MEMORANDUM OPINION
Pending before the Court is the Motion Of Defendants InterDigital Communications Corporation And InterDigital Technology Corporation To Dismiss Count Two Of The Complaint. D.I. 10. For the reasons discussed, the Court will grant Defendants’ Motion To Dismiss Count Two Of The Complaint, and Count II will be dismissed without prejudice and with leave to refile.
BACKGROUND
I. Procedural Background
Plaintiffs, Hartford Fire Mutual Insurance Company and Hartford Casualty Mutual Insurance Company (“Hartford”), brought this action against Defеndants, In-terDigital Communications Corporation and InterDigital Technology Corporation (“InterDigital”), seeking declaratory judgment that Hartford has no duty to defend or indemnify InterDigital in connection with an underlying action brought against InterDigital by Nokia Corporation and Nokia, Inc. (“Nokia”), pending before this Court and styled as Nokia Corporation and Nokia, Inc. v. InterDigital Communications Corporation and InterDigital Technоlogy Corporation, Civil Action No. 05-16-JJF (the “Nokia action”). In the Nokia action, the Court dismissed twenty of the twenty-one counts brought against InterDigital by Nokia leaving only Nokia’s claim for violation of Section 43(a) of the Lanham Act based on statements purportedly made by InterDigital about its patents and Nokia’s products, which Nokia contends damaged its business and reputation in the wireless market.
*377 Hartford originally commenced this action for declaratory judgment in the Eastern District of Pennsylvania, and it was transferred to this Court on July 7, 2006. Briefing on InterDigital’s Motion To Dismiss has been completed, and therefore, the Motion is ready for the Court’s review.
II. Factual Background
Hartford issued two insurance policies (the “Policies”) to InterDigitial, one effective for the period from December 22, 2003 to December 22, 2004, and the other effective for the period from December 22, 2004 until December 22, 2005. Pursuant to these Policies, Hartford agreed to indemnify InterDigital for “ ‘those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies.’ ” D.I. 13 at 4 (referring to the Policies). For coverage to exist, the offense must, among other things, arise out of the insured’s business and be committed in the “coverage tеrritory” during the period that the Policies were effective. Id.
Under the Policies, “personal and advertising injury” is defined as injury, including consequential bodily injury, arising out of certain listed offenses. Id. For purposes of this litigation, the applicable listed offense refer to “ ‘[o]ral, written or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.’ ” Id. However, the Policies bar coverage for “personal and advertising injury” that falls within certain exclusions, including but not limited to “personal and advertising injury” (1) caused by an offense committed by, at the direction of or with the consent of the insured with the expectation of inflicting “personal and advertising injury,” (2) arising out of oral, written or electronic publication material, if done by or at the direction of the insured (i) with knowledge of its falsity or (ii) whose publication occurred prior to the beginning of the policy period, (3) arising out of the failure of goods, products or services to conform with statements of quality or performance made in the insured’s advertisements or on the insured’s website, and (4) arising out of violations of intellectual property rights such as copyright, patеnt, and trademark. Id. at 4-5.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(1) authorizes the Court to dismiss a complaint for lack of subject matter jurisdiction. Motions brought under Rule 12(b)(1) may present either a facial challenge or a factual challenge to the Court’s subject matter jurisdiction. Courts have considered challenges to the ripeness of a claim to be facial challenges to subject matter jurisdiction.
See e.g. Thompson v. Borough of Munhall,
In reviewing a facial challenge under Rule 12(b)(1), the standards relevant to Rule 12(b)(6) apply. In this regard, the Court must accept all factual allegations in the complaint as true and all reasonable inferences must be drawn in favor of the plaintiff.
NE Hub Partners, L.P. v. CNG Transmission Corp.,
DISCUSSION
I. The Parties’ Contentions
By its Motion, InterDigital requests the Court to dismiss, without prejudice to its *378 renewal, Count Two of Hartford’s Complaint, which seeks a declaratory judgment that Hartford does not have a duty to indemnify InterDigital in connection with Nokia’s Lanham Act claim. InterDigital contends that a Lanham Act violation requires Nokia to demonstrate that InterDi-gital (1) made false or misleading statemеnts, and (2) acted in bad faith. Because the facts concerning InterDigital’s alleged conduct have yet to be determined in the Nokia action and InterDigital has not yet suffered an adverse judgment in that action, InterDigital contends that Count Two of Hartford’s Complaint is premature and unripe for judicial determination.
In response, Hartford contends that there are numerous factual and legal issues in this case that do not depend on the Nokia action which could demonstrate that Hartford does not have a duty to indemnify InterDigital. Hartford also contends that it will be prejudiced if the Court dismisses Count Two with leave to renew after an adjudication of liability against InterDigital in the Nokia action, because Hartford will have to continue to defend InterDigital with no recourse for repayment if the Court should later determine that thе Policies do not provide coverage for Nokia’s Lanham Act claim.
According to Hartford, Pennsylvania law permits an insurer to cut off its defense and indemnity obligations before trial, if the insurer can demonstrate that there is no coverage for the claim asserted against its insured. 1 In this regard, Hartford urges the Court to allow it to discover (1) whether InterDigital’s alleged statements involve an enumerated “personal or advertising injury” as defined in the Policies, (2) when and by whom such statements were made to determine if they fall within the coverage period, (3) the circumstances concerning the statements to determine whether a policy exclusion applies (e.g. whether the insured knew the statements were false or expected to inflict “personal or advertising injury”), and (4) whether InterDigital has other insurance apрlicable to this matter. Hartford contends that it should be permitted to adjudicate these issues now for the additional reason that Hartford may be asked to fund a settlement of the Nokia action before any judgment is rendered. Thus, Hartford contends that a determination of whether it has a duty to indemnify InterDigital is ripe at this time, without the need to have liability in the underlying Nokia action adjudicated first.
II. Whether InterDigital Is Entitled To Dismissаl Of Count Two Of Hartford’s Complaint
A. Applicable Legal Principles
The insurer’s duty to defend an insured is a separate and distinct obligation from the insurer’s duty to indemnify the insured.
Sphere Drake P.L.C. v. 101 Variety, Inc., 35
F.Supp.2d 421, 427 (E.D.Pa.1999) (citing
Erie Ins. Exchange v. Transamerica Ins. Co.,
As a general matter, courts refrаin from adjudicating whether an insurer has a duty to indemnify the insured until after
*379
the insured is found liable for damages in the underlying action.
2
See e.g., American States Ins. Co. v. Component Techs.,
Inc.,
In addition to ripeness concerns, the question of whether to defer adjudication of the duty to indemnify also raises “a more basic concern with fairness given the insurer’s conflict of interest in representing an insured at the same time it attempts to establish facts that support the insured’s liability.” Couch on Insurance 3d. § 227:37. To extent that basic notions of fairness are implicated, this issue has also been characterized as “more a matter of when the court should exercise its discretion to decline jurisdiction, rather than its lack of jurisdiction under the principles of justiciability.” Id.
B. Whether Count II Of Hartford’s Complaint Is Ripe
Reviewing Hartford’s claim for indemnification asserted in Count II of its Complaint in light of the circumstances of this case and the applicable law, the Court concludes that Count II is not ripe for adjudication at this time. Under the first prong of the
Step-Saver
analysis, the parties’ interests are considered adverse when actual harm will result if the declaratory judgment is not granted.
Hartford suggests that it will be harmed if it must continue to defend In-terDigital without first establishing whether a duty to indemnify exists. Specifically, Hartford contends that “i[f] the Court were to conclude that Hartford cannot proceed to adjudicate whether it has a duty to indemnity InterDigital before the Nokia action is concluded (and the Court concludes that there is a duty to defend), Hartford would be in the prejudicial position of having to defend Nokia’s very expensive lawsuit for as long as that suit drags out, with no way to prove before judgment that there is no coverage.” (D.I. 13 at 2). In the Court’s view, however, no actual harm or prejudice to Hartford arises from this scenario. As the
*380
Court has recognized, the duty to defend is separate from the duty to indemnify, and Hartford may have to defend Inter-Digital regardless of whether it will ultimately be required to indemnify it.
See Component Techs.,
Hartford directs the Court to several cases which it contends support the proposition that a declaratory judgment on the duty to indemnify may be entertained before liability has been determined in the underlying аction. The Court has reviewed the cases identified by Hartford and finds them to be distinguishable from the circumstances here. For example, several cases cited by Hartford are cases involving coverage and indemnification claims that were brought
after
the resolution of the underlying litigation.
See e.g. Lucker Mfg. v. Home Ins. Co.,
As for the second-prong of the Step-Saver analysis, the Court likewise con- *381 eludes that Hartford has not demonstrated that a declaratory judgment on indemnification would be conclusive. As courts have recognized in discussing this prong of the Step-Saver analysis, a declaratory ruling concerning the duty to indemnify is contingent upon the insured subsequently being held liable in the underlying litigation. Indeed, Hartford acknowledges the contingent and speculative nature of its indemnification obligation in the following allegations of its Complaint:
69. Even if Hartford were to have an obligation to defend the Nokia complaint (which Hartford denies), Hartford may not ultimately owe any indemnity to In-terDigital because they duty to indemnify is not based on the allegations of the complaint.
70. The duty to indemnify is based on the true facts which have not yet been determined.
(D.I. 1 at ¶ 69-70). Hartford’s allegations also demonstrate that its indemnification claim is factually driven, and while Hartford contends that certain factual issues will not be decided in the Nokia action 4 , the Court is persuaded that sufficient overlap exists between the coverage issues here and the underlying claims in the Nokia action such that continued litigation of the indemnity issue would be imprudent. As а result of this overlap, the Court is more likely to face duplicative litigation which will squander the Court’s and the parties’ resources. In addition, the Court has concerns that a determination of the indemnification issue here could result in anomalous repercussions on the underlying Nokia action. For example, it is not inconceivable that the Court could determine that coverage does not exist in this litigation, yet Nokia could ultimately prevail on a theory within the Policies’ coverage once all the facts of that litigation are thoroughly considered. Such results would undoubtedly lead to continued litigation thwarting the probability that a declaratory judgment on indemnity in this case would be conclusive.
With regard to the third prong of the
Step-Saver
test, the Court must determine whether a declaratory judgment concerning the duty to indemnify would have practical utility to the parties at this time. In evaluating this prong, the Court may consider such things as (1) the hardship to the parties if the court withholds a declaratory decision, (2) whether the claim involves uncertain or contingent events, and (2) whether the parties’ plans for future action may be affected by the declaratory judgment.
NE Hub Partners,
L.P.
For the reasons discussed in the context of the other two Step-Saver elements, including the contingent nature of Hartford’s indemnity claim and the possibility of du-plicative litigation, the Cоurt concludes that a declaratory judgment concerning the duty to indemnify will have little practical value to the parties and may work to prejudice InterDigital in the underlying *382 Nokia action. As InterDigital points out, if facts material to the Nokia action are adjudicated here, InterDigitial runs the risk of being collaterally estopped from litigating those issues in the underlying action. Further, the type of anomalous results discussed in the context of the con-clusivity prong may also lead to additional litigation in this action. On the other hand, a finding of no liability in the Nokia action would render any judgment on indemnity in this case of no value to the parties. Given these circumstances, the Court cannot conclude that a declaratory judgment on indemnity will be useful to the parties at this time.
C. Whether The Count Should Exercise Its Discretion To Declinе to Exercise Jurisdiction Over Count II Of Hartford’s Complaint
In the alternative, the Court concludes, in its discretion, that it should decline to exercise jurisdiction over Count Two until completion of the Nokia action.
Terra Nova Ins. Co., Ltd. v. 900 Bar, Inc.,
[T]he superior resources and expertise of the insurance company in litigating these maters are one aspect of the protection an insured purchases with his policy. Here, the policy language was sufficiently clear to preclude any reasonably expectation of a defense to claims for damages caused intentionally. At the same time, the insured could not possibly have anticipated that the very resources for which he bargained would be turned against him and used to establish his liability whenever intentional tort was alleged. An early declaratory judgment in these circumstanсes would serve as a procedural mechanism to defeat the reasonable expectations of the insured, which state courts have so zealously guarded through contract interpretation.
Terra Nova Ins.,
CONCLUSION
For the reasons discussed, the Court will grant InterDigital’s Motion To Dismiss Count Two Of The Complaint. Count II will be dismissed without prejudice to *383 its refiling following the conclusion of the underlying litigation in the Nokia action.
An appropriate Order will be entered.
ORDER
At Wilmington, this 14 day of December 2006, for the reasons set forth in the Memorandum Opinion issued this date;
IT IS HEREBY ORDERED that:
1. The Motion Of Defendants InterDi-gital Communications Corporation And In-terDigital Technology Corporation To Dismiss Count Two Of The Complaint (D.I. 10) is GRANTED.
2. Count Two of the Complaint is DISMISSED without prejudice to its refiling following the conclusion of the underlying litigation in the Nokia action.
3. Within twenty (20) days of the date of this Order the parties shall submit a joint, proposed Scheduling Order for the Court’s considеration. If the parties are unable to reach agreement, they shall outline their disputes in the joint, proposed Scheduling Order.
Notes
. For purposes of the instant Motion To Dismiss, the parties have relied upon Pennsylvania law without making any detailed choice of law arguments. Accordingly, the Court will proceed under the principles of Pennsylvania law for adjudicating this Motion.
. Courts outside of the Third Circuit have alsо taken this approach.
See e.g., Universal Underwriters Ins. Co. v. Lou Fusz Auto. Network, Inc.,
. See infra Section II.A. of this Memorandum Opinion and note 2 for additional cases recognizing the principle that courts should refrain from adjudicating whether an insurer has a duty to indemnify until after the insured is found liable in the underlying action.
. Hartford contends that the following facts will not be addressed in the Nokia action: (1) whether InterDigital made any slanderous, libelous or disparaging statements during the Policies' period; (2) whether InterDigital knew such statements were false; (3) whether Nokia’s alleged injury arises out of intellectual property rights which are excluded from coverage under the Policies; and (4) whether InterDigital has other insurance that applies to some of the amounts claimed by Nokia. Through its Lanham Act сlaim, however, Nokia has put forward questions which touch on at least two of the factual inquiries identified by Hartford. Specifically, Nokia’s Lanham Act claim concerns whether InterDigital made false or misleading statements and acted in bad faith. Though separate legal theories, the facts underlying these issues also pertain to Hartford's inquiry concerning whether InterDigital’s statements were slanderous, libelous or disparaging and whether Nokia knew the alleged statements were false.