Medical Mutual Insurance Co NC v. Rebecca Littaua, No. 21-1215 (4th Cir. 2022)
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Plaintiff, Medical Mutual Insurance Company (“Med Mutual”) was the insurance carrier for numerous defendants in medical malpractice suit. Med Mutual provided the defense for the state case but, during discovery, alleged that one of the insureds had made a material modification to the Decedent’s medical records. Med Mutual brought the federal action seeking a declaratory judgment concluding that it has no obligation to provide insurance coverage for the defense of the state case. The district court declined to exercise jurisdiction over a declaratory judgment action while a parallel action was pending in state court.
The Fourth Circuit affirmed the district court’s decision. The court explained when a Section 2201 action is filed in federal court while a parallel state case is pending, the court has recognized that “courts have broad discretion to abstain from deciding declaratory judgment actions.” When deciding whether to hear such a declaratory judgment action, the court considers four factors: (1) whether the state has a strong interest in having the issues decided in its courts; (2) whether the state courts could resolve the issues more efficiently than the federal courts; (3) whether the presence of “overlapping issues of fact or law” might create unnecessary “entanglement” between the state and federal courts; and (4) whether the federal action is mere “procedural fencing”. Here, the factors favoring abstention are at least as strong, if not stronger, than those favoring retention and Med Mutual has not demonstrated an abuse by the district court of its broad discretion.
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