Tuesday, October 27, 2020

Judge Crafts Remedy in Coverage Action So that Injured Party is Not Left Out of the Fight

In the case of Crum & Forster Specialty Ins. Co. v. Strong Contractors, Inc., No. 2:19-CV-03519-JD (E.D. Pa. Sept. 18, 2020 DuBois, J.), the court addressed issues surrounding an injured party’s desire to intervene into a declaratory judgment action between a liability carrier and the alleged tortfeasor. 
According to the Opinion, in an underlying state court action, the injured party Plaintiff filed suit against the alleged tortfeasor, Strong Contractors, claiming that the negligence of the tortfeasor in failing to barricade an opening in a floor on a construction site led to the Plaintiff’s injuries. 

The carrier for the alleged tortfeasor filed this federal court action seeking to rescind its policy issued to the alleged tortfeasor on the grounds that the alleged tortfeasor had allegedly misrepresented important information in its application for the insurance coverage. When the alleged tortfeasor failed to appear in the federal court action, the insurance company moved to have a default judgment entered. 

At that time, the injured party Plaintiff filed a Motion to Join the federal court action as a necessary party. 

The federal court agreed with the carrier’s position that the injured parties did not qualify as a necessary party in this federal court declaratory judgment action on coverage given that the injured party only had a financial interest in the outcome of the case, which did not constitute a legally protected interest recognized under Rule 19 governing the intervention into actions by new parties.

The court additionally ruled that the injured party was not entitled to intervene as of right and was not entitled to join the action under a permissive intervention under F.R.C.P. 24, again noting that the injured party’s interests in the outcome of the federal court coverage action was merely economic in nature. 

The court also held that the injured party’s contingent financial interests did not generate common questions of law or fact with the coverage dispute. 

Despite ruling against the injured party’s Motion to Intervene, the federal court ultimately declined to retain its jurisdiction over this coverage action under the Declaratory Judgments Act. 

The court ruled that the intertwined nature between the present coverage action and the injured party’s personal injury against the alleged tortfeasor would make granting a default judgment in favor of the liability carrier an inequitable result. As such, the court noted that, if the carrier were to file its declaratory judgment action in state court, the injured party would have to be joined as an indispensable party. 

The court ruled that it appeared that the carrier had filed suit specifically to avoid having to join the injured party or others to its coverage action. As such, the federal court declined to retain jurisdiction over this matter. 

Anyone wishing to review a copy of this decision may click this LINK.

Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (Oct. 8, 2020).

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