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Stay of Action against Insurer under First-to-File Rule

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Court: U.S. District Court, Eastern District of Louisiana.

Plaintiff filed an action alleging take-home exposure from asbestos fibers while living with her grandfather, who was a welder for 40 years at Avondale Shipyards.

The plaintiff was diagnosed with lung cancer, which she alleged resulted from asbestos exposure from asbestos fibers brought home on her grandfather’s work clothing from her birth in 1962 until 1982, when her grandfather retired from the shipyard. The action was removed to federal court and amended to add numerous additional defendants, including Pennsylvania Insurance Company (“PIC”), an insurer that allegedly provided coverage for executive and officer for liability for some executive officers at Avondale, and liability coverage to a seller of asbestos products.

PIC filed a motion to stay the action in the Eastern District of Louisiana under the “first-to-file rule,” arguing that all claims as to PIC should be stayed until an action in the District of Massachusetts regarding PIC’s liability for policies, such as the ones at issue in this action is determined. The Massachusetts action concerns PIC’s claims that policies like the ones at issue were issued by American Employers Insurance Company (“AEIC”), a separate insurance company, which was acquired from PIC pursuant to a stock-purchase agreement by Sparta Insurance Company in 2007, and that PIC therefore has no liability for any AEIC issued policy.

In the Fifth Circuit, when related cases are pending before two federal courts, the court in which a case was last filed may refuse to hear it if the issues “substantially overlap.” Substantial overlap does not require that the cases be identical, only that the actions share substantive “core issues,” as judged on a case-by-case basis. The first-to-file rule is grounded in principles of comity and judicial economy, and intended to avoid wasteful duplicative litigation or interference with the proceedings of other judicial districts.

The court held that PIC was entitled to a stay as to the claims against it under the first-to file rule.

First, the court found that the claims in the Massachusetts action substantially overlapped with those against PIC in the Louisiana court; whether PIC or Sparta is potentially responsible pursuant to the AEIC policies remains to be determined, and the plaintiff’s claims against PIC are related to liability of the asbestos seller and Avondale executives and liability coverage under AEIC policies.

Second, the court held that a stay to determine which insurer, PIC or Sparta, is liable for the AEIC policy coverage would not deny the plaintiff her statutory rights to pursue a direct action against an insurer under Louisiana law, or to a jury determination as to insurance coverage, observing that whether an insurer is liable — and which insurer is liable —are separate inquiries.

Read the full decision here.