Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-1_07-cv-00563/USCOURTS-alsd-1_07-cv-00563-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Declaratory Judgement

---

1 The Mandals’ Motion to Dismiss was not originally accompanied by a brief, in

contravention of Local Rule 7.1(a). For that reason, an Order (doc. 16) was entered requiring the

Mandals to file the requisite brief. The Mandals complied, submitting memoranda of law eight

days after the filing of their Motions, after which a full briefing schedule was entered. 

Defendants GMC Concrete and George Sullivan simply adopted the Mandals’ arguments in their

entirety; therefore, no separate briefing on the GMC/Sullivan Motion was needed.

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

ATLANTIC CASUALTY INSURANCE )

COMPANY, )

 )

Plaintiff, )

 )

v. ) CIVIL ACTION 07-0563-WS-B

 )

GMC CONCRETE COMPANY, INC., )

et al., )

 )

Defendants. )

ORDER

This matter comes before the Court on the Motion to Dismiss Declaratory Judgment

Action (doc. 13) and Motion to Stay Declaratory Judgment Action (doc. 14) filed by defendants

Robert A. Mandal, Jr., and Alice Mandal, as well as the filing styled “Motion to Dismiss

Complaint for Declaratory Judgment” (doc. 26) filed by defendants GMC Concrete Company,

Inc. and George Sullivan. The motions have been briefed and are now ripe for disposition.1

I. Background.

This insurance coverage dispute arises from work performed on a concrete courtyard and

driveway at a residence being constructed for defendants Robert A. Mandal, Jr., and Alice

Mandal (the “Mandals”) in Biloxi, Mississippi. Certain concrete work was contracted to

defendant GMC Concrete Company, Inc. (“GMC”), a corporation based in Mobile County,

Alabama, whose president is defendant George Sullivan (“Sullivan”). The Mandals felt that the

work performed by GMC and Sullivan was defective, and proceeded to file suit against them in

the Circuit Court of Harrison County, Mississippi in May 2006. That action is styled Robert A.

Mandal, Jr., et al. v. GMC Concrete Co., Inc., et al., Cause No. A2402-06-103 (the “Mandal

Case 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 1 of 11
2 In its Complaint (doc. 1), Atlantic Casualty relies on seven different exclusions

and policy provisions that it maintains excuse it from responsibility to provide indemnification

or a defense in the Mandal Action. Specifically, Atlantic Casualty asserts as follows: (a)

coverage is precluded by the independent contractors/subcontractors exclusion because the

sandblasting work was performed by an independent contractor or subcontractor retained by

GMC; (b) coverage is precluded by the property damage exclusion because the Mandals’ theory

of liability is that GMC and Sullivan incorrectly performed their work by improperly applying a

curative agent; (c) coverage is precluded by the exclusion for damage to the insured’s own

product because the allegedly damaged concrete work is the “product” of GMC and Sullivan; (d)

coverage is precluded by the exclusion for damage to the insured’s work; (e) coverage is

precluded by the exclusion for damage to impaired property; (f) coverage is precluded by the

lack of any “occurrence”; and (g) indemnification for any punitive damages award is barred by

operation of the punitive damages exclusion. (Complaint (doc. 1), ¶¶ 18-49.)

-2-

Action”). The Mandals alleged that GMC and Sullivan had applied insufficient curative agent to

the concrete, that they had negligently allowed the cement to dry for an extended period of time,

and that attempted sandblasting repairs had exacerbated the damage. The Mandals’ state-court

complaint seeks recovery on grounds of negligence, unjust enrichment, misrepresentation and

punitive damages. According to the parties, the Mandal Action remains pending at this time,

and the discovery process is underway.

On August 8, 2007, more than 14 months after the Mandal Action commenced, plaintiff

Atlantic Casualty Insurance Company (“Atlantic Casualty”) brought this declaratory judgment

action in this District Court seeking a judicial declaration of its rights and obligations with

respect to the underlying concrete dispute. Having issued a Commercial General Liability

Insurance policy to GMC that provided certain coverage during the time period of interest,

Atlantic Casualty requests a declaration that it has no duty to defend or indemnify GMC or

Sullivan for claims asserted against them in the Mandal Action.2 While awaiting such a ruling,

Atlantic Casualty is furnishing a defense to GMC and Sullivan in the Mississippi litigation. Of

significance to the instant motions, Atlantic Casualty has not been joined as a party in the

Mandal Action; therefore, the insurance coverage issues (including duty to defend and duty to

indemnify) are not pending before the Mississippi court, but are exclusive to these proceedings.

Now all four defendants urge this Court to dismiss or stay this declaratory judgment

Case 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 2 of 11
3 Procedurally, movants have unnecessarily complicated this Court’s task. Rather

than filing a single, integrated motion to dismiss or, in the alternative, to stay, the Mandals filed

two separate motions with two separate (but almost verbatim) memoranda of law. It is an

inefficient use of resources for the Court to inspect two virtually identical nine-page briefs line

by line looking for any material differences. Such duplication in filings is to be avoided

whenever reasonably possible, in favor of either a single integrated motion or, at a minimum, the

incorporation or adoption of one brief into another.

4 To credit defendants’ conclusory objection that the declaratory judgment action is

premature or unripe until a judgment has been entered in the Mandal Action, despite its having

never been briefed, would be to lend tacit approval to an end-run around Local Rule 7.1 and to

shift the burden of researching and articulating arguments from movants to the Court. The

undersigned declines to do so; however, as explained infra, the Court may entertain a properly

supported, timely request to refrain from deciding the indemnity issue, depending on the

resolution of the duty to defend issue and the status of the Mandal Action.

-3-

action because of the pending Mandal Action in Mississippi.3

 In particular, defendants argue

that the Court should exercise its discretion to refuse jurisdiction; however, their Motions (docs.

13, 14) diverge from their Briefs (docs. 20, 21) in the grounds asserted for seeking such an

outcome. The Motions state (with no citations to authority) that this action is premature because

there has been no liability determination against GMC or Sullivan in the Mandal Action. In that

regard, the Mandals’ Motions state, GMC’s “exposure has not been determined, facts have not

been justified, no judgment has been entered, and it cannot yet be determined if the insurance

policy exclusions even apply.” (Doc. 13, ¶ 4; see also doc. 14, ¶ 4.) By contrast, the briefs (save

for one conclusory paragraph devoid of citations) eschew discussion of ripeness or prematurity,

but instead focus exclusively on Wilton/Ameritas abstention. The Mandals do not explain this

disconnect between their Motions and their briefs. However, because the Mandals never briefed

the ripeness/prematurity issue, the requirements of Local Rule 7.1 remain unsatisfied with

respect to that issue.4

II. Legal Standard.

Atlantic Casualty’s claims in this action were brought pursuant to 28 U.S.C. §§ 2201 et

seq., seeking a declaration “regarding the scope and extent of insurance coverage provided under

a Commercial General Liability policy issued by Atlantic Casualty to GMC ....” (Complaint, ¶

6.) It is well-settled that the Declaratory Judgment Act “confer[s] on federal courts unique and

Case 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 3 of 11
5 See also Guideone Elite Ins. Co. v. Old Cutler Presbyterian Church, Inc., 420

F.3d 1317, 1324-25 (11th Cir. 2005) (explaining that district court’s exercise of authority to

proceed in declaratory judgment action is reviewed for abuse of discretion and that there is a

zone of choice within which courts may go either way); Prudential Ins. Co. of America v. Doe,

140 F.3d 785, 789 (8th Cir. 1998) (“The Supreme Court’s decision in Wilton ... vests the district

courts with broad discretion in deciding whether to hear a declaratory judgment action.”).

6 Ven-Fuel is in line with extant Supreme Court jurisprudence. More than 60 years

ago, the Supreme Court opined that it would be both “uneconomical” and “vexatious” for a

federal district court to hear a declaratory judgment action, concurrently with ongoing

proceedings involving the same parties and same legal issues (not arising under federal law) in

state court. Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 495, 62 S.Ct. 1173, 86 L.Ed.

1620 (1942). The Brillhart Court admonished lower courts scrupulously to avoid what it termed

“[g]ratuitous interference with the orderly and comprehensive disposition of a state court

litigation.” Id.

-4-

substantial discretion in deciding whether to declare the rights of litigants.” Wilton v. Seven

Falls Co., 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). Indeed, the Supreme

Court has “repeatedly characterized the Declaratory Judgment Act as an enabling Act, which

confers a discretion on the courts rather than an absolute right upon the litigant.” 515 U.S. at

287 (citations omitted). As the Eleventh Circuit has observed, the Act “only gives the federal

courts competence to make a declaration of rights; it does not impose a duty to do so.” Ameritas

Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th Cir. 2005).5

 “The desire of insurance

companies ... to receive declarations in federal court on matters of purely state law has no special

call on the federal forum.” State Auto Ins. Companies v. Summy, 234 F.3d 131, 136 (3rd Cir.

2000).

Consistent with the foregoing, it has long been recognized in this Circuit that a district

court has discretion to “decline to entertain a declaratory judgment action on the merits when a

pending proceeding in another court will fully resolve the controversy between the parties.” 

Ven-Fuel, Inc. v. Department of the Treasury, 673 F.2d 1194, 1195 (11th Cir. 1982).6 In

Ameritas, the Eleventh Circuit reaffirmed Ven-Fuel and furnished district courts with guidance

in how to wield their Wilton/Brillhart discretion under the Declaratory Judgment Act where

there are parallel state proceedings. The Ameritas court emphasized that district courts must

balance the interests of federalism, comity, and efficiency in determining whether to hear a

Case 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 4 of 11
7 These considerations have been echoed by other appellate courts. See, e.g.,

Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (federal court

“should discourage litigants from filing declaratory actions as a means of forum shopping; and it

should avoid duplicative litigation”); Mitcheson v. Harris, 955 F.2d 235, 237-39 (4th Cir. 1992)

(citing as reasons to dismiss declaratory actions the philosophy of judicial federalism, as well as

pragmatic concerns of efficiency and comity).

8 In Manuel v. Convergys Corp., 430 F.3d 1132 (11th Cir. 2005), the Eleventh

Circuit reiterated that the decision to hear a declaratory judgment action is discretionary, that

such discretion should not be rigidly or mechanically applied, and that a vast spectrum of

considerations is available to district courts deciding whether to hear such an action. See id. at

1135, 1137-38.

-5-

declaratory judgment action when confronted with a parallel state action. 411 F.3d at 1330-31.7

To assist district courts in this endeavor, Ameritas promulgated a non-exhaustive set of

“guideposts” to be considered, including: (i) the state’s interest in deciding the matter; (ii)

whether a judgment in the federal action would completely resolve the controversy; (iii) whether

the declaratory judgment action would clarify the parties’ legal relations; (iv) whether the federal

action amounts to procedural fencing; (v) whether a ruling in the federal action would increase

friction between federal and state courts or otherwise encroach on state proceedings; (vi)

whether a superior alternative remedy exists; (vii) whether underlying facts are important to

informed resolution of the matter; (viii) whether the state court is better situated than the federal

court to evaluate those facts; and (ix) the nexus (if any) between the underlying issues and state

law/policy, and whether federal common or statutory law requires resolution of the declaratory

action. See id. at 1331; see also Lexington Ins. Co. v. Rolison, 434 F. Supp.2d 1228, 1238-44

(S.D. Ala. 2006) (applying Ameritas guideposts in context of declaratory judgment action filed

by insurer after entry of state court judgment against putative insured).8

III. The Abstention Issue.

As a threshold matter, Atlantic Casualty challenges the propriety of an Ameritas analysis

altogether, on the ground that this case and the Mandal Action are not parallel. This position

appears well-founded. As mentioned supra, Atlantic Casualty is not a party to the Mandal

Action and the insurance coverage issues animating this action have not been joined in the

Mississippi proceedings. Because the parties, arguments and issues in this case differ from those

Case 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 5 of 11
9 See also Detco, 426 F.3d at 998 (“A number of our sister circuits agree that the

broad discretion granted in Wilton does not apply when there are no parallel state court

proceedings.”); Maryland Cas. Co. v. Knight, 96 F.3d 1284, 1289 (9th Cir. 1996) (observing that

cases “in which there are no parallel state court proceedings[] lie at the outer boundaries of the

district court’s discretion under the Declaratory Judgment Act”); Cameron & Barkley Co. v.

Fabreeka Int’l, Inc., 144 F. Supp.2d 1382, 1384 (M.D. Ga. 2001) (denying motion to dismiss

declaratory judgment action on the ground that there were no parallel proceedings).

10 The Eleventh Circuit does not appear to have squarely held that the discretion not

to exercise jurisdiction over a declaratory judgment action depends on the existence of a parallel

state lawsuit. Thomas involved a scenario where there was no state-court action at all, so the

Eleventh Circuit might find that a related (but not parallel) state lawsuit suffices to trigger some

form of limited discretion. Several other circuits have so held. See, e.g., Detco, 426 F.3d at 998-

99 (discretion remains, albeit in more limited form, in deciding whether to exercise jurisdiction

over a declaratory judgment action where there is no parallel state-court action); SherwinWilliams Co. v. Holmes County, 343 F.3d 383, 394 (5th Cir. 2003) (“The lack of a pending

-6-

in the Mandal Action, there is no parallel state-court action. See Scottsdale Ins. Co. v. Detco

Industries, Inc., 426 F.3d 994, 997 (8th Cir. 2005) (“Suits are parallel if substantially the same

parties litigate substantially the same issues in different forums.”) (citations omitted). A number

of courts have either held or suggested that the absence of parallel proceedings undermines the

premise of a Wilton discretion analysis, rendering it inappropriate or inapplicable. See, e.g.,

American Cas. Co. of Reading, Pennsylvania v. Sanders Hyland Corp., 2007 WL 841743, *6

(S.D. Ala. Mar. 16, 2007) (“where there are no parallel state proceedings, ... the Brillhart

abstention doctrine is inapplicable and it is an abuse of discretion” to dismiss the declaratory

judgment action).9 The Eleventh Circuit has pointed out that “[a] court may exercise its

discretion to dismiss a declaratory judgment action in favor of a pending state court proceeding

that will resolve the same state law issues. It is an abuse of discretion, however, to dismiss a

declaratory judgment action in favor of a state court proceeding that does not exist.” Federal

Reserve Bank of Atlanta v. Thomas, 220 F.3d 1235, 1247 (11th Cir. 2000). It could be

convincingly argued that a Wilton/Ameritas analysis has no place in this case because there are

no parallel proceedings.

That said, the Court need not make a categorical ruling that parallel state proceedings are

a necessary prerequisite to the vesting of discretion to decline to hear a declaratory judgment

action.10 Even if defendants were correct that the presence of a related (but not parallel) stateCase 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 6 of 11
parallel state proceeding should not automatically require a district court to decide a declaratory

judgment action ....”); Aetna Cas. & Sur. Co. v. Ind-Com. Elec. Co., 139 F.3d 419, 423 (4th Cir.

1998) (“There is no requirement that a parallel proceeding be pending in state court before a

federal court should decline to exercise jurisdiction over a declaratory judgment action.”). Even

in those decisions, however, it has been recognized that the lack of a pending parallel proceeding

“is a factor that weighs strongly against dismissal.” Sherwin-Williams, 343 F.3d at 394.

11 In their principal brief, defendants theorize that “[t]he pending state court case

may result in a conflicting outcome.” (Doc. 21, at 5.) They hypothesize that “the resolution of

facts relating to coverage questions ... [is] also necessary to resolve the underlying dispute.” (Id.

at 6.) They reiterate that “[t]he state litigation will resolve factual issues that have a direct

bearing on the coverage issues.” (Id. at 6.) What facts? Defendants do not identify them, other

than to suggest that “consequential sandblasting caused additional damage to the floor, walls,

floors [sic], and landscaping,” and that “[i]t may also be determined that Sullivan is not an

independent contractor under the law.” (Reply Brief (doc. 27), at 2.) But defendants have made

no showing that the question of coverage for consequential sandblasting damage is at issue in

this declaratory judgment action; to the contrary, they insist that it is not. (Id.) So if the

Mississippi court makes a factual determination about consequential sandblasting damage that is

not subsumed in any of the policy exclusions invoked by Atlantic Casualty in this action, there

would be no conflict because this Court would not be addressing that question. Likewise, while

this Court is being asked to apply the independent contractor exclusion of the Atlantic Casualty

policy, defendants have made no showing that the Mississippi court will need to make a legal

determination as to whether GMC qualifies as an “independent contractor” as defined in that

policy. Simply put, defendants have failed to identify substantial issues of overlapping fact or

law presented in these two cases, such that much of the rationale for Ameritas abstention simply

is not supportable here. Defendants have not shown that resolution of Atlantic Casualty’s duty

to defend or indemnify GMC and Sullivan requires fact-finding that may conflict with facts

found in the Mississippi proceedings.

-7-

court action gives rise to Ameritas discretion, their Motions to Dismiss and to Stay would still

fall short. Ameritas does not warrant abstention here. The bulk of the Ameritas guideposts

(including the state’s interest in deciding the matter, the likelihood of friction between state and

federal courts or encroachment on state proceedings, the importance of underlying facts, the

relative posture of state and federal courts to decide those facts, and whether policy/legal

considerations support the state or federal court deciding the matter) only favor abstention when

both the state and federal courts are asked to decide the same legal or factual issues. Defendants’

briefs are long on vague allusions to overlapping facts, but distressingly short on anything

approaching a specific showing that identical factual or legal questions have been placed before

this Court and the Mississippi state court.11 Other Ameritas guideposts (such as whether the

Case 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 7 of 11
-8-

declaratory judgment action would clarify the parties’ legal relations and whether a superior

alternative remedy exists) unquestionably favor allowing this case to proceed. It cannot be

reasonably disputed that a declaration of insurance coverage issues would clarify the parties’

legal relations. Further, it is undoubtedly a superior remedy for a court sitting in Alabama to

interpret and construe an Alabama insurance policy in a declaratory judgment action and to make

a timely declaration of the insurer’s duty to defend obligations than for the question to remain

undecided while the insurer provides a defense in the underlying Mississippi case, in which that

insurer is not a party and as to which the insurer believes no duty to defend attaches.

Defendants proffer several additional arguments why they believe a stay or dismissal is

appropriate; however, none are persuasive. Defendants suggest that “Mississippi has a

significant interest in having its state court resolve this matter” because it involves “negligent

acts occurring in Mississippi” to Mississippi citizens. (Doc. 21, at 5-6.) Of course, the

Mississippi state court will resolve all liability issues concerning those alleged acts. Defendants

have failed to explain how this action will in any way interfere with or encroach upon the

Mississippi court’s ability to do so. Thus, this consideration does not favor abstention. Next,

defendants contend that if this declaratory judgment action is allowed to proceed, the result will

be piecemeal resolution of this dispute in two different courts. (Id. at 6.) But if the Court

declined to exercise jurisdiction, the insurance coverage issues would remain in limbo because

they have not been joined in the Mississippi action. Thus, the coverage and liability issues will

inevitably have to be resolved in two different actions, regardless of whether the Court exercises

jurisdiction or not. As such, declining to exercise jurisdiction over this case would yield no

efficiency improvements, but would simply force Atlantic Casualty to file another lawsuit at

some other time or in some other place to secure a ruling on the coverage questions, which will

not be answered in the Mississippi proceedings. Finally, defendants somewhat confusingly

accuse Atlantic Casualty of procedural fencing because “this action has been brought solely

under 28 U.S.C. §§ 2201-2202, and not diversity jurisdiction.” (Id. at 6.) At a minimum,

defendants misread the Complaint, in which Atlantic Casualty plainly alleges that “[t]his court

has jurisdiction pursuant to 28 U.S.C. § 1332(a).” (Doc. 1, ¶ 7.) No showing of procedural

Case 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 8 of 11
12 Also, the Court is not swayed by defendants’ argument in their reply brief that

“[c]overage issues will be better defined once the parties know exactly what transpired” and that

this action should be stayed “until the facts relating to the underlying state case in Mississippi

have been decided.” (Doc. 27, at 3-4.) Defendants seem to be assuming that the Mandal Action

will result in a detailed recitation of findings of fact concerning the underlying conduct that can

then be plugged into the insurance policy language to make coverage determinations. In the vast

majority of civil actions, of course, there are no such findings of fact. Juries are not typically

asked to render detailed factual findings of “exactly what transpired,” and defendants fail to

explain why they believe the Mississippi action will elicit such determinations. Nor have

defendants shown any significant overlap between liability facts (which will be decided in the

Mississippi case) and coverage facts (which are at issue here).

13 Some of these authorities couch the issue in ripeness terms, while others frame it

as a matter of discretion and efficiency, rather than jurisdiction. See, e.g., Nationwide Ins. v.

-9-

fencing has been made here.12

In sum, it is doubtful whether an Ameritas analysis is even appropriate here given the

absence of a parallel state-court action; however, giving movants the benefit of the doubt on that

point, the Ameritas guideposts weigh heavily against the exercise of discretion not to hear this

declaratory judgment action. To stay or dismiss this action in its entirety would deprive Atlantic

Casualty of its right to a prompt resolution of the outstanding coverage issues, and would in no

way promote the objectives of efficiency, comity, federalism, and non-interference with statecourt proceedings on which the Wilton/Brillhart doctrine is founded.

IV. Ripeness/Prematurity Issue.

As discussed supra, defendants raised but did not effectively brief a ripeness/prematurity

argument that Atlantic Casualty’s declaratory judgment claims should be stayed or dismissed

because the underlying Mississippi case must be concluded before the declaratory judgment

issues will ripen. Even if that argument had been properly presented, it would not support

dismissal or stay of this action in its entirety.

Recall that Atlantic Casualty in its Complaint seeks a declaration both as to its duty to

defend and its duty to indemnify. There is ample support in the case law for the proposition that

“an insurer’s duty to indemnify is not ripe for adjudication in a declaratory judgment action until

the insured is in fact held liable in the underlying suit.” Assurance Co. of America v. Legendary

Home Builders, Inc., 305 F. Supp.2d 1266, 1270 (S.D. Ala. 2003) (citations omitted).13 But the

Case 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 9 of 11
Zavalis, 52 F.3d 689, 693 (7th Cir. 1995) (“the duty to indemnify is not ripe for adjudication until

the insured is in fact held liable in the underlying suit”); American Fidelity & Cas. Co. v.

Pennsylvania Threshermen & Farmers’ Mut. Cas. Ins. Co., 280 F.2d 453, 461 (5th Cir. 1960)

(observing in context of declaratory judgment action concerning insurance coverage that “it is

not the function of a United States District Court to sit in judgment on these nice and intriguing

questions which today may readily be imagined, but may never in fact come to pass,” such that

district court “was well within its considered judicial discretion to decline to express legal

opinions on academic theoreticals which might never come to pass”); Employers Mut. Cas. Co.

v. All Seasons Window & Door Mfg., Inc., 387 F. Supp.2d 1205, 1211-12 (S.D. Ala. 2005) (“It is

simply inappropriate to exercise jurisdiction over an action seeking a declaration of the

plaintiff’s indemnity obligations absent a determination of the insureds’ liability to the

movants.”); State Farm Fire and Cas. Co. v. Myrick, 2007 WL 3120262, *2 (M.D. Ala. Oct. 23,

2007) (“Resolving the duty to indemnify before the underlying case is concluded could

potentially waste resources of the court because the duty to indemnify could become moot if the

insured prevails in the underlying lawsuit.”); State Farm Fire & Cas. Co. v. Middleton, 65 F.

Supp.2d 1240, 1248 (M.D. Ala. 1999) (insurer’s duty to indemnify insured “is not ripe for

adjudication until [the insured] is in fact held liable in the underlying state court action”).

-10-

duty to defend aspect of this action is situated differently. GMC and Sullivan having invoked

Atlantic Casualty’s duty to defend in the Mandal Action and Atlantic Casualty disagreeing that

such a duty exists, there is unquestionably a ripe, live controversy on that issue. Indeed,

“[c]ourts have recognized a controversy exists regarding the duty to defend when the insured

seeks a defense from an insurance company, but the insurance company denies that it is

obligated.” State Farm Fire and Cas. Co. v. Myrick, 2007 WL 3120262, *2 (M.D. Ala. Oct. 23,

2007); American Fidelity & Cas. Co. v. Pennsylvania Threshermen & Farmers’ Mut. Cas. Ins.

Co., 280 F.2d 453, 458 (5th Cir. 1960) (opining that duty to defend and duty to indemnify “are

separate and distinct in the sense that the duty to defend does not depend upon the payment to

damage claimant or the rendition of a judgment declaring the assured’s legal obligation to pay”). 

Furthermore, the determination of whether the duty to defend is activated typically does not turn

on factual findings in the underlying litigation. See Nationwide Ins. v. Zavalis, 52 F.3d 689, 693

(7th Cir. 1995) (“The insurance company’s obligation to supply a defense is most often

determined primarily, if not exclusively, from the face of the underlying complaint against the

insured.”). Thus, regardless of the propriety of the timing and posture of Atlantic Casualty’s

duty to indemnify claims, its request for a declaration as to its duty to defend is clearly

appropriate and should proceed at this time.

Case 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 10 of 11
-11-

The determination that Atlantic Casualty’s duty to defend claims may go forward leaves

unanswered the ultimate fate of its duty to indemnify claims. After considering all of the

circumstances (including defendants’ failure to brief the ripeness / prematurity issue, and the

reluctance of district courts to develop parties’ legal arguments for them), the Court adopts the

approach taken by the Northern District of Alabama in a 1999 decision, to-wit:

“This court concludes that it should retain jurisdiction to hear both the duty to

defend and the indemnification issues. The duty to defend is more extensive than

the duty to indemnify. If the court determines that there is a duty to defend, it

may well be appropriate not to then reach the further issue of duty to indemnify.

However, a determination that there is no duty to defend may well determine the

duty to indemnify issue. Both discretion and common sense mandate that the

court retain jurisdiction at least until the duty to defend issue is determined ....”

Employers Mut. Cas. Co. v. Evans, 76 F. Supp.2d 1257, 1262 (N.D. Ala. 1999). This action will

proceed to final ruling on the duty to defend issue. The duty to indemnify issue will remain part

of the case, but will not be considered by the Court until the earlier of (a) final disposition of the

Mandal Action; or (b) a ruling on the duty to defend, at which time the Court will entertain any

motion that the parties may wish to file concerning the duty to indemnify claims.

V. Conclusion.

For all of the foregoing reasons, the Mandals’ Motion to Dismiss Declaratory Judgment

Action (doc. 13) and Motion Stay Declaratory Judgment Action (doc. 14), as well as GMC and

Sullivan’s Motion to Dismiss Complaint for Declaratory Judgment (doc. 26) are denied. The

Mandals having previously filed an Answer (doc. 12), GMC and Sullivan are ordered to file an

answer on or before December 21, 2007.

DONE and ORDERED this 7th day of December, 2007.

s/ WILLIAM H. STEELE 

UNITED STATES DISTRICT JUDGE

Case 1:07-cv-00563-WS-B Document 28 Filed 12/07/07 Page 11 of 11