Declaratory judgment action by an insurer; Stay of proceedings pending the outcome of a related case

Concluding that the trial court did not abuse its discretion by granting a stay of proceedings pending the outcome of collateral federal tort litigation, the court affirmed. Defendants-the Fays were seriously injured due to carbon monoxide poisoning while staying at a hotel owned and operated by defendant-Warren Hospitality Suites. They sued Warren Hospitality in the federal tort litigation. Plaintiff-Atain Insurance Company “insures Warren Hospitality and is providing a defense in the tort suit under a reservation of rights. Atain filed this declaratory action seeking an adjudication that it does not have a duty to defend or indemnify in the federal action due to an exclusion in the policy” that excludes coverage for damages or injuries caused by “pollutants.” The Fays’ tort complaint alleged that the “carbon monoxide was caused by ‘an uncontrollable fire’ in the hotel’s HVAC system.” Atain maintained that “carbon monoxide is a ‘pollutant’ and coverage” was excluded under the policy. The court noted that two “trial courts have independently determined that the tort action and the declaratory action have common issues of fact as to the cause of the alleged carbon monoxide discharge. The trial court properly exercised its discretion by staying the proceedings in the declaratory action ‘[t]o prevent any inequity in this matter and in the interest of judicial economy[.]’ Because of the overlap of the factual issues, the outcome of the tort action could impact the declaratory action. For example, if Warren Hospitality prevails in the tort action, then the declaratory action would become moot.” Thus, it was “within the range of principled outcomes for the trial court to wait for the cause of the carbon monoxide poisoning to be litigated in the underlying tort action. This approach clearly serves judicial economy.” Likewise, the trial court “did not abuse its discretion because Atain would not suffer any prejudice by the stay. Atain’s legal interests remain intact and, if not rendered moot by the litigation of the factual issues, can be litigated in full later.”