1

We note that although the caption of the amended

complaint lists American International Group, Inc. as a defendant,

none of the counts in the amended complaint are directed against

American International Group, Inc.

 UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

NATIONAL RECOVERY AGENCY, INC.: CIVIL NO. 4:05-CV-0033

and DIVERSIFIED BILLING :

SERVICES, INC., :

:

Plaintiffs : (Magistrate Judge Smyser)

:

v. :

:

AIG TECHNICAL SERVICES, INC., :

and ILLINOIS NATIONAL :

INSURANCE COMPANY, :

:

Defendants :

MEMORANDUM AND ORDER

The plaintiffs, National Recovery Agency, Inc. and

Diversified Billing Services, Inc., commenced this action by

filing a complaint on January 6, 2005. On September 30,

2005, the plaintiffs filed an amended complaint. The

defendants are AIG Technical Services, Inc. (AIGTS) and

Illinois National Insurance Company (Illinois National).1

The amended complaint contains three counts. In Count

I, the plaintiffs are seeking a declaratory judgment that,

Case 4:05-cv-00033-JAS Document 60 Filed 11/22/05 Page 1 of 5
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pursuant to an insurance policy issued by defendant Illinois

National, Illinois National must provide the plaintiffs a

defense in a case filed against them by Forward Thinking,

Inc. (Forward Thinking) in New Jersey Superior Court as well

as a declaratory judgment that defendant Illinois National

must indemnify them for the claims of Forward Thinking. In

Count II, the plaintiffs are seeking damages on a claim that

defendant Illinois National breached the insurance contract

by failing to provide them a defense or indemnification in

the case filed by Forward Thinking. In Count III, the

plaintiffs are seeking damages on a claim that defendants

Illinois National and AIGTS acted in bad faith in violation

of 42 Pa.C.S.A. § 8371 and Pennsylvania common law by failing

to provide them a defense or indemnification in the case

filed by Forward Thinking. 

 The parties have consented to proceed before a

magistrate judge pursuant to 28 U.S.C. § 636(c).

On October 20, 2005, the defendants filed an answer to

the amended complaint. 

On November 18, 2005, the defendants filed a motion to

stay all proceedings and a brief in support of that motion. 

Case 4:05-cv-00033-JAS Document 60 Filed 11/22/05 Page 2 of 5
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The defendants contend that the plaintiffs’ claims

based on a failure to indemnify are not ripe. They argue (1)

that a duty to indemnify does not arise until the insured is

found liable for damages in the underlying action, (2) the

Forward Thinking case is still proceeding in the Superior

Court of New Jersey and is not scheduled for trial until

April of 2006, and (3) therefore, the plaintiffs’ claims

based on a failure to indemnify are not ripe. Rather than

seek dismissal of the plaintiffs’ claims based on a failure

to indemnify, the defendants seek to stay the entire case

until sometime after the Forward Thinking litigation is

completed and the plaintiffs’ indemnity claims are ripe. The

defendants contend that the entire case should be stayed

because judicial economy would not be served by allowing the

case to proceed on only those claims that are ripe. The

defendants assert that proceeding now with discovery,

pretrial proceedings and trial in this case on the

plaintiff’s bad faith/duty to defend claim would almost

certainly result in duplicative effort if the plaintiffs’

claims based on a failure to indemnify survive the Forward

Thinking case. 

The plaintiffs concur in the defendants’ motion to stay

all proceeding. However, we do not see the need to stay this

case. 

Case 4:05-cv-00033-JAS Document 60 Filed 11/22/05 Page 3 of 5
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We agree that the plaintiffs’ claims based on a failure

to indemnify are not ripe since the plaintiffs have not been

found liable in the Forward Thinking case. The plaintiffs’

claims based on a failure to indemnify will only become ripe

if the plaintiffs are found liable in the Forward Thinking

case and if, after that finding of liability, the defendants

refuse or fail to indemnify the plaintiffs. Given those

contingencies, it is not clear that the plaintiffs’ indemnity

claims will become ripe. Rather than delay this case

indefinitely, we will dismiss the unripe claims and proceed

with those claims that are ripe. 

IT IS ORDERED that the plaintiffs’ claim in Count I of

the amended complaint seeking a declaratory judgment that

Illinois National must indemnify the plaintiffs for the

claims of Forward Thinking, the plaintiffs’ claim in Count II

for damages against defendant Illinois National for breach of

the insurance contract based on a failure to indemnify the

plaintiffs from the claims of Forward Thinking, and the

plaintiffs’ claim in Count III for damages against defendants

Illinois National and AIGTS for a bad faith failure to

indemnify the plaintiffs in the case filed by Forward

Thinking are DISMISSED. IT IS FURTHER ORDERED that the

defendants’ motion (doc. 58) to stay all proceedings is

DENIED and this case shall proceed on the remaining claims in

Case 4:05-cv-00033-JAS Document 60 Filed 11/22/05 Page 4 of 5
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accordance with the case management order of October 18,

2005.

/s/ J. Andrew Smyser

J. Andrew Smyser

Magistrate Judge

Dated: November 22, 2005. 

Case 4:05-cv-00033-JAS Document 60 Filed 11/22/05 Page 5 of 5