Contract Interpretation is a Matter of State Law
Post 4918
Read the full article at https://www.linkedin.com/pulse/federal-jurisdiction-requires-issue-barry-zalma-esq-cfe-xudpc, see the full video at https://rumble.com/v5jxznx-federal-jurisdiction-requires-a-federal-issue.html and at https://youtu.be/Blh_2tALXVE and at https://zalma.com/blog plus more than 4900 posts.
Lititz Mutual Insurance Company sought a declaratory judgment that it is under no obligation to defend or indemnify Steve Wilson in the underlying/related action. The USDC issued a rule to show cause why the instant case should not be dismissed for lack of subject matter jurisdiction.
In Lititz Mutual Insurance Co. v. Steve D. Wilson, et al., No. 5:24-cv-0155, United States District Court, E.D. Pennsylvania (October 22, 2024) the court resolved the question of subject matter jurisdiction.
BACKGROUND
Steve Wilson is an insured under a homeowner’s policy issued by Lititz Mutual Insurance Company. Lititz, sued Wilson seeking a declaratory judgment that it is under no obligation to defend or indemnify him pursuant to that policy in the underlying/related action.
The Complaint premised the Court’s jurisdiction on 28 U.S.C. § 2201 and because Plaintiffs in the underlying matter allege violations of the United States Constitution.
Lititz moved for Summary Judgment arguing that there exists no issue of material fact that the underlying claims arose outside of the Policy period and that the Policy excludes coverage for the intentional acts alleged in the underlying suit.
Analysis – The Court has no subject matter jurisdiction over this suit.
Lititz bears the burden of proving subject matter jurisdiction exists.
In its Complaint, Lititz seeks two counts of declaratory relief. However, the Declaratory Judgment Act does not provide an independent basis for subject-matter jurisdiction; it merely defines a remedy. The controversy must have its own jurisdictional basis.
Lititz invoked federal question jurisdiction because Plaintiffs in the underlying matter allege violations of the United States Constitution. In the declaratory judgment context, federal courts have regularly taken original jurisdiction over suits in which, if the declaratory judgment defendant brought a coercive action to enforce its rights, that suit would necessarily present a federal question.
However, there is no federal question where, in a hypothetical suit bringing a coercive action to enforce his rights, Wilson would be asserting a state law breach of contract claim against Lititz, not violations of the United States Constitution.
Since breach of contract does not arise under the Constitution or any federal law, Lititz failed to establish federal question jurisdiction.
Special Limited Federal Question
In special and limited federal question cases, explaining that federal jurisdiction over a state law claim will lie if a federal issue is:
necessarily raised,
actually disputed,
substantial, and
capable of resolution in federal court without disrupting the federal-state balance approved by Congress.
The question faced by the court is “would the hypothetical breach of contract suit necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities?” The USDC held that it does not.
Lititz’s first argument is that the conduct alleged in the underlying complaint occurred before the policy was in effect. This plainly does not necessarily raise a federal question. It is simply a matter of timing regarding the intended harm exclusion.
Contract interpretation is a matter of state law and thus does not necessarily raise a federal issue. Resolving the hypothetical breach of contract suit does not turn on substantial questions of federal law, it merely requires comparing the four corners of the insurance contract to the four corners of the complaint.
In this context, that would require a court to determine whether Wilson’s alleged actions were expected or intended within the meaning of the policy exclusion, not whether a constitutional violation occurred.
Since Lititz failed to establish the Court’s subject matter jurisdiction over the case, it was dismissed.
ZALMA OPINION
Insurance companies seem to prefer dispute resolution to happen in federal court. Lititz failed to allege facts that would raise federal jurisdiction for its declaratory relief action. Jurisdiction was clear in any state court and this waste of time will arise in a state court shortly after this decision. The duty to defend can be resolved in state court by bringing the same cause of action where jurisdiction resides.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://barryzalma.substack.com/subscribe
Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg
Go to the Insurance Claims Library – https://lnkd.in/gwEYk
Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105
See the full video at https://lnkd.in/gPa6Vpg8 and at https://lnkd.in/ghgiZNBN, and at https://zalma.com/blog plus more than 5100 posts.
Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....
Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104
Read the full article at https://lnkd.in/gbcTYSNa, see the full video at https://lnkd.in/ggmDyTnT and at https://lnkd.in/gZ-uZPh7, and at https://zalma.com/blog plus more than 5100 posts.
Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy
In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.
The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS
Parties Involved:
CAEA is insured by Associated Industries Insurance Company, Inc. ...
Exclusion Establishes that There is No Duty to Defend Off Site Injuries
Post 5103
Read the full article at https://lnkd.in/geje73Gh, see the full video at https://lnkd.in/gnQp4X-f and at https://lnkd.in/gPPrB47p, and at https://zalma.com/blog plus more than 5100 posts.
Attack by Vicious Dog Excluded
In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)
Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that
1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.
Presently before the Court are two ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.
This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...
