Although there were concurrent state and federal proceedings regarding the insureds' claims for damage caused by Kilauea Volcano, the federal district court refused to dismiss or stay the federal action. Aqulina v Certain Underwriters at Lloyd's Syndicate #2003, 465 F. Supp. 3d 1066 (D. Haw. 2020).
Plaintiffs held homeowner's policies from Lloyd's that were brokered and underwritten by various defendants. Coverage from the May 2018 eruption of Kilauea Volcano was denied based upon an exclusion precluding coverage for lava-related damage.
Plaintiffs sued Lloyds and various brokers in federal court, alleging that defendants had engaged in a deceptive scheme to defraud plaintiffs and deprive them of meaningful coverage. Lawsuits were also filed in state court, with plaintiffs arguing their losses were covered by their policies and that defendants wrongfully relied solely on the lava exclusion to deny claims.
Defendant Retail Brokers, one of the brokers, moved to dismiss or in the alternative stay the federal court proceedings under the Colorado River abstention doctrine. See Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). To utilize the abstention doctrine, Retail Brokers had to show "exceptional circumstances" under an eight part test.
The court determined that Retail Brokers failed to show "exceptional circumstances" to suggest piecemeal litigation would be problematic if the court retained jurisdiction. The court agreed with plaintiffs that the federal and state-court actions raised different issues and that the state-court action would not answer the central questions in this case. The state action addressed allegations of coverage under the policies, while the federal case involved issues regarding the procurement of the policies. While state law controlled, the federal court was fully capable of deciding claims of unfair and deceptive acts and negligence.
The only facts that weighed in favor of a stay were the minor inconvenience of the federal action where the federal court was located on Oahu and defendants were located on the Big Island, the fact that plaintiffs filed both parallel actions, and the similarities between the state and federal lawsuits. On balance, these factors did not establish "exception circumstances" required for the Colorado River deference. Neither dismissal nor a stay was warranted.
