Builders Mutual Insurance v. Futura Group, L.L.C.
2011 U.S. Dist. LEXIS 45137
E.D. Va.2011Background
- Proto sued Futura in Virginia Beach circuit court seeking damages related to alleged drywall defects in the Proto residence.
- Builders Mutual insured Futura and provided defense under a reservation of rights in the underlying state case.
- Builders Mutual filed a federal declaratory judgment action seeking a ruling that it has no duty to defend or indemnify Futura.
- The Protos moved to stay the federal action pending resolution of the underlying state court case.
- Virginia law applies; the court analyzes duties to defend and indemnify under the Eight Corners Rule and related principles.
- The court concludes the case should not be stayed and proceeds with the declaratory judgment action, with indemnity to be resolved after state facts if any duty to defend exists.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court should stay the federal action pending state court resolution. | Protos argue stay promotes efficiency and comity by deferring to state court. | Builders Mutual contends stay is unwarranted; issues can be decided now and avoid piecemeal litigation. | Denied stay. |
| Whether the state court has a strong interest in deciding contractual coverage issues given the Eight Corners Rule. | Protos contend Virginia state law should decide coverage questions central to the case. | Protos emphasize state-law questions (pollution/ensuing loss) are novel and merit state resolution. | Contractual coverage issues need not be resolved in state court; avoid stay. |
| Whether the duty to indemnify should be decided before the state court resolves underlying facts. | Indemnity depends on litigated facts; waiting for state findings would be appropriate. | Indemnity issues require state-fact findings but are narrower than defense duty and may follow defense ruling. | Indemnity determination awaits state court findings; may be addressed after defense issue. |
| Whether adjudication would entangle overlapping issues of fact or law between state and federal courts. | Not necessary to re-find facts for defense; Eight Corners dictates legal analysis from pleadings. | State action might share underlying facts; potential entanglement could arise. | Insufficient entanglement to warrant a stay. |
| Whether the action constitutes procedural fencing or forum shopping. | Nauilus factors show no improper forum shopping. | Federal filing is strategic; avoid state court rulings. | No procedural fencing; stay denied. |
Key Cases Cited
- Penn-America Ins. Co. v. Coffey, 368 F.3d 409 (4th Cir. 2004) (duty to defend determined by eight corners; stay considerations guided by four Nautilus factors)
- USAA v. Nationwide Mut. Ins. Co., 218 Va. 861 (Va. 1978) (insurer cannot be joined as a party to state tort action; matters governability and injunctive relief context)
- Bohreer v. Erie Ins. Grp., 475 F. Supp. 2d 578 (E.D. Va. 2007) (duty to defend may depend on potential coverage; eight corners framework)