Allstate Ins. Co. v. Brown

• Decision Date: 24 April 1990
• Docket Number: Civ. A. No. 89-0175-A.
• Citation: 736 F. Supp. 705
• Parties: ALLSTATE INSURANCE COMPANY, Plaintiff, v. Ocie BROWN, Defendant.
• Court: U.S. District Court — Western District of Virginia

736 F. Supp. 705

ALLSTATE INSURANCE COMPANY, Plaintiff, v. Ocie BROWN, Defendant.

Civ. A. No. 89-0175-A.

United States District Court, W.D. Virginia, Abingdon Division.

April 24, 1990.

Larry B. Kirksey, Bristol, Va., for plaintiff.

Timothy L. Forbes, Grundy, Va., for defendant.

MEMORANDUM OPINION

GLEN M. WILLIAMS, Senior District Judge.

This matter is before the court on the plaintiff's motion for summary judgment. The plaintiff, Allstate Insurance Company ("Allstate"), brought this action in order to obtain a declaration of its rights and obligations under the uninsured motorist provisions of an automobile liability insurance policy. Allstate relies on 28 U.S.C. § 1332 as the basis for this court's jurisdiction.

BACKGROUND

Ocie Brown suffered an accident on August 2, 1986, while she was driving an automobile owned by Mr. Doffie Hurley. Brown claims that another driver, whose identity remains unknown to her, caused her to leave the roadway and drive over an embankment in order to avoid a head-on collision. Accordingly, Brown filed a motion for judgment against John Doe in the Circuit Court of Buchanan County, Virginia.

Copies of the motion for judgment were served on two insurance companies, Allstate and the Colonial Insurance Company of California ("Colonial").¹ At the time of the accident, Brown's husband maintained a policy with Allstate, which afforded uninsured motorist coverage to Brown as a member of her husband's household. Similarly, Hurley held a policy with Colonial, which provided uninsured motorist coverage for persons while occupying the vehicle which Brown was driving at the time of her accident.

Brown reached a settlement with Colonial, by which she received the sum of $1000. In return, Colonial was relieved of any liability to her which Colonial might have sustained as a result of her accident.² Evidently, Hurley's policy with Colonial covered bodily injuries resulting from an accident with an uninsured motorist to the extent of $25,000 per person and $50,000 per accident. Brown's suit against John Doe remains pending. Allstate was given no notice of the settlement between Brown and Colonial prior to its execution.³

Allstate now seeks to have this court declare that it is relieved of any obligation to Brown under her husband's policy because of her settlement with Colonial. The Allstate policy contains an "other insurance" clause, to the effect that "with respect to an insured while occupying a motor vehicle not owned by the named insured, this insurance shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such vehicle as primary insurance." Exhibit A at 17. In addition, an exclusion in the policy provides with regard to uninsured motorist coverage that "this insurance does not apply ... to bodily injury or property damage with respect to which the insured or his legal representative shall, without the consent of Allstate, make any settlement with any person or organization who may be legally liable therefor." Exhibit A at 13. As counsel for Brown admits, the Supreme Court of Virginia has upheld this type of provision as it applied in Virginia Farm Bureau v. Gibson, 236 Va. 433, 374 S.E.2d 58 (1988).

JURISDICTION

Brown has suggested that the court lacks jurisdiction over this dispute. Specifically, she contends that the amount in controversy requirement of 28 U.S.C. § 1332 is not met. For the court to have jurisdiction under section 1332, the amount in controversy must exceed $50,000.⁴ Allstate has amended its complaint to show that the applicable limit of its coverage is $100,000. Dismissal for lack of subject matter jurisdiction is proper only where the court can determine to a "legal certainty" that the amount in controversy is insufficient. Heavner v. State Auto. Ins., 340 F.Supp. 391, 393 (W.D.Va.1972).

"If there is one situation where the amount of a claim can be determined with legal certainty, it is in a case when a claim is asserted on an insurance policy limiting liability." Payne v. State Farm Mut. Auto. Ins. Co., 266 F.2d 63, 64 (5th Cir. 1959). In the usual case of this kind, where the insured seeks to recover to the fullest extent of coverage, the court can determine the amount in controversy by reference to the face of the policy. See, e.g., Doucet v. Travelers Ins. Co., 362 F.2d 263 (5th Cir.1966); Carpenter v. Illinois Centr. Gulf R. Co., 524 F.Supp. 249, 253 (M.D.La.1981); Heavner, 340 F.Supp. at 393. This case is made difficult, however, by the fact that Brown seeks a judgment of only $50,000 plus costs in her state court action. Where the insured does not seek to recover the maximum under the policy, the court cannot rely exclusively on the policy limit as the measure of the amount in controversy. See Maryland Cas. Co. v. Baker, 196 F.Supp. 234, 236 (E.D.Ky.1961).

Following Judge Dalton's holding in Heavner, the court concludes that the costs which Brown seeks as part of her state court action may be counted as part of the amount in controversy in the present action. Heavner, 340 F.Supp. at 393. The court observes, without deciding, that like the statute at issue in Heavner, the Virginia statute may require Allstate to pay Brown's costs if Allstate is otherwise liable to Brown for whatever judgment she might obtain in her state court action. See Va. Code Ann. § 38.2-2206A. Thus, following the contents of Brown's motion for judgment as well as the terms of the Allstate policy, the court cannot conclude that the amount in controversy does not exceed $50,000. See, e.g., Government Employees Ins. Co. v. Lally, 327 F.2d 568, 569 (4th Cir.1964) (claim and policy limits exceed jurisdiction amount); Automobile Club Ins. Co. v. Craig, 328 F.Supp. 988, 989 (E.D.Ky.1971) (same); Travelers Ins. Co. v. Crane, 94 F.Supp. 44, 46 (E.D.Mich.1950) (same).

In addition, the court is mindful of decisions which have minimized the importance of the insured's claim or failure to make a claim to the determination of the amount in controversy where the policy limits exceed the jurisdictional amount. For example, in Commercial Cas. Ins. Co. v. Humphrey, 13 F.Supp. 174 (S.D.Tex.1935), the court explained that "the test of jurisdiction is not what Pierce the injured party may claim against Humphrey the insured or the plaintiff the insurer, but the maximum amount for which the plaintiff may be liable under the policy." Id. at 178. See also Builders & Manufacturers Mut. Cas. Co. v. Paquette, 21 F.Supp. 858, 863-64 (D.Me.1938) (same). Likewise, noting the possibility that the injured party could amend its complaint to state additional damages within the coverage of the policy, the court ruled in Morgan v. Liberty Mut. Ins. Co., 261 F.Supp. 709 (D.S.C.1966) that "the amount of the injured party's claim in state court is not controlling here, for the action seeks a declaratory judgment of rights and/or responsibilities under defendant's policy and the possible liability exceeds the statutory minimum." Id. at 712. See also Security Ins. Co. v. Jay, 109 F.Supp. 87, 89 (D.Minn.1952) ("The mere fact that a claim has not been filed should not determine if the court does or does not have jurisdiction"). The court cannot conclude with legal certainty that the jurisdictional requirement is not met in this case as the policy limit is over $50,000 and Brown remains free to amend her motion for judgment to seek a judgment of more than the jurisdictional minimum.

DISCUSSION

In reviewing the merits of Allstate's motion, the court must begin with Brown's argument that the consent-to-settlement clause does not apply to a settlement with Colonial. At the time of Brown's settlement with Colonial, Brown had not obtained a judgment against an uninsured motorist. Colonial could not have been held liable under its policy with Hurley at that time. See State Farm Mut. Auto. Ins. Co. v. Kelly, 238 Va. 192, 195, 380 S.E.2d 654, 656 (1989); Midwest Mut. Ins. Co. v. Aetna Cas. & Sur. Co., 216 Va. 926, 929, 223 S.E.2d 901, 904 (1976). Nevertheless, the court rejects Brown's argument as an exaltation of form over substance. Colonial may have been liable for Brown's injuries upon the satisfaction of the conditions precedent to coverage under its policy with Hurley.

Allstate relies on the holding in Gibson. Gibson involved two tort-feasors, including an insured motorist as well as a "John Doe." Before trial, the accident victim settled with the insured motorist for $35,000. The jury found John Doe liable for damages in the amount of $70,000. When the accident victim attempted to recover part of the judgment against John Doe under the uninsured motorist provisions of his own policy, his insurer refused to pay. 236 Va. at 436, 374 S.E.2d at 60.

The accident victim filed suit against his insurer, who raised the insured's violation of the policy's consent-to-settlement clause as a defense. That trial court concluded that the consent-to-settlement clause was void. The supreme court reversed.

The court justified its decision in theoretical terms:

In Virginia, uninsured motorist protection does not provide insurance for an uninsured motorist; it provides insurance to the insured motorist. In effect it is a safety net to give an injured insured a fund from which to recover where the tort-feasor either has no insurance or has inadequate insurance. By its very nature, uninsured motorist coverage is not intended to be the ultimate source of payment where any tort-feasor liable in part for the injury to the insured has adequate resources to pay the judgment. The consent-to-settlement clause protects the insurer's power to preserve potential sources of recovery. Thus, the clause prevents an uninsured motorist carrier from paying a claim when another source of funds should pay.

Id. at 438, 374 S.E.2d at 61-62. The jury found that the accident victim has sustained damages in the amount of $70,000. The insured tort-feasor in Gibson was covered up to $100,000. In...