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Nationwide Mutual Insurance Co. v. Smith

United States District Court, D. Kansas

February 28, 2014

NATIONWIDE MUTUAL INSURANCE COMPANY and AMCO INSURANCE COMPANY, Plaintiffs,
v.
MONTE JEAN SMITH, individually; MONTE JEAN SMITH, as trustee of the Monte Jean Smith Revocable Trust dated April 17, 2001; HY GRADE CONSTRUCTION AND MATERIALS, INC.; MARY JO BRADSHAW; and STEPHEN L. BRADSHAW, as Special Administrator for the Estate of Lewis K. Bradshaw, Defendants.

MEMORANDUM AND OPINION

JULIE A. ROBINSON, District Judge.

Plaintiffs Nationwide Mutual Insurance Company and AMCO Insurance Company filed this lawsuit, seeking a declaration that certain farm liability policies do not provide coverage for the losses arising from a fatal injury suffered by Lewis J. Bradshaw on property owned by Defendant Hy Grade Construction and Materials while he was working for Hy Grade, or for any of the claims, injuries and damages alleged in Neosho County Case No. 2010 CV 109, and that Plaintiffs have no contractual duty to defend Defendants in that state court action. This matter is before the Court on the following motions: Plaintiffs' Motion for Summary Judgment (Doc. 58) and Motion to Strike Demand for Jury Trial (Doc. 56); the Bradshaw Defendants' Motion to Strike from the Pretrial Order the Affirmative Defense of Smith and Hy Grade (Doc. 60); and the Smith Defendants' Motion for Stay of Declaratory Judgment Proceedings (Doc. 82) pending resolution of the underlying state court lawsuit. Plaintiffs and the Bradshaw Defendants oppose the request for stay. For the reasons explained in detail below, the Court grants the motion to stay.

I. Procedural and Factual Background

On November 8, 2008, Lewis J. Bradshaw ("Bradshaw") was clearing brush between rows of pecan trees on the Ponderosa Pecan Farm owned by Plaintiff Hy Grade, and was burning a brush pile. While clearing and burning the brush, there was an explosion that caused Bradshaw to suffer "major injury" that ultimately resulted in his death the next day.

On November 5, 2010, Mary Jo Bradshaw, the widow of Bradshaw, and Stephen L. Bradshaw, the Special Administrator of Bradshaw's estate, filed suit against Smith, the Trust and Hy Grade (the "Smith Defendants") in Neosho County District Court (the "State Court Action"), seeking survival and wrongful death damages as a result of Bradshaw's accident. The Smith Defendants contend that Bradshaw was using explosives on Hy Grade's property without permission and/or was not acting within the scope of his employment. Trial was scheduled to commence in November 2013.

Plaintiff Nationwide Insurance Co. ("Nationwide") insures the Smith Defendants under a farm liability policy and Plaintiff AMCO Insurance Co. ("AMCO") insures these defendants under a farm umbrella liability policy. Plaintiffs filed this declaratory judgment action on September 1, 2011, seeking the declaration that neither policy provides coverage for the claims, losses, and damages alleged in the State Court Action, and that neither has a duty to defend in that case.

On April 8, 2013, Plaintiffs moved for summary judgment and to strike their demand for jury trial. Plaintiffs contend that the employee injury exclusion in the two farm policies applies because Bradshaw was an employee of Hy Grade. The Bradshaw Defendants moved to strike from the Pretrial Order Hy Grade's affirmative defense that Bradshaw's possession and/or use of any explosive device was outside the parameters of what he was authorized to possess or use on Hy Grade's property, arguing that this issue would be determined by the State Court Action prior to this case being tried in federal court, and that the State Court finding would have res judicata effect on the declaratory judgment action. Both the Smith Defendants and the Bradshaw Defendants opposed summary judgment on the grounds that material disputed facts remained on the question of whether Bradshaw was an independent contractor or employee, and if the latter, whether his injuries resulted or arose out of his employment, as required by the employee injury exclusion. Trial in this declaratory judgment matter was scheduled to commence in December 2013.

In October 2013, after trial in the State Court Action was continued until September 2014, the Smith Defendants moved to stay the declaratory judgment action during the pendency of the State Court Action. The Court continued the December 9, 2013 trial date, and ordered further briefing on the issue of whether these proceedings should be stayed.

II. Discussion

The decision whether to exercise jurisdiction in a declaratory judgment action is a matter within the sound discretion of the district court.[1] It is well settled, however, that "[a] federal court generally should not entertain a declaratory judgment action over which it has jurisdiction if the same fact-dependent issues are likely to be decided in another pending proceeding."[2]

In the case of State Farm Fire & Casualty Co. v. Mhoon , [3] the Tenth Circuit set forth five factors that a district court should evaluate in determining whether to exercise jurisdiction over a declaratory judgment action:

(1) whether a declaratory action would settle the controversy; (2) whether it would serve a useful purpose in clarifying the legal relations at issue; (3) whether the declaratory remedy is being used merely for the purpose of "procedural fencing" or "to provide an arena for a race to res judicata "; (4) whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and (5) whether there is an alternative remedy which is better or more effective.[4]

While the parties agree that the Mhoon factors govern the Court's analysis, they dispute the application and weight of the factors. The Court discusses each in turn.

The first Mhoon factor weighs slightly in favor of Plaintiffs. This declaratory action will settle the issue whether the farm policy provides coverage for the accident in which Mr. Bradshaw died. The ...


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