ORDER

(Mot to Stay Disc-Dkt.#22)

PEGGY A. LEEN, Magistrate Judge.

Before the court is Plaintiffs' Motion to Stay Discovery (Dkt. #22). The court has considered the Motion, Defendant Acosta's Opposition (Dkt. #23), Plaintiffs' Reply (Dkt. #24), and the arguments of counsel at a hearing conducted January 10, 2012. Chad Fears appeared on behalf of the Plaintiff, Robert Cottle appeared on behalf of Defendant Acosta, and Breen Arntz appeared telephonically on behalf of Defendant Leiker. Defendant Leiker did not file an opposition to the motion, and the time for filing an opposition has run.

BACKGROUND

The Complaint (Dkt. 1) in this case was filed August 3, 2011. It is a declaratory judgment action brought by Plaintiff Liberty Mutual Fire Insurance Company and Liberty Mutual Insurance Company ("Liberty Mutual") against Defendants Tony Leiker and Mary Ann Acosta. Liberty Mutual issued two policies of insurance to Leiker, an auto policy and personal catastrophic policy. On March 13, 2010, Leiker was driving his 2005 Nissan pickup truck in front of the residence he shares with Acosta when Acosta was injured as a result of being dragged a number of feet by the pickup truck and thrown into the asphalt roadway. Acosta reported the incident to the Las Vegas Metropolitan Police Department which prepared an incident report which was provided to Liberty Mutual on May 11, 2010. Acosta made a claim against Leiker for damages for personal injury caused by Leiker's operation of the vehicle on the date of the incident. Both Leiker and Acosta tendered Acosta's claims for bodily injury to Liberty Mutual under the auto policy and personal catastrophe policy.

Liberty Mutual is defending the underlying state court action under a reservation of rights contending that Leiker may have made false, misleading and fraudulent statements to Liberty Mutual concerning the accident, and that Acosta's injuries may not have been an "accident" or may be excluded under the intentional injury exclusions of the policies.

The complaint in this federal action seeks a declaration of the parties' rights and obligations under the auto policy and personal catastrophe policy, including whether liability coverage exists under the policies. Acosta filed an Answer (Dkt. #11) September 14, 2011. Leiker filed an Answer and Counterclaim (Dkt. #13) on September 25, 2011.

On October 19, 2011, Acosta filed a state case alleging Leiker operated his vehicle in a careless and negligent manner causing her personal injuries, and that he acted "wilfully and maliciously, and with oppression, fraud or malice" entitling her to punitive damages. Based on Acosta's allegations in the underlying state court action Liberty Mutual argues the court should stay this declaratory relief action until the outcome of the underlying state case to eliminate the risk of inconsistent factual determinations that might prejudice the insured, Leiker. Liberty Mutual notes that courts have identified three problems with proceeding with coverage issues in a declaratory relief action which necessarily turns on facts to be litigated in an underlying action. First, the insurer is supposed to be on the side of the insured in the underlying defense of the personal injury action, but is effectively attacking its insured in a declaratory relief action. Second, proceeding with a declaratory relief action forces the insured to fight a two-front war, litigating the underlying personal injury action and the declaratory relief action. Third, there is a risk that if the declaratory relief action proceeds to judgment before the underlying personal injury action is resolved that the insured could be collaterally estopped to contest issues in the personal injury action based on adjudication of the declaratory relief action.

Liberty Mutual is defending Leiker in the underlying state court action. However, it also contests coverage in this declaratory relief action contending that Acosta's injuries may be the result of intentional acts by Leiker with intent to injure Acosta, and that Leiker's conduct may have been fraudulent. Thus, a stay of the declaratory relief action pending resolution of the underlying state case is appropriate to eliminate the risk of inconsistent factual determinations that could prejudice Leiker.

Defendant Mary Ann Acosta, f/k/a Mary Ann Acosta-Liker, opposes the motion to stay on various grounds. Leiker did not file an opposition and the time for filing an opposition has now run. Acosta argues that the cases cited by Liberty Mutual in support of its motion to stay involve lawsuits filed by the insured, not the insurance company, and do not support a stay of this action. Acosta also argues that the parties need discovery quickly to determine whether this declaratory relief action was filed as a "sham to gather discovery not otherwise available, or pressure a favorable settlement in the underlying action, or whether it should be addressed on its merits." Acosta claims that Liberty Mutual filed this lawsuit for the sole purpose of obtaining a police report from Acosta, and that after it received the report, it now seeks to stay this proceeding. Acosta points out that she did not ask to be a Defendant in this case and should not be "forced to place her life on hold indefinitely because Liberty Mutual no longer wants to litigate in federal court."

Counsel for Acosta served Liberty Mutual with notices of depositions pursuant to Rule 30(b)(6) and with other outstanding discovery. Liberty Mutual prepared and circulated a scheduling order, but now seeks to "disavow involvement in this matter." Counsel for Acosta indicates that Liberty Mutual sought a stipulation to stay discovery in this case in which it stated that it did not agree that the action for declaratory relief would prejudice Leiker's defense in the underlying case. However, this motion now contradicts that representation. Finally, counsel for Acosta argues that the policy limits demand in the underlying motor vehicle case expires January 6, 2012, and that by operation of Nevada law the burden of any excess verdict shifts from Leiker to Liberty Mutual. Thus, Lieker will not be prejudiced by going forward and no stay should extend beyond that date.

Counsel for Acosta attaches an August 31, 2011, letter from counsel for Liberty Mutual to him advising him that the declaratory relief action was filed "to enable Liberty Mutual to subpoena the police recordings of Ms. Acosta's statements to the police on the night of the incident." In the letter, Liberty Mutual forwarded a proposed stipulation and order to stay discovery of this case indicating the parties were in the process of scheduling a private mediation, and that Leiker had consented to stay as appropriate to avoid any prejudice. Although Liberty Mutual did not agree that this declaratory relief action would necessarily cause prejudice to Leiker's defense of the underlying action, it agreed to stay this case "for this reason as well."

Counsel for Acosta indicates that she has amended the complaint in the underlying state court action to remove allegations of any intentional, wilful, wanton or oppressive conduct on the part of Tony Leiker, Liberty Mutual's insured as "an accommodation after discussion with Leiker's personal counsel based on the statements of the parties to the event." Acosta claims Leiker will not be prejudiced in the state court case by proceeding with this action because all information that has already been gathered by Liberty Mutual is also discoverable in the state court action. Additionally, Acosta also argues that no issues that need to be investigated in the state court action have a bearing on coverage, and that Liberty Mutual has already conducted a lengthy examination under oath of its insured, Leiker, in addition to obtaining the police reports and records from Acosta.

If the court is inclined to grant any stay, Acosta asks that the stay last no longer than 60 days, and that the parties be required to provide an amended scheduling order. Counsel for Acosta claims that Nevada district court actions are taking almost 36 months to be heard, and that the parties need an earlier adjudication of their respective rights, and the insured "needs to know who is going to pay the verdict" in the underlying matter. Specifically, counsel for Acosta argues that Acosta "needs to know how to deal with Leiker", whether he will be personally responsible, or whether the carrier will be responsible for the underlying negligence action. Under these circumstances, Acosta argues is makes more sense to have the merits of the declaratory relief action adjudicated "to allow the parties to know who will be paying for the ultimate verdict in the underlying action." Finally, Acosta asks that if the court grants any stay, that it require Liberty Mutual to respond to outstanding written discovery, and allow Acosta to proceed with the deposition she previously noticed, and that the parties be ordered to prepare an amended scheduling order.

Liberty Mutual replies that Plaintiff's opposition confuses the issues with inaccurate, unsupported and superfluous assertions, and fails to provide any legal authority supporting her position. Liberty Mutual also contends that Acosta's opposition is internally inconsistent in maintaining that she should be immediately dismissed as an improper party on the one hand, but insisting that she be allowed to proceed with discovery and a speedy trial on the other. Liberty Mutual acknowledges that it does not necessarily believe that conducting discovery in this action would prejudice Leiker's defense in the underlying state case. However, in an abundance of caution, Liberty Mutual moves for a stay to avoid the possibility that Leiker's defense in the underlying state case might be prejudiced. Thus, Liberty Mutual is not trying to avoid its pending discovery obligations, only being careful and prudent with respect to its insured's interests in the underlying suit. Liberty Mutual presumes that Acosta wants this declaratory judgment action to move forward so that she can use any "prejudicial discovery" that Liberty Mutual uncovers in this action against Leiker in the underlying case. This is precisely why courts have entered stays of declaratory relief actions pending the resolution of the underlying case. Liberty Mutual asks that the court reserve ruling on the motion to stay until Leiker has the opportunity to tell the court whether his defense in the underlying case may be prejudiced by the parties' discovery in this case or not.

DISCUSSION

At the hearing, counsel for Leiker indicated he did not file a response to the motion, but is not opposed to a stay. His client is concerned that he may be potentially prejudiced by proceeding in two actions at the same time. He and his client were hopeful that Liberty Mutual and Acosta would agree to mediate both the underlying state court action and this declaratory relief action. However, to date, the parties have not reached an agreement. Counsel for Acosta indicated he was amenable to attempting to mediate both actions as long as the mediation occurs in a reasonable amount of time and is not used to delay this case or the underlying state court action. Counsel for Liberty Mutual is also interested in scheduling a prompt mediation. Under these circumstances,

IT IS ORDERED that: