusion. While it
appears no Kentucky court has addressed the illusory coverage
doctrine for an assault and battery exclusion, the Kentucky
Court of Appeals has addressed this doctrine in the context
of exclusions in general. See Ritchie v. Turner, 547
S.W.3d 145, 149 (Ky. App. 2018). Thus, the Federal Court can
apply the doctrine of illusory coverage to the undisputed
factual situation and Policy here. The second sub-factor
therefore is neutral and does not weigh heavily in the
balance. Cole's Place, 936 F.3d at 401.
Whether There is a Close Nexus Between Underlying Factual and
Legal Issues and State Law and/or Public Policy, or Whether
Federal Common or Statutory Law Dictates a Resolution of the
third sub-part “focuses on whether the issue in this
federal action implicates important state policies and is,
thus, more appropriately considered in state court.”
Flowers, 513 F.3d at 561. Kentucky state courts are
“more familiar and, therefore, better able to
resolve” interpretation of insurance contracts.
Id. Even when the state law is not difficult to
apply, the Sixth Circuit has usually found “that the
interpretation of insurance contracts is closely entwined
with state public policy.” Cole's Place,
936 F.3d at 400 (citing e.g., Flowers, 513 F.3d at
561 and Travelers, 495 F.3d at 273). Because this
action involves an interpretation of a Kentucky insurance
contract, the third sub-factor counsels against jurisdiction.
Whether there is an alternative remedy which is better or
fifth and final factor asks “whether there is an
alternative remedy which is better or more effective”
than federal declaratory relief. Grand Trunk, 746 F.2d at
326. Kentucky law provides a declaration of rights procedure,
under KRS § 418.040. Mass. Bay Ins. Co. v. Christian
Funeral Dirs., Inc., No. 18-5267, 2018 WL 6787945, at *8
(6th Cir. Dec. 26, 2018). The Sixth Circuit has held that,
“[i]n many ways, this alternative would have been
better.” Flowers, 513 F.3d at 562. Specifically,
“[t]he Kentucky courts are in a superior position to
resolve undecided questions of ...