Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_19-cv-01388/USCOURTS-casd-3_19-cv-01388-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:2201 Creation of a Remedy - Declaration of Rights

---

1

3:19-cv-1388-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

PHILADELPHIA INDEMNITY 

INSURANCE COMPANY,

Plaintiff,

v.

SEALFIT, INC.,

Defendant.

Case No.: 3:19-cv-1388-GPC-AGS

ORDER GRANTING DEFENDANT

SEALFIT’S MOTION TO STAY

[ECF No. 15]

Before the Court is Defendant SEALFIT, Inc.’s (“Defendant” or “Sealfit”) motion 

to stay proceedings. ECF No. 15. Plaintiff Philadelphia Insurance Company (“Plaintiff”

or “Philadelphia”) filed an opposition on November 15, 2019. ECF No. 20. Sealfit filed 

a reply on November 27, 2019. ECF No. 21. 

FACTUAL BACKGROUND

Philadelphia issued an insurance policy to Sealfit effective July 1, 2016 to July 1, 

2017 (the “Policy”). ECF No. 1 (“Compl.”) ¶ 11. On September 25, 2018, a complaint 

was filed in San Diego Superior Court (“Wrongful Death Action”) against Sealfit 

alleging that Kirk Deligiannis died on September 25, 2016 as a result of Sealfit’s 

negligence. Deligiannis participated in a multi-day, 50-hour strenuous fitness event, 

which was organized and promoted by Sealfit. The plaintiffs in the Wrongful Death 

Case 3:19-cv-01388-GPC-AGS Document 24 Filed 01/14/20 PageID.<pageID> Page 1 of 7
2

3:19-cv-1388-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Action allege the following:

Towards the end of the event, Defendants recognized that the decedent was 

suffering and had become pale. They then removed him from the training. For 

some inexplicable reason, Defendants were grossly negligent in allowing decedent 

to return to the strenuous training after recognizing he was in a perilous medical 

condition. Additionally, Defendants had promised to monitor his nutrition and 

intake and grossly failed to do so resulting in a major decline in his blood sugar 

levels. Shortly thereafter, decedent collapsed, and without an AED or emergency 

medical care for at least 16 minutes, died.” 

ECF No. 20 at 18.1 Philadelphia agreed to defend Sealfit against the Wrongful Death 

Action under reservation of rights on June 13, 2019. Compl. ¶ 10. On July 25, 2019, 

Philadelphia filed a complaint in this Court seeking entry of a judicial declaration that 

Philadelphia has no duty to either defend or indemnify Sealfit in the Wrongful Death 

Action since there was no actual coverage under the Policy for all or part of the Wrongful 

Death Action.2 

A. The Policy

The Policy provides Sealfit commercial general liability coverage, under which 

Philadelphia agrees to pay damages because of “bodily injury” caused by an 

“occurrence” which occurs during the policy period. ECF No. 20 at 5. The Policy also 

contains a Participant Legal Liability – Accident Medical Warranty Endorsement 

 

1 Plaintiff requests that this Court take judicial notice of the complaint filed in the Wrongful Death 

Action (filed as ECF No. 20, Exhibit A to the Declaration of Lisa Darling-Alderton) pursuant to Federal 

Rules of Evidence Rule 201. A district court may consider “material which is properly submitted as part 

of the complaint.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). If the documents are 

not attached to the complaint, an exception exists if the documents’ “authenticity ... is not contested” and 

“the plaintiff's complaint necessarily relies” on them. Id. (citations omitted). “Even if a document is 

not attached to a complaint, it may be incorporated by reference into a complaint if the plaintiff refers 

extensively to the document or the document forms the basis of the plaintiff's claim.” United States v. 

Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). The complaint in the underlying Wrongful Death Action 

was attached to the Complaint filed in this action and is referred to extensively by both parties. The 

Court therefore GRANTS Plaintiff’s request for judicial notice.

2 Plaintiff filed the Complaint against both Sealfit and CrossFit, Inc. (“Crossfit”). Plaintiff and Sealfit 

jointly stipulated to dismiss Crossfit from the action without prejudice on October 31, 2019. ECF No. 

19. 

Case 3:19-cv-01388-GPC-AGS Document 24 Filed 01/14/20 PageID.<pageID> Page 2 of 7
3

3:19-cv-1388-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(“Endorsement”), which states:

Catastrophic Medical Insurance

Limits no less than: $25,000

Specified Athletic Activity: All

A. In order for there to be coverage for “bodily injury” to “player participants,” 

hereafter referred to as “Participant Legal Liability” coverage under this policy, 

Catastrophic Medical Insurance for the specified athletic activity and at no less 

than the limit shown in the Schedule above must be in full force and effect at 

the time of the “occurrence” giving rise to a claim under this policy. Failure to 

maintain coverage on all “player participants” in the Specified Athletic Activity 

shown in the Schedule above will fully void “participant legal liability” 

coverage with respect to any “player participants.”

B. For purposes of this endorsement, it is understood and agreed that “player 

participant” means any individual while practicing for or participating in a sport 

or athletic activity specified above.

Compl. ¶ 11. Sealfit did not obtain Catastrophic Medical Insurance. Id. ¶ 12.

DISCUSSION

Sealfit argues that a stay is warranted since Plaintiff’s requested relief is based on 

facts that relate to and directly overlap with facts at issue in the Wrongful Death Action –

namely, whether Deligiannis died during or after the Kokoro fitness event, which would 

in turn determine whether Deligiannis qualifies as a “player participant” under the Policy. 

Philadelphia counters that the Endorsement from the Policy applies and therefore, 

Sealfit’s failure to obtain Catastrophic Medical Insurance eliminated any duty on the part 

of Philadelphia to defend or indemnify Sealfit in the Wrongful Death Action. The Court 

agrees with Sealfit.

B. Legal Standard

A court has the inherent power to stay proceedings. See Landis v. North Am. 

Co., 299 U.S. 248, 254 (1936). The Ninth Circuit has noted the following three 

considerations that a district court should take into account before entering a stay: 

(1) “the possible damage which may result from the granting of a stay,” (2) “the hardship 

Case 3:19-cv-01388-GPC-AGS Document 24 Filed 01/14/20 PageID.<pageID> Page 3 of 7
4

3:19-cv-1388-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

or inequity which a party may suffer in being required to go forward,” and (3) “the 

orderly course of justice measured in terms of the simplifying or complicating of issues, 

proof, and questions of law which could be expected to result from a stay.” CMAX, Inc. 

v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). 

With regard to insurance disputes, in order “[t]o eliminate the risk of inconsistent 

factual determinations that could prejudice the insured, it is appropriate to stay a 

declaratory relief action seeking to determine an insurer’s duty to defend, pending 

resolution of the underlying third party suit, where the coverage question turns on facts to 

be litigated in the underlying action.” Montrose Chem. Corp. v. Superior Court, 6 Cal. 

4th 287, 290–91 (1993) (“Montrose I”); see also Northland Ins. Co. v. Briones, 81 Cal.

App. 4th 796, 803–04 (2000) (“[A] stay of the declaratory relief action pending 

resolution of the third party suit is appropriate when the coverage question turns on facts 

to be litigated in the underlying action.”). “By contrast, when the coverage question is 

logically unrelated to the issues of consequence in the underlying case, the declaratory 

relief action may properly proceed to judgment.” Montrose I, 6 Cal 4th 287, 290-91. In 

other words, a stay is not required if the court can resolve the coverage question as “a 

matter of law without making any factual determinations that would prejudice the insured 

in the third party action.” GGIS Ins. Servs., Inc. v. Superior Court, 168 Cal. App. 4th

1493, 1505 (2008).

C. A Stay is Warranted 

Here, the Court cannot determine purely as a matter of law whether Philadelphia’s 

Policy bars the Philadelphia’s duty to defend or indemnify since factual development will 

be required to determine whether the Endorsement applies. Philadelphia argues that the 

complaint in the Wrongful Death Action shows “on its face that the injury complained of 

. . . is excluded from the policy,” and therefore Philadelphia has no obligation to defend. 

In support, Philadelphia cites the GGIS court’s explanation that an insurer’s duty to 

defend can be negated if insurer “extinguishes[s] . . . all facts suggesting potential 

coverage.” ECF No. 20 at 7 (citing GGIS, 168 Cal. App. 4th 1493, 1506). However, the 

Case 3:19-cv-01388-GPC-AGS Document 24 Filed 01/14/20 PageID.<pageID> Page 4 of 7
5

3:19-cv-1388-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

question of whether Deligianiss died during the event is an unresolved factual question 

and the resolution of this question will affect the question of insurance coverage, since, if 

he died after the conclusion of the Kokoro event, there is a possibility that Philadelphia 

would be required to provide coverage.

Further, the California Supreme Court has explained that at least with respect to 

the duty to defend, “facts known to the insurer and extrinsic to the third party complaint 

can generate a duty to defend, even if the face of the complaint does not reflect a 

potential for liability under the policy.” Montrose I, 6 Cal. 4th 287 at 296. “[T]he third 

party plaintiff cannot be the arbiter of coverage.” Id. Therefore, a “[d]efendant cannot 

construct a formal fortress of the third party’s pleadings and retreat behind its walls.” 

Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 276 (1966). Since “[t]he pleadings are 

malleable, changeable and amendable . . . courts do not examine only the pleaded word 

but the potential liability created by the suit.” Id.

The insurance dispute in the instant case is not of the kind where potential 

coverage is so “tenuous and farfetched” as to negate any possibility that the insurer has a 

duty to defend or indemnify. Lassen Canyon Nursery v. Royal Ins. Co. of America, 720 

F.2d 1016 (9th Cir. 1983) (insurance policy covering claims for property damage clearly 

did not cover antitrust claims). If Sealfit proves in the Wrongful Death Action that 

Deligiannis did not die “while practicing for or participating in” Kokoro, Sealfit can 

establish that Philadelphia’s “Endorsement” does not apply thereby confirming

Philadelphia’s duty to defend or indemnify. Since the Court cannot make such a factual 

finding at this juncture, a stay is warranted. The Court therefore GRANTS Plaintiff’s 

motion to stay. 

D. A Declaratory Judgment Would Not Be Beneficial or Appropriate

Philadelphia argues that the declaratory judgment would be beneficial and 

appropriate in order to provide an early adjudication of the rights of all parties, prompting 

the plaintiffs in the Wrongful Death Action to pursue the defendants with the “deepest 

pockets, and accept more reasonable settlements.” ECF No. 20 at 10. Sealfit counters 

Case 3:19-cv-01388-GPC-AGS Document 24 Filed 01/14/20 PageID.<pageID> Page 5 of 7
6

3:19-cv-1388-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

that a declaratory judgment at this juncture would prejudice Sealfit in the Wrongful 

Death Action since it may collaterally estop Sealfit from relitigating factual findings with 

regard to the timing and circumstances of Deligianiss’s death and further, a declaratory 

judgment would require Sealfit to litigate on two, if not more, fronts. 

While the Declaratory Judgment Act “gave the federal courts competence to make 

a declaration of rights; it did not impose a duty to do so.” Public Affairs Associates v. 

Rickover, 369 U.S. 111, 112 (1962). The factors listed in Brillhart v. Excess Ins. Co. of 

America, 316 U.S. 491 (1942) remain the “philosophic touchstone for the district court” 

in considering declaratory judgment actions. Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 

1220, 1225 (9th Cir. 1998). Generally, Brillhart counsels district courts to stay actions in 

order to avoid: (1) needless decisions of state law; (2) forum shopping; and (3) 

duplicative litigation. See id.; St. Paul Fire & Marine Ins. Co. v. Nonprofits Untied, 91 F. 

App’x 537, 538 (9th Cir. 2004). 

In general, California courts have expressed the following concerns regarding 

litigating insurance coverage simultaneously as the underlying dispute is being litigated: 

First, the insurer, who is supposed to be on the side of the insured and with whom 

there is a special relationship, effectively attacks its insured and thus gives aid and 

comfort to the claimant in the underlying suit; second, such a circumstance 

requires the insured to fight a two front war, litigating not only with the underlying 

claimant, but also expending precious resources fighting an insurer over coverage 

questions this effectively undercuts one of the primary reasons for purchasing 

liability insurance; and third, there is a real risk that, if the declaratory relief action 

proceeds to judgment before the underlying action is resolved, the insured could be 

collaterally estopped to contest issues in the latter by the results in the former. 

David Kleis, Inc. v. Superior Ct., 37 Cal.App.4th 1035, 1044–45, 44 Cal.Rptr.2d 181 

(1995). “If the declaratory relief action is tried before the underlying litigation is 

concluded, the insured may be collaterally estopped from relitigating any adverse factual 

findings in the third party action, notwithstanding that any fact found in the insured's 

favor could not be used to its advantage.” Montrose Chem. Corp. v. Superior Court 

(Canadian Universal Ins. Co.) (“Montrose II”), 25 Cal. App. 4th 902, 910 (1994), as 

Case 3:19-cv-01388-GPC-AGS Document 24 Filed 01/14/20 PageID.<pageID> Page 6 of 7
7

3:19-cv-1388-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

modified (June 30, 1994).

Here, denying Sealfit’s motion to stay would place it in the exact situation warned 

of in David Kleis and Montrose II. Sealfit argues that in the event that this instant action 

is not stayed, Sealfit would be required to litigate prospective bad-faith, concealmeant, 

California Business & Professions Code Section 17200 claims, and fraudulent 

inducement claims against Philadelphia, while simultaneously litigating the Wrongful 

Death Action in state court. The Court agrees. Declaratory relief for Philadelphia would 

impose prejudice on Sealfit by requiring require Sealfit to fight a “two-front war.” 

Montrose II, 25 Cal. App. 4th 902, 910. 

CONCLUSION

In sum, the Court concludes that a stay of this case is warranted. The Court 

GRANTS Defendant Sealfit’s motion to stay.

IT IS SO ORDERED.

Dated: January 14, 2020

Case 3:19-cv-01388-GPC-AGS Document 24 Filed 01/14/20 PageID.<pageID> Page 7 of 7