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Where a home insurance carrier sought a declaration that it had no duty to provide coverage for a house fire, but no underlying suits or any plausible third-party claims had been asserted, the lawsuit was dismissed because the coverage claims were not ripe.

Background

Nationwide Insurance Company of America issued a tenant policy to Dewanna Seward. On or about Apr. 13, 2022, the defendant’s rental home caught on fire. Nationwide alleges that at the time of the fire, the defendant ran a daycare business, Indoor/Outdoor Reach LLC, in the leased home.

As a result, Nationwide filed this lawsuit, asking the court to declare that it “has no obligation to provide insurance coverage or benefits to the Defendant” or to defend and indemnify her against any third-party claims arising from the April 13, 2022 fire. Defendant filed a motion to dismiss for lack of subject-matter jurisdiction.

Analysis

Nationwide’s complaint requests declaratory judgment on: (1) whether Nationwide has a duty to defend against third-party claims arising from the fire, (2) whether Nationwide has a duty to indemnify the defendant for any such claims and (3) whether Nationwide owes the defendant coverage for her own losses due to the fire. The key question before the court is whether each ground is justiciable. None are. And even if the claims in the complaint were ripe, the court would decline to exercise its discretion under the Declaratory Judgment Act, or DJA.

Duty to defend

First, there is no underlying complaint because there is no pending action by a third party. Nationwide avers that third-party claimants may file suit in the future. But a “future injury” cannot form the basis of justiciability if it is “wholly speculative” or depends “upon contingent future events that may not occur as anticipated, or indeed may not occur at all.” While Nationwide views any potential legal claim as a claim itself, that is not the standard this court must apply. Because the duty to defend has not been triggered, this matter is not ripe.

Nationwide represents that it “has been called upon to defend and pay third party claims” via attorney representation letters. However, in an Aug. 31, 2022 letter, the attorney that previously represented those potential claimants withdrew his representation. And in the nearly two years since the attorney’s withdrawal, Nationwide has not received any subsequent notices of representation or suits filed against the defendant.

Nor has any attorney come forward on behalf of these potential claimants to inform Nationwide that the claims will proceed. Assuming without deciding that something less than a lawsuit can trigger the duty to defend, the lawyer’s withdrawal, coupled with almost two years of inaction, has extinguished any threat of a lawsuit sufficient to create a justiciable case or controversy.

Duty to indemnify

In Virginia the duty to indemnify “relies on litigated facts.” Here, no underlying action has been litigated, so there are no facts to “rel[y]” on. The question “in controversy” — whether Nationwide will be obligated to indemnify against future claims — is far from “final.” Nationwide’s obligation to indemnify is “dependent on future uncertainties” and is “wholly speculative.”

Coverage

The only remaining question is about Nationwide’s obligation to provide coverage to the defendant for her personal losses. But the defendant has not yet sought coverage for any such losses. Accordingly, the court finds that Nationwide’s request for a declaration regarding its obligation to provide coverage is not ripe.

Remaining arguments

Nationwide argues that a dismissal would cause it significant hardship because the potential claimants are minors, who could pursue claims “ten years from now,” when “all the evidence will be gone.” But the evidence Nationwide would use to dispute an alleged duty to indemnify or defend, if such duties were ever triggered, would consist largely of the text of the policy and the plaintiff’s own testimony about the nature of any business she ran out of her rented home. That evidence is not going away. And to the extent that other evidence might be necessary, Nationwide already possesses some of it.

If the court’s conclusion were incorrect, and this action were justiciable under Article III, the court would nonetheless decline to exercise its discretion under the DJA, because given the speculative nature of the injury Nationwide has presented, exercising jurisdiction here would risk “advising what the law would be upon a hypothetical state of facts.”

Defendant’s motion to dismiss granted.

Nationwide Insurance Company of America v. Seward, Case No. 2:22-cv-316, Apr. 30, 2024. EDVA at Norfolk (Walker). VLW 024-3-259. 13 pp.