MARCH 2016 BAD FAITH CASES: IN EASTERDAY V. FEDERAL MUTUAL, COURT REMANDS DECLARATORY JUDGMENT ACTION INVOLVING NOVEL ISSUE OF STATE LAW (Philadelphia Federal)

Easterday v. Federated Mutual Insurance Company involved a class action claim for a declaratory judgment concerning underinsured motorist, coverage, breach of contract and bad faith.  Applying the Third Circuit’s analysis in Reifer on when a district court should entertain a declaratory judgment action, the federal district court remanded the case to state court.  It found the heart of the case would be decided in the declaratory judgment action, and the results of the contract and bad faith claims were entirely dependent on that decision.

The court found that the plaintiffs were seeking a declaration that they are entitled to underinsured motorist benefits under the business insurance policy at issue. Thus, “[t]he outcome of the bad faith and breach of contract claims depends on the resolution of the declaratory judgment claims. This action neither presents a federal question nor does it promote a federal interest. The dispute over the scope of coverage of the insurance contract is purely a matter of state law and there are no federal interests at stake. In fact, this action involves novel issues involving purely state law. As this action is inherently one for declaratory judgment, coupled with claims for breach of contract and bad faith, I will exercise my discretion to decline jurisdiction and grant the motion to remand this matter to state court.”

Date of Decision:  February 8, 2016

Easterday v. Federated Mut. Ins. Co., 2016 U.S. Dist. LEXIS 15440 (E.D. Pa. Feb. 8, 2016) (Stengel, J.)