Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_15-cv-00704/USCOURTS-azd-2_15-cv-00704-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:2201 Declaratory Judgment

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Riverport Insurance Company,

Plaintiff, 

v. 

Horizon Human Services Incorporated, 

Defendant.

No. CV-15-00704-PHX-DLR

ORDER 

 Before the Court are Plaintiff/Counter-Defendant Riverport Insurance Company’s 

motion to dismiss or strike counterclaims and affirmative defenses, (Doc. 18), and 

Defendant/Counterclaimant Horizon Human Services, Inc.’s motion to stay or, in the 

alternative, motion to dismiss, (Doc. 22).1

 The motions are fully briefed. For the reasons 

stated below, Riverport’s motion is denied and Horizon’s motion is granted.2

BACKGROUND

 This is an insurance coverage declaratory action brought by Riverport Insurance 

Company against its insured, Horizon Human Services, Inc. Horizon provides 

“behavioral health services to adults and children in Pinal County and Gila County, 

Arizona,” which include “‘Seriously Mentally Ill’ determinations, crisis management, 

 

1

 Horizon also filed a motion to expedite, (Doc. 46), which is denied as moot. 

2

 Horizon’s request for oral argument is denied. The issues are fully briefed, and the Court finds that oral argument will not aid in the resolution of this matter. See LR 

Civ. 7.2(f); Fed. R. Civ. P. 78(b). 

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behavioral health residential housing, group home housing, and in-home behavioral 

patient case management.” (Doc. 1, ¶ 11.) Horizon provided mental health treatment to 

Joseph Cecil Cain, a diagnosed schizophrenic with paranoid and aggressive tendencies. 

(Id., ¶ 12.) Cain was designated by the State of Arizona as “Seriously Mentally Ill,” and 

in 2009, he was committed after a “guilty but insane” conviction for “stabbing his 

roommate in the neck while at a residential facility.” (Id., ¶¶ 12-13.) 

 For several months, Horizon provided Cain “his medications and psychiatric 

services, [and oversaw] his placement in a residential facility.” (Id., ¶ 14.) Cain bounced 

around “multiple facilities and a group home, leaving each because of behavioral or 

substance abuse issues,” but eventually moved in with his 65-year old mother and 63-

year old aunt. (Id.) Horizon visited Cain several times at his mother’s residence and 

Cain visited Horizon’s clinics for psychiatric services. (Id., ¶ 15.) 

 On October 4, 2013, Cain told a Horizon case manager that he wanted to stop 

taking his medication and discontinue his treatment. (Id., ¶ 16.) That same day, Cain 

“grabbed a hot frying pan, threw sizzling grease into his mother’s face, then grabbed a 

knife and stabbed her repeatedly.” (Id., ¶ 2.) He then stabbed his aunt. (Id., ¶ 17.) 

Cain’s aunt survived, but his mother died from the attack. (Id.) On October 10, 2013, the 

Regional Behavioral Health Authority opened an investigation into Horizon’s treatment 

of Cain. (Id., ¶ 20.) 

 Although Horizon had insurance from another carrier, it applied for professional 

liability insurance through Riverport on November 15, 2013. (Id., ¶¶ 23-24.) Prior to 

issuing the policy, Riverport required Horizon to disclose any acts, errors, omissions, or 

violations that “might reasonably be expected to result in a claim or suit” because they 

would not be covered. (Id., ¶¶ 26, 37.) It obtained statements from six of Horizon’s 

directors and officers, but none of them mentioned the incident involving Cain. (Id., ¶¶ 

27-34.) 

 On October 3, 2014, Charlene Eiden, as statutory beneficiary of Cain’s mother, 

and Cain’s aunt, Karen Thomas, filed suit against Horizon for negligence, medical 

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negligence, gross negligence, and punitive damages arising out of the attack (the “Eiden

action”). (Id., ¶ 42.) They allege Horizon failed to take appropriate steps to ensure that 

Cain received adequate care and treatment. (Id., ¶ 46.) Riverport is currently “defending 

Horizon in the underlying action under a complete reservation of rights, including the 

right to seek reimbursement of the attorney’s fees and costs expended to defend Horizon 

since there is no coverage.” (Id., ¶ 49.) 

 On April 17, 2015, Riverport brought the instant action under the Federal 

Declaratory Judgment Act, 28 U.S.C. § 2201(a), seeking a declaration that the attack is 

not covered under the policy’s Prior Acts Endorsement and that it occurred prior to the 

inception of the commercial general liability portion of the policy. On June 19, 2015, 

Horizon filed counterclaims for breach of contract and a declaration that the attack is 

covered under the Prior Acts Endorsement. (Doc. 14 at 10-11.) Thereafter, Riverport 

filed a motion to strike Horizon’s counterclaims and several of its affirmative defenses, 

(Doc. 18), and Horizon filed a motion to stay or dismiss the action pending the resolution 

of the underlying state case. (Doc. 22.) Because Horizon’s motion to dismiss is 

dispositive, the Court will address it first. 

MOTION TO DISMISS 

 Horizon moves to dismiss this case pending the resolution of the Eiden action 

because the two actions involve overlapping factual issues. It argues Riverport should 

have filed this action in state court and that litigating the two cases in different courts 

could result in inconsistent rulings. Riverport argues the two cases involve different sets 

of facts and that forcing it to re-file in state court would be a waste of judicial resources. 

I. Legal Standard 

 The Federal Declaratory Judgment Act (“FDJA”) provides that “[i]n a case of 

actual controversy within its jurisdiction . . . any court of the United States, upon the 

filing of an appropriate pleading, may declare the rights and other legal relations of any 

interested party seeking such a declaration[.]” 28 U.S.C. § 2201(a). “The exercise of 

jurisdiction under the [FDJA] is committed to the sound discretion of the federal district 

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courts.” Huth v. Hartford Ins. Co. of the Midwest, 298 F.3d 800, 802 (9th Cir. 2002). 

“[A] district court is authorized . . . to stay or to dismiss an action seeking a declaratory 

judgment before trial or after all arguments have drawn to a close.” Wilton v. Seven Falls 

Co., 515 U.S. 277, 288 (1995). In determining whether to assert jurisdiction over the 

case, courts look to the factors set out in Brillhart v. Excess Insurance Company of 

America, 316 U.S. 491, 62 (1942): “The district court should avoid needless 

determination of state law issues; it should discourage litigants from filing declaratory 

actions as a means of forum shopping; and it should avoid duplicative litigation.” Gov’t 

Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998). 

II. Analysis 

A. Presumption in Favor of Abstention 

 Horizon argues there is a presumption that federal courts should abstain from 

exercising jurisdiction over insurance coverage declaratory actions. Riverport argues the 

presumption was overruled by Dizol, which stated, “there is no presumption in favor of 

abstention in declaratory actions generally, nor in insurance coverage cases specifically.” 

133 F.3d at 1225. Riverport’s reading of Dizol is inaccurate.3

 

 The Ninth Circuit limited the reach of Dizol in Huth, explaining that “the Dizol

court qualified its language by noting that ‘when other [non-discretionary] claims are 

joined with an action for declaratory relief . . . , the district court should not, as a general 

rule, remand or decline to entertain the claim for declaratory relief . . . [in order] to avoid 

piecemeal litigation.’” 298 F.3d at 803 (quoting Dizol, 133 F.3d at 1225)). Instead, “the 

language merely affirms the well-accepted rule that the decision whether to exercise 

jurisdiction over a declaratory action lies in the sound discretion of the district court.” Id. 

Dizol went on the state that “[i]f there are parallel state proceedings involving the same 

 

3

 Riverport also argues most of the case law cited by Horizon has been superseded by Dizol. (Doc. 33 at 2.) Dizol overruled many of those cases, but “only to the extent that those cases erroneously held or suggested that the district court must sua sponte state 

its reasons for taking jurisdiction of an FDJA action when its jurisdiction was not challenged by the parties.” Nat’l Union Fire Ins. Co. of Pittsburgh v. Aero Jet Servs., 

LLC, No. CV-11-01212-PHX-DGC, 2011 WL 4708857, at *2 (D. Ariz. Oct. 7, 2011). 

This is not the issue here. 

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issues and parties pending at the time the federal declaratory action is filed, there is 

presumption that the entire suit should be heard in state court.” Dizol, 133 F.3d at 1225. 

Riverport did not bring any nondiscretionary claims, both claims seek declaratory relief. 

Thus, the only issue is whether the two proceedings are parallel. 

 Riverport argues “there is no pending state court proceeding involving the same 

issues between the same parties.” (Doc. 33 at 3.) It claims this case “cares only about 

what happened after the murder, including the investigation into Horizon, Horizon’s 

tender of the matter to its prior carrier, and Horizon’s representations made during the 

application process for the Riverport policy.” (Id. at 4 (emphasis added).) Riverport 

argues the issues in the Eiden action depend solely on what happened before the attack, 

i.e., “the allegedly negligent treatment of [Cain] leading up to his murderous acts.” (Id.) 

But proceedings are sufficiently parallel if they “arise from the same factual 

circumstances.” Gold Eagle Ins. Co. v. Travelers Co., 103 F.3d 750, 754 (9th Cir. 1996) 

(overruled on other grounds). The issues and facts do not have to be identical. See 

Employers Reinsurance Corp. v. Karussos, 65 F.3d 796, 798 (9th Cir. 1995) (finding 

parallel proceedings where the federal declaratory judgment “raise[d] factual questions 

similar to those before the state court” (emphasis added)). Here, both suits arise from the 

same set of facts: Cain’s attack on his mother and aunt on October 4, 2013, and thus 

necessarily involve similar factual issues. As such, the proceedings are sufficiently 

parallel for the presumption to apply. 

 Thus, because Riverport did not bring any non-discretionary claims and because 

there is a pending state proceeding arising out of the same factual scenario, the Court 

begins its analysis with a presumption against exercising jurisdiction in this case.4

 

B. Jurisdiction is not Appropriate 

 In Karussos, the insurer brought an action in federal court seeking a declaration of 

no coverage after the insured was sued by a third party in state court. 65 F.3d at 798. 

The insurer argued that the insured was not covered because “prior to the effective date 

 

4

 Even without the presumption, the Brillhart factors favor abstention. 

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of [the] policy, [the insured] became aware that the [third party] dispute would lead to a 

claim or suit against him.” Id. at 800 (internal quotation marks omitted). This issue, the 

court found, overlapped with issues in the underlying state case, namely the “nature of 

[the plaintiff’s] relationship with the [third parties], as well as the point at which the 

relationship turned adversarial.” Id. at 800. The district court exercised jurisdiction over 

the case and granted summary judgment against the insurer on the issue of coverage. Id.

at 798. The Ninth Circuit reversed and concluded that the district court abused its 

discretion by asserting jurisdiction over the case because it involved similar factual 

questions as the underlying state case and the insurer could have filed the action in state 

court. Id. 800-01. The court found “no facts or circumstances which would make the 

exercise of federal court jurisdiction appropriate.” Id. at 799. 

 The court in Aero Jet reached a similar conclusion. There, the insured was sued in 

state court by a third party for breach of contract and fraud arising out of the insured’s 

faulty maintenance of an aircraft. Aero Jet, 2011 WL 4708857, at *1. The insurer denied 

coverage and filed suit in federal court seeking a declaration that it had no duty to defend 

or indemnify the insured. Id. The court dismissed the case. Id. at *5. It noted that “the 

question before the Court in this case is not whether it could adjudicate the state law 

insurance coverage issue, but whether such adjudication would be ‘needless’ because that 

issue could be adjudicated in the pending state court proceeding.” Id. at *3. The factual 

record relating to “the timing and nature of the alleged damage to the Aircraft and 

whether such damage constitutes an ‘occurrence’ or an intentional act,” issues essential to 

the declaratory judgment claim, was pending before the state court. Id. at *4. Although 

the court found the insurer was not forum shopping, the court found exercising 

jurisdiction over the declaratory claim may result in duplicative litigation. Id. at *5. 

 Like Karussos and Aero Jet, the duty to avoid needless determination of state law 

issues weighs heavily in favor of abstention in this case. Riverport does not dispute that 

its declaratory action involves solely state law issues. This action could have been filed 

in the Arizona state courts, which are more apt to adjudicate issues involving Arizona 

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insurance law. Exercising jurisdiction in this case would frustrate Congress’s intent that 

insurance law disputes be left to the states. As Aero Jet noted, the issue here is not 

whether the Court could exercise jurisdiction over this case, but whether it should, given 

the pending state action. Riverport provides no reason or special circumstance that would 

make exercising jurisdiction in this case appropriate, and Ninth Circuit precedent 

“generally counsel[s] against the exercise of federal-court jurisdiction over claims for 

declaratory relief that involve only state law questions and are brought during the 

pendency of a related state court proceeding.” Karussos, 65 F.3d at 801. Therefore, the 

Court’s duty to avoid needless determination of state law issues largely weighs in favor 

of declining jurisdiction. 

 With respect to the second Brillhart factor, Horizon argues Riverport is forum 

shopping. But nothing prohibits an insurer from filing a declaratory action in federal 

court, and Riverport is not seeking to undermine any final state court ruling. See Aero 

Jet, 2011 WL 4708857, at *4. This factor is a wash. 

 Last, the Court must avoid duplicative litigation. Like Aero Jet and Karussos, this 

action and the Eiden action arose from the attack and may turn on similar factual issues, 

which could create conflicting decisions and frustrate the state court’s adjudication of the 

Eiden action. In addition, exercising jurisdiction over this case while the state action is 

pending may duplicate discovery efforts and waste resources. The mere possibility of 

duplicative litigation, however remote, weighs in favor of abstention.5

 

 Riverport argues that forcing it to re-file in state court will waste judicial 

resources. But this case is still in the early stages of litigation. Moreover, the fact that 

the parties will have to start over in state court does not outweigh the Court’s duty to 

avoid needlessly adjudicating state law issues and avoid duplicative or conflicting 

rulings. 

 Riverport also argues that it would be “fundamentally unfair” to have to defend 

 

5

 Even if duplicative litigation would not result, as Riverport argues, this does not eliminate the Court’s duty to avoid needless determination of state law issues. 

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Horizon in the underlying suit without a coverage determination. (Doc. 33 at 13.) But 

under the policy, Riverport has a broad contractual duty to defend Horizon, see Quihuis 

v. State Farm Mut. Auto. Ins. Co., 334 P.3d 719, 727 (Ariz. 2014) (“It is well settled that 

a liability insurer’s duty to defend is separate from, and broader than, the duty to 

indemnify.”), and it did so under a reservation of rights, “including the right to seek 

reimbursement of the attorney’s fees and costs expended to defend Horizon since there is 

no coverage,” (Id., ¶ 49). Riverport cannot complain that injustice results from its 

decision to defend its insured in the underlying action. 

III. Conclusion 

 Accordingly, on balance, the Brillhart factors weigh against the Court’s exercise 

of jurisdiction over this matter, and the case is dismissed. Riverport’s motion to strike is 

denied as moot, and Horizon’s motion to expedite is denied as moot. 

IT IS ORDERED that 

1. Riverport’s motion to strike, (Doc. 18), is DENIED. 

2. Horizon’s motion to stay/dismiss, (Doc. 22), is GRANTED. 

3. Horizon’s motion to expedite, (Doc. 46), is DENIED. 

4. The Clerk is directed to terminate this action. 

Dated this 20th day of November, 2015. 

Douglas L. Rayes 

United States District Judge

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