Clear Blue Specialty Insurance Company v. Karimi
3:24-cv-07351
| N.D. Cal. | Aug 25, 2025Background
- Plaintiff Clear Blue Specialty Insurance filed a federal action for declaratory relief and reimbursement, seeking a ruling that it is not obligated to defend or indemnify its insured, Rami Karimi (d/b/a Karimi Construction), in relation to personal injury lawsuits following a construction accident.
- The underlying accident involved a concrete truck tipping over during tennis court construction, injuring two workers, Chong and Castro, who later sued Karimi and others in state court.
- Multiple related state actions ensued: two personal injury lawsuits and two insurance subrogation actions for worker’s compensation claims.
- Clear Blue is defending Karimi in the state lawsuits under a reservation of rights and has argued that policy exclusions preclude coverage for the accident.
- Karimi, joined by other defendants, moved to stay the federal insurance coverage action pending resolution of the state court actions.
- The federal court addressed whether a stay of this insurance coverage case was warranted under federal procedural law (Landis standard), considering potential prejudice, hardship, and judicial efficiency.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Should action be stayed? | Delay harms Clear Blue’s ability to recover defense costs. | Dual litigation risks prejudice, inconsistent positions, and factual overlap. | Stay granted; delay is not cognizable harm. |
| Potential prejudice from stay | Delay in reimbursement harms Clear Blue. | Harm is speculative; Karimi’s hardship is being forced into inconsistent defenses. | No recognized harm to plaintiff; prejudice greater to defendants. |
| Judicial efficiency / Overlapping issues | Insurance policy interpretation is separate from state claims. | Factual overlaps, especially regarding roles and cause of accident. | Overlapping facts favor stay to avoid inconsistency. |
| Appropriate legal standard | N/A (Plaintiff contests but doesn't address standard directly) | Landis standard, not Brillhart, governs due to reimbursement claim. | Landis applies, not Brillhart. |
Key Cases Cited
- Landis v. North American Co., 299 U.S. 248 (federal courts have inherent power to stay proceedings considering balance of interests)
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (federal courts in diversity apply state substantive law and federal procedural law)
- CMAX, Inc. v. Hall, 300 F.2d 265 (three-factor test for stays: potential damage, hardship, and judicial economy)
- Clinton v. Jones, 520 U.S. 681 (burden is on movant to show necessity of stay)
- Scottsdale Ins. Co. v. MV Transportation, 36 Cal. 4th 643 (duty to defend may rest on extrinsic facts known to insurer, not just pleadings)