Tred R. Eyerly | Insurance Law Hawaii
The federal district court declined to exercise jurisdiction over the coverage action that was parallel to a case pending in state court involving the same parties and same issues pending. Navigators Ins, Co. v. Chriso’s Tree Trimming, 2020 U.S. Dist. LEXIS 129711 (E.D. Calif. July 22, 2020).
Pacific Gas & Electric (PG&E) entered into a tree, brush and wood removal contract with Mount F Enterprises, Inc. Mountain F subsequently entered into a subcontractor agreement with Chriso Tree Trimming, Inc. for work to be performed for PG&E. In August 2017, Chriso attempted to remove a tree, but the tree accidentally fell in the wrong direction and knocked down nearby powerlines. The powerlines came into contact with surrounding brush and started the “Railroad Fire.” The fire was eventually contained on September 15, 2017, after 12, 407 acres were burned and 7 structures and 7 homes were destroyed.
Five subrogation lawsuits were filed in state court against Chriso and Mountain F by various insurance companies that paid for the damage caused by the Railroad Fire. A policy limits demand to settle all claims against Chriso and Mountain F was made. Navigators insured Chriso for $9 million through a Commercial Excess Liability Policy, payable once all other insurance was exhausted. The policy included a “Professional Services Endorsement” (PSE Exclusion) that excluded coverage of “professional services.” “Professional services” was defined through a list of 12 non-exclusive professions and services that generally referred to activities involving specialized knowledge or skill that was predominantly mental or intellectual in nature rather than physical or manual.
Navigators filed in federal court for declaratory judgment against Chriso and Mountain F, contending there was no duty to defend or to indemnify because of the PSE Exclusion. Navigators argued that the trimming involved mental or intellectual skill and the labor involved was increasingly secondary with technological advances.
A couple of months later, Mountain F filed suit in state court against Chriso, Navigators and Chriso’s primary carriers. The suit alleged that Chriso failed to defend and indemnify Mountain F. Further Navigators failed to defend Mountain F as an additional insured under Chriso’s policy. The suit alleged that the PSE Exclusion did not apply because tree cutting and tree felling were not similar to any of the 12 examples of “professional services” listed in the policy.
Navigators filed a motion for summary judgment in the federal action. Mountain F followed with a motion to stay or, in the alternative, to dismiss, in light of the state court action. The court stayed Navigator’s motion for summary judgment pending resolution of the motion for stay
The court considered the factors in Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942) and Government Employees Ins. Co. v. Dizol, 133 F.3d 1220 (9th Cir. 2002). First, the court found this case was duplicative because the same issues involving the same parties were present in the state court case. There would be a needless determination of state law if jurisdiction was retained because two courts would apply the same settled principles to the same issues. Forum shopping was not an issue as Navigators had filed in federal court first.
All aspects of the controversy could be resolved in the federal case, favoring retaining litigation. Retaining jurisdiction would clarify whether the PSE Exclusion applied, but the same analysis would apply to the state case. Although res judicata might apply depending on which case was first resolved, this factor weighed in favor of retaining jurisdiction. There was no evidence that the federal case would be entangled with the state case, so this factor also weighed in favor of retaining jurisdiction. Finally, neither party would be inconvenienced by the federal court retaining jurisdiction.
While some factors weighed in favor of the federal court retaining jurisdiction, the court did not find that the factors were so weighty to overcome the presumption against retaining jurisdiction. Because the same issues and same parties were proceeding in a parallel state court case, the court declined to exercise jurisdiction over the declaratory judgment action. Navigators’ case was therefore dismissed.