ENVISION HEALTHCARE v. PREFERREDONE INSURANCE CO. (May 12, 2010)

PreferredOne, a health insurance company, entered into a contract with Envision Healthcare, a wholesale insurance broker, for the marketing and sales of its insurance products. Envision sold one of those insurance products to Bradley Romer. Romer had two knee surgeries, with serious complications, that resulted in a hospital bill in excess of $100,000. Upon receiving the hospital bill, PreferredOne did a little investigating into Romer's application. It concluded that he omitted a pre-existing condition. It then rescinded the policy and refused to pay the balance of the hospital bill. Romer brought a breach of contract suit in state court against PreferredOne. PreferredOne filed a third-party complaint against Envision for indemnification. Envision then filed suit against PreferredOne in federal court seeking a declaration that it had no duty to indemnify. It then unsuccessfully sought to dismiss the state court third-party complaint on the grounds that it involved the same legal issue. PreferredOne moved to dismiss the federal action. Concluding that the federal and state cases involved the same parties and presented the same legal issue, the district court dismissed the case under the Wilton/Brillhart doctrine of abstention. Envision appeals.

In their opinion, Judges Bauer, Manion, and Tinder affirmed. The Court first noted that its standard of review of the district court's decision to abstain is for abuse of discretion. Applying that standard, the Court found no abuse. In fact, it noted that the case presented a "classic example" of the proper use of the Wilton/Brillhart doctrine -- only declaratory relief is sought and a parallel state court action, between the same parties and addressing the same issue, is proceeding.