Coverage Case Stayed Because Same Factual Dispute in Underlying Case

The United States District Court for the Eastern District of California, applying California law, ordered a stay of the coverage case until the underlying state court action concludes. The coverage case involves an insurance coverage dispute between New York Marine & General Insurance Company (“New York Marine”) and its insureds. The defendant insureds are also defendants in the underlying California state court action. Defendants sought to stay the case “to avoid prejudice they may suffer if factual disputes common to both cases are litigated at the same time.”

Timothy Hildebrand alleged that he was injured at a punk rock concert at the hands of Mike Ness, the band’s lead singer. Hildebrand and Ness proffered wildly divergent accounts of the evening. Hildebrand sued Ness, the band, the concert venue, two businesses affiliated with Ness, and others for several intentional and negligent torts, among other claims. Ness and the two business affiliates tendered their defense to New York Marine, who agreed to provide a defense under a reservation of rights. New York Marine subsequently filed a declaratory judgment action to establish that it had no duty to defend or indemnify Ness or the businesses.

The court held that New York Marine’s duty to defend turned on the interpretation of the insuring agreement and the exclusions in its policies.  The court disagreed with New York Marine’s contention that its coverage claims could be litigated without resolving any factual disputes in the underlying action because coverage for Hildebrand’s claims is a possibility under the terms of both the coverage clause and the exclusion for intentional acts. And it is unclear whether Ness acted intentionally when he made contact with Hildebrand, if he made contact at all. The District Court held that a stay is mandatory because the same factual disputes will likely be litigated in this case and in Hildebrand’s underlying state court lawsuit. New York Marine & Gen. Ins. Co. v. Ness, No. 2:20-cv-00765-KJM-AC (E.D. Cal. Jan. 11, 2021).