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COMMERCIAL UNDERWRITERS INS. v. GLOWMASTER CORP.

July 17, 2000

COMMERCIAL UNDERWRITERS INSURANCE COMPANY, PLAINTIFF,
V.
GLOWMASTER CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Stein, District Judge.

OPINION

Plaintiff insurance company seeks a declaratory judgment that it has no duty to defend or indemnify defendant policyholder in an underlying personal injury action due to the policyholder's failure to notify plaintiff of the claim in a timely fashion. The policyholder has moved to dismiss the complaint and the insurance company has cross-moved for summary judgment. A parallel proceeding is pending in New Jersey state court. For the reasons set forth below, this Court declines to exercise jurisdiction over this declaratory action pursuant to 28 U.S.C. § 2201 and the complaint is dismissed.

I. Background.

In September 1997, plaintiff Commercial Underwriters Insurance Company ("Commercial"), a California corporation with its principal place of business in that state, issued a commercial general liability insurance policy to Glowmaster Corporation, a New Jersey corporation with its principal place of business in New Jersey. Glowmaster sells portable stoves and butane fuels at wholesale. Commercial's New York office handled the underwriting and issuance of that policy.

On October 11, 1997, during the term of the policy, Elizabeth Dicenso was injured in Virginia when a propane heating unit allegedly manufactured by Glowmaster exploded, severely injuring her. Almost two years later — in August 1999 — Dicenso filed a personal injury action against Glowmaster and others in Virginia state court, seeking $1.5 million in compensatory damages.

On November 22, 1999 — approximately three months after the personal injury action was started — Commercial filed this action in the Southern District of New York, seeking a declaratory judgment that it has no duty to defend or indemnify Glowmaster with respect to the underlying Dicenso action. Commercial contends that Glowmaster failed to provide adequate and timely notice of Dicenso's injury and claim as required by its policy.

One month later, on December 21, 1999, Glowmaster filed a complaint in the Superior Court of New Jersey, Bergen County, ("New Jersey action") against Commercial seeking a declaratory judgment and damages for breach of the duty of good faith and fair dealing and breach of fiduciary duty.

Glowmaster has moved to dismiss this action on four grounds: that (i) this Court should abstain from exercising its jurisdiction pursuant to 28 U.S.C. § 2201; (ii) this Court should dismiss the complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2); (iii) venue is improper pursuant to Fed.R.Civ.P. 12(b)(3); and (iv) this Court is an inconvenient forum pursuant to 28 U.S.C. § 1404(a). Commercial has cross moved for summary judgment.

For the reasons set forth below, this Court declines to exercise its jurisdiction over this action pursuant to 28 U.S.C. § 2201.

II. Discussion.

A district court derives its power to decide a declaratory action from the Declaratory Judgment Act. See 28 U.S.C. § 2201(a). The U.S. Supreme Court has "repeatedly characterized the Declaratory Judgment Act as `an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant.'" Wilton v. Seven Falls Co., 515 U.S. 277, 287, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) (quoting Public Service Com'n of Utah v. Wycoff Co., Inc., 344 U.S. 237, 241, 73 S.Ct. 236, 97 L.Ed. 291 (1952)). The U.S. Supreme Court has cabined the issue of when district courts should accept jurisdiction where a parallel state proceeding is pending:

Ordinarily 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 law, between the same parties. Gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be avoided.

Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 495, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942); see also Wilton, 515 U.S. at 282-83, 115 S.Ct. 2137.

"Federal and state proceedings are `concurrent' or `parallel' for purposes of abstention when the two proceedings are essentially the same; that is, there is an identity of parties, and the issues and relief sought are the same." National Union Fire Ins. Co. v. Karp, 108 F.3d 17, 22 (2d Cir. 1997). In considering its discretion, the district court "should examine the scope of the pending state court proceeding and the nature of defenses open there." National Union Fire Ins., 108 F.3d at 22. A non-exclusive list of factors includes: (1) whether the claim of all parties in interest can be adjudicated in the parallel state proceeding; (2) whether necessary parties have been joined; (3) whether those parties are amendable to process in that proceeding; (4) whether the case involves any federal questions of law; (5) avoiding duplicative proceedings; and (6) forum shopping. See Wilton, 515 U.S. at 282-83, 115 S.Ct. 2137; National Fire Ins. Co., 108 F.3d at 22; Reliance Ins. Co. of Illinois v. ...


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