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Penn-Star Insurance Co. v. 2700 Club

May 26, 2009


The opinion of the court was delivered by: Joan Humphrey Lefkow United States District Judge

Judge Joan H. Lefkow


Penn-Star Insurance Co. ("Penn-Star") seeks a declaratory judgment against its insured, 2700 Club, Inc. a/k/a 2700 Club LLC ("2700 Club"), denying coverage for 2700 Club in an underlying liability action filed by the defendant Grzegorz Jachimowski*fn1 in the Circuit Court of Cook County, Illinois, arising from injuries he received while working on a construction project on property he alleges is owned or controlled by 2700 Club. Before the court is the motion of Jachimowski to dismiss the action on the basis that the court should exercise its discretion to decline jurisdiction under the Declaratory Judgment Act based on considerations of practicality, judicial administration and comity. Defendant-insured 2700 Club joins the motion.*fn2 For the reasons stated below, the motion to dismiss [#29] is denied.


Penn-Star is a Pennsylvania insurance corporation with its principal place of business in Philadelphia, Pennsylvania. 2700 Club is an Illinois corporation with its principal place of business in Chicago, Illinois. Jachimowski and Virgal Tiran*fn3 ("Tiran") are citizens of Illinois. The amount in controversy exceeds $75,000. The court, therefore, has jurisdiction under 28 U.S.C. § 1332 and the Declaratory Judgment Act, codified at 28 U.S.C. § 2201 et seq. On December 23, 2003, Jachimowski was employed by a subcontractor for the construction of a building at a property owned by 2700 Club and located at 2700 W. Belmont Avenue ("the property"). He sustained injury while installing steel rebar on the building. He sued 2700 Club, several corporate entities associated with Tiran, his employer and others, for damages based on negligence. Penn-Star, which had issued an insurance policy to 2700 Club for a period including this event, filed this declaratory judgment action alleging that it has no duty to defend 2700 Club.*fn4

Penn-Star denies coverage on the basis that the policy covered the operation of a vacant lot or vacant building but not injury resulting from the construction of a building on the property. Penn-Star also denies coverage because 2700 Club allegedly failed to timely notify Penn-Star of Jachimowski's accident and subsequent suit, as required by the policy.


The Declaratory Judgment Act provides, in relevant part, that "any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." Nationwide Ins. v. Zavalis, 52 F.3d 689, 691-92 (7th Cir. 1995), quoting 28 U.S.C. § 2201(a). It is "an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant." Wilton v. Seven Falls Co., 515 U.S. 277, 287, 115 S.Ct. 2137, 132 L.Ed. 2d 214 (1995) (collecting cases). "[D]istrict courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites." Id. at 282 (citing Brillhart v. Excess Ins. Co., 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942)). "When a related state action is pending, concerns about comity, the efficient allocation of judicial resources, and fairness to the parties come into play." Zavalis, 52 F.3d at 692. "Gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be avoided." Brillhart, 316 U.S. at 495. Yet, "the mere pendency of another suit is not enough in itself to refuse a declaration." Sears, Roebuck & Co. v. Zurich Ins. Co., 422 F.2d 587, 590 (7th Cir. 1970).

The Seventh Circuit has identified four non-exclusive factors the district court should consider when ruling on a motion to dismiss based on its discretion to exercise jurisdiction over declaratory judgment actions: (1) whether the declaratory suit presents a question distinct from the issues raised in the state court proceeding; (2) whether the parties to the two actions are identical; (3) whether going forward with the declaratory action will serve a useful purpose in clarifying the legal obligations and relationships among the parties or will merely amount to duplicative and piecemeal litigation; and (4) whether comparable relief is available to the plaintiff seeking a declaratory judgment in another forum or at another time." Zavalis, 52 F.3d at 692.*fn5

I. Analysis of the Zavalis Factors

A. Whether the Declaratory Suit Presents a Auestion Distinct from the Issues Raised in the State Court Proceeding

The duty to defend, the parties seem to agree, is not dependent on determination of the events that gave rise to Jachimowski's injury or on the outcome of the underlying litigation. Rather, "the insurance company's obligation to supply a defense is most often determined primarily, if not exclusively, from the face of the underlying complaint against the insured."

Zavalis, 52 F.3d at 693-94. Indeed, the movants have not identified any issues of fact or law in the underlying litigation that will affect the ...

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