Cincinnati Specialty Underwriters Ins. Co. v. Red Rock Hounds

Citation511 F.Supp.3d 1105
Decision Date06 January 2021
Docket NumberCase No. 3:20-cv-00272-MMD-BNW
Parties The CINCINNATI SPECIALTY UNDERWRITERS INSURANCE COMPANY, Plaintiff, v. RED ROCK HOUNDS, et al., Defendants. Red Rock Hounds, et al., Counterclaimants, v. The Cincinnati Specialty Underwriters Insurance Company, et al., Counter-Defendants. Beehive Insurance Agency, Inc., Third-Party Plaintiff, v. Moore Clemens & Co., Inc., Third-Party Defendant.
CourtU.S. District Court — District of Nevada

Griffith H. Hayes, Litchfield Cavo LLP, Daniel Brian Cantor, Las Vegas, NV, for Plaintiff/Counter-Defendant The Cincinnati Specialty Underwriters Insurance Company.

John C. Boyden, Erickson Thorpe & Swainston, Ltd., Reno, NV, for Third-Party Plaintiff Beehive Insurance Agency.

Jack G. Angaran, Alice K. Herbolsheimer, Lewis Brisbois Bisgaard & Smith, LLP, Reno, NV, for Third-Party Defendant Moore Clements & Co., Inc.

Richard G. Hill, Law Office of Richard Hill, Reno, NV, Scott J. Tepper, Pro Hac Vice, Scott J. Tepper, Raskin Gorham Anderson Law, LLP, Los Angeles, CA, for Defendants/Counterclaimants Lynn Lloyd, Red Rock Hounds.

Prescott T. Jones, Resnick & Lewis, P.C., Las Vegas, NV, for Defendant/Counterclaimants Global Indemnity Group, Inc.

ORDER

MIRANDA M. DU, CHIEF UNITED STATES DISTRICT JUDGE

I. SUMMARY

This is a declaratory relief action to determine an insurance company's duty to defend or indemnify its insureds. Plaintiff Cincinnati Specialty Underwriters Insurance Company seeks declaratory judgment that under the commercial insurance policy ("Policy") they issued to Defendants, Red Rock Hounds and Lynn Lloyd, it has no duty to defend or indemnify Defendants in the action interested party Tracy Turnbow ("Turnbow") brought against Defendants in Nevada state court ("Turnbow Action").1 (ECF No. 1.) Plaintiff argues that four exclusions to the Policy apply to the Turnbow Action, and therefore, there is no coverage. (Id. ) Before the Court is Turnbow's motion to dismiss ("Motion to Dismiss"), arguing that Plaintiff's complaint fails to state a claim upon which relief can be granted. (ECF No. 10.) Defendants joined the Motion to Dismiss (ECF No. 14) and moved, in the alternative, to stay the case pending resolution of the Turnbow Action (ECF No. 15 at 7).2 Because Plaintiff's complaint indeed fails to state a claim upon which relief could be granted, and as further explained below, the Court will grant the Motion to Dismiss. Accordingly, the Court will also deny the Motion to Stay as moot.

II. BACKGROUND

The following facts are adapted from the Complaint. Defendants run mounted coyote hunts in which patrons ride on horseback accompanied by a pack of hounds. On or about September 25, 2019, Turnbow was on Defendants’ premises feeding horses. (ECF No. 1 at 2.) The horse Turnbow was feeding, Indy, "suddenly and unexpectedly kicked [Turnbow] in the back of her skull neck" and proceeded to stomp on her body, causing her further injury. (Id. ) On January 14, 2020, Turnbow filed a complaint in state court against Defendants, asserting claims for negligence and strict liability. (ECF Nos. 1-1 at 1, 10 at 1.) Turnbow alleges that Defendants knew Indy was aggressive, that Indy was prone to attack and injure people, and that another person had been attacked by Indy prior to the incident that injured Turnbow. (ECF No. 1 at 2.)

Plaintiff issued Defendants the Policy that was in effect from June 30, 2019 to June 30, 2020. (Id. at 3.) The Policy purports to provide coverage for "bodily injury" and "property damage" that "takes place in the coverage territory" and "occurs during the policy period." (Id. at 4.) But that coverage is subject to several exclusions. (Id. at 5-7.) Presently, Plaintiff is defending Defendants in the Turnbow Action under a reservation of rights. (Id. at 4.) On May 7, 2020, Plaintiff filed this action seeking a declaratory that under the Policy, it has no duty to defend or indemnify Defendants in the Turnbow Action. (Id. at 7-8.)

While the parties are completely diverse, Turnbow originally pled damages "in excess of $15,000." (ECF No. 1-1 at 7.) In response to the Court's order to show cause, Plaintiff demonstrated that the actual amount in controversy in the Turnbow Action is over $100,000, thus satisfying the prerequisites of diversity jurisdiction under 28 U.S.C. § 1332. (ECF No. 54.)

III. DISCUSSION

Turnbow moved to dismiss Plaintiff's request for declaratory judgment as to three stated exclusions for failure to state a claim upon which relief could be granted. (ECF No. 10 at 2.) As to the fourth exclusion, Turnbow asks that the Court either stay or dismiss Plaintiff's claim for lack of jurisdiction because it is not ripe. (ECF No. 10 at 2.) Defendants joined the Motion to Dismiss and request, in the alternative, that the Court stay this case pending the outcome of the Turnbow Action.3 (ECF No. 15.) As explained below, the Court will grant Turnbow's Motion to Dismiss—and will therefore deny the Motion to Stay as moot.

A. Jurisdiction

Because Turnbow asserts that a portion of Plaintiff's requested relief is not yet ripe and Defendant's Motion to Stay raised concerns about duplicative litigation and prejudice, the Court is compelled to examine its jurisdiction over this action. But because jurisdiction under the Declaratory Judgment Act is discretionary, the Court also considers whether the prudential Brillhart factors recommend exercising that jurisdiction. See Brillhart v. Excess Ins. Co. of Am. , 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). Because the Court finds that it does have subject-matter jurisdiction over this action and that the Brillhart factors do not weigh in favor of abstention, the Court will exercise its discretion to hear this case.

A lawsuit seeking federal declaratory relief must (1) "fulfill statutory jurisdictional prerequisites" and (2) present an "actual case and controversy within the meaning of Article III, section 2 of the United States Constitution." Gov't Emps. Ins. Co. v. Dizol , 133 F.3d 1220, 1222 (9th Cir. 1998) (citing Skelly Oil Co. v. Phillips Petroleum Co. , 339 U.S. 667, 672, 70 S.Ct. 876, 94 L.Ed. 1194 (1950) ); see also 28 U.S.C. § 2201(a). In a declaratory relief action, the amount in controversy for diversity jurisdiction purposes is "the value of the object of the litigation." Hunt v. Wash. State Apple Advert. Comm'n , 432 U.S. 333, 347, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). When an insurer contests the applicability of its liability coverage to a particular issue, the value of the object in litigation is "the value of the underlying potential tort action." Budget Rent-a-Car, Inc. v. Higashiguchi , 109 F.3d 1471, 1473 (9th Cir. 1997). An insurer's declaratory relief action to determine a duty to defend and indemnify their insured in a pending state court case creates an actual case or controversy within the meaning of Article III, even when the underlying liability action has not yet proceeded to judgment. See Am. States Ins. Co. v. Kearns , 15 F.3d 142, 144 (9th Cir. 1994) (citing Md. Casualty v. Pac. Coal & Oil Co. , 312 U.S. 270, 61 S.Ct. 510, 85 L.Ed. 826 (1941) ).4

This case is justiciable. Plaintiff's request that the Court determine its legal duty to defend and indemnify Defendants in the underlying Turnbow Action is an actual case and controversy within the meaning of Article III. See Kearns , 15 F.3d at 144. Moreover, with only one exception, Plaintiff's claim is ripe for judicial review.5 The district court may determine the rights and relationships between the parties before the underlying state litigation has reached judgment. See id. Further, the Court is satisfied that it has statutory subject-matter jurisdiction over this action under 28 U.S.C. § 1332(a). The parties are completely diverse (ECF No. 1) and the amount in controversy of the underlying Turnbow Action exceeds $130,526.75. (ECF No. 54 at 2.) In sum, the Court may exercise jurisdiction over this case.

But whether to hear a case under the Declaratory Judgment Act is committed to the Court's "unique and substantial discretion." Wilton v. Seven Falls Co. , 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). "In exercising its authority under the Declaratory Judgment Act, a district court: ‘should avoid needless determination of state law issues; it should discourage litigants from filing declaratory actions as a means of forum shopping; and it should avoid duplicative litigation.’ " Acuity v. Cifuni , Case No. 2:19-cv-01879-GMN-DJA, 2020 WL 5763606, at *2 (D. Nev. Sept. 28, 2020) (referencing the three Brillhart factors). These prudential considerations reflect the core concerns of "how judicial economy, comity, and federalism are affected in a given case." Dizol , 133 F.3d at 1225. Therefore, the Court must still analyze the jurisdictional facts of this case using the Brillhart factors to determine whether it should.

While it is a close call, the Court finds that exercising jurisdiction over Plaintiff's request for relief ultimately would be appropriate under the Brillhart factors and other prudential reasoning. The first Brillhart factor—discouraging needless litigation of state-law issues—weighs most heavily against exercising jurisdiction because each of the declarations that Cincinnati seeks requires a determination of purely state-law issues. See R.R. St. & Co. v. Transp. Ins. Co. , 656 F.3d 966, 975 (9th Cir. 2011) ("In prior cases, [the Ninth Circuit] ha[s] recognized that needless determination of state law issues alone may support remand."); see also Acuity , 2020 WL 5763606 at *2 (reasoning there was little federal interest for a district court sitting in diversity to decide insurer's declaratory relief action that solely involved interpretation of Nevada insurance law). But the Supreme Court's concern in Brillhart that "it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in a state court presenting the same issues, not governed by federal...

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