Armstrong v. Liberty Mut. Fire Ins. Co.

555 F.Supp.3d 479

Thomas S. ARMSTRONG, Plaintiff

v.LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendants

Civil Action No. 3:20-CV-678-RGJ

United States District Court, W.D. Kentucky, Louisville Division.

Signed August 18, 2021

Filed August 19, 2021

Grover S. Cox, Grover S. Cox Law Office, Louisville, KY, for Plaintiff.

Charles H. Cassis, Goldberg & Simpson, LLC, Prospect, KY, for Defendants.

MEMORANDUM OPINION AND ORDER

Rebecca Grady Jennings, District Judge

Plaintiff Thomas S. Armstrong ("Armstrong") and Defendant Liberty Mutual Fire Insurance Company ("Liberty Mutual") both move for summary judgment. [DE 11; DE 12]. Briefing is complete [DE 13; DE 14; DE 16] and this matter is ripe. For the reasons below, the Court will DENY Armstrong's Motion for Summary Judgment [DE 11] and GRANT Liberty Mutual's Motion for Summary Judgment [DE 12].

I. BACKGROUND

In September 2019, Ashley Stickle ("Stickle") struck Armstrong with her vehicle while he was riding his bicycle. [DE 12 at 137]. Stickle was insured by State Farm, and Armstrong settled his suit against Stickle for her policy limits. Id. Armstrong had Underinsured Motorist ("UIM") coverage under a Liberty Mutual policy (the "Policy"). Id. at 138. The central dispute is whether the Policy entitles Armstrong to $100,000 or $300,000 in UIM coverage for the damages he sustained due to the accident. [DE 1-1 at 6]. In April 2020, Armstrong sent Liberty Mutual a Coots notice and demanded UIM coverage. [DE 12 at 137-38]. Liberty Mutual offered Armstrong $100,000 in UIM coverage, which it contends is the Policy's limit. Id. at 138. In October 2020, Armstrong sued in Jefferson County Circuit Court seeking a declaratory judgment that the Policy's limit is $300,000, not $100,000. [DE 1-1]. Liberty Mutual timely removed the case to this Court based on diversity. [DE 1]. The parties now cross-move for summary judgment. [DE 11; DE 12].

II. DISCUSSION

A. Jurisdiction

Under 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). While neither party has addressed the Court's jurisdiction, the Court will first determine whether the exercise of jurisdiction is appropriate under the circumstances of this case before addressing the parties’ motions for summary judgment. See Berkley Assurance Co. v. Carter Douglas Co., LLC , No. 1:18-CV-00099-GNS, 2020 WL 201051, at *1 (W.D. Ky. Jan. 13, 2020) ("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)").

The court considers five factors (" Grand Trunk factors") to determine whether the exercise of Declaratory Judgment Act jurisdiction is proper. Grand Trunk W.R.R. Co. v. Consol. Rail Corp. , 746 F.2d 323, 326 (6th Cir. 1984) (internal quotation marks omitted). Although the Court must balance the five factors, the Sixth Circuit has never clarified the relative weights of the factors. Id. at 326.

The 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 Scottsdale Ins. Co. v. Flowers , 513 F.3d 546, 557 (6th Cir. 2008) ; Bituminous , 373 F.3d at 814 ; and Northland Ins. Co. v. Stewart Title Guar. Co. , 327 F.3d 448, 454 (6th Cir. 2003) ).

There are two lines of cases in the Sixth Circuit. United Specialty Ins. Co. v. Cole's Place, Inc. , No. 3:17-CV-00326-TBR, 2018 WL 1914731, at *4 (W.D. Ky. Apr. 23, 2018), aff'd , 936 F.3d 386 (6th Cir. 2019) (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 ).

This action falls into the first line of cases. The parties dispute whether Armstrong is entitled to $100,000 or $300,000 in UIM coverage. There are no fact-bound issues of state law awaiting resolution in the state-court litigation. See Bituminous , 373 F.3d at 813–14. As a result, this declaratory judgment action will "settle the controversy," as it resolves the dispute between the insurer and insured over coverage. See, e.g., W. World Ins. Co. v. Hoey , 773 F.3d 755, 760–61 (6th Cir. 2014). The first two Grand Trunk factors therefore support the exercise of jurisdiction.

The 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. Based on the parties’ pleadings, there is no competing state court declaratory action. Thus, the third Grand Trunk factor supports the exercise of jurisdiction.

The fourth Grand Trunk factor addresses "whether accepting jurisdiction would increase friction between federal and state courts" and is broken into three sub-parts. Id. at 559. The 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." Id. at 560. Here, any factual determinations the Court may have to make will not overlap with a state court action because there is no state court action pending. As a result, this sub-part supports exercising jurisdiction.

The 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. at 561 (quoting Travelers Indem. Co. v. Bowling Green Prof. Assoc. , 495 F.3d 266, 273 (6th Cir. 2007) ). The questions that would arise here do not, however, involve novel issues of Kentucky law. See Cole's Place, Inc. , 2018 WL 1914731, at *8. The second sub-part therefore is neutral.

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, Inc. , 936 F.3d at 401, 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-part counsels against exercising jurisdiction.

The 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. , 759 Fed.Appx. 431, 441-42 (6th Cir. 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 state law," and "Kentucky courts might also have been able to combine the two actions so that all issues could be resolved by the same judge." Id. For these reasons, overall, the fifth Grand Trunk factor weighs against exercising jurisdiction.

As noted above, the Sixth Circuit has never suggested the relative weight of the factors; instead, "[t]he relative weight of the underlying considerations of efficiency, fairness, and federalism will depend on facts of the case." Cole's Place, Inc. , 936 F.3d at 402 (citing Hoey , 773 F.3d at 759 ). Further, "[t]he essential question is always whether [the court] has taken a good look at the issue and engaged in a reasoned analysis of whether issuing a declaration would be useful and fair." Id. (citing Hoey , 773 F.3d at 759 ) (citation omitted). Having evaluated those factors, the first three factors support exercising jurisdiction, as does one sub-part of the fourth factor. Because of the importance of these factors, the exercise of the Court's discretionary jurisdiction is appropriate.

B. Summary Judgment

Summary judgment is required when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The moving party bears the burden of specifying the basis for its motion and showing the lack of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party satisfies this burden, the nonmoving party must produce specific facts showing a material issue of fact for trial. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "Factual differences are not considered material unless the differences are such that a reasonable jury could find for the party contesting the summary judgment motion."...