Donegal Insurance Group v. Innovations Windows & Siding, LLC
4:23-cv-03092-JMG-MDN
| D. Neb. | Mar 27, 2024Background
- Innovations Windows & Siding, LLC (Innovations) installed allegedly defective windows in a home owned by Mary Yelken and Phillip Kottmeyer.
- Donegal Insurance Group (Donegal), Innovations’ liability insurer, was not notified of a state court lawsuit brought by the homeowners for the alleged defective installation.
- Donegal learned about the state court suit a year later and began a federal declaratory action seeking a determination that it owed no coverage obligations to Innovations.
- Innovations did not participate in or respond to the federal court proceedings and was later dissolved as an LLC by the state.
- The homeowners obtained a state court judgment against Innovations and later began garnishment proceedings against Donegal in state court.
- Both Donegal and the homeowners sought declaratory judgments in federal court regarding coverage and indemnity, resulting in jurisdiction and standing disputes.
Issues
| Issue | Plaintiff’s Argument | Defendant’s Argument | Held |
|---|---|---|---|
| Standing on Counterclaim | Homeowners lack standing under Nebraska law | Agreement—homeowners agree they lack standing | Court applied federal law: standing exists only as to indemnity, not defense |
| Federal Jurisdiction | Homeowners suit is necessary to resolve coverage | Court lacks jurisdiction due to parallel state case | Federal court abstains, dismisses case due to parallel state garnishment proceeding |
| Default Judgment Against Innovations | Proper due to lack of response by Innovations | -- | Not appropriate since it would affect homeowners’ rights and serve no useful purpose |
| Declaration on Duty to Defend | Donegal seeks declaration of no duty to defend | Homeowners contest; Innovations is inactive | Request is moot or not ripe; court declines to issue judgment |
Key Cases Cited
- Capitol Indem. Corp. v. Haverfield, 218 F.3d 872 (8th Cir. 2000) (federal courts should abstain from declaratory judgment actions if parallel state proceedings exist)
- Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942) (counseled federal court abstention in favor of parallel state actions on same issues)
- Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270 (1941) (actual controversy exists between injured party and insurer for indemnification)