Coverage Litigation - Declaratory Judgment Actions

Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York has held that a Bermuda insurer must post a bond pursuant to N.Y. Ins. Law § 1213 after it filed a motion to compel arbitration.  MF Global Holdings Ltd. v. Allied World Assur. Co., Ltd., 2017 WL 2533353 (Bankr. S.D.N.Y. June 12, 2017).

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The United States District Court for the District of Minnesota has held that a coverage dispute must be transferred to federal court in Washington, in deference to the insured’s later-filed coverage action pending in that court. Everest Indem. Ins. Co. v. Ro, 2016 WL 4007578 (D. Minn. Jul. 26, 2016). The court also concluded that, under 28 U.S.C. § 1391, venue was improper because no substantial events or omissions giving rise to the claim occurred in the District of Minnesota.
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A New Jersey federal district court has held that a declaratory judgment and breach of contract action against a professional liability insurer was not subject to dismissal for failure to state a claim based on the policy’s conversion of funds exclusion as a matter of law because the court could not conclude whether conversion occurred, or whether the claim arose out of conversion, at such an early stage in the proceeding. ABL Title Ins. Agency, LLC v. Maxum Indem. Co., 2016 WL 3610163 (D.N.J. June 30, 2016).
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A federal district court in Virginia has denied an insured’s motion to dismiss or stay an insurer’s declaratory judgment coverage action in favor of the insured’s parallel state court coverage action, citing the insured’s earlier praise of the federal court as the “superior forum” for the dozens of underlying suits filed against the insured. Liberty Mutual Fire Ins. Co. v. Lumber Liquidators Inc., No. 4:14-cv-00034 (E.D. Va. Sept. 4, 2015).
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The New Jersey Supreme Court has held that a third-party claimant who steps into the insured’s shoes to establish a liability insurer’s duty to defend is entitled to its attorneys’ fees under New Jersey law, even if the claimant does not ultimately recover from the insured. Occhifinto v. Olivo Construction Co., Case No. A-77-13, 07-13, 0717 (N.J. May 7, 2015).
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A federal district court in Washington has denied two insureds’ motions to abstain or stay a declaratory judgment action brought by their insurer, finding that concurrent adjudication would not require duplicative factual or legal determinations nor prejudice the insureds’ underlying defense.  Evanston Ins. Co. v. Workland & Witherspoon, PLLC, 2014 WL 4715879 (E.D. Wash. Sept. 22, 2014)
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