The federal district court, district of Hawaii, recently granted the insured's motion for remand. Catholic Foreign Mission Society of Am., Inc. v. Arrowood Indem. Co., Civ. No. 14-00420, Order Granting Plaintiff's Motion for Remand and Denying Defendants' Motion to Dismiss or Transfer (D. Haw. Dec. 30, 2014) [Order here]. [Full disclosure - our office represents the insured, Maryknoll].
Maryknoll was sued in several lawsuits filed in Hawaii state court by victims of alleged sexual abuse occurring as far back as the 1950s by members of the clergy. Maryknoll was insured during these periods under liability policies issued by various carriers. The successor of Royal Globe Insurance Company, Arrowood Indemnity Company, agreed to defend some of the underlying lawsuits, but declined to defend others. The Travelers Companies, Inc. refused to defend.
Arrowood filed a complaint in the Southern District of New York for a declaratory judgment on its coverage obligations to Maryknoll. Thereafter, Maryknoll sued Arrowood and Travelers in Hawaii state court. (Travelers contends it is improperly named as a defendant, and the proper defendant is St. Paul Fire and Marine Insurance Company). Arrowood and Travelers/St. Paul removed to the federal district court in Hawaii. Maryknoll subsequently filed for leave to amend by filing a second amended complaint. The proposed second amended complaint would add additional insurers and seek coverage for additional underlying lawsuits filed against Maryknoll. Further, Maryknoll moved to remand the case back to state court, while Arrowood moved to dismiss the Hawaii coverage action or transfer the case to the Southern District of New York.
The Hawaii federal district court granted Maryknoll's motion for remand and denied Arrowood's motion to dismiss or transfer. The court relied on factors set forth in Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942) and Gov't Employees Ins. Co. v. Dizol, 133 F.ed 1220 (9th Cir. 1998).
The court's order first addressed a dispute among the parties as to whether the underlying state court actions were "parallel" state court proceedings that would weigh in favor of remand. The court agreed with Maryknoll that the underlying cases were sufficiently parallel state court proceedings. If the allegations raised in the underlying proceedings raised any possibility of coverage, the insurers would have a duty to defend. The duty to indemnify also rested on factual determinations made in the underlying state cases.
The court next found that the Brillhart factors favored remand. The coverage action presented no federal question nor was any federal interest at issue. The cases was governed by state law. Remand would avoid needless determination of state insurance law issues.
Hawaii also had a stronger interest in seeing its insurance laws applied than New York had in seeing New York law applied. All of the underlying lawsuits were filed in Hawaii. The fact witnesses in the underlying lawsuits were located in Hawaii. Hawaii was the state which the parties understood to be the principal location of the insured risk during the years of the policies.
The court also agreed that ordering remand would discourage forum shopping. Before Arrowood filed its suit in New York, the parties were discussing coverage issues. When Arrowood refused to defend some of the underlying cases, Maryknoll warned that it would have no alternative but to seek declaratory relief against Arrowood. Shortly thereafter, Arrowood filed its suit in the Southern District of New York.
The court further determined that remand would avoid duplicative litigation. The coverage action raised many of the same issues before the state courts in the underlying actions.
The Dizol factors also favored remand. The underlying lawsuits were still being litigated in state court and the resolution of issues in these underlying cases would have an impact on the coverage issues. The state court was in a better position to resolve the issues raised in the declaratory judgment action. Maintaining the declaratory action in the federal district court would therefore result in entanglement between the federal and state court systems.
Finally, the convenience of the parties and the availability and relative convenience for witnesses weighed in favor of remand. The circumstances giving rise to the underlying state cases occurred in Hawaii. A remedy for the federal court's decision to decline to exercise jurisdiction was readily available in the form of remand to the Hawaii state court.
