PUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT


PENN-AMERICA INSURANCE COMPANY,        
                Plaintiff-Appellant,
                 v.
GREGORY COFFEY; STEVEN SIMONS;
A.J.Z., INCORPORATED, t/a A. J.                  No. 03-1137
Gators Grille & Sports Bar; STATE
FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY; JAMES A.
SIZEMORE,
               Defendants-Appellees.
                                       
           Appeal from the United States District Court
          for the Eastern District of Virginia, at Norfolk.
               Rebecca Beach Smith, District Judge.
                          (CA-02-632-2)

                      Argued: February 26, 2004

                       Decided: May 20, 2004

       Before NIEMEYER and MICHAEL, Circuit Judges,
             and HAMILTON, Senior Circuit Judge.



Reversed and remanded by published opinion. Judge Niemeyer wrote
the opinion, in which Judge Michael and Senior Judge Hamilton
joined.


                             COUNSEL

ARGUED: Geoffrey Martin Bohn, CUNNINGHAM & ASSO-
CIATES, Arlington, Virginia, for Appellant. Richard Cunningham,
2               PENN-AMERICA INSURANCE CO. v. COFFEY
Appellate Litigation Clinic, GEORGETOWN UNIVERSITY LAW
CENTER, Washington, D.C., for Appellees. ON BRIEF: Steven H.
Goldblatt, Director, Cary Berkeley Kaye, Supervising Attorney,
James M. Sullivan, Appellate Litigation Clinic, GEORGETOWN
UNIVERSITY LAW CENTER, Washington, D.C., for Appellees.


                               OPINION

NIEMEYER, Circuit Judge:

   Penn-America Insurance Company commenced this action to
obtain a declaratory judgment that it had no duty to defend or to
indemnify its insured, A.J. Gators Grille & Sports Bar ("A.J. Gators"),
with respect to a tort action filed against A.J. Gators by James Size-
more in the Circuit Court of the City of Chesapeake, Virginia. Size-
more’s suit seeks damages for injuries he sustained in the A.J. Gators
parking lot when he was struck by an automobile driven by another
customer of A.J. Gators. The district court dismissed the declaratory
judgment action, concluding that exercising jurisdiction would require
resolution in this case of the same factual issues in dispute in the state
tort action. For the reasons that follow, we disagree. Accordingly, we
reverse the district court’s dismissal order and remand for further pro-
ceedings.

                                    I

   On April 5, 2001, while patronizing A.J. Gators in Chesapeake,
Virginia, Gregory Coffey and Steven Simons became aggressive and
hostile toward other customers and toward A.J. Gators employees.
When several employees confronted Coffey and Simons, "insults,
threats and blows were exchanged," and Coffey and Simons either left
or were removed from the premises. The A.J. Gators employees pur-
sued Coffey and Simons into the parking lot where "a protracted and
violent fight erupted" between Coffey and Simons and the employees.
As Coffey and Simons drove away in Coffey’s automobile, the A.J.
Gators employees struck both the automobile and the occupants "with
fists and metal pipes," leading Coffey to lose control of his vehicle
and strike James Sizemore, a bystander in the parking lot who had
just left the bar.
               PENN-AMERICA INSURANCE CO. v. COFFEY                   3
   Sizemore filed a personal injury action in state court against Coffey
and Simons, as well as A.J.Z., Inc. ("A.J.Z."), the owner of A.J.
Gators, alleging (1) negligence by A.J. Gators and its employees; (2)
negligence by Coffey and Simons; (3) intentional, malicious, and
reckless action by A.J. Gators supervisors who directed employees to
pursue and assault Coffey and Simons despite knowing patrons would
likely be injured; and (4) intentional, malicious, and reckless action
by, and agreement between, Coffey and Simons to use a vehicle to
strike one or more A.J. Gators employees, for whom they mistook
Sizemore. That action is still pending.

   Shortly after the state court action was commenced, Penn-America,
A.J.Z.’s insurer, commenced this action, invoking diversity jurisdic-
tion under 28 U.S.C. § 1332 and seeking a declaratory judgment that
the claims filed by Sizemore against A.J.Z. in state court were
excluded from the coverage of the Penn-America liability policy
issued to A.J.Z. because of an "Assault and Battery Exclusion." In
particular, the policy excludes from coverage claims "resulting from
assault and battery or physical altercations," regardless of whether the
claimant’s injuries were caused by A.J.Z., its employees, or its
patrons. Penn-America named as defendants all of the parties to the
state court action, as well as State Farm Mutual Automobile Insurance
Company, Sizemore’s automobile insurer, because Sizemore’s policy
included coverage for uninsured and underinsured motorists such as
Coffey and Simons.

   Sizemore filed a motion to dismiss this action, urging the district
court not to adjudicate the coverage question while the state court
case was pending. The district court granted Sizemore’s motion to
dismiss and, sua sponte, dismissed the action as to all defendants. The
district court concluded that to decide whether Penn-America was
obligated to defend and indemnify A.J.Z. would require resolution of
the same factual issues of causation raised in Sizemore’s underlying
state court action — i.e., whether Sizemore’s injuries resulted from
assault and battery. The court also noted that the Commonwealth of
Virginia has an inherent interest in deciding matters of state law.

   Penn-America filed this appeal, and only Coffey and Simons have
filed a brief and presented oral argument in opposition — principally
because we appointed counsel for them to protect their interests on
4              PENN-AMERICA INSURANCE CO. v. COFFEY
appeal. Neither Sizemore nor A.J.Z. elected to file a brief or appear
at oral argument.

                                   II

   Under the Declaratory Judgment Act, a district court, in a case or
controversy otherwise within its jurisdiction, "may declare the rights
and other legal relations of any interested party seeking such declara-
tion, whether or not further relief is or could be sought." 28 U.S.C.
§ 2201(a) (emphasis added). The Supreme Court has "repeatedly
characterized the Declaratory Judgment Act as ‘an enabling Act,
which confers a discretion on the courts rather than an absolute right
upon the litigant.’" Wilton v. Seven Falls Co., 

, 287
(1995) (quoting Pub. Serv. Comm’n of Utah v. Wycoff Co., 

, 241 (1952)). Thus we review for abuse of discretion a district
court’s decision whether to hear a federal declaratory judgment
action. 

   As an initial matter, "a declaratory judgment action is appropriate
‘when the judgment will serve a useful purpose in clarifying and set-
tling the legal relations in issue, and . . . when it will terminate and
afford relief from the uncertainty, insecurity, and controversy giving
rise to the proceeding.’" Centennial Life Ins. Co. v. Poston, 

, 256 (4th Cir. 1996) (quoting Aetna Cas. & Sur. Co. v. Quarles,

, 325 (4th Cir. 1937)). When a related state court proceed-
ing is pending, however, "‘considerations of federalism, efficiency,
and comity’" should inform the district court’s decision whether to
exercise jurisdiction over a declaratory judgment action. See 

(quoting Nautilus Ins. Co. v. Winchester Homes, Inc., 

,
376 (4th Cir. 1994)). As the Supreme Court stated in Wilton,

    where another suit involving the same parties and presenting
    opportunity for ventilation of the same state law issues is
    pending in state court, a district court might be indulging in
    "[g]ratuitous interference" . . . if it permitted the federal
    declaratory action to proceed.

(quoting Brillhart v. Excess Ins. Co. of Am.,

, 495 (1942)).
                PENN-AMERICA INSURANCE CO. v. COFFEY                     5
  To determine whether to proceed with a federal declaratory judg-
ment action when a parallel state action is pending, we have focused
on four factors for guiding the analysis:

     (1) whether the state has a strong interest in having the
     issues decided in its courts; (2) whether the state courts
     could resolve the issues more efficiently than the federal
     courts; (3) whether the presence of "overlapping issues of
     fact or law" might create unnecessary "entanglement"
     between the state and federal courts; and (4) whether the
     federal action is mere "procedural fencing," in the sense that
     the action is merely the product of forum-shopping.

United Capitol Ins. Co. v. Kapiloff, 

, 493-94 (4th Cir.
1998) (quoting Nautilus 

) (the "Nautilus factors").

   To make its decision, the district court focused principally on the
third Nautilus factor, concluding that "[i]n determining whether the
[assault and battery] exclusion applies, this court must resolve the fac-
tual issues surrounding the altercation and the injury to Sizemore to
determine whether Sizemore’s injuries ‘result[ed] from assault and
battery.’" Because "[t]hese issues of causation are the very issues that
must be litigated in the state court case as well," the district court con-
cluded that there were "overlapping issues of fact or law that would
cause entanglement between the state and federal court systems."
Thus, the core question that we must resolve is whether the district
court’s efforts to decide the coverage issue would result in entangle-
ment, through gratuitous interference, with state court proceedings by
preempting critical factual findings that the state court will have to
make in resolving Sizemore’s personal injury claims. For two distinct
reasons, we conclude that the district court can resolve the coverage
dispute in this case without such entanglement.

   First, the duty-to-defend question in this case will not require the
district court to resolve factual questions at all. It need only decide
such coverage by comparing what Sizemore has alleged in the state
court action with the language of the Penn-America insurance policy.
Under Virginia law, an insurer’s duty to defend arises "whenever the
complaint against the insured alleges facts and circumstances, some
of which, if proved, would fall within the risk covered by the policy."
6               PENN-AMERICA INSURANCE CO. v. COFFEY
Brenner v. Lawyers Title Ins. Corp., 

, 102 (Va. 1990);
see also Va. Elec. & Power Co. v. Northbrook Prop. & Cas. Ins. Co.,

, 265-66 (Va. 1996). And there is no duty to defend
"if it appears clearly that the insurer would not be liable under its con-
tract for any judgment based upon the allegations." 

(emphasis added). Although an insurer’s duty to indem-
nify will depend on resolution of facts alleged in the complaint, no
such factfinding is necessary if there is no duty to defend because the
allegations, even when taken as proved, would fall outside the poli-
cy’s coverage.

   In this case, therefore, the district court was presented with the task
of determining whether the allegations of the complaint, if proved,
would bring the claim within the coverage of the Penn-America pol-
icy. Under the terms of that policy, Penn-America has no duty to
defend or indemnify A.J.Z. if Sizemore’s injuries "result[ed] from
assault and battery or physical altercations" — regardless of whether
the injuries (1) were "caused by . . . or with the direct or indirect
involvement of" A.J. Gators, its employees or patrons; (2) arose out
of A.J. Gators’ "failure to properly supervise or keep [its] premises
in a safe condition"; or (3) arose out of A.J. Gators’ failure to prevent
or suppress the physical altercation, including a failure that resulted
from negligent training. Thus, unless Sizemore’s injuries allegedly
resulted, in part, from some action by A.J. Gators’ employees distinct
from their role in the physical altercation, then the assault and battery
exclusion would apply. In deciding that question, the district court
need not make independent findings as to what actually occurred on
April 5, 2001, but rather need only decide whether the complaint’s
allegations, if proved, would bring the factual scenario within the
scope of the exclusion.

   Second, the finding of causation necessary to decide whether Size-
more’s injuries "resulted from" a physical altercation is distinct in
kind from the causation questions that will have to be resolved in
deciding whether Sizemore recovers on his tort claims. To resolve the
coverage question, the court must decide, based on facts alleged in the
complaint, whether Sizemore’s injuries "resulted from" — in the con-
tractual language of the policy — "assault and battery or physical
altercations that occur[red] in, on, near, or away from [A.J. Gators’]
premises," regardless of whether the injuries were caused by A.J.
               PENN-AMERICA INSURANCE CO. v. COFFEY                   7
Gators employees or patrons, or whether the injuries arose out of A.J.
Gators’ failure to supervise its employees, failure to maintain its
premises in safe condition, or failure to train its employees properly.
In other words, the court need only decide the scope of the contrac-
tual language, "resulted from," regardless of who caused Sizemore’s
injuries. On the other hand, in the state court proceeding, the fact-
finder will have to determine whether Sizemore’s injuries were "prox-
imately caused" by any of the defendants during the events on April
5, 2001, assessing responsibility to each. As the district court
observed, constructing the chain of causation may be a complex task
as the factfinder must determine the causal contribution of each
defendant’s conduct to Sizemore’s injuries and resolve questions of
intervening causation. But it is not necessary to resolve those issues
before defining the scope of the contract’s assault and battery exclu-
sion.

   None of the remaining three Nautilus factors plays a particularly
important role, as the district court observed, in assessing whether the
declaratory judgment action should be decided now. On the first fac-
tor, while the State certainly has a strong interest in protecting its
jurisprudence and an interest in deciding cases calling for application
of its own law, to defer to the state court tort case in the circum-
stances before us will not advance the State’s interests significantly
because (1) the contractual coverage issue will not be decided by the
state tort case, and (2) Penn-America is not a party to the state case.
Moreover, as we have observed, the State’s interest is "not particu-
larly significant" where any state law issues are standard and "un-
likely to break new ground." 

.

   The second Nautilus factor — whether the state court could resolve
the issues more efficiently — is indeterminate for similar reasons.
Because Penn-America is not a party in the state action and it is not
clear under Virginia rules that Penn-America could intervene to have
coverage issues decided within the scope of the underlying tort case,
dismissing the federal coverage case would not seem to advance any
cause of efficiency.

  Finally, on the last Nautilus factor of whether Penn-America is pro-
cedurally fencing or forum-shopping in prosecuting the federal
declaratory judgment action, no party has advanced convincing evi-
8              PENN-AMERICA INSURANCE CO. v. COFFEY
dence that Penn-America is doing so in this case. There is a live and
serious question of whether the assault and battery exclusion in the
policy issued to A.J.Z. applies, and the evidence in the record leads
to the conclusion that Penn-America has appropriately sought a
declaratory judgment in federal court to clarify and settle the issue.

   At bottom, we conclude that the district court can address the cov-
erage question presented by Penn-America without becoming entan-
gled in the tort issues that must be decided in resolving Sizemore’s
state law tort claims and that the court should not have refused to
exercise the federal jurisdiction invoked with the commencement of
this declaratory judgment action. As the district court itself recog-
nized, a declaratory judgment in this action would "clarif[y] and set-
tl[e] the legal relations in issue" and would "terminate and afford
relief from the [coverage] controversy." See Aetna Cas. & Sur. Co.
v. Quarles, 

, 325 (4th Cir. 1937). Accordingly, we reverse
the district court’s order of dismissal and remand this case for further
proceedings consistent with this opinion.

                                      REVERSED AND REMANDED