However, under this factor, the Court must consider whether the present action would require the Court to address needless determination of novel state law issues. Dizol, 133 F.3d at 1224-1225; see also Progressive Cas. Ins. Co. v. Dalton, No. 2:12-cv-00713-MCE-CKD, 2012 WL 6088313, at * 7 (E.D. Cal. Dec. 6, 2012) ("In considering this factor, courts often examine whether adjudicating the declaratory judgment action will require the determination of novel questions of state law."). Avoidance of duplicative issues is a separate factor considered by the Court.
(Doc. 34 at 20.) Integon cites to Progressive Cas. Ins. Co. v. Dalton, No. 2:12-cv-00713-MCE-CKD, 2012 U.S. Dist. LEXIS 173423, at *21-24 (E.D. Cal. Dec. 6, 2012), where the court found there was no forum shopping because the threatened state court action involved tort issues of negligence and the federal case involved issues of contract interpretation and insurance. While some of the basic information involved in this declaratory judgment action may overlap with the claims in the underlying state court action, Integon's action regarding coverage issues will raise the subject of policy interpretation and will not adjudicate the underlying action's disputed facts.
See Kearns, 15. F.3d at 144; Merritt, 974 F.2d at 1199; see also Progressive Cas. Ins. Co. v. Dalton, No. 2:12-CV-00713 MCE, 2012 WL 6088313, at *5 (E.D. Cal. Dec. 6, 2012) ("[C]ourts have 'consistently held that a dispute between an insurer and its insureds over the duties imposed by the insurance contract [to defend and indemnify] satisfies Article Ill's case and controversy requirement.'" (quoting Gov't Emp. Ins. Co. v. Dizol, 133 F.3d 1220, 1222 n.2 (9th Cir. 1998))). Defendants' argument that this case is distinguishable from Kearns and Merritt is without merit.
The fact that a defendant's liability may be contingent does not necessarily mean there is no controversy. Progressive Cas. Ins. Co. v. Dalton, No. 12-713, 2012 WL 6088313, at *5 [(E.D. Cal. Dec. 6, 2012)]. Furthermore, the Act allows the district court to litigate a controversy that would "otherwise . . . only be tried in the future."
Rather, Hanover will merely have to show that the underlying allegations are "of the nature and kind" that are excluded by the policy, and this showing is "logically unrelated" to the factual issues in the Underlying Action. See Montrose I, 6 Cal. 4th at 302; see also Progressive Cas. Ins. Co. v. Dalton, 12-cv-00713-MCE-CKD, 2012 WL 6088313, at *12 (E.D. Cal. Dec. 6, 2012) (holding the court could "resolve the declaratory judgment action" without "inquir[ing] into the possible negligence or breach of fiduciary duty by the Directors and Officers"). Finally, Hanover has made multiple representations that it will not raise factual issues regarding McDuffie's conduct, and McDuffie has not indicated that it will seek such facts from Hanover.
The claim involves a determination whether the Umbrella Policies must drop down to cover Suits. "This evaluation should involve a relatively straightforward analysis of the policy, without infringing on novel state law issues." Progressive Cas. Ins. Co. v. Dalton, No. 12-cv-00713, 2012 WL 6088313, at *7 (E.D. Cal. Dec. 6, 2012) (considering interpretation of insurance contract coverage). The present action does not appear to be the result of forum shopping.
The Court can resolve it without reaching the merits of Mercola's allegations by simply interpreting the policy's terms and examining the claims Mercola makes in his lawsuit. See Progressive Cas. Ins. Co. v. Dalton, 2012 WL 6088313, at *12 (E.D. Cal. Dec. 6, 2012). Thus, Columbia doesn't join forces with Mercola by bringing its declaratory relief action, and collateral estoppel concerns aren't implicated.
"When such a potential conflict exists, a district court should enter a stay." Progressive Cas. Ins. Co. v. Dalton, 2:12-CV-00713, 2012 WL 6088313, at *11 (E.D.Cal. Dec.6, 2012). Here, even though the underlying litigation has settled, the settlement is currently on appeal.
Similarly in Progressive Cas. Ins. v. Dalton, No. 2:12-cv-00713-MCE-CKD, 2012 WL 6088313, *4-5 (E.D. Cal. Dec. 6, 2012), an insurance company who carried a liability policy on a bank's directors and officers brought suit seeking a declaratory judgment that they were not liable for the bank's losses. Id. at *1.
"When such a potential conflict exists, a district court should enter a stay." Progressive Cas. Ins. Co. v. Dalton, 2:12-CV-00713, 2012 WL 6088313, at *11 (E.D. Cal. Dec. 6, 2012). "Federal courts in California have followed the Montrose rule."