Travelers Home & Marine Ins. Co. v. Gray

• Decision Date: 19 December 2014
• Docket Number: 1130035.
• Parties: TRAVELERS HOME AND MARINE INSURANCE COMPANY v. Dianne GRAY and Martin Gray.
• Court: Alabama Supreme Court

171 So.3d 3

TRAVELERS HOME AND MARINE INSURANCE COMPANY

v.Dianne GRAY and Martin Gray.

1130035.

Supreme Court of Alabama.

Dec. 19, 2014.

Carol Ann Smith of Smith & Pace, PC, Birmingham, for appellant.

Kenneth J. Mendelsohn, of Jemison & Mendelsohn, P.C., Montgomery, for appellees.

Opinion

MURDOCK, Justice.

Travelers Home and Marine Insurance Company (“Travelers”) appeals a summary judgment entered by the Elmore Circuit Court in favor of Dianne Gray and Martin Gray in the Grays' action arising from injuries Dianne suffered as the result of a motor-vehicle accident. We reverse the judgment of the trial court.

I. Facts and Procedural History

On February 14, 2010, Lawana Levirt Williams Coker and Dianne were involved in a motor-vehicle accident in Elmore County; Coker was without motor-vehicle insurance at the time of the accident. On February 7, 2012, the Grays filed in the trial court a three-count complaint naming as defendants Coker and Travelers and a fictitiously named defendant. In count I, Dianne alleged that Coker's negligent and/or wanton operation of her motor vehicle caused the accident and that, Dianne said, as a result of the accident, she suffered, “among other things, numerous serious physical injuries; substantial medical expenses including multiple bills to Baptist Hospital; future medical bills; past and future physical pain and mental anguish; permanent disability and diminished ability to do things that she could do before the collision.” In count II, Dianne alleged that she was owed uninsured-motorist (“UM”) benefits from Travelers, her motor-vehicle insurer. In count III, Martin alleged a claim of loss of consortium. Travelers answered the complaint, denying the material allegations therein and asserting certain affirmative defenses. Coker, however, failed to answer the complaint.

On January 25, 2013, the trial court entered the following order:

“Plaintiff is given 15 days to file Motion for Default against Defendant Lawana Coker. Plaintiff shall submit an evidentiary affidavit in support of damages and proposed order via ‘proposed order’ que[ue]. The affidavit may be submitted as a supplement to the motion for default. In the event that this order is not complied with, Lawana Coker will be dismissed as a Defendant.”

On February 7, 2013, the Grays moved the trial court to enter a default judgment in their favor and against Coker, requesting that the trial court assess damages in the amount of $500,000 for Dianne and $50,000 for Martin. The Grays supported their motion for a default judgment with Dianne's affidavit, in which Dianne alleged that, among other things, the accident had caused her to suffer numerous physical injuries; caused her to be unable to sleep; caused her to suffer from depression; and caused a breakdown of her marriage to Martin. The Grays' February 7, 2013, motion requested no relief as to Travelers.

On February 8, 2013, the trial court entered a default judgment in favor of the Grays and against Coker for the amounts requested by the Grays in their motion for a default judgment.

On April 8, 2013, the Grays filed a new summary-judgment motion in which, for the first time, they sought relief against Travelers. The Grays did not base their summary-judgment motion against Travelers on the ground that there was no genuine issue of fact as to whether tortious conduct on the part of an uninsured third party, Coker, had caused them to suffer injury. Instead, they based their summary-judgment motion against Travelers solely on the fact that they previously had obtained a default judgment against Coker. In this regard, the Grays argued that they were entitled to a judgment as a matter of law against Travelers because, they said, “Travelers as a party defendant had notice and adequate opportunity to intervene and present any defenses and arguments necessary to protect its position with respect to the entry of or the amount of damages in the Default Judgment. By failing to do so, Defendant Travelers legally is bound by the judgment.” The Grays argued as follows:

“The law is well settled that when plaintiffs join their own liability insurer as a party defendant in a suit against the uninsured motorist ‘the insurer would be bound by the factfinder's decisions on the issues of liability and damages.’ Lowe v. Nationwide Ins. Co., 521 So.2d 1309, 1310 (Ala.1988).... The law is also clear that the UM-insurer is bound by a Default Judgment so long as ‘it had full notice and adequate opportunity to intervene and present any defenses and arguments necessary to protect its position.’ Champion Ins. Co. v. Denney, 555 So.2d 137, 139–40 (Ala.1989). Here, Travelers had ‘had full notice and adequate opportunity’ but chose to do nothing to ‘protect its position.’ Accordingly Travelers is bound by the Default Judgment.”

On May 15, 2013, Travelers responded to the Grays' summary-judgment motion, arguing that it was not bound by the default judgment, which had been entered against only Coker. Specifically, Travelers argued:

“Champion [ Insurance Co. v. Denney, 555 So.2d 137 (Ala.1989),] stands for the proposition that a UM insurance carrier is bound by a default judgment only if the carrier is provided notice of the insured's action against the tortfeasor and it elects not to participate in the action. Bailey [v. Progressive Specialty Ins. Co., 72 So.3d 587, 594 (Ala.2011) ] (emphasis added).”

Travelers further argued:

“In this case, Travelers chose to participate in the action by filing an Answer to the plaintiffs['] Complaint, in which it denied the allegations and asserted any substantive defenses that would be available to the tortfeasor, as allowed under State Farm [Mutual Automobile Insurance Co.] v. Bennett, 974 So.2d 959, 962 (Ala.2007).^{[ 1 ]} By filing this Answer, Travelers has indicated its willingness to participate in the action and protect its position, as contemplated in Champion [Insurance Co. v. Denney, 555 So.2d 137 (Ala.1989) ].”

After holding a hearing on May 21, 2013, the trial court entered a summary judgment in favor of the Grays and against Travelers. In its judgment, the trial court, citing Lowe v. Nationwide Insurance Co., 521 So.2d 1309, 1310 (Ala.1988), Champion Insurance Co. v. Denney, 555 So.2d 137, 139–40 (Ala.1989), and Bailey v. Progressive Specialty Insurance Co., 72 So.3d 587 (Ala.2011), first concluded that Travelers was bound by the default judgment entered against Coker because (1) Travelers failed to defend against the default judgment and (2) Travelers failed to contest the amount of damages. The trial court further concluded “the undisputed facts support a judgment as a matter of law,” stating:

“In this case, the [Grays] have produced substantial evidence negating the existence of any genuine issue of material fact. Travelers has not produced any evidence to rebut the [Grays'] evidence. Instead, as Travelers admitted at the Hearing, it was relying on its Answer. However, the law is clear that Travelers may not rest upon mere denials in its Answer, but must produce substantial evidence to prove a genuine issue for trial. Proof by [sic] is required. Travelers did not do so and thus, has not met its burden.

“Accordingly, the Court concludes that there is no genuine issue for trial. The evidence is undisputed that Defendant Williams–Coker was at fault; that Defendant Williams–Coker was uninsured; that Dianne Gray was not guilty of contributory negligence; that the injuries Dianne and Martin Gray suffered and will suffer in the future were caused by this wreck; that the injuries were very severe; and that the [Grays] are covered under the UM provisions of [their] policy with Travelers. The Court further concludes that an award of damages of $500,000.00 for Plaintiff Dianne Gray, and $50,000.00 for Plaintiff Martin Gray is appropriate under the undisputed facts of this case.”

On June 21, 2013, Travelers, pursuant to Rule 55(c), Ala. R. Civ. P., moved the trial court to set aside its February 8, 2013, default judgment “to the extent [the Grays] seek to bind Travelers” or, in the alternative, to “enter an Order specifically holding that the Default Judgment Order shall have no binding effect on Travelers.” In that motion, Travelers again argued that it should not be bound by the default judgment entered against Coker because, Travelers said, “[it] filed a timely and proper Answer to [the Grays'] Complaint” and “[it] ha[d] fully participated in this action.” Travelers also filed, pursuant to Rule 59(e), Ala. R. Civ. P., a motion to alter, amend, or vacate the trial court's summary judgment in favor of the Grays and against Travelers and supported that motion with several evidentiary attachments. The trial court entered separate orders denying Travelers' Rule 55(c) and Rule 59(e) motions. Travelers appealed.

II. Analysis

Travelers contends that the default judgment entered against Coker is not binding on Travelers and that the trial court's judgment concluding otherwise is contrary to this Court's decision in Bailey v. Progressive Specialty Insurance Co., supra. We agree.

In Lowe, supra, this Court explained the process that must be followed for both the insured and the UM-insurance carrier to protect their rights when the insured wishes to make a claim for UM benefits in connection with an action by the insured against the alleged tortfeasor:

“A plaintiff is allowed either to join as a party defendant his own liability insurer in a suit against the underinsured motorist or merely to give it notice of the filing of the action against the motorist and of the possibility of a claim under the underinsured motorist coverage at the conclusion of the trial. If the insurer is named as a party, it would have the right, within a reasonable time after service of process, to elect either to participate in the trial (in which case its identity and the reason for its being involved are proper information for the jury), or not to participate in the trial (in which case no mention of it or its potential

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