Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
January 26, 2022
Declaratory Relief Action Does not Impinge on State Court Tort Action

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/

Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
December 10, 2025
$500 a Day Penalty if no Workers’ Compensation Insurance

Refusal to Provide Workers’ Compensation is Expensive
Post 5240

Read the full article at https://lnkd.in/guC9dnqA, see the video at https://lnkd.in/gVxz-qmk and at https://lnkd.in/gUTAnCZw, and at https://zalma.com/blog plus more than 5200 posts.

In Illinois Department of Insurance, Insurance Compliance Department v.USA Water And Fire Restoration, Inc., And Nicholas Pacella, Individually And As Officer, Nos. 23WC021808, 18INC00228, No. 25IWCC0467, the Illinois Department of Insurance (Petitioner) initiated an investigation after the Injured Workers’ Benefit Fund (IWBF) was added to a pending workers’ compensation claim. The claim alleged a work-related injury during employment with the Respondents who failed to maintain workers’ compensation Insurance.

Company Overview:

USA Water & Fire Restoration, Inc. was incorporated on January 17, 2014, and dissolved on June 14, 2019, for failure to file annual reports and pay franchise taxes. It then operated under assumed names including USA Board Up & Glass Co. and USA Plumbing and Sewer. The business ...

00:09:22
December 09, 2025
Go Directly to Jail, Do not Pass Go

Arsonist Incompetently Moves Pro Se to Avoid Prison

Post 5239

Read the full article at https://lnkd.in/gRX8TfKn, see the video at https://lnkd.in/gY3Jvnqp and at https://lnkd.in/gRCaaf-3, and at https://zalma.com/blog plus more than 5200 posts.

In Christopher A. Barosh v. Morris Houser, et al., Civ. No. 22-0769, United States District Court, E.D. Pennsylvania (November 25, 2025) a convicted arsonist and insurance fraudster moved the USDC acting in Pro se filed Objections to Magistrate Judge Reid’s Recommendation that the US District Judge dismiss his § 2254 Petition to avoid jail.

BACKGROUND

In October 2005, Barosh set fire to his girlfriend’s Philadelphia home — some 25 hours before the cancellation of the property’s insurance policy. Several witnesses saw Barosh leaving the property shortly before the fire erupted. After the fire, Barosh made “two separate admissions of guilt.”

He attempted to pay an acquaintance to provide him with an alibi for the time of the arson. The eyewitnesses, brother, and ...

00:07:00
December 08, 2025
Settlement & Release Finalizes Dispute Against Payor

Conditional Release Allows Supplemental Claims
Post 5238

Read the full article at https://lnkd.in/ge2yNQby, see the video at https://lnkd.in/gcSF9KWj and at https://lnkd.in/gQfJqwiM, and at https://zalma.com/blog plus more than 5200 posts.

A Release Should Totally Resolve Dispute

In Harvey et al. v. Hall, No. A25A1774, Court of Appeals of Georgia, Fourth Division (December 3, 2025) Paul Harvey, an employee of Arthur J. Dovers (d/b/a 3D Mobile Home Services), drove a truck towing a trailer loaded with machinery and equipment. Harvey fell asleep, veered off the road, and crashed into a culvert, causing Lamar Hall serious injuries.

FACTS OF SETTLEMENT

On August 18, 2020, Hall signed a limited liability release under OCGA § 33-24-41.1, releasing Harvey, Dovers, and their insurer (Georgia Farm Bureau Insurance Company) from liability for the accident in exchange for $50,000, “except to the extent other insurance coverage is available which covers the claim.”

Dovers’s general liability insurer (Republic-Vanguard ...

00:07:01
October 31, 2025
The Zalma Philosophy of Claims Handling – Part 9

The Professional Claims Handler
Post 5219

Posted on October 31, 2025 by Barry Zalma

An Insurance claims professionals should be a person who:

Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.

How to Create Claims Professionals

To avoid fraudulent claims, claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers ...

post photo preview
October 20, 2025
The Zalma Philosophy of Claims Handling – Part I

The History Behind the Creation of a Claims Handling Expert

The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210

This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster

When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.

I was initially sat at a desk reading a text-book on insurance ...

post photo preview
October 20, 2025
The Zalma Philosophy of Claims Handling – Part I

The History Behind the Creation of a Claims Handling Expert

The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail

Post 5210

This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.

My Training to be an Insurance Claims Adjuster

When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.

I was initially sat at a desk reading a text-book on insurance ...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals