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Onebeacon Insurance Company v. Felicia Bonanno Russell

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY


April 29, 2011

ONEBEACON INSURANCE COMPANY,
PLAINTIFF,
v.
FELICIA BONANNO RUSSELL, ET AL., DEFENDANTS.

The opinion of the court was delivered by: Mary L. Cooper United States District Judge

NOT FOR PUBLICATION

OPINION

A PERSON named Ronald B. Smith ("Smith") brought an action in New Jersey state court to recover damages for, inter alia, legal malpractice ("State Tort Action") against Felicia Bonanno Russell, Ronald J. Sama, and Sama & Russell LLC ("Insureds"). (Dkt. entry no. 1, Compl. at 2; see id., Ex. A, State Tort Action Complaint.) The State Tort Action remains pending. (Compl. at 3, 8.) OneBeacon Insurance Company ("Insurer") provided coverage to the Insureds. (Id. at 5.) The Insurer brought this separate action against the Insureds for a judgment declaring that the Insurer is not obligated to defend and indemnify the Insureds in the State Tort Action ("Declaratory Judgment Action"). (See id.)

THE INSURER could either (1) be named in the State Tort Action as a defendant, as a third-party defendant, or in some other capacity, or (2) bring the declaratory-judgment claims in the appropriate state court and seek to have them consolidated with the State Tort Action. A determination as to any claim in the Declaratory Judgment Action would necessarily affect - and thus interfere with - the State Tort Action. As a result, this Court must abstain from adjudicating the Declaratory Judgment Action. See Wilton v. Seven Falls Co., 515 U.S. 277, 280-90 (1995) (upholding Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942)); see also Atl. Mut. Ins. Co. v. Gula, 84 Fed.Appx. 173, 174-75 (3d Cir. 2003) (affirming judgment dismissing complaint for, inter alia, reasons discussed above); Nationwide Mut. Ins. Co. v. Lowe, 95 F.Supp.2d 274, 276-77 (E.D. Pa. 2000) (abstaining in federal action even though insurer not named in state action, because deciding insurance-coverage issue raised in federal action would affect - and thus interfere with - underlying state action).

THE DECLARATORY JUDGMENT ACTION (1) is, as the Court's shorthand reference suggests, a declaratory-judgment action involving insurance-coverage issues under state law, (2) concerns issues that will be raised in the State Tort Action, and (3) could be adjudicated by the same judge overseeing the State Tort Action. As a result, the Complaint in the Declaratory Judgment Action should be dismissed. See Williams v. State Auto Prop. & Cas. Ins. Co., No. 08-4983, 2009 WL 1119502, at *2-3 (E.D. Pa. Apr. 24, 2009) (remanding action concerning insurance coverage, and noting "the possibility of interfering with the state court cases regarding the same matter is substantial" because the conduct of certain parties would need to be addressed in both the underlying state action and the removed declaratory-judgment action). The dismissal will be without prejudice to the Insurer to recommence the Declaratory Judgment Action in the appropriate state court within 30 days, as the limitations period is tolled by the filing of a federal complaint. See Jaworowski v. Ciasulli, 490 F.3d 331, 333-36 (3d Cir. 2007); Galligan v. Westfield Ctr. Serv., 82 N.J. 188, 191-95 (1980).*fn1

THE COURT, in view of the pending State Tort Action, must "promote judicial economy by avoiding duplicative and piecemeal litigation". State Auto Ins. Cos. v. Summy, 234 F.3d 131, 135 (3d Cir. 2001). It appears that "[t]he desire of insurance companies and their insureds to receive declarations in federal court on matters of purely state law has no special call on the federal forum". Id. at 136. For good cause appearing, the Court will issue an appropriate order and judgment.*fn2

Mary L. Cooper


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