United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
C. HAMILTON, UNITED STATES DISTRICT JUDGE.
matter is before the Court on the Motion to Stay filed by
Defendant Galen Insurance Company and Defendant Galen
Insurance Management Company. (ECF 18). The Motion has been
fully briefed and is ready for disposition.
Complaint, filed on March 29, 2017, Plaintiff Allied World
Surplus Lines Insurance Company f/k/a Darwin Select Insurance
Company (Allied World) seeks declaratory judgment, pursuant
to the Federal Declaratory Judgement Act, 28 U.S.C. §
2201, regarding coverage under Private Risk-Transfer
Organizations Management and Professional Liability Insurance
Policies (the Policies) issued to Defendant Galen Insurance
Company (GIC) and Defendant Galen Insurance Management
Company, Inc. (GIMC, and, jointly with GIC, the Galen
Defendants). (ECF 1 (Complaint)). The Court has jurisdiction
over this matter pursuant to 28 U.S.C. § 1332. (ECF 1,
¶ 8; ECF 10 (Answer), ¶ 8).
the Policies at issue in this matter is for the period of
April 26, 2014, to April 26, 2015 (the 2014-2015 Policy).
(ECF 1.4). The second policy at issue is for the period of
April 26, 2015, to April 26, 2016 (the 2015-2016 Policy).
(ECF 1.6). Allied World also issued a renewal policy for the
period of April 26, 2016, to April 26, 2017 (the 2016-2017
Policy). (ECF 1.8). The 2014-2015 Policy provides for limits
of liability of $1, 000, 000 each for Management Liability,
Professional Liability, and Employment Practices Liability
for all loss from all claims under the insuring agreement.
The 2015-2016 Policy and the 2016-2017 Policy provide for a
limit of $2, 000, 000 each for Management Liability,
Professional Liability, and Employment Practices Liability.
All three Policies provide for a limit of $25, 000 for
Network Security Liability.
14, 2014, Howard Nathans filed a Complaint against the Galen
Defendants for wrongful termination of employment and breach
of contract (the Nathans Claim). Subsequently, on April 4,
2016, Defendant Dennis Lowry, the former Chief Financial
Officer of GIC, filed a Complaint, in Circuit Court of St.
Louis County, Missouri, against the Galen Defendants for
wrongful termination of his employment (the Lowry Claim).
(ECF 1.3). The Galen Defendants requested coverage for the
Nathans Claim under the 2014-2015 Policy and requested
coverage for the Lowry Claim under the 2015-2016 Policy.
Allied World initially agreed to defend the Galen Defendants
against the Lowry Claim under the 2015-2016 Policy under a
complete reservation of rights. Subsequently, Allied World
advised the Galen Defendants that it would continue to defend
them against the Lowry claim, but that it would do so
pursuant to a complete reservation of rights under the
2014-2015 Policy, rather than the 2015-2016 Policy, because,
pursuant to the provisions of those Policies, the Lowry Claim
and the Nathans Claim are considered a single claim first
made during the 2014-2015 Policy period. (ECF 1, ¶¶
28-31; ECF 10, ¶¶ 28-31).
alleged basis for Allied World's assertion that the Lowry
Claim and the Nathans Claim are a single claim is that they
are “based on, aris[e] out of, directly or indirectly
result from, in consequence of or in any way involv[e] the
same or related facts, circumstances, situations,
transactions or events or the same related series of facts,
circumstances, situations, transactions or events, whether
related logically, causally or in any other way, ” as
provided by the 2014-2015 Policy and the 2015-2016 Policy.
(ECF 1, ¶25).
claim for Declaratory Relief before this Court, Allied World
seeks a declaration that the Lowry Claim is either covered by
the 2014-2015 Policy or that it is not covered at all due to
misrepresentations in the applications for coverage under the
2015-2016 Policy and the 2016-2017 Policy. Allied World also
seeks rescission of the 2015-2016 Policy and the 2016-2017
Policy, and, if the Court determines there is no coverage,
seeks reimbursement of all amounts paid for the Lowry Claim.
(ECF 1, ¶¶ 50, 54, 59, 63, 67).
Galen Defendants have counterclaimed, seeking a declaration
that the Lowry Claim is covered under the 2015-2016 Policy
and that Allied World is obligated to indemnify the Galen
Defendants and to reimburse them for their defense costs in
connection with the Lowry Claim. (ECF 10 at 9-16.).
about May 31, 2017, the Circuit Court of Cole County,
Missouri, entered a Judgment, Decree and Final Order of
Liquidation, placing GIC in liquidation. The Liquidation
Order states: “No action at law or equity or in
arbitration shall be brought against [GIC] or the Liquidator,
whether in this state or elsewhere, nor shall any such
existing actions be maintained or further presented after
issuance of this Order.” (ECF 18 (Motion to Stay),
¶¶ 2-3; ECF 30 (Memorandum in Opposition to
Defendants/Counterclaim Plaintiffs' Motion to Stay) at 7
(citing Liquidation Order ¶ 29)). The parties agree that
Liquidation Order applies only to GIC. (ECF 18, ¶¶
2-3; ECF 30 at 7).
preliminary matter, the doctrine of discretionary abstention
provides that “abstention from the exercise of federal
jurisdiction is the exception, not the rule.”
Colorado River Water Conservation Dist. v. United
States, 424 U.S. 800, 813 (1976) (emphasis added).
Abstention “is an extraordinary and narrow exception to
the duty of a District Court to adjudicate a controversy
properly before it.” Id. at 813. See also
New Orleans Pub. Serv., Inc. v. Council of the City of New
Orleans (NOPS), 491 U.S. 350, 359 (1989).
courts have articulated several abstention doctrines,
including the Burford Doctrine, Burford v. Sun
Oil Co., 319 U.S. 315 (1943), and the Colorado
River Doctrine, Colorado River, 424 U.S. 800. In
Wolfson v. Mutual Benefit Life Insurance Company, 51
F.3d 141 (8th Cir. 1995) (called into question on
other grounds), the Eighth Circuit reversed the district
court's order to stay a federal action to recover life
insurance benefits and held:
[T]he abstention doctrine [was] first enunciated in
Burford . . . . As the doctrine is now articulated,
Burford abstention is appropriate in two
extraordinary situations, when “there have been
presented difficult questions of state law bearing on policy
problems of substantial public import whose importance
transcends the result in the case then at bar, ” or
when “exercise of federal review of the question in a
case and in similar cases would be disruptive of state
efforts to establish a coherent policy with respect to a
matter of substantial public concern, ” when
“there have been presented difficult questions of state
law bearing on policy problems of substantial public import
whose importance transcends the result in the case then at
bar, ” or when ...