Declaratory Relief Only Available If There is an “Actual Controversy”

Insurer’s Dispute Premature

Insurance companies often seek the help of federal courts to determine disputes over which insurer owe what to an insured in what amounts. In Progressive American Insurance Company v. Kanzer, Slip Copy, United States District Court, Florida, CASE NO: 8:16-CV-1154-T-30AEP (06/24/2016) the USDC in Florida was asked to resolve a dispute between insurers over defense and indemnity of their mutual insureds as a result of an vehicle accident causing bodily injuries.


Plaintiff Progressive American Insurance Company seeks a declaration regarding the priority of insurance coverage. Specifically, this declaratory judgment action arises out of an underlying state court action styled, Anthony Gallo v. Stephen R. Kanzer, pending in Pinellas County, Florida Circuit Court (the “underlying action”). In the underlying action, Anthony Gallo filed a single-count negligence action against Stephen R. Kanzer for bodily injuries Gallo suffered as a result of a motor vehicle accident caused by Kanzer’s negligence.


Progressive alleges in this case that it issued two insurance policies to Kanzer: a personal automobile policy, with potentially relevant limits of $250,000 each person and $500,000 each accident, and a personal umbrella policy, with a potentially relevant limit of $1,000,000 per occurrence. Progressive alleges that Twin City Insurance Company issued to Kanzer’s employer, Morgan & Morgan, Tampa, P.A., a liability insurance policy, containing business auto coverage, with a relevant limit of $1,000,000 per occurrence. Progressive also contends that North River Insurance Company issued to Morgan & Morgan a commercial umbrella policy, with a relevant limit of $25,000,000 per occurrence.

Progressive does not seek a declaration from this Court on the duty to defend; it concedes that it is providing Kanzer with a defense in the underlying action. Progressive requests the Court to declare that Kanzer is an insured under the Twin City and North River policies issued to Morgan & Morgan, and is therefore entitled to coverage under those policies for the damages Gallo claims in the underlying action. Progressive also asks the Court to declare that there is a specific priority of coverage among the various policies, whereby the Progressive personal automobile policy provides the first layer of indemnity coverage to Kanzer up to its applicable limits, followed by the Twin City policy up to its applicable limits, followed by the Progressive and North River umbrella policies on a pro rata basis according to their respective policy limits.

North River moves to dismiss Progressive’s complaint for declaratory relief for lack of subject matter jurisdiction (a lack of an “actual controversy”) and for failure to state a cause of action pursuant.


The test for an “actual controversy” under the Declaratory Judgment Act does not require a present dispute, but only the “practical likelihood” that a dispute will arise. Here, the Court concludes that there are too many contingencies at issue and that the “practical likelihood” that they will occur is too hypothetical at this point. For example, as North River points out, North River’s indemnity obligations to the insured are contingent on the insured actually being held liable in the underlying action. North River’s indemnity obligations are also contingent on the exhaustion of the underlying insurance. Those events may never occur.

On that same note, any declaration regarding the priority of coverage implies that there is a duty to indemnify Kanzer.

Progressive’s declaratory action is premature. The Court should never waste judicial resources and the resources of the parties on speculative, hypothetical injuries.

However, rather than dismiss this case as North River requests, the Court elects to stay the action, pending the outcome of the underlying action.


Insurance disputes that pose an actual controversy can always be resolved by a declaratory relief action. However, when the issue is speculative and premature courts should ignore the request for declaratory relief. In this Solomon-like decision the USDC punted the case until there is a resolution of the underlying case. If there is a defense verdict there will be no dispute between the insurers and if there is a verdict for the plaintiff then the court can consider the issue.

ZALMA-INS-CONSULT                      © 2016 – Barry Zalma

Barry Zalma, Esq., CFE, practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.  He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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