IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEBRASKA

DONEGAL INSURANCE GROUP,

Plaintiff, 

vs. 

INNOVATIONS WINDOWS & 

SIDING, LLC, MARY YELKEN, and 

PHILLIP KOTTMEYER,

Defendants.

4:23-CV-3092

MEMORANDUM AND ORDER

Innovations Windows & Siding, LLC, a Nebraska company, installed

windows in a home owned by Mary Yelken and Phillip Kottmeyer in Lincoln,

Nebraska. Donegal Insurance Group, a Pennsylvania company, is Innovations'

liability insurer. The homeowners allege that the windows were defectively

installed, and they sued Innovations in a Nebraska state court. Donegal

brought the present lawsuit prior to an imminent judgment in favor of the

homeowners in the state court lawsuit. Filing 5. The homeowners filed a

counterclaim against Donegal. Filing 8.

This matter is before the Court on Donegal's motion for default judgment

against Innovations (filing 29), Donegal's motion to dismiss the counterclaim

for lack of standing (filing 9), and the homeowners' motion to dismiss for lack

of jurisdiction under Fed. R. Civ. P. 12(h)(3) (filing 16).

I. BACKGROUND

Under Innovations' insurance policy, Donegal has a duty to defend and

a duty to indemnify Innovations for bodily injury and property damage caused

by an accident. See filing 5 at 7, 8. The policy requires Innovations to

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immediately send copies of "any demands, notices, summonses or legal papers

received in connection with" a lawsuit, and Innovations must assist and

cooperate as needed in defending the suit. Filing 5 at 5. Donegal's

representative attempted to inform Innovations that "failure to comply with

the conditions . . . may result in a declination of coverage." Id.

The homeowners sued Innovations in October 2021 in the District Court

of Lancaster County, Nebraska, alleging that Innovations improperly installed

windows.1 Donegal was not a party to the homeowners' lawsuit, nor did

Innovations inform Donegal of the lawsuit. Donegal first became aware of the

homeowners' claims a year after the lawsuit was filed. Filing 5 at 3. The

Donegal representative contacted the homeowners, indicating that Donegal

"was in the process of declining coverage to Innovations due to its failure to

comply with the policy." Id.

Donegal then sued Innovations and the homeowners in this Court.

Donegal alleges Innovations' policy excludes the damages sought by the

homeowners. See filing 5 at 10. Innovations appears to have fallen off the

Earth—it did not respond to several phone calls from Donegal's

representatives regarding the homeowners' lawsuit, and emails were returned

as undeliverable. Filing 5 at 3. According to the Nebraska Secretary of State's

records, Innovations is an inactive LLC and it was administratively dissolved

in June 2023. In this lawsuit, Donegal completed service on Innovations by

publication, after several failed service attempts. See filing 26; filing 14.

1 Specifically, the homeowners alleged that at least three windows were installed upsidedown, replacement windows were improperly sized, windows were improperly sealed, the

sealant used on some windows caused severe health issues, the windows decreased energy

efficiency in their house, and Innovations misrepresented the quality of the windows. See

filing 5 at 2.

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Donegal asks for declarations pursuant to 28 U.S.C. § 2201 that "Donegal

appropriately declined coverage to Innovations," and that "Donegal has no

ongoing duties and obligations . . . to defend or indemnify Innovations" in the

homeowners' lawsuit. Filing 5 at 11. In their counterclaim, the homeowners

have asked this Court to declare that Donegal is obligated "to pay the sums

that Innovations becomes legally obligated to pay as damages because of the

bodily injury sustained by" the homeowners. Filing 8 at 4.

The Court has taken judicial notice of Yelken v. Innovations Windows &

Siding, CI-21-41, the homeowners' lawsuit in the District Court of Lancaster

County, Nebraska. On October 31, 2023, the homeowners obtained a judgment

against Innovations. In December 2023, they initiated garnishment

proceedings against Donegal.

II. DISCUSSION

Donegal argues that the homeowners' counterclaim should be dismissed

because they lack standing under Nebraska law. The homeowners actually

agree, and further assert that they should be dismissed as parties because this

Court has no jurisdiction over Donegal's action against them under Nebraska

law. Donegal argues that the homeowners are "necessary parties" under both

Fed. R. Civ. P. 19 and Neb. Rev. Stat. § 25,159.

The parties' focus on Nebraska law is incorrect—this is a federal court,

and both the homeowners' and Donegal's actions were brought under 28 U.S.C.

§ 2201, seeking a declaration of their "rights and other legal relations." See

Dairyland Ins. Co. v. Makover, 654 F.2d 1120, 1125 (5th Cir. Unit B 1981) ("In

this case the action was not brought under authority provided by state law but

rather was instituted by the insurer pursuant to the Federal Declaratory

Judgment Act, [28 U.S.C. § 2201]."); filing 5; filing 8. So, the Court must

determine, as a matter of federal law, whether the parties have standing, even

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though the resolution of the parties' claims is dependent on state law. See

Capitol Indem. Corp. v. Haverfield, 218 F.3d 872, 874 (8th Cir. 2000).

Under federal law, there is an actual controversy between an injured

party and an insurance company based on the acts of a tortfeasor. See id.;

Nationwide Mut. Ins. Co. v. Barrow, 29 F.4th 1299, 1302 (11th Cir. 2022)

(citing Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270 (1941)); Amling

v. Harrow Indus. LLC, 943 F.3d 373, 378 (7th Cir. 2019). However, this is only

true as to an insurer's duty to indemnify—an injured party does not have

standing to invoke an insurer's duty to defend a tortfeasor. Barrow, 29 F.4th

at 1302-03.

Having determined this Court can hear both parties' claims as to

Donegal's duty to indemnify, the question now is whether it should. See

Cincinnati Indem. Co. v. A&K Constr. Co., 542 F.3d 623, 625 (8th Cir. 2008).

Exercising jurisdiction in a declaratory judgment action is discretionary. §

2201 (a federal district court "may declare the rights and other legal relations

of any interested party seeking such declaration" (emphasis added)); see also

Scottsdale Ins. Co. v. Detco Indus., 426 F.3d 994, 996 (8th Cir. 2010) (citing

Haverfield, 218 F.3d at 874). A district court may dismiss or stay a declaratory

judgment action which serves no useful purpose. Cincinnati Indem. Co., 542

F.3d at 625 (citing Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)).

In the absence of a parallel action in state court involving the same

claims and the same parties, courts in the Eighth Circuit follow a six-factor

test to determine whether to abstain from a declaratory action. Scottsdale, 426

F.3d at 998 (quoting Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419,

422 (4th Cir. 1998)). But "[i]t would be uneconomical as well as vexatious for a

federal court to proceed in a declaratory judgment suit where another suit is

pending in a state court presenting the same issues, not governed by federal

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law, between the same parties." Haverfield, 218 F.3d at 874-75 (quoting

Brillhart v. Excess Ins. Co., 316 U.S. 491, 495 (1942)).

In Haverfield, an insurance company sought a declaratory judgment

against its insured and the individuals injured by the insured, just like this

case. 218 F.3d at 873-74. The insurer filed its federal court action six months

before the injured parties filed a petition to collect the insurance pursuant to a

judgment against the insured. Id. at 875. The Eighth Circuit held that the

district court abused its discretion in denying a motion to dismiss when a

parallel state court proceeding was pending at the time the motion was denied.

Id.

The Court has taken judicial notice of the homeowners' proceedings in

state court. The homeowners filed a writ of garnishment against Donegal in

December 2023. There is a parallel action between the same parties pending

in state court, presenting the same issues, not governed by federal law. See id.;

Brillhart, 316 U.S. at 495. Even though Donegal filed its action well before the

current garnishment proceedings, Haverfield indicates that the Court should

not exercise jurisdiction under § 2201.

Additionally, it's unclear what "useful purpose" a declaratory judgment

would serve. See Cincinnati Indem. Co., 218 F.3d at 623 (citing Wilton, 515

U.S. at 288). Regarding Donegal's duty to defend, Innovations has not invoked

its rights under the policy—nor can it be said, given Innovations' failure to

respond to this lawsuit and its mysterious disappearance from the state court

proceedings, that such an invocation is likely to ever happen. Further,

judgment has been entered against Innovations, and Donegal did not defend it

in those proceedings. Donegal's request for a declaration that it has no duty to

defend Innovations in the homeowners' lawsuit is either moot, or it never

ripened to begin with, and a declaratory judgment is not appropriate.

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A declaratory judgment might be useful regarding Donegal's duty to

indemnify, but the Court cannot enter a default judgment in favor of Donegal

that would impact the rights of the homeowners. See, e.g., United Fire & Cas.

Ins. Co. v. Thompson, No. 1:09-cv-051, 2010 WL 561578, at *2 (E.D. Mo. Feb.

10, 2010). And for the reasons explained above, it is more appropriate for the

parties to sort out Donegal's obligations under the insurance policy in the

currently pending garnishment proceedings.

Given these circumstances, this Court will not exercise jurisdiction over

Donegal's § 2201 action against Innovations and the homeowners. The Court

will also exercise its discretion not to enter a default declaratory judgment

against Innovations. See Thompson, 2010 WL 561578, at *2. This case is

dismissed.2

IT IS ORDERED:

1. The plaintiff's motion to dismiss (filing 9) is granted. 

2. Defendants Mary Yelken and Phillip Kottmeyer's motion to 

dismiss (filing 16) is granted.

3. The plaintiff's motion for default judgment (filing 29) is 

denied.

2 A stay rather than a dismissal is preferred "where the possibility of a return to the federal 

court remains." Haverfield, 218 F.3d at 875 n.2. But this Court sees no reason why the case 

would return to federal court when the outcome of the state's garnishment proceedings will 

be binding on the parties. 

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4. This case is dismissed.

5. A separate judgment will be entered. 

Dated this 27th day of March, 2024.

BY THE COURT:

John M. Gerrard

Senior United States District Judge

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