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Berkley Assurance Co. v. Carter Douglas Company, LLC

United States District Court, W.D. Kentucky, Bowling Green Division

January 13, 2020

BERKLEY ASSURANCE COMPANY PLAINTIFF
v.
CARTER DOUGLAS COMPANY, LLC; and STEPHEN BRADLEY HATCHER DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          GREG N. STIVERS, CHIEF JUDGE UNITED STATES DISTRICT COURT

         This matter is before the Court on Plaintiff's Motion for Declaratory Judgment and Summary Judgment (DN 13). The motion is now ripe for review. For the reasons that follow, Plaintiff's motion is DENIED.

         I. BACKGROUND

         On February 27, 2017, Defendant Stephen Bradley Hatcher (“Hatcher”) executed an Independent Contractor Agreement with Defendant Carter Douglas Company, LLC (“Carter Douglas”). (Compl. Ex. 1, DN 1-1). On March 17, 2017, Hatcher was renovating a building on behalf of Carter Douglas when the rafter he was walking on broke underneath him causing him to fall and suffer injuries including brain trauma, a fractured skull, a crushed wrist, and a broken vertebra, face bone, and right shoulder. (Compl. Ex. 3, ¶ 4, DN 1-3; Hatcher Dep. 87:5-10, Nov. 8, 2017, DN 13-2).

         Hatcher thereafter filed a workers' compensation claim. (Compl. Ex. 2, at 1, DN 1-2). An initial dispute arose as to whether Hatcher was working as an employee or independent contractor for Carter Douglas at the time of the injury. (Compl. Ex. 2, at 1). The Administrative Law Judge (“ALJ”) found Hatcher to be an employee rather than an independent contractor of Carter Douglas. (Compl. Ex. 2, at 13-14). The Court's own research reveals that Hatcher's workers compensation claim is still before the ALJ. Hatcher v. Carter Douglas Co., No. 2017-01510 (Ky. A.L.J. Nov. 27, 2019). After the ALJ's determination, Hatcher filed a separate action in state court alleging that Carter Douglas failed to comply with Kentucky workers' compensation laws, which, if true, would negate the exclusive remedy provision of those laws and allow Hatcher to pursue a claim in Kentucky state court. (Compl. Ex. 3, ¶¶ 7-8); see KRS 342.690(2). A Kentucky CourtNet search of that state court action reveals that it is being held in abeyance as of December 10, 2019, pending final resolution of Hatcher's workers' compensation claim. Hatcher v. Carter Douglas Co., No. 18-CI-00311 (Ky. Cir. Ct. Dec. 10, 2019).

         Plaintiff Berkley Assurance Company (“Berkley”), which issued a commercial general liability insurance policy to Carter Douglas, filed the present action seeking a declaratory judgment that Berkley “has no obligation to provide coverage to Carter Douglas” for any claims made by Hatcher arising from his fall. (Compl. ¶¶ 22-27). Berkley also seeks a declaratory judgment that it has no further obligation to defend Carter Douglas in the underlying state court action between Hatcher and Carter Douglas. (Compl. ¶ 27). Berkley has moved for declaratory judgment and summary judgment, to which no response has been filed. (Pl.'s Mot. Summ. J., DN 13).

         II. JURISDICTION

         To the extent the Court possesses subject matter jurisdiction over this case, it is based on diversity. See 28 U.S.C. § 1332.

         III. DISCUSSION

         Although the issue has not been raised, courts are encouraged to, sua sponte, examine the issue of whether to exercise their discretion in asserting jurisdiction over actions brought pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a). See Travelers Indem. Co. v. Bowling Green Prof'l Assocs., PLC, 495 F.3d 266, 271 (6th Cir. 2007) (raising the issue, sua sponte, of whether to exercise jurisdiction over declaratory judgment action). Under the Declaratory Judgment Act, “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). A court's exercise of jurisdiction under the Declaratory Judgment Act, however, is discretionary-not mandatory. See Bituminous Cas. Corp. v. J & L Lumber Co., 373 F.3d 807, 812 (6th Cir. 2004) (citing Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942)). The Sixth Circuit has outlined the following five factors to analyze when determining whether a district court should exercise jurisdiction over a request for a declaratory judgment:

(1) whether the declaratory action 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 the purpose 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 which is better or more effective.

Id. (citation omitted); see also Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 564 (6th Cir. 2008). These factors embody three main principles: efficiency, fairness, and federalism. See W. World Ins. Co. v. Hoey, 773 F.3d 755, 759 (6th Cir. 2014) (citation omitted).

         A. Settlement of the Controversy and Clarification of Legal Relations

         In insurance coverage cases, most courts consider the first two factors together because “it is almost always the case that if a declaratory judgment will settle the controversy, then it will clarify the legal relations in issue.” Flowers, 513 F.3d at 555 (citations omitted). Ultimately, “a declaratory judgment is proper if it will only have to decide purely legal questions or engage in fact-finding that does not affect the parties in the underlying action.” Argonaut-Midwest Ins. Co. ...


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