The Movement Toward Increased Federal Jurisdiction Over Insurance Declaratory Judgment Actions
In the U.S. Court of Appeals for the Third Circuit, district courts exercising their discretion under the DJA are guided by the landmark opinion in Reifer v. Westport Insurance, 751 F.3d 129 (3d Cir. 2014). Reifer sets forth the factors a district court must address when deciding whether to abstain from hearing an insurance coverage declaratory judgment action.
August 23, 2023 at 12:20 PM
8 minute read
Special SectionsInsurance carriers typically prefer a federal court to decide their insurance coverage declaratory judgment actions. The federal bench's well-known facility with insurance law and the relative uniformity of federal procedure are among the reasons carriers regard a federal forum as more appealing than state court. As a result, a carrier often brings a declaratory judgment action in federal court to determine its obligation to defend and indemnify a defendant in an action pending in state court. In that circumstance, the federal Declaratory Judgment Act (DJA) provides an exception to the general rule that federal courts have a strict duty to exercise the jurisdiction conferred on them by Congress. Specifically, the DJA grants federal courts broad discretion in deciding whether to abstain from hearing the action or remanding it to state court. While the discretion granted under the DJA is substantial, it is not unlimited. In the words of the U.S. Supreme Court, it is "bounded and reviewable."
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