Court Opinion

ID: 1035941
Source: CourtListenerOpinion
Date Created: 2013-08-01 00:01:29.267738+00
Date Added: 2024-06-11T12:45:36.859749
License: Public Domain

United States Court of Appeals
                           For the Eighth Circuit
                       ___________________________

                               No. 12-1599
                       ___________________________

                         Lexington Insurance Company

                       lllllllllllllllllllll Plaintiff - Appellee

                                          v.

           Integrity Land Title Co., Inc.; Integrity Disbursing, LLC

                           lllllllllllllllllllll Defendants

   Fidelity National Financial, Inc., as Successor by Merger to Lawyers Title
     Insurance Corporation and Commonwealth Land Title Insurance Co.

               lllllllllllllllllllllIntervenor defendants - Appellants
                                       ____________

                   Appeal from United States District Court
                for the Eastern District of Missouri - St. Louis
                                ____________

                         Submitted: November 15, 2012
                             Filed: July 31, 2013
                                ____________

Before RILEY, Chief Judge, WOLLMAN and MELLOY, Circuit Judges.
                             ____________

MELLOY, Circuit Judge.
        This declaratory judgment action concerning an errors and omissions ("E&O")
insurance policy is the sixth lawsuit arising from several real estate transactions.
Defendants Integrity Land Title Co. and Integrity Disbursing, LLC (collectively
"Integrity"), issued title commitments, served as closing agents, disbursed
construction funds, and sold title-insurance policies relating to certain real estate
transactions. Intervenor Fidelity National Financial, Inc. ("Fidelity"),1 issued the
title-insurance policies and eventually paid substantial sums to settle claims on those
policies. Plaintiff Lexington Insurance Company ("Lexington"), issued the disputed
E&O policy to Integrity and denied coverage to Integrity for claims arising from the
real estate transactions.

       In the present case, Lexington seeks a declaration that it owes Integrity neither
coverage nor defenses under the E&O policy. Fidelity, who hopes to recover from
Lexington as well as from Integrity, intervened and asserted that it, too, desired a
declaration regarding coverage. Fidelity then reversed course and moved for a stay.
Fidelity argued in its motion that the district court2 should grant a stay and allow
coverage issues to be decided in one of five pending state-court actions.

      The district court denied Fidelity's motion for a stay and granted summary
judgment to Lexington, finding no duty to provide coverage or defenses based upon
the E&O policy. Fidelity appeals the denial of its motion for a stay as well as the
grant of summary judgment. We affirm.

      1
       Fidelity is the successor to two separate title insurers who actually issued the
policies in these cases. For all purposes, we refer to Fidelity and its predecessors
simply as "Fidelity."
      2
       The Honorable Thomas C. Mummert, III, United States Magistrate Judge for
the Eastern District of Missouri, presiding by written consent of the parties pursuant
to 28 U.S.C. § 636(c).

                                          -2-
I.    Background

       The underlying events that gave rise to the claims on the Fidelity title-insurance
policies and the Lexington E&O policy are material to understanding the issues in
this case. Lexington's denials of coverage and the district court's substantive rulings
depended in large part on the E&O policy's coverage dates, the dates on which
underlying events occurred, the dates on which Integrity received notice of claims,
and the dates on which Integrity provided notice of claims to Lexington.
Accordingly, we describe below the E&O policy, the transactions, and the claims as
relevant to resolution of this appeal.

      A.     The Lexington E&O Policy

       Integrity applied for the E&O policy from Lexington in February 2008 and
again in April 2008. Integrity's April 2008 application was the same as the February
2008 application, but with the February date crossed out and the April date written
in. Based on the April 2008 application, Lexington issued a "claims made and
reported" policy with a policy period from April 15, 2008, through July 15, 2009, and
with a retroactive date of May 23, 2006. The policy provided $1 million in coverage
as follows:

      [Lexington] will pay on behalf of [Integrity] Damages for which
      [Integrity] becomes legally obligated to pay because of any Claim first
      made against [Integrity] during the Policy Period and reported in writing
      to [Lexington] pursuant to the terms of this policy, within the Policy
      Period, or to the extent applicable, the Basic or Extended Reporting
      Period. Such Damages must arise out of the actual or alleged Wrongful
      Act first committed on or after the Retroactive Date . . . in the course of
      [Integrity's] rendering or failing to render Professional Services for
      others.

                                          -3-
       The policy contained a "Prior and Pending Litigation Exclusion" that excluded
coverage for "any claim or litigation against any insured occurring prior to, or
pending as of the inception date of this policy including (but not limited to) claims,
demands, causes of action, legal or quasi-legal proceedings, decrees, or judgments"
and "any subsequent litigation or claims arising from or based on substantially the
same matters as alleged in the pleading of such prior or pending litigation." The
policy also contained a "Prior Knowledge Exclusion" that excluded coverage for
claims "based upon or arising out of any alleged act, error, omission or circumstance
likely to give rise to a Claim that an Insured had knowledge of prior to the effective
date of the this policy." Further, in the application for the policy, Integrity answered
"no" to a question that asked if Integrity had knowledge of any acts, errors, or
omissions that "might" give rise to a claim under the proposed policy. The policy
application was expressly incorporated into and served as part of the policy. The
application also warned that no coverage would extend to claims arising from such
acts, errors, or omissions that Integrity had knowledge of prior to policy inception.

       The policy defined "Related Claims" as "collectively all Claims involving the
same Wrongful Act or Wrongful Acts which are logically or causally connected by
any reason of any common fact, circumstance, situation, transaction event or
decision." The policy imputed to a group of Related Claims the earliest notice date
or claim-made date for any one of the Related Claims.

      Finally, the policy disavowed any intention to create third-party beneficiaries
and did not identify Fidelity as an additional insured entity. The policy application
asked for the names of title-insurance firms for whom Integrity sold policies, and one
of the companies Integrity disclosed was a predecessor to Fidelity. The policy,
however, provided that no third party had the right to join an action by Integrity
against Lexington and no third party had the right to sue Lexington on the policy.
Finally, the policy provided that benefits were to be paid directly to parties injured
by Integrity's wrongful acts and not to Integrity itself.

                                          -4-
      B.     The Transactions

        Integrity performed title searches and issued title commitments on certain
lakefront property as well as certain new home developments. The lakefront property
at issue was sold to a first family, the Talleys, in October 2005. Integrity performed
a title search and issued a title commitment to the Talleys at that time. The Talleys
subsequently sold a portion of that property to a second family, the Gassens, in
November 2006. Integrity performed a separate title search and provided other
services to the Gassens in October and November 2006.

        As to both the Talley and the Gassen title searches, Integrity failed to discover
that a power company had obtained title through condemnation of land surrounding
the lake up to an elevation contour of 665 feet. The title commitments Integrity
issued for the Talleys and the Gassens purported to cover lakefront property from the
660-foot elevation contour and higher, thus erroneously characterizing the land
actually conveyed to the Talleys and Gassens. Integrity also failed to identify other
interests in the property held by additional third parties. When issuing title
commitments to the Talleys and the Gassens, Integrity also sold to both families title-
insurance policies underwritten by Fidelity. In this regard, Integrity was acting as
Fidelity's agent. Fidelity eventually incurred substantial attorneys fees and expenses
and paid substantial sums to the Talleys and Gassens due to the infirmities with their
titles.

        Later, from January 2007 through August 2008, Integrity issued title
commitments and title-insurance policies covering fifty-nine different properties in
residential developments being built by a firm named Bower & Bailey. In the title-
insurance policies for the Bower & Bailey properties, Integrity failed to include
exclusions from coverage for later-filed mechanics liens. In addition, before issuing
title commitments, Integrity failed to investigate whether subcontractors had been
paid. Further, Integrity acted as a disbursing agent for certain aspects of the

                                          -5-
development of these properties, was responsible for releasing some funds to
contractors, and failed to obtain lien waivers prior to releasing those funds.

      Bower & Bailey eventually failed, leaving subcontractors unpaid and leading
to subcontractors' lawsuits and mechanics liens. Fidelity asserts that it paid over $1.5
million to satisfy claims and liens related to the Bower & Bailey developments and
incurred hundreds of thousands of dollars in attorneys fees.

      C.     The Underlying Lawsuits and the Provision of Notice to Lexington

             1.     Bower & Bailey/Contemporary Flooring Litigation

       On March 17, 2008, one of the unpaid subcontractors for the Bower & Bailey
properties, Contemporary Flooring and Design, Inc. ("Contemporary Flooring"), filed
a lawsuit in Missouri state court against eighty-one defendants, including two parties
identified as "Integrity Disbursing, LLC, Trustee" and "Integrity Land Title, Trustee"
(the "Contemporary Flooring litigation"). Contemporary Flooring presented separate
claims in its complaint identifying separate parcels of property and naming different
defendants as relevant to each parcel. The claims against Integrity named Integrity
as a defendant only as the trustee of deeds of trust and sought determinations of
priority of title as between Integrity and Contemporary Flooring (who had filed
mechanics liens against the properties).3

     Also in March 2008, Integrity received notices from homeowners in the Bower
& Bailey developments and forwarded at least fifteen lien claims to Fidelity. A
newspaper article published in March 2008 quoted Integrity's president as stating that

      3
        The Contemporary Flooring litigation evolved into larger, consolidated
litigation involving liens and subsequently filed actions by other contractors.
Additional details regarding the expanded nature of the Contemporary Flooring
litigation are not material to this appeal.

                                          -6-
homeowners should forward information about liens to Integrity and that "in most
cases [title] insurance should cover the liens." That same month, Integrity's president
referred to the situation involving unpaid subcontractors and liens on the Bower &
Bailey properties as the "Bower & Bailey debacle."

       When applying for the E&O policy in April 2008, Integrity did not disclose to
Lexington the March 2008 lawsuit, the March 2008 notices from homeowners, the
fact that Integrity had begun forwarding claims to Fidelity, or any related information.

       In February 2009, after Fidelity received demands from title-insurance
policyholders, provided defenses to such policyholders, and made payments to lien
claimants, Fidelity sought indemnification from Integrity. In March 2009, Integrity
sought coverage pursuant to the E&O policy with Lexington and tendered Fidelity's
demand for indemnification to Lexington. Lexington initially provided a defense to
Integrity under a reservation of rights relating to Fidelity's indemnification demands.
In July 2009, however, Lexington denied coverage and ceased providing a defense.
Lexington asserted that Contemporary Flooring's state-court lawsuit, filed in March
2008, related to the same alleged underlying wrongful acts and omissions that gave
rise to the title-insurance claims against Fidelity and Fidelity's indemnification
demands against Integrity. Lexington concluded that coverage was excluded because
the Contemporary Flooring litigation predated the effective date of the E&O policy
and because the facts giving rise to Bower & Bailey-related claims were known to
Integrity when Integrity submitted its April 2008 application to Lexington for the
E&O policy.

             2.     Talley Litigation

      In December 2008, the Talleys filed a lawsuit in Missouri state court against
multiple parties, including Integrity, Fidelity, and the parties who sold the lakefront
property to the Talleys (the "Talley litigation"). Integrity tendered a claim to

                                          -7-
Lexington based upon the Talley's demands, and Lexington denied both coverage and
a defense. Lexington asserted that the alleged wrongful acts and omissions that gave
rise to the claim occurred no later than October 2005, when Integrity provided
services to the Talleys. According to Lexington, because October 2005 preceded the
E&O policy's retroactive date of May 23, 2006, claims arising from those wrongful
acts and omissions were not covered even if the actual claims were made and reported
to Lexington during the policy period. In the present appeal, no party argues that
there should be E&O coverage for the claims arising from the alleged October 2005
wrongful acts involving the Talleys.

             3.     Gassen Litigation

       The Gassens filed a lawsuit in state court against multiple parties, including
Integrity, Fidelity, and the Talleys, in August 2009 (the "Gassen litigation"). The
Gassen litigation subsequently was consolidated with the Talley litigation. In April
2010, three weeks prior to a scheduled trial date for the combined suits, a
representative of Integrity wrote to a claims examiner for Lexington to request a
defense and coverage for the Gassen litigation. Eventually, through counsel,
Lexington denied Integrity's request for coverage of the Gassen litigation.

       Lexington asserted four reasons for denying coverage to Integrity. First,
Lexington asserted that the Gassens did not make their claim against Integrity until
after expiration of the E&O policy's period for making claims. Specifically, the
Gassens filed suit against Integrity and others in August 2009, and the period for
making claims under the E&O policy expired in July 2009. Second, Lexington
argued that the Talley and Gassen claims were not "Related Claims" as defined by the
policy and that the earlier date of notice for the Talley claim should not be imputed
to the Gassen claim. In support of this argument, Lexington asserted that, even
though some of the same property was at issue, the Gassen claim was based on a
separate lawsuit involving a separate real estate transaction and a separate title search

                                          -8-
by Integrity for separate clients. Third, Lexington argued that Integrity did not report
the claim to Lexington during the policy's period for reporting claims. Finally,
Lexington argued that even if coverage might otherwise apply, Integrity provided
notice to Lexington regarding the Gassen claim a mere three weeks prior to trial and
thereby failed to satisfy a contractual obligation from the E&O policy to provide
timely notice and cooperation to Lexington. There is no allegation that Lexington
was made a party to the Gassen litigation or that Lexington had notice of the Gassen
claim prior to Integrity's request for a defense and coverage in April 2010, shortly
before trial.

             4.     Fidelity's Talley and Gassen Litigation

        On June 7, 2010, Fidelity, the Talleys, and the Gassens sued Integrity and
Lexington in Missouri state court to recover for losses relating to Integrity's actions
or omissions in the Talley and Gassen transactions ("Fidelity's Talley and Gassen
litigation"). Fidelity asserted contract and tort claims against Integrity based upon an
agency and indemnification agreement between Fidelity and Integrity. Fidelity also
asserted third-party beneficiary claims against Lexington.

       Lexington moved to dismiss for lack of standing. In successfully resisting
Lexington's motion to dismiss, Fidelity argued that the case did not involve
interpretation of the E&O policy. Specifically, in written arguments to the state court
filed on September 14, 2010, Fidelity argued:

      [T]his is not a declaratory judgment action. [Fidelity's] Petition does not
      cite to the Declaratory Judgment Act, nor does it seek interpretation of
      the E&O policy which provides coverage for [Fidelity's] losses. The
      causes of action asserted against Lexington are well pleaded third-party
      beneficiary claims, requesting damages against Lexington. Thus,
      because [Lexington's motion to dismiss] is premised entirely on the
      Declaratory Judgment Act and there is no such claim asserted in this

                                          -9-
       case, Lexington's motion fails to set forth any valid ground which would
       warrant dismissal.

(Emphasis added).

       The state court denied Lexington's motion to dismiss.

              5.     Fidelity's Bower & Bailey Litigation

       On July 30, 2010, Fidelity sued Bower & Bailey, Integrity, and Lexington in
state court seeking to recover funds Fidelity paid to settle claims under Fidelity's title-
insurance policies on properties in the Bower & Bailey developments ("Fidelity's
Bower & Bailey litigation"). Fidelity asserted third-party beneficiary claims against
Lexington based upon the E&O policy. In response, Integrity again sought coverage
from Lexington relating to claims arising from the Bower & Bailey transactions. On
September 10, 2010, Lexington again denied coverage, stating, "As provided in our
denial of July 10, 2009, Integrity Land Title Company, Inc. was aware of the Claims
and/or Related Claims at least as early as March 17, 2008, prior to the Policy's
inception date . . . ."

              6.     The Present Action

       On November 15, 2010, with the five above-described actions already filed in
state court, and after Fidelity argued to the state court that its third-party beneficiary
claims against Lexington did not seek interpretation of the E&O policy, Lexington
brought the present declaratory judgment action in federal district court. Lexington
named only Integrity as a defendant. Lexington identified all five state-court actions
and sought a declaration that it owed no duty to provide defenses and coverage to
Integrity.

                                           -10-
       On January 12, 2011, Fidelity moved to intervene and filed a proposed
intervenor's complaint. Fidelity argued that it should be allowed to intervene as a
matter of right pursuant to Federal Rule of Civil Procedure 24(a)(2), and as a matter
of permission pursuant to Rule 24(b)(1)(B). In its motion and proposed complaint,
Fidelity asserted unequivocally that, like Lexington, it sought a declaratory ruling as
to the coverage issues Lexington raised in its federal complaint. Lexington, as the
plaintiff in the declaratory judgment action, did not object to Fidelity's proposed
intervention. Integrity stated no position on the matter.

        Fidelity argued that Integrity was required by the terms of agency agreements
with Fidelity to carry E&O insurance and that adverse resolution of Lexington's
declaratory judgment action would impede Fidelity's ability to protect its own
interests. Fidelity also argued that it filed the motion to intervene early in the federal
litigation and that intervention would result in no prejudice to the original parties. On
February 10, 2011, the district court agreed and granted the motion to intervene as a
matter of right pursuant to Rule 24(a)(2).

       A few months later, on April 20, 2011, Fidelity reversed course and moved to
stay the federal proceedings. In its motion to stay, Fidelity argued that it did not want
the federal court to resolve the coverage disputes. Fidelity asserted that the coverage
disputes were raised in the final two underlying state-court lawsuits (Fidelity's Talley
and Gassen litigation and Fidelity's Bower & Bailey litigation) and that the federal
court should allow those state courts to resolve coverage issues.

      Lexington resisted the motion to stay. Lexington argued that Fidelity should
be estopped from seeking a stay after intervening with a complaint demanding
resolution of the coverage issues. Lexington also resisted the motion based upon
standards generally applicable for staying federal declaratory judgment actions in the
face of earlier-filed state-court actions.

                                          -11-
       The district court denied Fidelity's motion for a stay under the standards for
abstention in declaratory judgment actions. The district court referenced, but did not
rely upon, Lexington's theory of estoppel. Lexington and Fidelity then filed cross-
motions for summary judgment. The district court granted summary judgment to
Lexington, finding no duty to provide coverage or defenses for any of the claims and
holding: (1) Lexington did not receive notice of the Gassen claim until after the
period for reporting Claims under the E&O policy had expired; (2) the Gassen claim
was not asserted against Integrity until after the policy's coverage period had expired;
(3) the Gassen claim was not a Related Claim entitled to the benefit of the earlier
notice date for the Talley claim; (4) even if the Gassen claim had otherwise been
covered by the policy, notice to Lexington shortly before trial violated a condition of
the policy requiring timely notice and cooperation; (5) coverage for claims related to
the Bower & Bailey transactions was precluded by several different exclusions in the
policy because (a) the Contemporary Flooring litigation preceded the policy's
effective date, (b) Integrity failed to disclose the Contemporary Flooring litigation
when applying for the policy and later claims arose from the same operative facts
(prior pending litigation exclusion), (c) Integrity had knowledge of the underlying
disputes prior to the policy's effective date (prior-knowledge exclusion), and (d) the
claims were based upon Integrity's failure to obtain lien waivers (lien-waiver
exclusion); and (6) Fidelity was not a third-party beneficiary of the E&O policy.

       Fidelity now appeals the denial of its motion for a stay. Fidelity also appeals
the grant of summary judgment in favor of Lexington, but only as to the claims
related to the Bower & Bailey transactions and as to the determination that Fidelity
is not a third-party beneficiary of the E&O policy.

                                         -12-
II.   Discussion

      A.     Motion to Stay

             1.     Standards Applicable to Staying Declaratory Judgment Actions

         "Generally, a federal district court must exercise its jurisdiction over a claim
unless there are exceptional circumstances for not doing so." Scottsdale Ins. Co. v.
Detco Indus., Inc., 426 F.3d 994, 996 (8th Cir. 2005) (citation and internal quotation
marks omitted); see Colo. River Water Conservation Dist. v. United States, 424 U.S.
800, 817–18 (1976) (stating that federal courts have a "virtually unflagging obligation
. . . to exercise the jurisdiction given them"). This general rule, however, yields to
practical considerations and substantial discretion when the federal complaint seeks
a declaration pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a). Wilton
v. Seven Falls Co., 515 U.S. 277, 282 (1995) ("[D]istrict courts possess discretion in
determining whether and when to entertain an action under the Declaratory Judgment
Act, even when the suit otherwise satisfies subject matter jurisdictional
prerequisites."). The Supreme Court has described discretion under the Declaratory
Judgment Act as "unique and substantial," id. at 286, emphasizing that the Act
"provides that a court 'may declare the rights and other legal relations of any
interested party seeking such declaration.'" Id. (quoting 28 U.S.C. § 2201(a) (1988
ed., Supp. V)). The Court characterized this language as a "textual commitment to
discretion" that "distinguish[es] the declaratory judgment context from other areas of
the law in which concepts of discretion surface." Id. at 286–87.

      The full scope of a district court's discretion to grant a stay or abstain from
exercising jurisdiction under the Declaratory Judgment Act differs depending upon
whether a "parallel" state court action involving questions of state law is pending.
Scottsdale, 426 F.3d at 999. Where such an action is pending, a district court enjoys
broad discretion. Id. at 997. This broad discretion is to be guided by considerations

                                          -13-
of judicial economy, Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942),
by "considerations of practicality and wise judicial administration," Wilton, 515 U.S.
at 288, and with attention to avoiding "[g]ratuitous interference" with state
proceedings, Brillhart, 316 U.S. at 495.

       Where no such parallel state action is pending, discretion to abstain or grant a
stay still exists, but that discretion is less broad and is to be exercised according to a
six factor test that our Circuit has adopted:

      (1) whether the declaratory judgment sought "will serve a useful purpose
      in clarifying and settling the legal relations in issue";
      (2) whether the declaratory judgment "will terminate and afford relief
      from the uncertainty, insecurity, and controversy giving rise to the
      [federal] proceeding";
      (3) "the strength of the state's interest in having the issues raised in the
      federal declaratory judgment action decided in the state courts";
      (4) "whether the issues raised in the federal action can more efficiently
      be resolved in the court in which the state action is pending";
      (5) "whether permitting the federal action to go forward would result in
      unnecessary 'entanglement' between the federal and state court systems,
      because of the presence of 'overlapping issues of fact or law'"; and
      (6) "whether the declaratory judgment action is being used merely as a
      device for 'procedural fencing'—that is, 'to provide another forum in a
      race for res judicata' or 'to achiev[e] a federal hearing in a case otherwise
      not removable.'"

Scottsdale, 426 F.3d at 998 (alteration in original) (quoting and adopting a test
articulated by the Fourth Circuit in Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139
F.3d 419, 422 (4th Cir. 1998) (per curiam)).

      The determination of whether suits are parallel, therefore, is a threshold
determination for identifying the extent of a district court's discretion to grant a stay.
"Suits are parallel if 'substantially the same parties litigate substantially the same

                                          -14-
issues in different forums.'" Id. at 997 (quoting New Beckley Mining Corp. v. Int'l
Union, United Mine Workers, 946 F.2d 1072, 1073 (4th Cir.1991)). The Supreme
Court has described such suits as presenting "the same issues, not governed by federal
law, between the same parties." Brillhart, 316 U.S. at 495. These descriptions are
necessarily imprecise given the wide array of issues—and varying articulations of
similar issues—that may arise in arguably related litigation. As a functional matter,
though, state proceedings are parallel if they involve the same parties or if the same
parties may be subject to the state action and if the state action is likely to fully and
"satisfactorily" resolve the dispute or uncertainty at the heart of the federal
declaratory judgment action. Id. at 495 (describing the inquiry as "whether the
questions in controversy . . . can better be settled in the proceeding pending in state
court"). We may therefore consider the likelihood that a state court will resolve the
issues later presented in federal court, and we may also consider the likely
completeness of any such state-court resolution when assessing whether the earlier-
filed actions involve "substantially the same issues." Scottsdale, 426 F.3d at 997
(citation and internal quotation marks omitted).

       We review for abuse of discretion the district court's denial of Fidelity's motion
for a stay in this declaratory judgment action. Cont'l Cas. Co. v. Advanced Terrazzo
& Tile Co., 462 F.3d 1002, 1006 (8th Cir. 2006). We review de novo "whether
parallel proceedings were pending in state court at the time [Lexington] brought the
declaratory judgment action." Id.

             2.     Application to the Present Case

       Lexington argues on appeal that the district court found the state-court actions
to be not parallel to the federal declaratory judgment action and properly exercised
its limited discretion when applying the Scottsdale factors. Lexington also argues
that Fidelity should be judicially estopped from seeking a stay after (1) intervening
via an intervenor's complaint and claiming a desire to resolve the coverage issues in

                                          -15-
federal court; (2) previously arguing in state court that the state actions did not
involve a coverage question; and (3) inducing Lexington not to resist Fidelity's
proposed intervention. Fidelity argues that judicial estoppel is inapplicable on the
present facts. Fidelity also argues the district court failed to make a parallelism
determination and improperly focused on all five prior actions when only the two
prior suits filed by Fidelity involved coverage disputes. Fidelity argues that, as a
result of the absence of a parallelism determination, the district court misconstrued
the full scope of its discretion to grant a stay, erroneously applied the Scottsdale
factors rather than the Wilton framework, and, ultimately, erred in denying the stay.

        The district court characterized the issue in the present action as "whether
Lexington has a duty to defend and indemnify Integrity in three groups of claims, i.e.,
the Contemporary Flooring claims, the Talley claims, and the Gassen claims."
Regarding the Contemporary Flooring litigation, the court noted that eighty-one
defendants were named in the case and Lexington was not a party to the suit. The
court concluded that the Contemporary Flooring litigation would not afford an
opportunity to resolve "the uncertainty of Lexington's duties to Integrity." The
district court also noted that Fidelity already had settled the Talley litigation and the
Gassen litigation. The Talley litigation and the Gassen litigation, therefore, could not
be deemed parallel proceedings at the time the district court ruled on the motion for
a stay. There is no allegation that the settlements in the Talley litigation and Gassen
litigation somehow defined or touched upon Lexington's duties towards Integrity.

       Finally, in reference to Fidelity's Talley and Gassen litigation and Fidelity's
Bower & Bailey litigation, the district court noted that Fidelity had only identified
Lexington as a defendant in reference to third-party beneficiary claims. The court
described Fidelity's claims against Integrity as alleging "breach of contract,
negligence, negligent misrepresentation, negligent concealment, indemnification,"
and "breach of agency agreement." The court concluded that the suits brought by
Fidelity were separate actions in two different judicial districts involving many

                                          -16-
separate issues that would not necessarily resolve the uncertainty of Lexington's
duties to Integrity. The district court concluded:

       Moreover, the issues about that coverage can be more efficiently
       resolved in this court than in the two state court actions [filed by
       Fidelity], each in a different judicial circuit, in which the coverage issue
       is but one of many issues. And, in the Contemporary Flooring case,
       Lexington is not even a defendant. Thus, the uncertainty of Lexington's
       duties to Integrity in that case would remain even after the other two
       state court actions have been resolved. Permitting this case to proceed
       would not result in an unnecessary entanglement of the federal and state
       court systems, nor has there been any showing that this action was
       initiated as a device for procedural fencing. Indeed, any such fencing
       could arguably be attempted to be erected by Fidelity, who intervened
       on the grounds that, inter alia, no prejudice would result from its entry
       into this litigation and who now urges a stay of the litigation until two
       state court actions with some of the same issues and with no trial date
       have been resolved.

(Emphases added).

       We interpret the district court's analysis as reflecting a determination that the
state and federal proceedings were not parallel: the district court identified the five
earlier-filed state-court lawsuits and concluded that the first three state-court lawsuits
were dissimilar to the federal action. The court then identified differences between
the remaining state and federal litigation and proceeded to analyze the propriety of
the stay in a manner consistent with the six-factor Scottsdale test.4

      4
        To the extent Fidelity argues that the district erred by considering all five prior
lawsuits when assessing the propriety of a stay, we reject Fidelity's arguments. As
quoted with emphasis above, the court focused its analysis on Fidelity's two state-
court actions. We agree with the district court that the Contemporary Flooring
litigation would not resolve coverage issues as between Lexington and Integrity and

                                           -17-
       Keeping in mind the functional rationale for using different standards when
parallel proceedings exist, we also agree that Fidelity's two earlier-filed actions were
not parallel to the present case. Even though Fidelity, Integrity, and Lexington were
all parties to Fidelity's two state-court actions, it does not seem likely that those
actions, as pled and argued by Fidelity, would fully or satisfactorily resolve the
uncertainty surrounding Lexington's duties toward Integrity. Resolution of Fidelity's
tort and contract claims against Integrity would demand no interpretation of the E&O
policy nor clarify for Lexington whether it owed a defense to Integrity in Fidelity's
two lawsuits (or if it owed Integrity reimbursement of any defense costs associated
with the other state-court actions).

       Further, the possible state-court resolution of Fidelity's third-party beneficiary
claims against Lexington could occur in several different ways, many of which would
not require the state court to address Lexington's duty towards Integrity. For
example, the state court could simply view the contractual relationship between
Lexington and Integrity as not supporting Fidelity's claim to third-party beneficiary
status. Such an approach would involve an analysis of the insurance contract (and
potentially, additional evidence) to determine Lexington's and Integrity's intentions
regarding third-party beneficiaries. See, e.g., L.A.C. ex rel. D.C. v. Ward Parkway
Shopping Ctr. Co., 75 S.W.3d 247, 260 (Mo. 2002) (en banc) (analyzing the "four
corners of the contract" to determine whether the parties intended to benefit a third
party). If a state court were to take this approach, it would leave untouched the

would not touch upon Lexington's duty to defend Integrity. We also agree that the
separate Talley litigation and Gassen litigation, which had been settled before the
district court ruled on the motion for a stay, were not pending parallel proceedings.
To the extent Fidelity takes issue with the district court's failure to use the term
"parallel" expressly in its written order, our review of the threshold parallelism
determination is de novo, and we agree that the proceedings were not parallel. Cont'l
Cas. Co., 462 F.3d at 1006.

                                          -18-
questions of coverage and defenses at issue in the present case. Given the presence
of language in the E&O policy disclaiming third-party rights against Lexington, it
seems unlikely that a state court would find it necessary to address coverage issues
as between Integrity and Lexington in order to resolve Fidelity's claim to third-party
beneficiary status under the E&O contract.

       In this regard, and as discussed further below, we find Fidelity's own arguments
in Fidelity's Talley and Gassen litigation to be instructive. Fidelity expressly argued
to the state court that its third-party beneficiary claims against Lexington did not
require the state court to interpret coverage issues as between Lexington and
Integrity.5 Notwithstanding this argument, it is possible that state-court resolution of
the third-party beneficiary claims could involve clarification of Lexington's duties
towards Integrity. For example, a court could address a third-party beneficiary claim
by assuming such status exists but resolving coverage issues in a manner so as to
resolve the third-party claim. See, e.g., Morelock-Ross Props., Inc. v. English Vill.
Not-for-Profit Sewer Corp., 308 S.W.3d 275, 278 n.6 (Mo. Ct. App. 2010) (assuming
third-party beneficiary status and resolving the case by interpreting the underlying
contract). Such an analysis would clarify Lexington's duty to provide coverage to
Integrity, if not its separate duty to provide defenses. We cannot say, however, that
such an analysis or resolution was likely to take place in the underlying state-court
actions given the express contractual language in the E&O policy denying the
intention to vest third parties with the ability to hale Lexington into court. We also

      5
        Fidelity made factual and legal assertions in its complaint that were
interpretations of the E&O policy. Fidelity, however, did not make demands for relief
that necessarily required interpretation of the Lexington's duties towards Integrity.
Our references to Fidelity's arguments in motions before the state court should not be
viewed as a determination that Fidelity is judicially estopped from making any of its
present arguments in federal court. We merely refer to Fidelity's shifting positions
to illustrate that it remained uncertain whether the issues raised in the declaratory
judgment action were likely to be addressed in the pending state court actions.

                                         -19-
do not see any suggestion in the state-court pleadings or in the parties' briefs that
these actions would have clarified Lexington's duty to defend Integrity in the various
underlying proceedings.

       Although the same parties were involved in the federal action and in Fidelity's
state-court actions, and although some of the same issues could have arisen, we do
not believe it is likely that the state-court actions actually would clarify and resolve
the issues presented in federal court. We therefore believe the district court correctly
determined those actions were not parallel.

        Turning to application of the Scottsdale factors, 426 F.3d at 998, we find no
abuse of discretion in the district court's denial of Fidelity's motion for a stay. The
first, second, and fourth factors—"whether the declaratory judgment sought will serve
a useful purpose in clarifying and settling the legal relations in issue"; "whether the
declaratory judgment will terminate and afford relief from the uncertainty, insecurity,
and controversy giving rise to the [federal] proceeding"; and "whether the issues
raised in the federal action can more efficiently be resolved in the court in which the
state action is pending," id.—can be viewed as supporting denial of the stay. As
noted by the district court, the state-court cases involved wholly distinct issues
concerning Integrity's potential breaches of contractual and tort duties towards
Fidelity. Resolution of coverage issues in state court was by no means certain and the
presence of multiple unrelated issues made efficient resolution even less certain. In
contrast, the coverage issues regarding the E&O policy were front and center in the
federal case. Further, no party suggests that the third factor—"the strength of the
state's interest in having the issues raised in the federal declaratory judgment action
decided in the state courts"—is particularly weighty in the present case.

       Regarding the fifth Scottsdale factor, the same considerations that caused us
to find a lack of parallel proceedings also show that "permitting the federal action to

                                         -20-
go forward" in this instance "would [not] result in unnecessary 'entanglement'
between the federal and state court systems, because of the presence of 'overlapping
issues of fact or law.'" Id.

       Finally—and on the present facts, importantly—the sixth factor strongly
supports the district court's election to exercise jurisdiction and deny Fidelity's motion
for a stay. Lexington was sued in state court in different judicial districts several
times. The Talleys named Lexington as a defendant in the Talley litigation in
December 2008. Next, in August 2009, the Gassens named Lexington as a defendant
in the Gassen litigation. In June and July 2010, Fidelity named Lexington as a
defendant in Fidelity's Bower & Bailey litigation as well as Fidelity's Talley and
Gassen litigation. Then, on September 14, 2010, Fidelity interpreted its own state-
court complaint and represented that its complaint "does not cite to the Declaratory
Judgment Act, nor does it seek interpretation of the E&O policy which provides
coverage for [Fidelity's] losses." (Emphasis added).

       Approximately two months later, in November 2010, Lexington filed the
present action. Consequently, we do not view Lexington as having used the
declaratory judgment action "merely as a device for procedural fencing—that is, to
provide another forum in a race for res judicata or to achieve a federal hearing in a
case otherwise not removable." Scottsdale, 426 F.3d at 998 (citations and internal
quotation marks omitted). Rather, Lexington's entry into federal court appears to
have been a much-delayed choice to seek a federal declaratory judgment in fairly
direct response to Fidelity's assertion that the same coverage issues were not present
in the state-court actions. This response occurred not in the context of one earlier-
filed suit but in the context of ongoing litigation taking place in multiple districts,
addressing Lexington's duties only in piecemeal fashion (if at all), and involving
disparate issues. Such a response does not appear to be an inappropriate attempt to

                                          -21-
thwart the first-filer's choice of forum nor does it appear to be an improper race for
res judicata or procedural fencing.

        Fidelity cites several cases for the proposition that district courts abuse their
discretion when refusing to abstain or issue stays in situations like this. Fidelity's
cases simply do not control on the present facts. Further, Fidelity fails to
acknowledge the scope of the district court's discretion. Our review of cases
addressing abstention in the context of the Declaratory Judgment Act reveals that it
is relatively uncommon for reviewing courts to find discretion abused when a district
court elects to exercise jurisdiction. See Capitol Indem. Corp. v. Haverfield, 218 F.3d
872, 877 (8th Cir. 2000) (Loken, J., dissenting) (discussing the rarity of appellate
courts finding abuses of discretion where district courts exercise jurisdiction under
the Declaratory Judgment Act). And when such abuses are found, there typically are
distinguishing factors not present in this case.

       In Haverfield, for example, we held that a district court abused its discretion
by denying a motion to stay a declaratory judgment action filed by an insurer seeking
a coverage determination in the face of parallel proceedings. There, we described the
parallel proceedings as involving "the same parties, the same issue, the same
insurance policies, and the same arguments." Id. at 875. Haverfield involved no
suggestion that the state-court plaintiff had represented to the state court that it was
not seeking a coverage determination. Further, in finding an abuse of discretion, we
carefully examined the underlying substantive argument and emphasized that it
involved an unsettled question of state law subject to a split in the state's own courts.
We determined that on such facts and in the face of an intrastate split, it was prudent
to allow the state courts to resolve their own split of authority rather than having a
federal district court issue a nonprecedential interpretation of the issue. Accordingly,
an exercise of federal jurisdiction in Haverfield would have been a highly inefficient

                                          -22-
incursion by the federal courts into an area of state law that required clarification by
the state's own courts.

       In BASF Corp. v. Symington, 50 F.3d 555, 559 (8th Cir. 1995), also cited by
Fidelity, we held it was an abuse of discretion for a district court to entertain a
declaratory judgment action in the face of an earlier-filed state complaint seeking
substantive relief. Symington, however, preceded the Supreme Court's decision in
Wilton and also preceded our decision in Scottsdale. In Symington, our decision
rested largely on a determination that the declaratory judgment plaintiff had
participated in inappropriate forum shopping merely to thwart the state-court
plaintiff's choice of forum and to invoke a more favorable statute of limitations. We
stated that "[d]eclaratory judgment actions may on occasion merit 'a closer look' to
ensure that the declaratory plaintiff is not motivated by forum-shopping concerns."
Id. at 558 (quoting Nw. Airlines, Inc. v. Am. Airlines, Inc., 989 F.2d 1002, 1007 (8th
Cir. 1993)). And we concluded that suits "'for declaratory judgment aimed solely at
wresting the choice of forum from the natural plaintiff will normally be dismissed.'"
Id. (quoting Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 10 F.3d 425, 431 (7th Cir.
1993)). Because we determined in Symington that the declaratory judgment plaintiff
had participated in inappropriate forum shopping to thwart the state-court plaintiff's
choice of forum, and because we find no improper procedural fencing or forum
shopping in the present case, Symington does not persuade us that the present case
involves an abuse of discretion.

        In Royal Indemnity Co. v. Apex Oil Co., 511 F.3d 788, 796 (8th Cir. 2008), we
held that a district court did not abuse its discretion by abstaining after an insurance
company brought a declaratory judgment action seeking clarification of the rights of
multiple insurance companies regarding environment contamination. Again, Apex
Oil is unlike the present case in that there is no suggestion in Apex that the state-court
plaintiff had disclaimed a desire to resolve the same issues in state court. Even if the

                                          -23-
facts of Apex Oil could be deemed analogous to the present facts, however, our
holding that the district court in Apex Oil did not abuse its discretion by abstaining
in no way implies that future courts necessarily abuse their discretion by refusing to
abstain. See City of Jefferson City, Mo. v. Cingular Wireless LLC, 531 F.3d 595,
604–05 (8th Cir. 2008) (stating that even though Brillhart holds that district courts
with jurisdiction are "not required to exercise that jurisdiction, . . . Brillhart does not
suggest . . . that the district court . . . was required to abstain" (internal citation
omitted)).

       In Cincinnati Indemnity Co. v. A&K Construction Co., 542 F.3d 623, 624 (8th
Cir. 2008), we held that a district court erred by finding that it lacked jurisdiction to
address a workers compensation claim where diversity jurisdiction existed. We also
held, however, that in light of a pending state administrative action before the
Missouri Department of Labor and Industrial Relations and a pending declaratory
judgment action in state court, the district court should have abstained to allow "the
state proceedings . . . to resolve the issue . . . which [would] result in uniform
decisions within the state's statutory scheme." Id. at 625. In reaching this conclusion,
we also noted that the parties and issues were identical and we expressly avoided
addressing any questions of state administrative exhaustion. Id. Here, no such
complicating factors exist.

       The present case is more akin to Continental Casualty Co. v. Advance Terrazzo
& Tile Co., 462 F.3d 1002, 1007 (8th Cir. 2006), where we held a district court did
not abuse its discretion by refusing to abstain. The "parallel proceeding" question
was simpler in Continental Casualty than in the present case because, unlike the
present case, the insurance company had not been named in the underlying state-court
proceedings. Still, in applying Scottsdale, we "discern[ed] no improper procedural
maneuvering by the insurance companies," and no strong state interests nor improved
efficiencies demanding abstention. Id.

                                           -24-
       In summary, the district court enjoys discretion when applying Scottsdale, and
we conclude that the district court did not abuse its discretion in denying the motion
for a stay.6

      B.     Summary Judgment

       Fidelity's appeal from the adverse grant of summary judgment is limited.
Fidelity conceded prior to the district court's ruling that the E&O policy provided no
coverage for the Talley claim. And Fidelity is no longer seeking to recoup its losses
related to the Gassen claim. Further, Fidelity does not argue that coverage exists
specifically for the actual claims raised in the March 2008 complaint filed by
Contemporary Flooring in the Contemporary Flooring litigation (which preceded the
effective date of the E&O policy). Rather, Fidelity argues that its own later demand
upon Integrity for indemnification of sums paid to settle claims made on the Bower
& Bailey title-insurance policies (as eventually expressed in Fidelity's Bower &
Bailey litigation) is a separate claim that the district court mistakenly conflated with
the Contemporary Flooring litigation. Fidelity argues that the district court erred in
holding that the E&O policy provided no coverage for the later claim stemming from
Fidelity's indemnification demand upon Integrity. We review a grant of summary
judgment de novo. Carmody v. Kan. City Bd. of Police Comm'rs, 713 F.3d 401, 404
(8th Cir. 2013).

      Although the district court and the parties address several different competing
theories regarding coverage and potentially applicable exclusions, we find it
necessary to address only two exclusions in the E&O policy: the prior-knowledge

      6
      Because we conclude it was proper for the district court to deny Fidelity's
motion to stay these federal proceedings, we need not address Lexington's alternative
argument concerning judicial estoppel.

                                         -25-
exclusion and the lien-waiver exclusion. We hold that both exclusions, independently
and in the alternative, preclude coverage for the claim as articulated by Fidelity on
appeal. In reaching this holding, we assume without deciding that Fidelity is correct
when it argues that the Contemporary Flooring litigation and Fidelity's subsequent,
but factually intertwined, indemnification demand upon Integrity may be treated as
separate "Claims" under the E&O policy. We also assume without deciding that
coverage might otherwise extend to the narrow claim as articulated by Fidelity on
appeal, and we assume no other exclusions apply to defeat coverage.

             1.    The Prior-Knowledge Exclusion

      The E&O policy provided:

      This policy shall not apply to any Claim
            ...
      Based upon or arising out of any alleged act, error, omission or
      circumstance likely to give rise to a Claim that an Insured had
      knowledge of prior to the effective date of this policy. This exclusion
      includes, but is not limited to any prior Claim or possible Claim
      referenced in the insured's application.

(Emphasis added). In addition, the application asked for disclosure of information
similar to information referenced in the above-quoted prior-knowledge exclusion:

      15.    Does any person or entity proposed for insurance have knowledge
             of any act, error or omission which might give rise to a claim(s)
             under the proposed policy?

In the application, Integrity's president answered "no" to question 15. The
application provided, "If a policy is issued, the application is attached to and made

                                        -26-
a part of the policy so it is necessary that all questions be answered in detail."
Finally, the application stated:

      Applicant and Insurer agree that with respect to Questions 14, 15 and 16
      above, that if such knowledge . . . exists, then any litigation, claim,
      action, proceeding, investigation, or occurrence arising out of, in
      connection with, relating to or which is a part of (I) such known acts,
      errors and omissions . . . is excluded from any coverage which may be
      afforded on the basis of this application.

       The effective date of the policy was April 15, 2008, and the application was
dated April 1. On March 13, Integrity received calls from homeowners in the Bower
& Bailey developments reporting that they were being served with liens, and Integrity
forwarded the calls to Fidelity. Still in March, Integrity forwarded to Fidelity via
email fifteen lien claims that homeowners had received. On March 17, Contemporary
Flooring served its state-court complaint upon Integrity. The complaint described in
detail Bower & Bailey's failure to pay Contemporary Flooring for work performed on
many properties and Contemporary Flooring's filing of mechanics liens on those
properties. The complaint asserted rights in those properties, by virtue of the liens,
superior to the titleholders and sought damages. A newspaper article published in
March 2008 regarding the failure of the Bower & Bailey quoted Integrity's president
as saying property owners should be contacting their title insurers and that most
claims should be covered by title insurance.

       In addition, Integrity's president stated during his own Rule 30(b)(6) deposition
that he received a request from Fidelity for a copy of an indemnification agreement
between Integrity and Bower & Bailey in March 2008. And the same request was
referenced in an email between Integrity's president and his secretary.
Notwithstanding this request and the naming of Integrity as a defendant in the

                                         -27-
Contemporary Flooring litigation, Integrity's president testified that he did not believe
Integrity was likely to face liability regarding the Bower & Bailey properties.

       Finally, a senior vice president/regional major-claims attorney for Fidelity who
served as Fidelity's Rule 30(b)(6) designee described the entities likely to be impacted
by the information Integrity had received prior to policy inception. He explained that
a firm like Integrity, upon discovering that subcontractors had not been paid and lien
waivers had not been obtained, would have known that its clients and its title-insurer
underwriter were "in trouble":

      Q.     Because if I understand correctly, if I'm a land title agent like
             Integrity and I get notice or information that subs on a project for
             which I'm doing work as a title agent aren't being paid, then that
             could mean big problems, can't it?
      A.     If I'm getting notice from some source.
      Q.     The subs themselves?
      A.     Then yes, absolutely it can be a problem.
      Q.     Because I've got to protect my buyer. I've got to protect myself.
             I've got to protect my underwriting company from claims; isn't
             that correct?
      A.     Your duties are going to run severalfold there. You're certainly
             going to want to—since you're acting as agent for the buyer, yes,
             you want to protect your buyer. You're acting as the agent for the
             company with your ear to the ground, then you want to protect the
             company. So those are just two of the people that certainly you
             want to watch our for.
      ...
      Q.     [T]he truth of the matter is if a land title agent like Integrity gets
             notice that sub[contractors] aren't being paid on a given project,
             and that agent has worked—the title agent—for a bunch of sales
             within that project, then the title agent—what happens is the
             antennae of concern goes up. I could be in trouble, my clients the
             buyers could be in trouble, my underwriter could be in trouble.
             True?

                                          -28-
      A.     Yes.
      Q.     Claims could be made against some or all of us. True?
      A.     Yes.

        Based on the foregoing, including the opinion of Fidelity's own designee
regarding the meaning and impact of such knowledge within the industry, we have
little trouble concluding that Integrity had actual knowledge of facts that could
possibly give rise to lien claims against property owners, title-insurance claims
against Fidelity, and, ultimately, indemnification claims against Integrity. Based on
the language of the policy's prior-knowledge exclusion, however, the questions we
must answer are (1) whether such known facts demonstrated that the possible future
indemnification claim was "likely," and (2) based upon the application, whether such
known facts demonstrated that such a future claim "might" be filed.7

       Fidelity argues that information Integrity possessed prior to policy inception
did not show that an indemnification claim by Fidelity was "likely." According to
Fidelity, nothing had taken place at the time of policy inception to finally establish
Fidelity's own liability on its title-insurance policies. And by extension, nothing had
happened to give rise to a potential indemnification claim against Integrity. In this
regard, we believe that Fidelity is attempting to read the terms "likely" and "might"
out of the policy and application, respectively, and demanding a degree of certainty
inconsistent with the policy language. Simply put, if we were to adopt Fidelity's

      7
        As noted above, the application was expressly incorporated into the policy.
It is not clear to us why the policy application and separate exclusion use different
terms. We believe, however, that the term "might" (as used in the application) under
any plain and reasonable interpretation indicates a requirement for lesser degree of
certainty than the term "likely" (as used in the separate exclusion). We apportion the
burden of proof to Lexington to prove the applicability of the exclusion contained in
the application. Stark Liquidation Co. v. Florists' Mut. Ins. Co., 243 S.W.3d 385, 394
(Mo. Ct. App. 2007).

                                         -29-
position, the prior-knowledge exclusion would exclude only coverage for ripened
claims that had already been made or were certain to be made as of the time of policy
inception. We reject this position as an unreasonable interpretation of the terms
"likely" and "might."

       In support of its position, Fidelity cites Freemont Indemnity Co. v. Lawton-
Byrne-Bruner Insurance Agency Co., 701 S.W.2d 737, 741 (Mo. Ct. App. 1985). In
Freemont, the Missouri Court of Appeals held that a similar exclusion did not apply,
even though an applicant for an E&O insurance policy knew prior to policy inception
that one of its own clients had sent a letter to state regulators complaining about the
applicant's provision of services. The subject of the letter later ripened into a lawsuit,
and the E&O insurer attempted to invoke the prior-knowledge exclusion.
Importantly, the Missouri Court of Appeals noted that the state regulators had
communicated with the applicant and that the applicant "considered the matters raised
in the [client's letter to regulators] to be closed." Id. at 743. Based largely on the
determination that the applicant reasonably believed the matter was settled, the
Missouri Court of Appeals held:

       "[K]nowledge of any circumstance which might result in a claim," as
       stated in [the E&O] policy, must mean knowledge more reasonably
       substantial and certain than [the applicant's] knowledge in the present
       case which was limited to an understanding that it had successfully
       responded to the [client's] letter of inquiry to the [state regulators] and
       that the matter was fully resolved.

Id.

       Here, in contrast, the timing of Integrity's receipt of information about its own
potential liability and Fidelity's potential liability in no similar way excuses Integrity's
failure to make a disclosure. It is not reasonable to conclude that Integrity could have

                                           -30-
believed that the matter was settled or unlikely to result in claims against Integrity.
Rather, the entire situation with the Bower & Bailey's failure—described by
Integrity's president as a "debacle"—was unfolding contemporaneously with
Integrity's application to Lexington for the E&O policy. The present case, therefore,
contains no possibility of a finding like that in Freemont which held, essentially, that
the later-filed lawsuit was a surprise to the insured based upon the knowledge
possessed at policy inception. Here, Integrity's president had stated publicly that title
insurance would cover most lien claims, he knew that claims would be made against
Fidelity, and he knew that his firm had failed to protect Fidelity and landowners.

       Fidelity also relies upon Sager v. St. Paul Fire & Marine Insurance Co., 461
S.W.2d 704, 707 (Mo. 1971). In Sager, the issues presented were not similar to the
present case. There, the policy at issue was an occurrence-based attorney-malpractice
policy rather than a claims-made policy. The court had to determine whether an
attorney had given notice "[a]s soon as practicable" after "receiving information as
to any occurrence covered by" his malpractice insurance policy. Id. at 706 (internal
quotation marks omitted). The issue before the court was whether an "occurrence"
had taken place at various early points during the attorney's ill-fated representation
of a client or whether an occurrence did not take place until later, when the
representation eventually culminated in the attorney missing a statutory deadline.
The issue was not whether a prior-knowledge exclusion applied nor was the state
court in Sager called upon to determine the degree of certainty required to make such
an exclusion applicable. The Missouri Supreme Court concluded simply that,
notwithstanding the lawyer's knowledge that a deadline would be missed, the
"occurrence" did not actually take place until the deadline passed. Id. at 707. We
decline the invitation to rely upon Sager's specific interpretation of the term
"occurrence" in an occurrence-based policy to answer the unrelated question of how
to interpret the prior-knowledge exclusion in a claims-made policy.

                                          -31-
       Because we conclude the information Integrity undisputedly possessed at the
policy's inception showed that the future indemnification demand by Fidelity was
"likely," we conclude Lexington has established that the prior-knowledge exclusion
applies.

              2.     Lien-Waiver Exclusion

       Lexington's E&O policy excluded coverage for "any claim arising out of any
release of funds without receipt of . . . appropriate waivers or releases of liens from
any contractor, subcontractor, or materials or service provider[.]" Lexington did not
assert this exclusion as a basis for denying coverage when Integrity tendered
Fidelity's indemnification demands to Lexington. As a result, Fidelity argues
Lexington is estopped from asserting the lien-waiver exclusion to defeat coverage.
Fidelity also presents a causation-type argument, asserting that the exclusion is
inapplicable because Fidelity's indemnification claims do not arise out of Integrity's
failure to secure lien waivers or Integrity's failure to include exclusions for future lien
claims in the title-insurance policies sold to homeowners in the Bowers & Bailey
development. According to Fidelity, the claims arise out of Bower & Bailey's failure
to pay subcontractors.

      Regarding the estoppel argument, Fidelity overstates the extent to which an
insurer in Missouri is limited by the arguments first advanced to deny coverage.
Missouri law is clear: an insurer cannot deny coverage on one ground, induce
prejudicial reliance by the insured, and then later assert a new and inconsistent
ground for the denial of coverage. Brown v. State Farm Mut. Auto. Ins. Co., 776
S.W.2d 384 (Mo.1989) (en banc); see Cedar Hill Hardware & Const. Supply, Inc. v.
Ins. Corp. of Hannover, 563 F.3d 329, 342 (8th Cir. 2009) ("Estoppel applies only
where an insurer raised inconsistent defenses and, by raising inconsistent defenses,
caused prejudice to the insured.") The present lien-waiver exclusion is not
inconsistent with the prior-knowledge exclusion, and Fidelity does not explain how

                                           -32-
the failure to raise the lien-waiver exclusion earlier can be viewed as prejudicial.
Further, there is no suggestion in the present case that Lexington expressly waived
any defenses. Simply put, nothing in Missouri law or the present facts precludes
Lexington from adding the separate and not-inconsistent lien-waiver exclusion to
support its denial of coverage.

       Regarding the causation arguments, Fidelity takes too narrow a view of
causation. Fidelity is correct when it asserts that the failure of the general contractor
to pay subcontractors was a cause of Fidelity's eventual liability on the title-insurance
policies (and by extension a cause of Fidelity's demand upon Integrity for
indemnification). It is also true, however, that Fidelity's liability was caused by
Integrity issuing the underlying title-insurance policies without including exclusions
for later-filed mechanics liens and by Integrity's failure to secure lien waivers before
releasing funds or issuing title commitments.

        As noted by the district court, Fidelity's complaint in its Bower & Bailey
litigation cited as negligence on Integrity's part the following acts: (1) failure to
obtain lien waivers; (2) failure to place funds into escrow; (3) failure to apply funds
to unpaid contractors; and/or (4) failure to postpone closing pending payment to
contractors. In the same complaint, Fidelity alleged these acts were the direct and
proximate causes of damages to Fidelity in the form of title-insurance claims
defended and paid by Fidelity. The Fidelity indemnification claims, therefore, were
claims "arising out of any release of funds without receipt of . . . appropriate waivers
or releases of liens from any contractor, subcontractor, or materials or service
provider[.]"

       Because we conclude Lexington neither waived nor is estopped from asserting
the lien-waiver exclusion, and because we conclude the lien-waiver exclusion applies,
we also affirm the determination of no coverage on this alternative basis.

                                          -33-
III.   Conclusion

       The district court did not abuse its discretion in denying the motion for a stay.
In addition, the district court properly granted summary judgment regarding Fidelity's
indemnification claims. Because no party appeals the underlying rulings regarding
the lack of coverage for any other claims, we do not consider the propriety of the
district court's election to address third-party beneficiary status nor its substantive
determination as to that issue.

       We affirm the judgment of the district court.
                       ______________________________

                                         -34-