Opinion
Case No. 04-71176.
May 26, 2005
ORDER TO SHOW CAUSE
The Complaint in this matter alleges that Plaintiff Nautilus Insurance Company, (hereinafter "Nautilus"), an Arizona insurance company, issued a policy of insurance to non-party Doug Minard, d/b/a/ Tri-Star Roofing, with an endorsement naming Defendant I.L.S. General Contractors, Inc., (hereinafter "I.L.S."), a Michigan contractor, as an additional insured. It is undisputed that currently pending in the Wayne County Circuit Court is an action against Defendant I.L.S., Defendant Insurance Loss Specialists, and Doug Minard d/b/a/ Tri-Star Roofing, by Defendant Auto Club Group Insurance Company, (hereinafter "Auto Club") as subrogee of Defendants Terrance Thomson and Nancy Thomson (hereinafter "Wayne County Action"). Nautilus alleges that in the Wayne County Action, Defendant Auto Club claims that Defendant I.L.S. failed to properly repair the ceiling of the Defendant Thomson's home, causing $571,825.44 worth of damage, including "extensive exposure of friable asbestos containing materials." Am. Compl. at ¶ 6. Nautilus alleges that Defendant I.L.S. requested indemnification under the policy before Defendant Auto Club initiated the Wayne County Action. Nautilus denied the request, however, and informed Defendant I.L.S. that "it was reserving its right to deny a defense and indemnification pursuant to the provisions of the insurance contract." Am. Compl. at ¶ 9.
Nautilus filed a Complaint on March 30, 2004, and a First Amended Complaint on July 13, 2004, requesting a declaratory judgment against Defendant I.L.S. and Defendant Insurance Loss Specialists. The remaining Defendants, according to Nautilus, "are included for res judicata purposes." Am. Compl. at ¶ 11. Nautilus maintains that under the facts alleged in the Wayne County Action, it has no duty to indemnify or defend Defendant I.L.S. under ten different limitations and exclusions in the Policy. Defendants Auto Club, Terrance Thomson and Nancy Thomson, however, maintain that "a significant part of the damages claimed in the underlying lawsuit against Defendant I.L.S. occurred through negligence of Defendant I.L.S. in failing to properly supervise and control [the Defendant Thomsons'] roofing project and to complete it without damages to the Thomson property in a timely manner." Defendant Auto Club and Defendants Nancy and Terrance Thomson's Response to Plaintiff's Motion for Default Judgment, at 2. Thus, Defendants Auto Club, Terrance Thomson and Nancy Thomson maintain that Plaintiff Nautilus is liable to provide coverage for the underlying lawsuit.
Although it is not alleged in the Amended Complaint, it appears that the only statutory avenue for resolving the instant dispute in federal court is the Declaratory Judgment Act, 28 U.S.C. § 2201(a). As the Supreme Court has observed:
Prior to [the Declaratory Judgment Act], a federal court would entertain a suit on a contract only if the plaintiff asked for an immediately enforceable remedy like money damages or an injunction, but such relief could only be given if the requisites of jurisdiction, in the sense of a federal right or diversity, provided foundation for resort to the federal courts. The Declaratory Judgment Act allowed relief to be given by way of recognizing the plaintiff's right even though no immediate enforcement of it was asked.Skelly Oil Co. v. Petroleum Co., 339 U.S. 667, 671-72 (1950). The Sixth Circuit has emphasized, however, that "[e]xercise of jurisdiction under the Declaratory Judgment Act . . . is not mandatory," and "declaratory judgment actions seeking an advance opinion on indemnity are seldom helpful in resolving an ongoing action in another court." Bituminous Cas. Corp. v. JL Lumber Co. Inc., 373 F.3d 807, 812 (6th Cir. 2003). Indeed, numerous decisions within the Sixth Circuit suggest that a federal court should ordinarily abstain from deciding insurance coverage issues under the Declaratory Judgment Act. See Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968-969 (2000); Allstate v. Mercier, 913 F.2d 273, 277 (6th Cir. 1990); American Home Assurance Co. v. Evans, 791 F.2d 61 (6th Cir. 1996); Manley, Bennett, McDonald Co. v. St. Paul Fire Marine Ins. Co., 791 F.2d 460 (6th Cir. 1986); Omaha Property Casualty Ins. Co. v. Johnson, 923 F.2d 446, 448 (6th Cir. 1991); and Westfield Ins. Co. v. Mainstream Capital Corp., ___ F. Supp. 2d. ___, 2005 WL 975986 (E.D. Mich. April 19, 2005) (dismissing case in which the insurer sought a declaration of no duty to indemnify insured builder in state-court breach of warranty and misrepresentation action alleging defective workmanship).
Therefore, the Court HEREBY ORDERS: Plaintiff to SHOW CAUSE, in writing, no later than 5:00 p.m. on June 13, 2005, as to why this Court should not decline to exercise jurisdiction in this matter. Plaintiff's response shall contain specific and accurate legal support, including pinpoint citations to authority relied upon, and shall be limited to ten pages and comply with E.D. MICH. L.R. 5.1. Defendants may respond and Plaintiff may reply within the time periods set forth in this Court's local rules. See E.D. MICH. L.R. 7.1.
IT IS SO ORDERED.