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Federal Court Declines to Exercise Jurisdiction Over Insurer’s Declaratory Judgment Action That Raised “Novel Issue of Ohio Insurance Law”

On June 13, 2023, the Sixth Circuit issued a decision in Admiral Ins. Co. v. Fire-Dex, LLC, Case No. 22-3922, affirming a district court’s order declining to exercise jurisdiction over an insurer’s declaratory judgment action on the ground that the action turned on a “novel issue of Ohio insurance law” that should be resolved by the Ohio state courts.

At issue in Fire-Dex was whether illnesses arising from exposure to PFAS—so-called “forever chemicals”—in a manufacturer’s finished products constitute an “occupational disease” under Ohio law.  The Sixth Circuit affirmed the federal district court decision declining to exercise jurisdiction over the case, explaining:

No party cites an Ohio decision addressing the issue, nor are we aware of one.  In the absence of guidance from Ohio courts for us to follow, Admiral’s theories of liability under Ohio state law implicate concerns of comity.  States, it bears reminding are the master of their own law, subject to certain federal constitutional and statutory restraints.  So when unanswered questions of state law raise their heads, state courts are best suited to answer them, a proposition that has long been embraced in a host of settings.  The more novel the issue, the less guidance federal courts will have in interpreting state law. And the lesser the guidance, the greater the likelihood that a federal court’s conclusion would be out of step with a state court’s resolution of the issue.  Remember, the district court was asked to “declare” how Ohio law would interpret contractual language addressing liability to non-employees for PFAS exposure.  Doing so without any relevant state-imposed guardrails would make its journey a riskier one.  For these reasons, it was not an abuse of discretion for the district court to hold that these issues first need to be decided by Ohio state courts.

Especially so, we note, as this case involves a dispute over insurance law.  By and large, insurance rules and regulations are reserved to the states for crafting.  It is thus no surprise that we consistently counsel district courts to decline jurisdiction when asked to decide unresolved insurance coverage issues.

Although insurance coverage litigation is frequently venued in federal court, questions of policy interpretation are generally governed by state law.  And, as this decision illustrates, federal courts may be hesitant weigh in on novel questions of state law.  Rather than declining jurisdiction altogether, federal courts may also certify questions to the state supreme court.  The Second Circuit has often certified questions to the New York Court of Appeals in insurance matters.  Under New York law, at least, this option is not available to the federal district courts.

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