Resolution of Coverage Issues Appropriate Under Federal Declaratory Judgment Act

Описание: Declaratory Relief Available to an Insurer from USDC
Post number 5274

Insurer Seeks Limitation of Liability of Child Killed by Foster Dogs

In the Cincinnati Specialty Underwriters Insurance Company, an Ohio corporation v. Dennis Murphy, as Personal Representative of the Wrongful Death Estate of Avery Colin Jackson-Dunphy, Deceased; Patrick Admiral Dunphy, an Individual; Danika Thompson, an Individual; and Animal Services Center Of The Messila Valley, a New Mexico limited Liability Company, No. CIV 24-1039 JB/JFR, United States District Court, D. New Mexico (January 23, 2026) resolved the issues raised about the court's jurisdiction. 

Cincinnati Specialty Underwriters Insurance Company (“Cincinnati Insurance”) sought declaratory relief regarding an insurance policy’s sublimit following a fatal dog attack  which resulted in the death of Avery Colin Jackson-Dunphy.

THE ISSUE

The central legal issue arose from a motion to dismiss filed by Defendants Murphy and Dunphy, challenging the federal court’s subject-matter jurisdiction and raising abstention concerns due to ongoing state proceedings.

The defendants argued the amount in controversy was insufficient and that federal adjudication might interfere with related state litigation.

The factual background, drawn from the Complaint, recounts that Animal Services Center had placed several foster and adopted dogs with Avery’s maternal grandparents, the Owens. On the day of the incident, Avery was left unsupervised at her grandparents’ home with six dogs, leading to a fatal attack. The autopsy confirmed Avery died from multiple dog bite injuries.

FACTUAL BACKGROUND

In summary, the Court denied the motion to dismiss, finding both subject-matter jurisdiction and no basis for abstention, allowing the federal action to proceed to address the insurance coverage dispute related to the tragic incident.

ANALYSIS
LAW REGARDING EXERCISE OF DISCRETIONARY JURISDICTION OVER DECLARATORY JUDGMENT ACTIONS

The Federal Declaratory Judgment Act provides that “[i]n a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a).

The USCA for the Tenth Circuit adopts a five-factor test for evaluating whether a district court should exercise its discretionary jurisdiction over a declaratory judgment action:

whether a declaratory action would settle the controversy;
whether it would serve a useful purpose in clarifying the legal relations at issue;
whether the declaratory remedy is being used merely for the purpose of “procedural fencing” or “to provide an arena for a race to res judicata ”;
whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and
whether there is an alternative remedy which is better or more effective.

The federal Declaratory Judgment Act, 28 U.S.C. § 2201, vests the federal courts with power and competence to issue a declaration of rights.

Because the state court will determine, under state contract law, whether the tort action is covered by the insurance contract, it is not necessary for the federal court to issue a declaration on the insurance contract.

CINCINNATI INSURANCE MET THE $75,000.00 AMOUNT IN CONTROVERSY REQUIREMENT.

If the Court concludes that the sublimit does not apply, Cincinnati Insurance faces potential exposure up to the Policy's general limits: $1,000,000.00 per occurrence and $2,000,000.00 in the aggregate. The necessary amount in controversy therefore is present, and the Court denied the Motion to Dismiss for lack of diversity jurisdiction.

Defendants Motion to Dismiss for Want of Subject-Matter Jurisdiction, or, alternatively, to Dismiss Under Abstention Principles was denied.

ZALMA OPINION

When there is a dispute over the applicability of insurance coverages parties seeking coverage prefer to keep the issue before a state court rather than a federal court where the perception (probably inaccurate) that federal courts are more favorable to insurers. Here, the only issue was which stated limit of liability would apply to the horrendous death of a child by a pack of fostered dogs in the care of the child's grandparents. The USDC properly found jurisdiction over the limited issue.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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