SALT LAKE CITY (LN) — A federal judge in Utah held Thursday that AIX Specialty Insurance Company's declaratory judgment suit over a $4 million consent judgment entered without its participation could proceed, rejecting arguments that the Rooker-Feldman doctrine stripped the court of jurisdiction and that the case warranted discretionary abstention.
The dispute traces to the death of Thaes Webb Jr., whom the underlying state-court complaint alleged was fatally injured when his wheelchair tipped over of a Twin Oaks Senior Living vehicle. AIX had issued both a primary and an excess liability policy to Kim's New Star LLC, which operates Twin Oaks, and related insured defendants. The insurer denied coverage for claims arising incident under an auto-exclusion provision but agreed coverage might be available for other professional-negligence claims and provided a defense under a reservation of rights.
In August 2025, the insured defendants and the Webb family reached a settlement without AIX's involvement. A Utah state court entered a $4 million consent judgment against Twin Oaks; about $1 million has since been satisfied by other insurers, leaving roughly $2.97 million outstanding. The settlement assigned all of the insured defendants' rights against AIX to the Webb family, which then sought to collect.
AIX filed suit in federal court seeking a declaration that it owes no duty to defend or indemnify for auto-based claims and that the consent judgment creates no payment obligations for it. Defendants moved to dismiss, arguing the suit was a de facto appeal of the state-court judgment barred by Rooker-Feldman and that the court should decline jurisdiction under the Declaratory Judgment Act.
U.S. District Judge David Barlow rejected both arguments. On Rooker-Feldman, he held that AIX was not a party to the underlying action, was not named judgment, and did not sign the settlement agreement. Defendants' fallback argument — that AIX was a "state-court loser by proxy" through contractual privity with the insured defendants — relied on a Tenth Circuit precedent the Supreme Court overruled in Lance v. Dennis, which held that the doctrine "does not bar actions by nonparties to the earlier state-court judgment simply because, for purposes of preclusion law, they could be considered in privity with a party to the judgment."
Barlow also held that AIX's requested relief would not reverse or undo the consent judgment. The state-court ruling resolved the insured defendants' tort liability to the Webb family; it said nothing about AIX's separate contractual duty to indemnify. A finding that AIX owes no indemnity, he wrote, "would not change the fact that judgment was entered against the Insured Defendants, nor would it change the damages that were awarded."
On the Declaratory Judgment Act, Barlow walked through the Tenth Circuit's five-factor Mhoon framework and held that every factor favored keeping the case. He was unpersuaded by defendants' procedural-fencing argument — that AIX was trying to avoid state-court scrutiny of its defense and settlement conduct — noting that defendants had identified no pending or imminent state proceeding that would resolve the coverage question.
The roughly $2.97 million still outstanding on the consent judgment remains the practical prize at stake as the coverage litigation moves forward.