Southern-Owners Ins. Co. v. Galati Yacht Sales, LLC

SOUTHERN-OWNERS INSURANCE COMPANY, Plaintiff, v. GALATI YACHT SALES, LLC, JEFFCO MARINE SERVICES, INC., and JEFFERSON FORAKER, Defendants.

No. 8:21-cv-2567-VMC-SPF

United States District Court, M.D. Florida, Tampa Division

May 9, 2022

ORDER

VIRGINIA M. HERNANDEZ COVINGTON, UNITED STATES DISTRICT JUDGE.

This matter is before the Court on consideration of the Motion to Dismiss filed by Defendant Galati Yacht Sales, LLC, on January 31, 2022. (Doc. # 25). Defendants Jeffco Marine Services, Inc. and Jefferson Foraker have expressed their desire to join in Galati's Motion. (Doc. # 29 at 1-3). Plaintiff has responded. (Doc. ## 35, 39). For the reasons described below, the Motion is denied.

I. Background

This case involves an insurance dispute and an underlying lawsuit between some of the parties.

A. The Underlying Lawsuit

On August 19, 2021, Foraker sued Galati in Florida state court for negligence (the “Underlying Lawsuit”). (Doc. # 11). In his state-court complaint, Foraker alleged that, through his business, Jeffco Marine Services, Inc., he performed marine detailing work for Galati. (Id. at 1-2). On or about October 9, 2020, Foraker boarded a vessel, the “Red Lion, ” at Galati's request to perform some marine-detailing work. (Id. at 3) . Galati required its subcontractors, like Foraker, to wear shoe coverings so as not to scuff the deck of the boats. (Id.). Foraker alleged that, due to Galati's alleged negligence, he fell from the top of a tower or ladder on the boat, sustaining significant injuries. (Id. at 3-4).

Manatee County Clerk of Court records indicate that the Underlying Lawsuit is still open and active, with the state court having scheduled a hearing for May 2022 on Galati's pending motion for summary judgment.

B. The Insurance Policy

According to the operative complaint, Plaintiff Southern-Owners Insurance Company issued a Garage Liability Policy (the “Policy”) to Defendant Jeffco that was effective from March 25, 2020 until March 25, 2021. (Doc. # 6 at ¶ 12). The Policy contains an Additional Insured Endorsement, stating that Galati is an additional insured under the Policy “but only with respect to liability arising out of [Jeffco's] work for that insured by or for [Jeffco] ." (Id. at ¶ 20). Pursuant to that endorsement, Galati sought a defense and indemnification from Southern-Owners in the Underlying Lawsuit. (Id. at ¶¶ 15, 17).

The Policy also contains an Employer's Liability Exclusion, which excludes from coverage “Bodily injury to: (a) [a]n employee of any insured arising out of and in the course of employment by any insured.” (Id. at ¶ 21); see also (Doc. # 1-3 at 1).

Finally, the Policy also contains a Worker's Compensation Exclusion, which provides that the insurance policy does not apply to “[a]ny obligations that would be payable under . . . worker's compensation law[.]” (Doc. # 6 at ¶ 22).

C. The Instant Complaint

Southern-Owners seeks a declaratory judgment on three points. First, Southern-Owners claims that the allegations in the Underlying Lawsuit arise out of Galati's general business practices and thus are excluded from coverage under the plain language of the Policy. (Doc. # 6 at 5-6). Second, it argues that the Employer's Liability Exclusion serves to bar coverage because Foraker was Jeffco's employee, Foraker was acting in the scope of his employment when he was injured, and Foraker was thus Galati's “statutory employee” for purposes of Policy coverage. (Id. at 6-7). Third, SouthernOwners alleges that the Worker's Compensation Exclusion bars coverage because Foraker was injured while performing work requested by Galati, Foraker was therefore Galati's “statutory employee, ” and Galati is liable under Florida's worker's compensation law to Foraker. (Id. at 8-9).

Therefore, Southern-Owners seeks a declaration that: (1) the Policy does not provide insurance coverage for the claims alleged in the Underlying Suit or any and all other claims arising from the incident that occurred on October 9, 2020; and (2) that Southern-Owners has no duty to defend or indemnify Galati for any and all claims alleged in the Underlying Suit or any and all other claims arising from the incident that occurred on October 9, 2020. (Id. at 6, 7-8, 9).

On January 31, 2022, Galati filed a motion to dismiss the amended complaint. (Doc. # 25). Foraker and Jeffco have both attempted to join in Galati's Motion but, because the Motion is due to be denied for the reasons explained below, their request is moot. The Court solicited additional information from the parties and has reviewed the material provided.^[1] The Motion is now ripe for review.

II. Legal Standard

Southern-Owners brings the instant lawsuit pursuant to the federal Declaratory Judgment Act, 28 U.S.C. § 2201. The Declaratory Judgment Act provides, in relevant part:

In a case of actual controversy within its jurisdiction . . . 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. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

28 U.S.C. § 2201(a).

As the Supreme Court has explained, the Act vests federal district courts with discretion “in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites.” Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995); see also Id. at 288 (explaining that, in enacting the Declaratory Judgment Act, Congress “sought to place a remedial arrow in the district court's quiver; it created an opportunity, rather than a duty, to grant a new form of relief to qualifying litigants”). Consequently, “a district court is authorized, in the sound exercise of its discretion, to stay or to dismiss an action seeking a declaratory judgment before trial or after all arguments have drawn to a close.” Id. at 288. “[S]pecial flexibility is called for in the declaratory judgment context, where the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration.” United Purchasing Ass'n, LLC v. Am. Valve, Inc., No. 6:08-cv-515-GAP-GJK, 2008 WL 2557559, at *1 (M.D. Fla. June 20, 2008) (alteration added) (internal quotation marks and citations omitted).

III. Analysis

Galati argues that the amended complaint should be dismissed for lack of subject matter jurisdiction pursuant to the abstention doctrine. (Doc. # 25 at 1). Galati argues that this lawsuit is premature until such time as the Underlying Lawsuit is resolved and the state court has determined Galati's liability. (Id. at 2-3). Galati maintains that the policies of “efficiency, comity, and federalism” all weigh heavily in favor of dismissal of this action. (Id. at 5).

Southern-Owners rejoins that the abstention doctrine^[2]does not apply because the Underlying Lawsuit (1) is not a “parallel” proceeding presenting the same issues between the same parties; (2) does not encompass the complete controversy and does not address the insurance coverage issues at the heart of this case; (3) will not resolve this federal declaratory-judgment action; and (4) does not involve a compelling state interest. (Doc. # 35).

The Declaratory Judgment Act “gives the federal courts competence to make a declaration of rights; it does not impose a duty to do so.” Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th Cir. 2005). Further, the Declaratory Judgment Act is “an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant.” Wilton, 515 U.S. at 287 (internal quotation marks and citations omitted). “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.” Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942) . The Eleventh Circuit has provided the district courts with a series of “guidepost” factors to aid in balancing state and federal interests while deciding whether to exercise jurisdiction over a declaratory judgment case:

(1) the strength of the state's interest in having the issues raised in the federal declaratory action decided in the state courts;

(2) whether the judgment in the federal declaratory action would settle the controversy;

(3) whether the federal declaratory action would serve a useful purpose in clarifying the legal relations at issue;

(4) whether the declaratory remedy is being used merely for the purpose of “procedural fencing” - that is, to provide an arena for a race for res judicata or to achieve a federal hearing in a case otherwise not removable;

(5) whether the use of a declaratory action would increase the friction between our federal and state courts and improperly encroach on state jurisdiction; (6) whether there is an alternative remedy that is better or more effective;

(7) whether the underlying factual issues are important to an informed resolution of the case;

(8) whether the state trial court is in a better position to evaluate those factual issues than is the federal court; and

(9) whether there is a close nexus between the underlying factual and legal issues and state law and/or public policy, or whether federal common or statutory law dictates a resolution of the declaratory judgment action.

Ameritas, 411 F.3d at 1331. Not all of these guideposts are required, nor is any one guidepost controlling. Id. Rather, this Circuit follows a...