Two sides of the same coin: Sixth Circuit announces new jurisdictional standard for “mixed” insurance coverage actions

As litigation relating to PFAS exposure grows significantly across the US, companies have increasingly requested that their insurance carriers cover related defense and indemnity costs.  The recent PFAS decision in Fire-Dex, LLC v. Admiral Ins. Co., 139 F.4th 519 (6th Cir. 2025) has set new precedent regarding the way in which federal courts exercise their jurisdiction in “mixed” insurance coverage actions involving monetary and declaratory relief.   

Procedural background

Fire-Dex arises out of a series of underlying lawsuits filed by firefighters and their spouses alleging that Fire-Dex’s products have exposed them to PFAS.  Fire-Dex sued its insurer, seeking a declaration that its insurer had a duty to defend, as well as compensatory and punitive damages for breach of contract and bad faith.  The Ohio federal court remanded the declaratory judgment claims to state court and stayed the claims for damages pending resolution of the state court action.  Admiral appealed.

Sixth Circuit’s holding

The Sixth Circuit found that the district court abused its discretion in failing to exercise jurisdiction over the declaratory judgment claims.  The unanimous three-judge panel first explained the constitutional limits of federal courts’ jurisdiction.  Generally, when the US Congress grants federal courts with jurisdiction, such courts “must adhere to that command.”  However, under the “abstention doctrine,” there are “extraordinary and narrow” exceptions to that general rule.  Rooted in principles of federalism, the abstention doctrine generally precludes federal courts from hearing matters that are of particular importance to states and/or their laws. 

Unless the abstention doctrine applies, a district court must exercise its jurisdiction over a claim seeking damages.  By contrast, under the Declaratory Judgment Act, 28. U.S.C. § 2201(a) (the “Act”), federal courts have discretion whether to hear claims seeking declaratory relief.  In the context of a mixed-action, the Sixth Circuit noted that the presence of a declaratory judgment claim alongside a damages claim is not a “get-out-of-jurisdiction-free card.”  The Sixth Circuit interpreted the “permissive language” of the Act to apply to all claims for declaratory relief, irrespective of whether the claim is part of a mixed action.     

Furthermore, the panel found that the presence of a damages claim will “often” significantly limit a district court’s discretion in refusing to adjudicate a declaratory relief claim when both claims involve the “same legal issue.”  The panel explained that Fire-Dex’s declaratory relief and damages claims for Admiral’s alleged breach of contract are essentially “two sides of the same coin” because “[a] court would necessarily resolve whether Admiral had a duty to defend and indemnify Fire-Dex in deciding whether there had been a breach.”  In vacating and remanding the lower court’s decision, the Sixth Circuit found that equitable principles of efficiency, fairness, and federalism weighed in favor of the district court not abstaining from hearing the case. 

Takeaway

As Judge Amul Thapar in Fire-Dex acknowledges, jurisdiction is power.  Whether a case is litigated in state or federal court has important ramifications on the outcome of the litigation.  Coverage lawyers should be aware of the complex landscape among the US Circuits regarding the application of jurisdictional tests in mixed actions.  For example, the Second, Fourth, and Fifth Circuits apply traditional abstention doctrines; the Third, Seventh, and Ninth Circuits apply an “independent claim” test; and the Eighth Circuit applies an “essence of the suit” test.  The Sixth Circuit’s newly announced “same legal issue” framework clearly deepens the preexisting split among the federal courts of appeals in evaluating jurisdiction in mixed actions.  Coverage lawyers should proceed cautiously when filing lawsuits in federal court.