Federal judge declines jurisdiction in insurer's declaratory judgement action

By Jon Campisi | Mar 17, 2014

A federal judge in Philadelphia has declined to exercise jurisdiction over a

case involving an insurer who sought a determination that it has no obligation to defend or indemnify a property owner facing an underlying state court action brought by three of his tenants.

U.S. District Judge L. Felipe Restrepo on March 13 dismissed Employers Mutual Casualty Co.’s complaint without prejudice, a move that enables the plaintiff to seek a declaratory judgment in a Pennsylvania state court.

The case has its roots in a civil action brought in the Delaware County Court of Common Pleas by Stephanie Gephart, John Taylor, Jr., and Florence Sancken, who say they suffered a variety of injuries due to the failure of landlord Sean Burke to property care for the apartment that he rented to them.

The alleged injuries included asthma attacks, respiratory infections, hair loss, headaches and nosebleeds, records show.

In their suit, the plaintiffs assert violations of tort law, Pennsylvania contract law and the Landlord-Tenant Act.

The insurer filed its complaint this past July seeking a declaration that “the allegations and claims for relief in the underlying lawsuit do not allege an occurrence” under the terms of the insurance policy and, accordingly, do not trigger coverage on the part of the plaintiff, according to Restrepo’s judicial memorandum.

In October, the insurer filed for a default judgment.

The tenants are not parties to the insurance dispute.

Restrepo wrote that case law and court precedence weighed in favor of him declining to exercise supplemental jurisdiction in a case that is currently making its way through the state court system.

The judge wrote that he is bound by instruction from the Third Circuit Court of Appeals that when state law is established, courts should assume jurisdiction in declaratory judgment actions only in “unusual circumstances.”

“Here, rather than anything unusual, ‘the sole issue of insurance coverage … presents no federal question and promotes no federal interest,’” the judge wrote. “Instead, the suit ‘presents the common case of an insurance company coming to federal court, under diversity jurisdiction, to receive declarations on purely state law matters. This weighs heavily against the court exercising jurisdiction.”

Restrepo also noted that the insurer requests that he determines issues of “purely state law” without the benefit of hearing from the allegedly injured individuals, those tenants who are named as plaintiffs in the underlying action, but not the declaratory judgment suit.

“Given that all of the parties are not present in this action,’ … that Plaintiff has already attempted to receive a declaratory judgment against a person who may not actually exist, and ‘that it would be more efficient to have these state court issues addressed by the state court already considering related matters,’ I will decline jurisdiction and dismiss this action without prejudice,” Restrepo wrote.

As for his comment about the fact that the suit may contain a party who “may not exist,” the judge was referencing the discrepancy with regard to the defendant who was served with the federal declaratory judgment action.

During a conference call in December, Restrepo notified the insurer that although it was asking for a default judgment against men identified as Sean Burke, Sr. and Sean Burke, Jr., the plaintiff’s own affidavits of service stated that the person who accepted service for the defendants notified the process server that “there was no Sean Burke, Sr. or Sean Burke, Jr., there was just one Sean Burke,” court records state.

The lead defendant who was listed in the federal civil action was Burke Landscaping Inc.

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