Jeffrey Michael Cohen | Carlton Fields | December 23, 2015
In the insurance arena, courts are often confronted with simultaneous lawsuits involving the same, or almost the same, parties. In the “underlying case” a claimant seeks damages from an insured defendant. Simultaneously, the insured, the insurer, and often the damage case’s claimant, are litigating a “coverage case” to obtain a declaratory judgment regarding the insurer’s obligation to defend or indemnify the insured in the underlying case. In Homeowners Property & Cas. Ins. Co. v. Hurchalla, the court had to determine whether to stay the coverage case until the underlying case was resolved or allow the two cases to proceed simultaneously.The trial court stayed the coverage case; however, that decision was reversed by the appellate court.
In the underlying case, Lake Point, a property developer, sued Hurchalla for damages and an injunction alleging that she defamed the developer by making false statements that induced Martin County and others to void their contracts with the developer. Homeowners, Hurchalla’s liability insurer, originally defended under a reservation of rights but later withdrew the defense and sued for a judgment declaring that Homeowners did not provide coverage for the underlying case.
Hurchalla moved to “abate” the coverage case until the underlying case was resolved. She argued that litigating the coverage case would prejudice her defense in the underlying case and force her to disclose her strategies to the developer. Homeowners opposed abatement arguing that the two lawsuits were mutually exclusive and that resolution of the coverage issues would facilitate resolution of the underlying case. The trial court abated the coverage case.
The district court of appeal granted certiorari and quashed the order, holding that it departed from the essential requirements of law.
The court discussed the distinction between a “stay” and an “abatement” of the underlying case. Abatement requires “complete identity” of parties and causes of action. A stay requires “substantial similarity.” The propriety of abatement can be determined as a matter of law, but a stay is reviewed for abuse of discretion because it merely postpones the litigation. Conversely, abatement terminates one of the lawsuits because the suits are identical. So, the appellate court treated the order as a stay rather than abatement.
The court held that in evaluating stay of a coverage case pending resolution of the underlying case, three factors should be considered:
- whether the two actions are mutually exclusive;
- whether a decision on the indemnity issue will promote settlement of the underlying case and avoid collusion between the claimant and the insured to create coverage; and
- whether the insured has independent resources so that the coverage issue would be immaterial to the claimant.
In Hurchalla, the court determined…