The federal district court exercised its discretion under the Declaratory Judgment Act, declining jurisdiction over a case presenting claims arising from COVID-19. Marc Daniel Hospitality, LLC v. AmGuard Ins. Co., 2020 U.S. Dist. LEXIS 191956 (D. N.J. Oct 16, 2020).
Plaintiff operated an upscale sit-down restaurant and whiskey bar offering a full menu. In March 2020, state and local orders limited the scope and hours of operations of all restaurants in the state due to the COVID-19 pandemic. Subsequent orders mandated that New Jersey residents remain at home except under certain exceptions. Plaintiff had to temporarily close its restaurant.
Plaintiff sued the insurer in state court seeking a declaratory judgment as to plaintiff's rights under the policy. The insurer removed to federal district court and plaintiff sought to remand. Plaintiff urged the court to decline jurisdiction under the Declaratory Judgment Act because the matter presented a substantial unprecedented matter of concern for New Jersey, its businesses, and the insurance industry in New Jersey.
The court agreed. Federal courts were to hesitate in hearing a declaratory judgment action where it was restricted to issues of state law. The complaint here presented novel and important issues of state insurance law. A key issue was whether business losses were caused by the presence of the COVID-19 virus or, rather, caused by the Executive Orders which prompted the closure of plaintiff's restaurant.
Further, the same issues were already pending in state court. A significant number of cases related to insurance coverage for business interruption based on COVID-19 closures were pending across the country, including in New Jersey state courts. As the cases remained pending, the law on the issues remained unsettled.
Therefore, the case was remanded to state court.