Southern-Owners Insurance Company v. Galati Yacht Sales, LLC

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

SOUTHERN-OWNERS INSURANCE COMPANY,

Plaintiff,

v. Case No. 8:21-cv-2567-VMC-SPF

GALATI YACHT SALES, LLC,

JEFFCO MARINE SERVICES, INC.,

and JEFFERSON FORAKER,

Defendants.

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ORDER

This matter is before the Court on consideration of the

Motion to Dismiss filed by Defendant Galati Yacht Sales, LLC,

on January 31, 2022. (Doc. # 25). Defendants Jeffco Marine

Services, Inc. and Jefferson Foraker have expressed their

desire to join in Galati’s Motion. (Doc. # 29 at 1-3).

Plaintiff has responded. (Doc. ## 35, 39). For the reasons

described below, the Motion is denied.

I. Background

This case involves an insurance dispute and an

underlying lawsuit between some of the parties.

A. The Underlying Lawsuit

On August 19, 2021, Foraker sued Galati in Florida state

court for negligence (the “Underlying Lawsuit”). (Doc. # 1-

1). In his state-court complaint, Foraker alleged that,

through his business, Jeffco Marine Services, Inc., he

performed marine detailing work for Galati. (Id. at 1-2). On

or about October 9, 2020, Foraker boarded a vessel, the “Red

Lion,” at Galati’s request to perform some marine-detailing

work. (Id. at 3). Galati required its subcontractors, like

Foraker, to wear shoe coverings so as not to scuff the deck

of the boats. (Id.). Foraker alleged that, due to Galati’s

alleged negligence, he fell from the top of a tower or ladder

on the boat, sustaining significant injuries. (Id. at 3-4).

Manatee County Clerk of Court records indicate that the

Underlying Lawsuit is still open and active, with the state

court having scheduled a hearing for May 2022 on Galati’s

pending motion for summary judgment.

B. The Insurance Policy

According to the operative complaint, Plaintiff

Southern-Owners Insurance Company issued a Garage Liability

Policy (the “Policy”) to Defendant Jeffco that was effective

from March 25, 2020 until March 25, 2021. (Doc. # 6 at ¶ 12).

The Policy contains an Additional Insured Endorsement,

stating that Galati is an additional insured under the Policy

“but only with respect to liability arising out of [Jeffco’s]

work for that insured by or for [Jeffco].” (Id. at ¶ 20).

Pursuant to that endorsement, Galati sought a defense and

indemnification from Southern-Owners in the Underlying

Lawsuit. (Id. at ¶¶ 15, 17).

The Policy also contains an Employer’s Liability

Exclusion, which excludes from coverage “Bodily injury to:

(a) [a]n employee of any insured arising out of and in the

course of employment by any insured.” (Id. at ¶ 21); see also

(Doc. # 1-3 at 1).

Finally, the Policy also contains a Worker’s

Compensation Exclusion, which provides that the insurance

policy does not apply to “[a]ny obligations that would be

payable under . . . worker’s compensation law[.]” (Doc. # 6

at ¶ 22).

C. The Instant Complaint

Southern-Owners seeks a declaratory judgment on three

points. First, Southern-Owners claims that the allegations in

the Underlying Lawsuit arise out of Galati’s general business

practices and thus are excluded from coverage under the plain

language of the Policy. (Doc. # 6 at 5-6). Second, it argues

that the Employer’s Liability Exclusion serves to bar

coverage because Foraker was Jeffco’s employee, Foraker was

acting in the scope of his employment when he was injured,

and Foraker was thus Galati’s “statutory employee” for

purposes of Policy coverage. (Id. at 6-7). Third, Southern-

Owners alleges that the Worker’s Compensation Exclusion bars

coverage because Foraker was injured while performing work

requested by Galati, Foraker was therefore Galati’s

“statutory employee,” and Galati is liable under Florida’s

worker’s compensation law to Foraker. (Id. at 8-9).

Therefore, Southern-Owners seeks a declaration that: (1)

the Policy does not provide insurance coverage for the claims

alleged in the Underlying Suit or any and all other claims

arising from the incident that occurred on October 9, 2020;

and (2) that Southern-Owners has no duty to defend or

indemnify Galati for any and all claims alleged in the

Underlying Suit or any and all other claims arising from the

incident that occurred on October 9, 2020. (Id. at 6, 7-8,

9).

On January 31, 2022, Galati filed a motion to dismiss

the amended complaint. (Doc. # 25). Foraker and Jeffco have

both attempted to join in Galati’s Motion but, because the

Motion is due to be denied for the reasons explained below,

their request is moot. The Court solicited additional

information from the parties and has reviewed the material

provided.1 The Motion is now ripe for review.

II. Legal Standard

Southern-Owners brings the instant lawsuit pursuant to

the federal Declaratory Judgment Act, 28 U.S.C. § 2201. The

Declaratory Judgment Act provides, in relevant part:

In a case of actual controversy within its

jurisdiction . . . any court of the United States,

upon the filing of an appropriate pleading, may

declare the rights and other legal relations of any

interested party seeking such declaration, whether

or not further relief is or could be sought. Any

such declaration shall have the force and effect of

a final judgment or decree and shall be reviewable

as such.

28 U.S.C. § 2201(a).

As the Supreme Court has explained, the Act vests federal

district courts with discretion “in determining whether and

when to entertain an action under the Declaratory Judgment

1 In reviewing a motion to dismiss, the district court may

consider extrinsic documents if they are (1) central to the

plaintiff’s claim and (2) their authenticity is not

challenged. SFM Holdings, Ltd. v. Banc of Am. Sec., LLC, 600

F.3d 1334, 1337 (11th Cir. 2010). The additional documents

that the Court considered here, including the insurance

policy and the state court documents, are at the very heart

of both Southern-Owners’ declaratory judgment claim and the

issue of whether this Court must abstain in favor of the state

court action. Thus, the Court will consider them. See Celtic

Ins. Co. v. Digestive Med. Histology Lab, LLC, No. 19-24252-

CIV, 2019 WL 13020860, at *2 (S.D. Fla. Dec. 20, 2019)

(considering county small-claims actions and other documents

in determining abstention in declaratory judgment case).

Act, even when the suit otherwise satisfies subject matter

jurisdictional prerequisites.” Wilton v. Seven Falls Co., 515

U.S. 277, 282 (1995); see also Id. at 288 (explaining that,

in enacting the Declaratory Judgment Act, Congress “sought to

place a remedial arrow in the district court’s quiver; it

created an opportunity, rather than a duty, to grant a new

form of relief to qualifying litigants”). Consequently, “a

district court is authorized, in the sound exercise of its

discretion, to stay or to dismiss an action seeking a

declaratory judgment before trial or after all arguments have

drawn to a close.” Id. at 288. “[S]pecial flexibility is

called for in the declaratory judgment context, where the

normal principle that federal courts should adjudicate claims

within their jurisdiction yields to considerations of

practicality and wise judicial administration.” United

Purchasing Ass’n, LLC v. Am. Valve, Inc., No. 6:08-cv-515-

GAP-GJK, 2008 WL 2557559, at *1 (M.D. Fla. June 20, 2008)

(alteration added) (internal quotation marks and citations

omitted).

III. Analysis

Galati argues that the amended complaint should be

dismissed for lack of subject matter jurisdiction pursuant to

the abstention doctrine. (Doc. # 25 at 1). Galati argues that

this lawsuit is premature until such time as the Underlying

Lawsuit is resolved and the state court has determined

Galati’s liability. (Id. at 2-3). Galati maintains that the

policies of “efficiency, comity, and federalism” all weigh

heavily in favor of dismissal of this action. (Id. at 5).

Southern-Owners rejoins that the abstention doctrine2

does not apply because the Underlying Lawsuit (1) is not a

“parallel” proceeding presenting the same issues between the

same parties; (2) does not encompass the complete controversy

and does not address the insurance coverage issues at the

heart of this case; (3) will not resolve this federal

declaratory-judgment action; and (4) does not involve a

compelling state interest. (Doc. # 35).

The Declaratory Judgment Act “gives the federal courts

competence to make a declaration of rights; it does not impose

a duty to do so.” Ameritas Variable Life Ins. Co. v. Roach,

411 F.3d 1328, 1330 (11th Cir. 2005). Further, the Declaratory

Judgment Act is “an enabling Act, which confers a discretion

2 As the Eleventh Circuit has noted, the term “abstention” is

not technically correct because the decision to stay or

dismiss an action under the Declaratory Judgment Act does not

require the Court to reach for a judicially-created

abstention doctrine. Nat’l Tr. Ins. Co. v. S. Heating &

Cooling Inc, 12 F.4th 1278, 1282 n.2 (11th Cir. 2021). Rather,

the Act itself provides the Court with the necessary

discretion. Id.

on the courts rather than an absolute right upon the

litigant.” Wilton, 515 U.S. at 287 (internal quotation marks

and citations omitted). “Ordinarily it would be uneconomical

as well as vexatious for a federal court to proceed in a

declaratory judgment suit where another suit is pending in a

state court presenting the same issues, not governed by

federal law, between the same parties.” Brillhart v. Excess

Ins. Co. of Am., 316 U.S. 491, 495 (1942). The Eleventh

Circuit has provided the district courts with a series of

“guidepost” factors to aid in balancing state and federal

interests while deciding whether to exercise jurisdiction

over a declaratory judgment case:

(1) the strength of the state's interest in having the

issues raised in the federal declaratory action

decided in the state courts;

(2) whether the judgment in the federal declaratory

action would settle the controversy;

(3) whether the federal declaratory action would serve

a useful purpose in clarifying the legal relations

at issue;

(4) whether the declaratory remedy is being used merely

for the purpose of “procedural fencing” — that is,

to provide an arena for a race for res judicata or

to achieve a federal hearing in a case otherwise

not removable;

(5) whether the use of a declaratory action would

increase the friction between our federal and state

courts and improperly encroach on state

jurisdiction;

(6) whether there is an alternative remedy that is

better or more effective;

(7) whether the underlying factual issues are important

to an informed resolution of the case;

(8) whether the state trial court is in a better

position to evaluate those factual issues than is

the federal court; and

(9) whether there is a close nexus between the

underlying factual and legal issues and state law

and/or public policy, or whether federal common or

statutory law dictates a resolution of the

declaratory judgment action.

Ameritas, 411 F.3d at 1331. Not all of these guideposts are

required, nor is any one guidepost controlling. Id. Rather,

this Circuit follows a totality-of-the circumstances

standard.

The Eleventh Circuit revisited this topic just last

year, stating that “[w]hen a district court is deciding

whether to dismiss or stay a [Section] 2201(a) declaratory

judgment action in favor of a concurrent proceeding, we agree

that the degree of similarity between the proceedings is

significant,” such that “the greater the difference between

concurrent proceedings, the less likely refusing to exercise

jurisdiction will further the principles of wise judicial

administration, federalism, comity, and avoidance of

duplicative and officious federal proceedings.” Nat’l Tr.

Ins. Co. v. S. Heating & Cooling Inc, 12 F.4th 1278, 1285

(11th Cir. 2021). The degree of similarity between the

concurrent proceedings is not itself a “discrete” factor (or

a “tenth guidepost”) but, rather, is “encompassed by the

relevant Ameritas guideposts, and it is granted weight in the

balancing of those guideposts.” Id. at 1286.

Here, looking at the totality of the circumstances, the

Court concludes that this case is not sufficiently similar to

the Underlying Lawsuit to merit dismissal or a stay of this

matter. While they may arise from the same incident and

include some of the same parties, the essential dispute in

each is different. The state case involves a classic tort

claim — whether Galati negligently breached a duty of care

that it owed to Foraker and, if so, to what extent Foraker’s

damages can be attributed to Galati’s negligence. This

declaratory-judgment case, on the other hand, turns on the

interpretation of an insurance contract and the issue of

whether Galati may claim coverage under the subject Policy.

True, part of this case will be deciding whether Foraker was

Galati’s “statutory employee” such that he falls within

certain Policy exclusions and/or whether Galati’s liability

“arises out of” Jeffco’s or Foraker’s work for Galati. But

Galati has not demonstrated how the state court’s decision on

the tort claim would affect either of those determinations.

Indeed, as Defendants Jeffco and Foraker concede, “there are

no pending motions or otherwise in the state court action

which address the issues of Mr. Foraker’s employment status

with Galati, whether he was a ‘statutory employee,’ whether

he is eligible to receive worker’s compensation benefits,

and/or whether Mr. Foraker is foreclosed under Florida’s

Worker’s Compensation Law from bringing a negligence suit

against Galati, nor have any of these issues been raised as

an affirmative defense in that action.”3 (Doc. # 44 at 2-3).

3 In Florida, worker’s compensation is generally the exclusive

remedy available to an injured employee for the negligence of

his employer. Endurance Am. Specialty Ins. Co. v. United

Constr. Eng’g, Inc., 343 F. Supp. 3d 1274, 1278 (S.D. Fla.

2018). Under Florida’s Worker’s Compensation Law, an

“employee” is any person who receives remuneration from an

employer for the performance of any work or service. See Fla.

Stat. § 440.02(15)(a) (defining “statutory employee” under

the Workers’ Compensation Law). A contractor who sublets work

to a subcontractor becomes liable for the payment of

compensation to the subcontractor’s employees if the

subcontractor fails to secure worker’s compensation

insurance. Endurance, 343 F. Supp. 3d at 1279. In that

scenario, the contractor becomes the “statutory employer” of

the subcontractor’s employees. Id. And such “statutory

employees” are treated identically under the Florida Worker’s

Compensation Law to actual employees in relation to standard

employee exclusion clauses in insurance policies. Id. The

Court takes no position at this time on Foraker’s employment

status; it merely points out that this distinction could have

factored into the state court case. Upon review, it is

apparent that the state court will not be taking up this issue

– it was not raised as an affirmative defense or in Galati’s

motion for summary judgment.

Thus, looking to the Ameritas factors, the decision in

this case about whether Galati qualifies for insurance

coverage under the Policy would not settle in any way the

central questions of negligence and liability at issue in the

concurrent state proceeding. Relatedly, this federal

declaratory action would not serve a useful purpose in

clarifying the legal relations at issue in the state case.

And as the questions presented are so different, there is

little to no danger that the use of a declaratory action would

increase the friction between federal and state courts or

improperly encroach on state jurisdiction. Nor has Galati

demonstrated a close nexus between the underlying factual and

legal issues and state law and/or public policy, or whether

federal common or statutory law dictates a resolution of the

declaratory judgment action.

The Court’s decision is buttressed by Judge Brasher’s

concurring opinion in National Trust, in which he pointed out

that National Trust differed from those “run of the mill”

declaratory-judgment cases “that insurers reasonably expect

the federal courts to resolve” for two reasons. Nat’l Tr., 12

F.4th at 1290. First, the state law at issue there – whether

carbon monoxide is a “pollutant” under a pollution exclusion

in a liability insurance contract – was an open question under

Alabama law, which increased the state’s interest in

determining the issue of first impression. Id. at 1290-91.

Second, “unlike most declaratory judgment actions between a

liability insurer and its insured, this lawsuit turns more on

the facts of the alleged tort than an interpretation of the

insurance contract.” Id. at 1291. Indeed, in National Trust,

the relevant pollution policy exclusion had a “hostile fire

exception” which would apply if the tortfeasor’s misalignment

of the subject HVAC unit’s furnace burner caused the fire to

burn in the wrong place, thus causing the carbon monoxide

fumes which killed two people. Id. at 1282. As the Eleventh

Circuit explained, this decision created significant overlap

with the state court case:

So, even if carbon monoxide were a pollutant under

the insurance policy, the district court would

nevertheless be required to decide whether the

Hoges’ deaths fall within the hostile fire

exception. That inquiry would include determining

the alignment of the burner and the extent to which

any misalignment was responsible for the Hoges’

deaths. That analysis . . . would significantly

overlap with the factual evaluation that the

Alabama state court will undertake to determine

liability in the wrongful death action. Those and

other issues counseled against the district court

resolving National Trust’s declaratory judgment

action.

Id.

This case, however, presents none of the complicating

factors present in National Trust. See Id. The parties have

not pointed to any open or fragmented questions of state law

for this Court to decide in the first instance. And there is

no indication of the sort of factual overlap present in

National Trust. The circumstances, therefore, counsel against

the dismissal or stay of this action. See Auto-Owners Ins.

Co. v. Cymbal Props., LLC, No. 1:21-00111-KD-B, 2021 WL

4314458, at *7 (S.D. Ala. Sept. 22, 2021) (applying Ameritas

factors to find that federal court need not abstain from

deciding parameters of insurance policy where the resolution

of any disputed factual issues by the state court was

“irrelevant” to the resolution of the federal case nor was

there any overlap of the legal issues presented because “[t]he

issue of the insured’s liability has not been raised in the

federal case, and the issue of insurance coverage has not

been raised in the state-court case[]. While the cases are

related, they are separate – there is no reasonable risk of

inconsistent rulings, duplication of effort, or federal

entanglement with state court proceedings”); Northland Ins.

Co. v. Top Rank Trucking of Kissimmee, Inc., 823 F. Supp. 2d

1293, 1296 (M.D. Fla. 2011) (allowing insurer’s declaratory

judgment claim to proceed where the state court case involved

issues of negligence and vicarious liability whereas the

“only question” in the federal declaratory judgment case was

whether the plaintiff insurance company had an obligation

under its policy).

Accordingly, it is now

ORDERED, ADJUDGED, and DECREED:

(1) Defendant Galati Yacht Sales, LLC’s Motion to Dismiss

(Doc. # 25) is DENIED.

(2) Defendant Galati’s answer to the complaint is due 14

days from the date of this Order.

DONE and ORDERED in Chambers in Tampa, Florida, this 9th

day of May, 2022.

VIRGINIA M. HERNANDEZ*COVINGTON

UNITED STATES DISTRICT JUDGE

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