Republic Franklin Insurance Company v. Flinn Insurance, Inc., 1:20-cv-00328

Republic Franklin issued claims-made E&O policies to Flinn Financial (Korthase Flinn) for 2017–2019. Republic seeks a declaratory judgment that it has no duty to defend/indemnify Flinn for a Heartwood Mills suit due to untimely notice.
Heartwood engaged Flinn in 2017; Flinn employees (LaFave, Truman) exchanged emails and an SOV in July–Oct 2017 showing a purported increase in business-income coverage to $4,478,250, which Heartwood signed.
A fire occurred March 6, 2018. By May–June 2018 Heartwood noticed the policy still showed the lower $577,000 limit; PLM insurer had no record of any request to increase the limit (confirmed June 22, 2018).
Heartwood repeatedly pressed Flinn; on August 12, 2019 Heartwood’s lawyer asserted Flinn committed an error and claimed over $3M in loss. Flinn notified Republic on August 13, 2019 and Republic reserved rights and retained counsel. Heartwood sued Flinn in Jan. 2020.
Flinn moved to dismiss Republic’s amended complaint, arguing (1) the court should decline declaratory-judgment jurisdiction under 28 U.S.C. § 2201 and (2) Republic failed to state a notice-breach claim. The magistrate judge recommends denying the motion, exercising jurisdiction, and finding Republic pleaded sufficient facts that Flinn had notice of a "wrongful act" by mid-2018 and delayed notifying Republic.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether federal court should exercise declaratory-judgment jurisdiction	Republic: federal DJ action will settle coverage dispute between insurer and insured and involves issues distinct from state tort case	Flinn: court should decline under DJA because state forum is better and parallel state proceedings exist	Court: exercised jurisdiction (Grand Trunk factors weigh in favor: action will settle coverage dispute; issues distinct; minimal federal–state friction)
Whether Republic plausibly pleaded breach of policy notice requirements	Republic: Heartwood’s early communications (discrepancy/error/mistake) put Flinn on notice of a wrongful act by June 2018; Flinn’s Aug. 2019 notice to Republic was untimely	Flinn: Heartwood never alleged negligence until Aug. 12, 2019 letter, and Flinn notified Republic promptly the next day, so no late-notice breach	Court: denial of dismissal — allegations suffice under Twombly/Iqbal that earlier complaints amounted to notice of a negligent error/omission and that Flinn unreasonably delayed notifying Republic, stating a plausible claim

Wilton v. Seven Falls Co., 515 U.S. 277 (1995) (district courts have discretion to hear declaratory-judgment actions)
Grand Trunk W. R.R. Co. v. Consol. Rail Corp., 746 F.2d 323 (6th Cir. 1984) (factors guiding declaratory-judgment discretion)
Western World Ins. Co. v. Hoey, 773 F.3d 755 (6th Cir. 2014) (framework for balancing efficiency, fairness, and federalism in DJ actions)
Scottsdale Ins. Co. v. Flowers, 513 F.3d 546 (6th Cir. 2008) (insurer–insured coverage declaratory action can be appropriate when issues differ from pending state suit)
Bituminous Cas. Corp. v. J & L Lumber Co., 373 F.3d 807 (6th Cir. 2004) (caution against federal declarations that cannot bind underlying tort plaintiffs)
Travelers Indem. Co. v. Bowling Green Prof'l Assocs., PLC, 495 F.3d 266 (6th Cir. 2007) (district courts often stay/dismiss coverage DJ actions pending state proceedings)
Northland Ins. Co. v. Stewart Title Guar. Co., 327 F.3d 448 (6th Cir. 2003) (DJ action can settle insurer–insured coverage obligations even if it won't resolve the underlying tort)
Podiatry Ins. Co. of Am. v. Povich, 707 F. Supp. 2d 716 (W.D. Mich. 2010) (DJ action resolving whether insured complied with policy notice provisions)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for Rule 12(b)(6))
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (application of Twombly plausibility and dismissal standards)