Federal Court Retains Jurisdiction on Insurance Coverage Issue
Read the full article at https://www.linkedin.com/pulse/declaratory-relief-action-does-impinge-state-court-zalma-esq-cfe and https://zalma.com/blog plus more than 4050 posts.
Posted on January 26, 2022 by Barry Zalma
After an automobile collision in which James Bryant (“Bryant”) was driving a vehicle owned by RSS, LLC, and Steven Hughes (“Hughes”), and hit Glynn Allan Smith (“Smith”) (collectively “Defendants”) resulted in an insurance coverage claim. The vehicle was insured by Auto-Owners Insurance Company (“Auto-Owners” or “Plaintiff”), which claims there is no coverage because Bryant was not a permissive driver. Smith filed a Motion to Dismiss asking the Court to abstain from exercising jurisdiction over this matter pursuant to Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 377 (4th Cir. 1994) because among others reasons, there is a potential for unnecessary entanglement between this action and the personal injury action pending in State Court. The USDC, in Auto-Owners Insurance Company v. Glynn Allan Smith; RSS, LLC; Steven Hughes; and James Bryant, No. 4:21-cv-03693-JD, United States District Court, D. South Carolina, Florence Division (January 19, 2022), found it proper to resolve the insurance coverage issue.
BACKGROUND
The underlying State Court case arises from injuries suffered by Smith arising out of a motor vehicle collision. AutoOwners issued a Commercial Auto Policy (the “Policy”), to RSS, LLC, and Hughes with combined liability limits of $500,000.00 per accident. The 2005 pickup truck involved in the accident is insured under the Policy and appears as vehicle number 5 on the Declarations page. Plaintiff contends Bryant is not a scheduled driver on the Policy. Moreover, the insurer claims that “Bryant was not a scheduled driver for the subject vehicle or any vehicle [on the insurance policy] owned by the Named Insureds, nor was he authorized to drive the subject vehicle or any vehicle owned by RSS, LLC and/or Defendant Hughes.”
On August 4, 2020, Smith was hit by a vehicle driven by Bryant, when Bryant crossed the center line. The Complaint alleges Bryant was formally charged with, among other things, “Driving under suspension, license suspended for DUI – 1st offense; and . . . Driving under the Influence, less than 10, 1st offense.” Plaintiff, AutoOwners, is not a party in the State Court case as all the claims are based in tort. Plaintiffs sued seeking declaratory judgment contesting coverage to provide a defense or indemnification in the underlying State Court case.
DISCUSSION
Smith contends that facts weighs in his favor of the USDC abstaining from the case because the collision occurred in South Carolina, the Policy was issued in this State, and South Carolina has a strong interest in having its own courts interpreting South Carolina law.
This is an insurance coverage case that requires the Court to review the Policy and the applicable facts and issue a Declaratory Judgment as to the rights and responsibilities of the parties under the Policy. Federal Courts routinely adjudicate insurance policies governed by State.
Smith also asserted that this case can efficiently be resolved in the pending State Court case because the alleged coverage issue is being litigated in the underlying State Court case, which has been litigated for over a year. However, a review of the underlying State Court case indicates that resolution of this case in State Court would not be more efficient.
Plaintiff is not a party to the underlying State Court case. Additionally, as the underlying State Court case concerns tort issues while this case involves contract issues, the issues in each case are different.
Smith, in addition, contended that there exists the potential for entanglement between the State Court and this Court because AutoOwner’s obligations under the Policy will be addressed and litigated in the underlying State Court case. Entanglement occurs where many of the issues of law and fact sought to be adjudicated in the federal action are already being litigated by the same parties in the related state court action.
Entanglement is unlikely because the Auto-Owner’s contract dispute will not be adjudicated in the Underlying State Court case. Thus, no issues regarding AutoOwner’s rights or obligations are likely to be resolved in that action because the underlying State Court claims (i.e., negligence, vicarious liability etc . . .) do not relate to the USDC’S coverage determination. If the USDC determines during the course of litigation that it needs to wade into fact-finding in a manner that would impede upon the questions being considered by the State Court in the underlying case, the Court reserved its right to revisit this order and decide to abstain from hearing the case.
Lastly, in considering the last factor, the USDC found that this case is not being used merely as a device for procedural fencing. Accordingly, the Court found that the declaratory relief sought will serve a useful purpose in clarifying and settling the legal relations in issue, and will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.
For the foregoing reasons, the USDC decided to exercise jurisdiction over this case; and therefore, Smith’s Motion to Dismiss is denied.
ZALMA OPINION
A declaratory relief action has no relationship to a tort action. If AutoOwners is correct – and it appears so – that it owes neither defense nor indemnity to the defendant unlicensed driver it is entitled to seek a quick, simple and direct action in federal court to determine if it is correct in its conclusion that it owes neither defense nor indemnity to Byrant.
© 2022 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.
He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.
Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome.
You can contact Mr. Zalma at https://www.zalma.com, https://www.claimschool.com, [email protected] and [email protected] . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
You may find interesting the podcast “Zalma On Insurance” at https://anchor.fm/barry-zalma; you can follow Mr. Zalma on Twitter at; you should see Barry Zalma’s videos on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; or videos on https://rumble.com/zalma. Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims–library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/
Insurance Expert May Not Testify to Speculative and Contains Unsupported Conclusions.
Posted on September 18, 2026 by Barry Zalma
See the full video at and at https://rumble.com/v7fmifw-expert-may-only-testify-to-what-experience-supports.html
In Michele A. Over, and The Estate Of Paul R. Over v. State Farm Mutual Automobile Insurance Company, and State Farm Fire And Casualty Company, Civil Action No. 23-cv-02243-PAB-STV, United States District Court, D. Colorado (September 14, 2026) Michele and Paul Over sued State Farm Fire and State Farm Auto over hail-damage and stolen-vehicle claims.
The operative dispute concerned State Farm Auto’s motion to exclude or limit opinions from plaintiffs’ insurance-industry expert, Aaron Castillo. Castillo.
Law
The proponent of expert testimony must establish by a preponderance of the evidence that an expert is qualified and that the opinions are helpful, sufficiently grounded, and reliably derived and applied. Experience-based opinions must explain how the...
150 Months in Prison for Tax Fraud
Post 4846
Posted on September 17, 2026 by Barry Zalma
See the full video at https://lnkd.in/g8rh3JBX and https://lnkd.in/gmkdy-9C, In United States Of America v. Thomas Addaquay, Nos. 25-10609, 25-10611, United States Court of Appeals, Eleventh Circuit (September 9, 2026) the Eleventh Circuit affirmed all challenged convictions, the 150-month aggregate sentence, and the challenged $4,123,474.55 restitution award.
FACTS
In United States Of America v. Thomas Addaquay, United States Of America v. Thomas Addaquay, Nos. 25-10609, 25-10611, United States Court of Appeals, Eleventh Circuit (September 9, 2026) the Eleventh Circuit affirmed all challenged convictions, the 150-month aggregate sentence, and the challenged $4,123,474.55 restitution award.
FACTS
Thomas Addaquay controlled United Consolidated Accounting and Business Services (UC), nominally a check-cashing business.
The government proved a three-stage tax-refund scheme that converted the resulting refund checks into usable funds through ...
Major Fraud Perpetrator Asserts Fifth Amendment Privilege to Avoid Prosecution
Post 5489
Posted on September 14, 2026 by Barry Zalma
Fraudster Refuses to Answer Questions About His Alleged Fraud
See the full video at https://lnkd.in/gvicAMDr and at https://lnkd.in/gvicAMDr
In Great American Insurance Co. v. Gemstone Property Management, LLC, et al., No. 23-cv-9100 (LJL), United States District Court, S.D. New York (September 8, 2026) Great American Insurance Company alleged that it was defrauded through a scheme in which Subin Associates, LLP recruited individuals to stage construction-site injuries, arranged unnecessary medical treatment and litigation funding, and pursued fraudulent personal-injury claims.
Luis Manuel Garcia Salcedo, resulted in a $6 million settlement. Non-party Jose Hernandez allegedly worked as an assistant manager at Subin, operated Hernandez Associates, and owned litigation-funding companies that shared office space with Subin and provided services to its clients.
After Great American ...
Employee Report of Fraud Results in Damages Suit After Qui Tam Suit Settled
No Statutory Hearing Right Arose Because No Dental Commission Complaint License Suspension, Revocation, Or Sanction Occurred.
Post 4855
Posted on October 2, 2026 by Barry Zalma
In Abbas Mohammadi et al. v. William M. Tong et al., No. AC 47598, Court of Appeals of Connecticut (September 29, 2026) Abbas Mohammadi owned and operated Columbia Dental, P.C., which provided dental services through multiple Connecticut offices; Columbia Oral Maxillofacial Imaging, LLC served as the billing entity.
From April 2012 to February 27, 2013, Columbia Dental employed Brittany Ames Mahoney as a dental assistant. During her employment, Mahoney claimed to have discovered certain billing irregularities, including, but not limited to, false and fraudulent reimbursement claims submitted to the Department of Social Services for services rendered to Medicaid beneficiaries. Mahoney filed a complaint and an affidavit in the United States District Court for the District of...
Another Anniversary for Barry Zalma, Inc
Posted on October 1, 2026 by Barry Zalma
From October 1, 1979 – 2026
Post 4854
Read the full issue of ZIFL at https://zalma.com/blog/wp-content/uploads/2026/09/ZIFL-10-01-2026.pdf Forty seven years ago today I left the world of the employed and became an entrepreneur by opening my own law firm. The law practice was incorporated shortly thereafter as Barry Zalma, Inc.
When I opened for business on October 1, 1979, I had no clients and no certainty that I would have any in the future. I had borrowed money from the bank to carry me through the first six months and was concerned about my ability to pay the loan with my third child about to be born.
Much to my surprise and pleasure, on October 1, 1979, at 8:10 a.m., the best claims handler in the London market, Alan Warboys, called from London and provided me with my first case as an independent lawyer to represent Certain Underwriters at Lloyd’s, London. He, and the Lloyd’s Underwriters he represented, showed faith in me as a lawyer and insurance expert. Alan is now, although ...
Defendants Successfully Moved for Summary Judgment
Post 4854
Posted on September 30, 2026 by Barry Zalma
In Jeffrey Wayne Phillips v. Creative Website Studios, et al., No. 5:23-CV-568-BO-BM, United States District Court, E.D. North Carolina, Western Division (September 28, 2026) the Court needed to rule on the order and memorandum and recommendation (“M&R”) of the Magistrate.
Jeffrey Wayne Phillips had contracted with Creative Website Studios and SR Telecommunications for website and hosting services. He alleged that defendants repeatedly billed him for hosting periods he had already paid for and later took down his website. Phillips claimed the outage prevented him from bidding on U.S. government security contracts and sought roughly $300 million in consequential damages.
LAW
Under North Carolina law, fraud requires a false material representation or concealment, intent and effect of deception, resulting damage, and reasonable reliance. Obtaining property by false pretenses similarly requires an ...