Thursday, May 15, 2014

Third Circuit Issues Important Decision on Federal Court Jurisdiction Over Insurance Coverage Questions

In what the Pennsylvania and New Jersey Insurance Bad Faith Case Law Blog is describing as one of the Third Circuit’s most important decisions on the exercise of federal jurisdiction in insurance declaratory actions in recent times, the court in the case of Reifer v. Westport Insurance Corporation, No. 13-2880 2014 W.L. 1674112 (3d Cir. April 29, 2014 Van Antwerpen, J.), revisited the issue of whether or not a federal court could reject an insurance company's effort to bring a declaratory judgment action against an insured on an issue of coverage in the federal courts of Pennsylvania.  

While the Third Circuit in the Reifer decision sympathized with the District Court’s “apparent frustration over the volume of such cases,” the Third Circuit stated that it was not aware of any authority to support a proposition that an insurance company was barred from bringing declaratory judgment actions on the issue of coverage in federal court.  

After reviewing the law on the issue of abstention in this regard, the Third Circuit stated that there is no bright line rule permitting the District Courts to automatically abstain from hearing such cases unless there was a total absence of any federal legal question presented.  

This Reifer decision is to be distinguished from the Third Circuit's prior decision in the case of State Auto Insurance v. Summy, 234 F.3d 131 (3d Cir. 2000), in which the Court greatly limited the circumstances under which a federal district court would exercise jurisdiction over a declaratory judgment action concerning insurance coverage.   A factual distinction between these two cases is that, in Reifer, there was no pending parallel state action, as was the case in the matter of State Auto vs. Summy. 

The court in Reifer found that the absence of a parallel state proceeding would weigh significantly in favor of the federal court exercising jurisdiction over an insurance coverage question.   The Reifer court rejected any reading of the Summy case that would support an argument for an automatic declining of jurisdiction in every case where state law was firming established.   In this more recent Reifer Opinion, the Third Circuit clarified the factors a district court should consider in ultimately determining whether or not to exercise jurisdiction.  

Anyone wishing to review the Reifer Opinion by the Third Circuit Court of Appeals may click this LINK.

I send thanks to the Pennsylvania and New Jersey Insurance Bad Faith Case Law Blog by the law firm of Fineman Krekstein & Harris for bringing this case to my attention along with Attorney Brian C. Bevan, Esquire of the Pittsburgh law firm of the DiBella, Geer, McAllister & Best, P.C.  

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