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Progressive Northern Insurance Co. v. Morales-Elizalde

United States District Court, D. Nevada

June 12, 2014



JAMES C. MAHAN, District Judge.

Presently before the court is defendant Amy Chandler's motion to dismiss plaintiff Progressive Northern Insurance Company's ("Progressive") complaint for declaratory relief. (Doc. # 6). Plaintiff has responded to the motion to dismiss. (Doc. # 8).

I. Background

An automobile incident occurred between defendant Gamaliel Morales-Elizalde and defendant Chandler on October 22, 2010. (Doc. # 1). Later, Chandler initiated an injury liability claim against Morales. Chandler retained the Powell Litigation Group ("Powell"), who instructed Progressive, Morales' insurer, to pay out the $15, 000 "each person" policy limit, or else Chandler's counsel would "deem the policy uncapped'" and thus, according to Powell, "expose [its] insured to an excess judgment." (Doc. # 1 at 3-5).

Progressive sent a letter on December 9, 2010, stating the medical information provided by Chandler's counsel indicated that Chandler had "only received minimal care" and accordingly offered an $8, 545 settlement. (Doc. # 1 at 5). Progressive received a letter from Powell on December 14, 2010, detailing additional medical treatment, and demanded a settlement of $15, 000 within five days. In response, Progressive increased its settlement offer to $9, 100, explaining that the information provided by Powell showed a treatment history of "one emergency room visit, one visit with a medical doctor, and six visits to a chiropractor." (Doc. # 1 at 6). Powell responded on December 17, 2010, expressing its belief that the coverage had been "uncapped." (Doc. # 1 at 6).

Progressive provided a legal defense for Morales against Chandler's personal injury suit in state court and found during the discovery process that "Chandler had begun treating for a shoulder injury, and that she ultimately underwent surgery for that condition in June 2011" as well as additional medical treatment. (Doc. # 1 at 6). Progressive then offered the full $15, 000 policy limit as settlement but was rebuffed by Chandler's counsel.

Progressive believes that Chandler seeks "an excess judgment against Morales[], and [will] attempt to impose liability for the entry of that judgment against Progressive." (Doc. # 1 at 7). As a result, Progressive seeks declaratory relief that its potential liability from an adverse ruling in the underlying state case cannot exceed the $15, 000 policy limit. (Doc # 1).

In the instant motion, defendant Chandler requests that the court decline to exercise jurisdiction over this case due to the pending action in Nevada state court. (Doc. # 6). However, defendant Chandler asserts that Progressive's complaint for declaratory relief is "premature" and that Progressive should submit the present issue to state court. (Doc. # 6 at 5, 13).

II. Legal Standard

First, the Declaratory Judgment Act provides that "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." 28 U.S.C. § 2201(a). Under the Declaratory Judgment Act, district courts have "unique and substantial discretion" to decline to exercise jurisdiction over an action for declaratory relief. Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). When considering whether to rule on a declaratory relief complaint, "the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration." See id. at 288.

Second, the district court should assert its broad discretion within the declaratory relief realm with particular attention to actions impacting unresolved state cases. See Huth v. Hartford Ins. Co., 298 F.3d 800, 803 (9th Cir. 2002). Indeed, "[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." Id.

Next, a case or controversy is ripe if "the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (quoting Md. Cas. Co. v. P. Coal & Oil Co., 312 U.S. 270, 273 (1941)). Federal courts "do not give advisory opinions." Hunt v. State Farm Mut. Auto. Ins. Co., 655 F.Supp. 284, 286 (D. Nev. 1987) (citing Coffman v. Breeze Corps., 323 U.S. 316, 324 (1945)); see also U.S. Const. art. III, § 2. Furthermore, if the plaintiff's claims are merely speculative, asserted to protect potential future rights, the court cannot grant declaratory relief. See Hunt, 655 F.Supp. at 286.

Finally, to satisfy the federal requirement for a controversy, state law illustrates whether the plaintiff's alleged controversy "is real and immediate." Id. In other words, state law must show that the conflict is one that "involves present, as opposed to future or speculative, rights." See id. "[U]nder Nevada law, declaratory relief between a third party claimant and an insurer is proper only after the third party obtains a tort judgment against the tortfeasor." Vignola v. Gilman, 804 F.Supp.2d 1072, 1077 (D. Nev. 2011) (citing Knittle v. Progressive Cas. Ins. Co., 908 P.2d 724, 726 (Nev. 1996). Moreover, [t]he rights of a tort claimant against a ...

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