The Bad Wagon
Hoey arose when a wholesome recreation went terribly awry. Burt Hoey owns a farmers’ market that offered hay rides, pony rides and pumpkin picking. Via Craig’s List, he hired 23-year-old Mary Armbruster to run his hay wagon for eight weekends, paying her $100 a day in cash. In September 2011, an accident with the wagon crushed Ms. Armbruster’s spine, leaving her paralyzed from the waist down. She sued Mr. Hoey and his daughter for negligence in state court in Michigan.
Mr. Hoey was insured under a commercial general liability policy issued by Western World. The insurer agreed to defend the negligence suit, but it also reserved its right to deny coverage, based on the policy’s employee exclusion. The lawyer appointed by Western World then filed a workers compensation claim, asserting that Ms. Armbruster was eligible for workers compensation coverage as a statutory employee of Mr. Hoey. The negligence suit was stayed pending the resolution of that issue.
Separately, the insured and the insurer filed competing actions for declaratory judgment over the issue of coverage. Both suits were filed on the same day. Mr. Hoey and his daughter, joined by Ms. Armbruster, filed their action in a Michigan state court, while the insurer filed its suit in the U.S. District Court for the Eastern District of Michigan.
Western World removed the state court action, and the two cases were consolidated. The district court awarded summary judgment to the insurer, and Ms. Armbruster appealed.
That Settles … What?
In the Court of Appeals, Ms. Armbruster argued that the district court should have exercised its discretion by declining to rule on the parties’ dispute. That issue ordinarily turns on the factors that the Sixth Circuit identified in Grand Trunk, supra:
(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 res judicata;’
(4) whether the use of a declaratory action would increase the friction between our federal and state courts and improperly encroach upon state jurisdiction [which is determined by asking]
(a) whether the underlying factual issues are important to an informed resolution of the case;
(b) whether the state trial court is in a better position to evaluate those factual issues than is the federal court; and
(c) whether there is a close nexus between underlying factual and legal issues and state law...
