The Travelers Indemnity Company of Connecticutet al v. BNSF Railway Company

Background

BNSF purchased an easement in 2013 to move a railway track and hired J.L. Patterson & Associates to prepare project plans and Asta Associates to perform construction work. In 2017, North Richmond Properties sued BNSF, J.L. Patterson & Associates, and Asta Associates in California state court, alleging that the project flooded its land. The underlying complaint included a negligence claim against J.L. Patterson & Associates.

Travelers alleged that BNSF was an additional insured under J.L. Patterson & Associates’ primary and excess commercial insurance policies. Travelers denied BNSF’s 2019 request for defense and indemnity and denied a renewed request in 2024. Travelers then filed this federal action seeking a declaration that it had no duty to defend or indemnify BNSF in the state-court case. The underlying state case was scheduled for trial on September 8, 2025.

BNSF’s motion challenged only Travelers’ second cause of action, concerning the duty to indemnify—the alleged obligation to pay covered losses. BNSF did not challenge the first cause of action, concerning the duty to defend.

Ripeness

The court first considered whether Travelers’ indemnity claim was ripe, meaning ready for judicial decision. BNSF argued that an indemnity question could be decided only after BNSF had incurred liability in the underlying action. The court rejected that argument. Relying on California authority, the court held that although it could not determine the amount of an indemnity obligation before liability was established, it could decide whether the underlying claim was covered by the policy. The court also relied on Ninth Circuit authority recognizing that an insurer’s request for declarations about its duties to defend and indemnify in a pending third-party action can satisfy the requirement of an actual legal dispute.

The court further rejected BNSF’s argument that Travelers had to have agreed to defend BNSF before Travelers could show a legally sufficient injury. The court found Travelers’ indemnity claim ripe.

Discretion to Dismiss or Stay the Declaratory Claim

Under the federal Declaratory Judgment Act, courts have discretion to dismiss or stay a request for a declaration when a pending state proceeding would better resolve the dispute. The court applied the three factors from Brillhart v. Excess Insurance Co. of America: avoiding unnecessary decisions about state law, discouraging forum shopping, and avoiding duplicative litigation. The court also considered related concerns about whether the federal action would clarify the parties’ legal relationship, entangle the state and federal courts, or provide a useful remedy.

The first factor did not support dismissal or a stay. Although interpreting the insurance policy would require applying state law, the federal court would have to address state-law issues in deciding Travelers’ separate duty-to-defend claim anyway. BNSF did not identify any unusually complex or novel state-law issue raised only by the indemnity claim.

The second factor also did not support dismissal or a stay. BNSF did not substantively address forum shopping, and Travelers was not a party to the state-court action. The court stated that Travelers was not barred from bringing a federal declaratory-judgment action against its insured on a coverage issue.

The third factor did not support dismissal or a stay because BNSF failed to identify specific factual disputes in the state case that would overlap with the federal coverage analysis. Travelers’ theory was that the professional-services exclusion in the insurance policy barred coverage based on the allegations in the underlying complaint, regardless of whether damages were ultimately awarded. The state case did not address the policy terms, and the underlying complaint appeared to allege that J.L. Patterson & Associates’ conduct involved designing and preparing engineering plans. The court therefore found no concrete risk of duplicative litigation.

The court also noted that the declaratory action could clarify Travelers’ coverage duties if BNSF or J.L. Patterson & Associates were held liable in the state action. Because the state trial was scheduled for early September 2025, the court found that a stay would provide minimal benefit.

Request for a Stay Under the Court’s Inherent Powers

BNSF separately sought a stay under the court’s inherent authority recognized in Landis v. North American Co. The court explained that a party seeking such a stay must show a clear hardship or unfairness from proceeding, while the court must weigh the possible harm to the opposing party and whether a stay would simplify the issues and evidence.

The court found that these considerations did not support a stay. Travelers’ duty-to-defend and duty-to-indemnify theories were intertwined, so preventing Travelers from pursuing one part of its action would not simplify the case. BNSF also had not identified a concrete risk of inconsistent rulings if the indemnity claim continued.

Disposition

The court DENIED BNSF’s motion to dismiss or stay Travelers’ second cause of action. The order did not decide whether the insurance policy ultimately covered the underlying claims or whether Travelers owed a duty to defend or indemnify BNSF. The court also set a case management conference for July 29, 2025, and directed the parties to submit a joint case management statement by July 22, 2025.