<i>Wilton /Brillhart</i> Abstention Update

In Reifer v. Westport Ins. Corp., 2014 U.S. App. LEXIS 8014 (3d Cir. Pa. Apr. 29, 2014), the U.S. Court of Appeals for the Third Circuit affirmed a district court's decision to abstain from deciding, and remanded back to state court, an insurance coverage declaratory judgment action. While it is not unusual for federal courts to apply the Wilton/Brillhart abstention doctrine in response to a party motion, this case is remarkable because not only did the district court dismiss the case on its own motion, it did so fully a year after removal, with no parallel state court action pending and after the magistrate judge had issued a 39-page report recommending that the coverage question be answered in the insurer's favor. Reifer represents both a reaffirmance and an extension of the Third Circuit's decision in State Auto Ins. Cos. v. Summy, 234 F.3d 131 (3d Cir. 2000). In Summy, the court reversed, as an abuse of discretion, a district court's decision to exercise its discretionary jurisdiction to issue a declaratory judgment on an insurance coverage issue where a parallel state court proceeding was pending. The Summy court emphasized that district courts should generally defer to state courts to decide unsettled issues of state insurance coverage law by abstaining from exercising their jurisdiction under the Declaratory Judgment Act. Reifer extended the broad discretion of district courts to dismiss declaratory judgment actions to include cases where no parallel state court action is pending. Notwithstanding some token comments by the court in Reifer rejecting abstention on a routine basis, taken together, Reifer and Summy demonstrate the Third Circuit's strong preference for district courts to avoid deciding pure declaratory judgment actions involving unsettled questions of state insurance coverage law ' even where no party has asked that the federal courts abstain.

The Landscape: Summy and Its Progeny

The Declaratory Judgment Act (the “Act”), 28 U.S.C. ” 2201-2202, grants authority to district courts to “declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is sought,” where federal jurisdiction otherwise exists. The exercise of this authority, however, is discretionary, as the Supreme Court has made clear in a series of cases beginning with Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942), and culminating with Wilton v. Seven Falls Co., 515 U.S. 277 (1995).

In Summy, the insurer filed a declaratory judgment action in federal court and the insured subsequently filed a declaratory judgment action in state court. The insured's underlying action was pending in the same state court ' and in front of the same judge ' as the state court declaratory judgment action. The district court denied the insured's motion to stay or dismiss the federal declaratory judgment action and, while the state court action was pending, granted the insurer's motion for summary judgment.

The Third Circuit vacated the judgment as an abuse of discretion, and remanded the matter to the district court with instructions to dismiss the case. In the eyes of the Third Circuit, the district court's exercise of jurisdiction over the dispute amounted to a “'vexatious' and 'gratuitous interference' with state court litigation.” The court further cautioned that “district courts 'step back' and allow the state courts the opportunity to resolve unsettled state law matters.” As a parting shot, the Third Circuit opined, in obiter dictum, that “[t]he desire of insurance companies and their insureds to receive declarations in federal court on matters of purely state law has no special call on the federal forum.”

After Summy, district courts within the Third Circuit ' particularly the Western and Middle Districts of Pennsylvania ' engaged in wholesale dismissals of declaratory judgment actions involving insurance coverage, without engaging in any real, much less rigorous, analysis, under cover of deferring to state courts per Summy. See, e.g., Dixon v. Progressive Northern Ins. Co., 2008 U.S. Dist. LEXIS 65594 (W.D. Pa. Aug. 27, 2008) (“the sole issue of insurance coverage in this case presents no federal questions, nor promotes any federal interest”); Allstate Prop. & Cas. Ins. Co. v. Owens, 2011 U.S. Dist. LEXIS 2470 (W.D. Pa. Jan. 11, 2011) (“Indeed, this action presents the common case of an insurance company coming to federal court, under diversity jurisdiction, to receive declarations on purely state law matters.”); Maxum Indem. Co. v. Heyl & Patterson, Inc., 2011 U.S. Dist. LEXIS 102291 (W.D. Pa. Sept. 12, 2011) (“This Court believes that the state court system is more than capable of resolving the present dispute in accordance with its own law.”).

Reifer: The Underlying Facts

In Reifer, a workers' compensation plaintiff filed a malpractice action against her attorney, who was insured under a claims-made malpractice policy issued by Westport. The attorney failed to notify Westport of the claim, permitted his policy to lapse, and did not secure a replacement policy. Westport denied coverage on grounds of late notice. After the underlying plaintiff obtained a judgment against the insured attorney for over $4 million, the plaintiff took an assignment of the attorney's rights against Westport and sued the latter in state court seeking a declaration that Westport could not deny coverage without proving that it was prejudiced by the attorney's late notice. Westport removed the case to federal court on diversity grounds, and moved to dismiss for failure to state a claim. The plaintiff neither sought abstention and remand, nor did she file another state court action, nor did the underlying dispute remain pending in state court.

The magistrate judge wrote a lengthy opinion recommending that Westport's motion to dismiss be granted. The district judge, however, sua sponte decided to abstain from deciding “purely a state law issue” and remanded the case to Pennsylvania state court in reliance on Summy and those cases extending Summy in the Western and Middle Districts of Pennsylvania. Reifer v. Westport Ins. Corp., 943 F. Supp. 2d 506 (M.D. Pa. 2013).

The Third Circuit's Analysis

On appeal, Westport argued that the Act did not apply ' and that the case fell within the district court's compulsory diversity jurisdiction ' because, although ostensibly seeking a declaration that Westport owed the insured a duty to indemnify, plaintiff was actually seeking finite money damages from Westport in the judgment amount. The court rejected Westport's argument explaining that, standing in the place of the insured, plaintiff was ultimately asking for a declaration that coverage was owed under the policy and not for a direct award of money damages.

The Third Circuit next addressed the applicable standard of review. The court applied a traditional abuse of discretion test, retreating from its former position that a decision to decline jurisdiction under the Act was reviewable under a “heightened scrutiny” abuse of discretion standard. Most importantly, the court explained the extent of a district court's discretion to hear or abstain from hearing cases arising under the Act. The Third Circuit reiterated that, in exercising this discretion, a district court should consider:

the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy;

1. the convenience of the parties;
2. the public interest in settlement of the uncertainty of obligation; and
3. the availability and relative convenience of other remedies.

After cautioning that a declaratory judgment action should not be used “to provide another forum in a race for res judicata ,” the court restated that a district court must consider the following additional factors in cases involving insurance coverage:

1. A general policy of restraint when the same issues are pending in a state court;
2. An inherent conflict of interest between an insurer's duty to defend in a state court and its attempt to characterize that suit in federal court as falling within the scope of a policy exclusion; and
3. Avoidance of duplicative litigation.

The court then addressed the most salient issue presented in Reifer : the extent of a district court's discretion to abstain from hearing a case arising under the Act in the absence of a pending parallel state proceeding. The court explained that the absence of a pending parallel state proceeding “militates significantly in favor of exercising jurisdiction, although it alone does not require such an exercise ' [and t]he existence of pending parallel state proceedings militates significantly in favor of declining jurisdiction, although it alone does not require doing so.”

The Third Circuit then enunciated new considerations for district courts in determining whether to exercise discretion and hear cases arising under the Act. In addition to the required inquiry into the scope and nature of state court proceedings, if any, and the novelty of the state law issue raised, district courts must also consider:

1. the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy;
2. the convenience of the parties;
3. the public interest in settlement of the uncertainty of obligation;
4. the availability and relative convenience of other remedies;
5. a general policy of restraint when the same issues are pending in a state court;
6. avoidance of duplicative litigation;
7. prevention of the use of the declaratory action as a method of procedural fencing or as a means to provide another forum in a race for res judicata; and
8. (in the insurance context), an inherent conflict of interest between an insurer's duty to defend in a state court and its attempt to characterize that suit in federal court as falling within the scope of a policy exclusion.

Turning to the specific facts of the case, the Third Circuit held that the district court did not abuse its discretion in abstaining, notwithstanding the fact that a summary judgment motion had already been argued and ruled upon by the magistrate. The court placed particular import on the novel nature of plaintiff's coverage argument, and rejected Westport's argument that the case involved the application of well-settled Pennsylvania law regarding claims-made policies. The plaintiff argued that despite the generally applicable law as to claims-made policies, a malpractice insurer was required to show prejudice as a result of late notice because, if not, the public protection against attorney malpractice afforded by mandatory malpractice policies would be illusory. The court felt that the plaintiff presented a “nonfrivolous argument for possibly carving out an exception to governing Pennsylvania law in the context of legal malpractice insurance contracts” that was best heard in state court.

Reifer and similar decisions from other circuits evidence a trend “that rather than being subject to the requirement of exercising their 'virtually unflagging obligation' to accept jurisdiction, the federal courts have been given license to exercise their 'virtually unflagging opportunity' to avoid it.” Steven Plitt & Joshua D. Rogers, Judicial Abstinence: Ninth Circuit Jurisdictional Celibacy for Claims Brought Under the Federal Declaratory Judgment Act, 27 Seattle Univ. L. R. 751 (2002). In other words, district courts within these circuits are encouraged to avoid hearing complex insurance coverage disputes in deference to state courts.

This approach is not uniform, however. The issue was left open by Wilton , and two other circuits have limited discretion to dismiss declaratory judgment actions in the absence of parallel state proceedings. For instance, the Eleventh Circuit has adopted a categorical rule that a district court must hear a declaratory judgment action in the absence of a parallel state proceeding. See Federal Reserve Bank v. Thomas, 220 F.3d 1235 (11th Cir. 2000) (“It is an abuse of discretion, however, to dismiss a declaratory judgment action in favor of a state court proceeding that does not exist.”). Although not adopting a categorical rule, the Eighth Circuit has explicitly stated that a “district court's discretion is limited when no parallel proceedings are pending in state court, because in those circumstances there are less-pressing interests of practicality and wise judicial administration.” Scottsdale Ins. Co. v. Detco Indus., 426 F.3d 994 (8th Cir. 2005).

Although the Third Circuit acknowledged the general importance of the absence of a pending parallel state court proceeding and indicated that this factor deserves “increased emphasis,” the Reifer court afforded less weight to this consideration than these sister circuits.

Reifer's Silver Linings

Despite the court's ultimate holding, there may be some silver linings in the Reifer decision for insurers. For one thing, the Reifer court used similar language as many of its sister circuits in explaining that the lack of a state court proceeding “militates significantly in favor of exercising jurisdiction, although it alone does not require such an exercise.” Applying a nearly identical test, the Fifth Circuit has reversed a district court's dismissal of a declaratory judgment action in the absence of a pending parallel state proceeding. See Sherwin-Williams Co. v. Holmes County, 343 F.3d 383 (5th Cir. 2003) (“[e]ven without a per se rule requiring a district court to hear a declaratory judgment action where there is no pending state litigation, the presence or absence of a pending parallel state proceeding is an important factor.”).

This language may also signal that Reifer is limited to its facts. The case tangentially involved the regulation of Pennsylvania attorneys ' the insurance policy's purchase was compelled, and the type of policy regulated, by the Pennsylvania Supreme Court ' which falls squarely within the exclusive ambit of the Pennsylvania Supreme Court. Thus, the interpretation of the policy at issue in Reifer is more closely tied to state law than most any other types of insurance policies.

The Third Circuit also retreated (albeit slightly) from its strong admonition to insurers in Summy ' that insurance coverage disputes have “no special call on the federal forum” ' explaining that coverage actions brought in federal courts “implicate neither an improper use of procedure by insurance companies nor unfairness to insureds.” Further, the Reifer court disapproved certain district courts' practice of dismissing declaratory judgment actions involving insurance coverage, explaining that the “wholesale, 'revolving door' dismissal of such cases” does not evidence a “sound or reasoned” use of discretion. Thus, Reifer may turn out to expand the number of coverage cases district courts hear by forcing reluctant district courts to engage in a thorough analysis before dismissing insurance coverage declaratory judgment actions, in contrast to their post-Summy practice.

In fact, the only district court applying Reifer so far has exercised its discretion to retain jurisdiction over an action, albeit one involving both declaratory and non-declaratory claims. See BCB Bancorp. v. Progressive Cas. Ins. Co., 2014 U.S. Dist. LEXIS 73314 (D.N.J. May 28, 2014) (“[T]he factors set forth by the Third Circuit in Reifer weigh heavily in favor of federal retention of this matter.”).

It remains to be seen whether district courts strictly apply the factors set forth in Reifer or whether the Third Circuit has, in essence and effect, presented district courts a roadmap to banish insurance coverage declaratory judgment actions to state court.

William P. Shelley, a member of this newsletter's Board of Editors, is the managing partner of Gordon & Rees's Philadelphia office, and co-chair of the firm's Insurance Practice Group. Jacob C. Cohn is also a partner in the Philadelphia office. Andrew C. Lucking is a litigation associate at the firm.

In Reifer v. Westport Ins. Corp., 2014 U.S. App. LEXIS 8014 (3d Cir. Pa. Apr. 29, 2014), the U.S. Court of Appeals for the Third Circuit affirmed a district court's decision to abstain from deciding, and remanded back to state court, an insurance coverage declaratory judgment action. While it is not unusual for federal courts to apply the Wilton/Brillhart abstention doctrine in response to a party motion, this case is remarkable because not only did the district court dismiss the case on its own motion, it did so fully a year after removal, with no parallel state court action pending and after the magistrate judge had issued a 39-page report recommending that the coverage question be answered in the insurer's favor. Reifer represents both a reaffirmance and an extension of the Third Circuit's decision in State Auto Ins. Cos. v. Summy , 234 F.3d 131 (3d Cir. 2000). In Summy, the court reversed, as an abuse of discretion, a district court's decision to exercise its discretionary jurisdiction to issue a declaratory judgment on an insurance coverage issue where a parallel state court proceeding was pending. The Summy court emphasized that district courts should generally defer to state courts to decide unsettled issues of state insurance coverage law by abstaining from exercising their jurisdiction under the Declaratory Judgment Act. Reifer extended the broad discretion of district courts to dismiss declaratory judgment actions to include cases where no parallel state court action is pending. Notwithstanding some token comments by the court in Reifer rejecting abstention on a routine basis, taken together, Reifer and Summy demonstrate the Third Circuit's strong preference for district courts to avoid deciding pure declaratory judgment actions involving unsettled questions of state insurance coverage law ' even where no party has asked that the federal courts abstain.

The Landscape: Summy and Its Progeny

The Declaratory Judgment Act (the “Act”), 28 U.S.C. ” 2201-2202, grants authority to district courts to “declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is sought,” where federal jurisdiction otherwise exists. The exercise of this authority, however, is discretionary, as the Supreme Court has made clear in a series of cases beginning with Brillhart v. Excess Ins. Co. of Am. , 316 U.S. 491 (1942), and culminating with Wilton v. Seven Falls Co. , 515 U.S. 277 (1995).

In Summy, the insurer filed a declaratory judgment action in federal court and the insured subsequently filed a declaratory judgment action in state court. The insured's underlying action was pending in the same state court ' and in front of the same judge ' as the state court declaratory judgment action. The district court denied the insured's motion to stay or dismiss the federal declaratory judgment action and, while the state court action was pending, granted the insurer's motion for summary judgment.

The Third Circuit vacated the judgment as an abuse of discretion, and remanded the matter to the district court with instructions to dismiss the case. In the eyes of the Third Circuit, the district court's exercise of jurisdiction over the dispute amounted to a “'vexatious' and 'gratuitous interference' with state court litigation.” The court further cautioned that “district courts 'step back' and allow the state courts the opportunity to resolve unsettled state law matters.” As a parting shot, the Third Circuit opined, in obiter dictum, that “[t]he desire of insurance companies and their insureds to receive declarations in federal court on matters of purely state law has no special call on the federal forum.”

After Summy, district courts within the Third Circuit ' particularly the Western and Middle Districts of Pennsylvania ' engaged in wholesale dismissals of declaratory judgment actions involving insurance coverage, without engaging in any real, much less rigorous, analysis, under cover of deferring to state courts per Summy. See, e.g., Dixon v. Progressive Northern Ins. Co., 2008 U.S. Dist. LEXIS 65594 (W.D. Pa. Aug. 27, 2008) (“the sole issue of insurance coverage in this case presents no federal questions, nor promotes any federal interest”); Allstate Prop. & Cas. Ins. Co. v. Owens, 2011 U.S. Dist. LEXIS 2470 (W.D. Pa. Jan. 11, 2011) (“Indeed, this action presents the common case of an insurance company coming to federal court, under diversity jurisdiction, to receive declarations on purely state law matters.”); Maxum Indem. Co. v. Heyl & Patterson, Inc., 2011 U.S. Dist. LEXIS 102291 (W.D. Pa. Sept. 12, 2011) (“This Court believes that the state court system is more than capable of resolving the present dispute in accordance with its own law.”).

Reifer: The Underlying Facts

In Reifer, a workers' compensation plaintiff filed a malpractice action against her attorney, who was insured under a claims-made malpractice policy issued by Westport. The attorney failed to notify Westport of the claim, permitted his policy to lapse, and did not secure a replacement policy. Westport denied coverage on grounds of late notice. After the underlying plaintiff obtained a judgment against the insured attorney for over $4 million, the plaintiff took an assignment of the attorney's rights against Westport and sued the latter in state court seeking a declaration that Westport could not deny coverage without proving that it was prejudiced by the attorney's late notice. Westport removed the case to federal court on diversity grounds, and moved to dismiss for failure to state a claim. The plaintiff neither sought abstention and remand, nor did she file another state court action, nor did the underlying dispute remain pending in state court.

The magistrate judge wrote a lengthy opinion recommending that Westport's motion to dismiss be granted. The district judge, however, sua sponte decided to abstain from deciding “purely a state law issue” and remanded the case to Pennsylvania state court in reliance on Summy and those cases extending Summy in the Western and Middle Districts of Pennsylvania. Reifer v. Westport Ins. Corp. , 943 F. Supp. 2d 506 (M.D. Pa. 2013).

The Third Circuit's Analysis

On appeal, Westport argued that the Act did not apply ' and that the case fell within the district court's compulsory diversity jurisdiction ' because, although ostensibly seeking a declaration that Westport owed the insured a duty to indemnify, plaintiff was actually seeking finite money damages from Westport in the judgment amount. The court rejected Westport's argument explaining that, standing in the place of the insured, plaintiff was ultimately asking for a declaration that coverage was owed under the policy and not for a direct award of money damages.

The Third Circuit next addressed the applicable standard of review. The court applied a traditional abuse of discretion test, retreating from its former position that a decision to decline jurisdiction under the Act was reviewable under a “heightened scrutiny” abuse of discretion standard. Most importantly, the court explained the extent of a district court's discretion to hear or abstain from hearing cases arising under the Act. The Third Circuit reiterated that, in exercising this discretion, a district court should consider:

the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy;

1. the convenience of the parties;
2. the public interest in settlement of the uncertainty of obligation; and
3. the availability and relative convenience of other remedies.

After cautioning that a declaratory judgment action should not be used “to provide another forum in a race for res judicata ,” the court restated that a district court must consider the following additional factors in cases involving insurance coverage:

1. A general policy of restraint when the same issues are pending in a state court;
2. An inherent conflict of interest between an insurer's duty to defend in a state court and its attempt to characterize that suit in federal court as falling within the scope of a policy exclusion; and
3. Avoidance of duplicative litigation.

The court then addressed the most salient issue presented in Reifer : the extent of a district court's discretion to abstain from hearing a case arising under the Act in the absence of a pending parallel state proceeding. The court explained that the absence of a pending parallel state proceeding “militates significantly in favor of exercising jurisdiction, although it alone does not require such an exercise ' [and t]he existence of pending parallel state proceedings militates significantly in favor of declining jurisdiction, although it alone does not require doing so.”

The Third Circuit then enunciated new considerations for district courts in determining whether to exercise discretion and hear cases arising under the Act. In addition to the required inquiry into the scope and nature of state court proceedings, if any, and the novelty of the state law issue raised, district courts must also consider:

1. the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy;
2. the convenience of the parties;
3. the public interest in settlement of the uncertainty of obligation;
4. the availability and relative convenience of other remedies;
5. a general policy of restraint when the same issues are pending in a state court;
6. avoidance of duplicative litigation;
7. prevention of the use of the declaratory action as a method of procedural fencing or as a means to provide another forum in a race for res judicata; and
8. (in the insurance context), an inherent conflict of interest between an insurer's duty to defend in a state court and its attempt to characterize that suit in federal court as falling within the scope of a policy exclusion.

Turning to the specific facts of the case, the Third Circuit held that the district court did not abuse its discretion in abstaining, notwithstanding the fact that a summary judgment motion had already been argued and ruled upon by the magistrate. The court placed particular import on the novel nature of plaintiff's coverage argument, and rejected Westport's argument that the case involved the application of well-settled Pennsylvania law regarding claims-made policies. The plaintiff argued that despite the generally applicable law as to claims-made policies, a malpractice insurer was required to show prejudice as a result of late notice because, if not, the public protection against attorney malpractice afforded by mandatory malpractice policies would be illusory. The court felt that the plaintiff presented a “nonfrivolous argument for possibly carving out an exception to governing Pennsylvania law in the context of legal malpractice insurance contracts” that was best heard in state court.

Reifer and similar decisions from other circuits evidence a trend “that rather than being subject to the requirement of exercising their 'virtually unflagging obligation' to accept jurisdiction, the federal courts have been given license to exercise their 'virtually unflagging opportunity' to avoid it.” Steven Plitt & Joshua D. Rogers, Judicial Abstinence: Ninth Circuit Jurisdictional Celibacy for Claims Brought Under the Federal Declaratory Judgment Act, 27 Seattle Univ. L. R. 751 (2002). In other words, district courts within these circuits are encouraged to avoid hearing complex insurance coverage disputes in deference to state courts.

This approach is not uniform, however. The issue was left open by Wilton , and two other circuits have limited discretion to dismiss declaratory judgment actions in the absence of parallel state proceedings. For instance, the Eleventh Circuit has adopted a categorical rule that a district court must hear a declaratory judgment action in the absence of a parallel state proceeding. See Federal Reserve Bank v. Thomas , 220 F.3d 1235 (11th Cir. 2000) (“It is an abuse of discretion, however, to dismiss a declaratory judgment action in favor of a state court proceeding that does not exist.”). Although not adopting a categorical rule, the Eighth Circuit has explicitly stated that a “district court's discretion is limited when no parallel proceedings are pending in state court, because in those circumstances there are less-pressing interests of practicality and wise judicial administration.” Scottsdale Ins. Co. v. Detco Indus. , 426 F.3d 994 (8th Cir. 2005).

Although the Third Circuit acknowledged the general importance of the absence of a pending parallel state court proceeding and indicated that this factor deserves “increased emphasis,” the Reifer court afforded less weight to this consideration than these sister circuits.

Reifer's Silver Linings

Despite the court's ultimate holding, there may be some silver linings in the Reifer decision for insurers. For one thing, the Reifer court used similar language as many of its sister circuits in explaining that the lack of a state court proceeding “militates significantly in favor of exercising jurisdiction, although it alone does not require such an exercise.” Applying a nearly identical test, the Fifth Circuit has reversed a district court's dismissal of a declaratory judgment action in the absence of a pending parallel state proceeding. See Sherwin-Williams Co. v. Holmes County , 343 F.3d 383 (5th Cir. 2003) (“[e]ven without a per se rule requiring a district court to hear a declaratory judgment action where there is no pending state litigation, the presence or absence of a pending parallel state proceeding is an important factor.”).

This language may also signal that Reifer is limited to its facts. The case tangentially involved the regulation of Pennsylvania attorneys ' the insurance policy's purchase was compelled, and the type of policy regulated, by the Pennsylvania Supreme Court ' which falls squarely within the exclusive ambit of the Pennsylvania Supreme Court. Thus, the interpretation of the policy at issue in Reifer is more closely tied to state law than most any other types of insurance policies.

The Third Circuit also retreated (albeit slightly) from its strong admonition to insurers in Summy ' that insurance coverage disputes have “no special call on the federal forum” ' explaining that coverage actions brought in federal courts “implicate neither an improper use of procedure by insurance companies nor unfairness to insureds.” Further, the Reifer court disapproved certain district courts' practice of dismissing declaratory judgment actions involving insurance coverage, explaining that the “wholesale, 'revolving door' dismissal of such cases” does not evidence a “sound or reasoned” use of discretion. Thus, Reifer may turn out to expand the number of coverage cases district courts hear by forcing reluctant district courts to engage in a thorough analysis before dismissing insurance coverage declaratory judgment actions, in contrast to their post-Summy practice.

In fact, the only district court applying Reifer so far has exercised its discretion to retain jurisdiction over an action, albeit one involving both declaratory and non-declaratory claims. See BCB Bancorp. v. Progressive Cas. Ins. Co., 2014 U.S. Dist. LEXIS 73314 (D.N.J. May 28, 2014) (“[T]he factors set forth by the Third Circuit in Reifer weigh heavily in favor of federal retention of this matter.”).

It remains to be seen whether district courts strictly apply the factors set forth in Reifer or whether the Third Circuit has, in essence and effect, presented district courts a roadmap to banish insurance coverage declaratory judgment actions to state court.

William P. Shelley, a member of this newsletter's Board of Editors, is the managing partner of Gordon & Rees's Philadelphia office, and co-chair of the firm's Insurance Practice Group. Jacob C. Cohn is also a partner in the Philadelphia office. Andrew C. Lucking is a litigation associate at the firm.