Bad Day At The Track For Plaintiff In Its Attempt To Have Its Declaratory Judgment Action Decided In State Court
In Greenwood Racing v. American Guarantee & Liability Insurance Co. and Steadfast Insurance Co., the District Court for the Eastern District of Pennsylvania denied Greenwood Racing’s (“Greenwood”) motion to remand the case to state court. The court reasoned that although it could have abstained from jurisdiction, there were no novel issues of state law requiring remand.
Greenwood, like many businesses, was forced to close its racetrack because of government orders related to the COVID-19 pandemic. Even when Greenwood reopened, it earned significantly less revenue because of the remaining safety precautions related to the pandemic. It eventually filed a declaratory judgment action against its insurers, seeking to declare that they were required to insure the business losses. The insurers removed the case to federal court. Greenwood then filed a motion to remand.
The District Court noted that although it could remand the case back to state court, the relevant factors weighed against remand. First, the case presented no novel issues of state law, which would have required remand. The case only involved well-established principles of Pennsylvania insurance law (namely the limits of coverage related to business interruption). The law was clear that Greenwood needed to present evidence of direct physical loss or damage to the covered property. Second, the court found that the contamination exclusions in the policies did not present a novel issue of state law. Although Greenwood argued that the use of the word “virus” violated its reasonable expectations (i.e. that it would be covered for losses sustained during a virus like COVID-19), the court found that the reasonable expectations doctrine is well settled under Pennsylvania law. Greenwood’s argument did not present novel issues to be decided by the state court. Finally, the court found that remand was not mandatory because there were no parallel state proceedings. The court’s decision shows that the novel issues presented by business interruption cases related to COVID-19 may not be so novel anymore.
Should you have any questions about this case or others involving Covid-19 insurance cases, please contact Thomas Bracken.