The Travelers Indemnity Company v. Lexington Insurance Company

Background

Travelers sought declaratory relief against Lexington and AGLIC concerning the priority of insurers’ duties to indemnify J.T. Magen & Company, Inc. and JTM Construction Group Inc. in a related state personal-injury action. The underlying action arose from injuries Carlos Castro suffered while working as a pipefitter for Southland Industries on a construction project. Castro sued the two JTM entities for premises liability and negligence.

The opinion states that JTM was insured under a Travelers commercial general liability policy and was also an additional insured under policies issued to Southland by Old Republic Insurance Company, Lexington, and AGLIC. Old Republic accepted JTM’s defense and indemnity. In the state case, the Superior Court granted summary judgment to J.T. Magen & Company, Inc. on the issue of liability but denied JTM Construction Group Inc.’s motion for summary judgment on that issue.

AGLIC moved to stay the federal action until final judgment in the state case. Travelers opposed the motion, and Lexington stated that it did not oppose it. The court decided the motion without oral argument.

Judicial Notice

The court took judicial notice of the state court’s summary judgment order and a construction-law treatise requested by AGLIC. Travelers did not oppose those requests.

Ripeness

AGLIC argued that Travelers’ declaratory-relief claim was not ripe because the duty to indemnify JTM Construction Group could not be determined until the state case resulted in a judgment against that entity. Travelers responded that the dispute was ready for review because the insurers had a duty to consider settlement and could not do so properly while disagreeing about coverage priority.

The court explained that ripeness concerns whether a dispute is too premature for judicial review because the alleged injury is speculative or might never occur. Relying on its earlier ruling and the California decision in Ludgate Insurance Co. v. Lockheed Martin Corp., the court held that Travelers’ amended allegations adequately addressed the exhaustion of underlying insurance policies. The court noted that AGLIC did not argue that those policies were not exhausted and instead repeated an argument the court had already rejected. The court therefore found Travelers’ claim ripe.

Discretion to Decline Jurisdiction or Stay

AGLIC alternatively argued that the court should decline to provide declaratory relief or stay the federal action. The court considered factors from Brillhart v. Excess Insurance Co. and related cases, including whether the federal action would require needless decisions about state law, encourage forum shopping, or duplicate the state litigation.

The court found that AGLIC raised some of its factor-based arguments for the first time in its reply brief, which was independently sufficient reason to reject that argument as improperly presented. The court nevertheless considered the factors and found that the motion failed. It concluded that negligence and vicarious-liability issues were not currently before the federal court, AGLIC had not shown forum shopping, and AGLIC had not identified duplicative issues.

The court also found that the federal declaratory action served a useful purpose. The priority of the insurers’ indemnity obligations would need to be resolved if JTM Construction Group were held liable, and that insurance-priority question was distinct from the liability issues in the state case. The timing of the state trial and the federal case deadlines did not provide a reason to stay the federal action.

Disposition

The court found no reason to exercise its discretion to dismiss or stay the case. It ordered that AGLIC’s motion to stay was DENIED. The opinion did not decide the ultimate priority of the insurers’ coverage obligations.