The U.S. Court of Appeals for the Sixth Circuit, in Massachusetts Bay Insurance Company v. Christian Funeral Directors, Inc., No. 18-5267 (6th Cir. Dec. 26, 2018), recently upheld a district court’s declination of jurisdiction over an insurer’s declaratory judgment action on coverage. The court’s decision is a reminder that both insureds and insurers need to carefully consider the efficacy of bringing declaratory judgment actions on coverage in federal court, particularly where the coverage action is closely bound up with a pending state court action.
The plaintiff, Massachusetts Bay Insurance Company (Mass. Bay), initiated a declaratory judgment action after its insured, Christian Funeral Directors, Inc. (Christian), was sued in multiple Tennessee state court actions for alleged misconduct in the burial of bodies. In particular, it was alleged that Christian worked with a cemetery, Galilee Memorial Gardens, that operated as a cemetery without a valid certificate of registration, continued to sell burial plots even though all those plots were taken, and improperly disposed of bodies. Mass. Bay provided a defense to Christian under a reservation of rights. It then filed a declaratory judgment action in the U.S. District Court for the Western District of Tennessee, alleging it had no duty to defend or indemnify Christian in the underlying actions.