Clark v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 08 January 2007
• Docket Number: No. 05-4596.,05-4596.
• Citation: 473 F.3d 708
• Parties: Merry CLARK, on behalf of and as next friend of A.C., Minor, and S.C., Minor, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

473 F.3d 708

Merry CLARK, on behalf of and as next friend of A.C., Minor, and S.C., Minor, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.

No. 05-4596.

United States Court of Appeals, Seventh Circuit.

Argued September 19, 2006.

Decided January 8, 2007.

Ryan K. Johnson (argued), Keller & Keller, Indianapolis, IN, for Plaintiff-Appellant.

Mark D. Gerth (argued), Kightlinger & Gray, Indianapolis, IN, for Defendant-Appellee.

Before RIPPLE, MANION, and WOOD, Circuit Judges.

MANION, Circuit Judge.

Merry Clark, on behalf of her two minor children A.C. and S.C., sued State Farm Mutual Auto Insurance Company ("State Farm"), alleging that State Farm breached the terms of its insurance policy's underinsured motor vehicle ("UIM") provision when it denied the Clark children's UIM claims. The district court concluded that the driver of the automobile that injured the Clark children was not operating an underinsured motor vehicle as defined by Indiana's underinsured motorist statute. Accordingly, the district court held that the Clark children were not entitled to recovery under the terms of the policy's UIM provision and granted summary judgment in favor of State Farm. The Clark children appealed. We affirm.

I.

Merry Clark, her then husband, Robert Clark, and their minor children, A.C. and S.C. (collectively "the Clarks"), were involved in a motor vehicle collision in Crawfordsville, Indiana. All of the Clarks sustained injuries as a result of the collision. At the time of the collision, the Clarks were operating an automobile owned by Jerald and Martha Day, which was insured under a liability policy issued by State Farm. The driver of the other vehicle involved in the collision, Billy Akers, allegedly caused the collision due to his negligence. Akers died from the injuries he sustained in the collision. He was insured under a liability policy issued by American Family Mutual Insurance Company ("American Family").

Akers' American Family policy contained liability limits of $100,000 per person and $300,000 per accident. American Family settled Merry and Robert Clark's claims against it for a payment of $100,000 each, leaving $100,000 of the policy's per accident limit remaining to resolve A.C.'s and S.C.'s (collectively "the Clark children") claims. Merry Clark accepted on behalf of the Clark children, and with State Farm's consent entered into a settlement for the remainder of Akers' American Family per-accident policy limit. Pursuant to the final settlement, A.C. received $75,000 and S.C. received $25,000.

Following the final settlement with American Family, Merry Clark submitted a claim to State Farm on behalf of the Clark children for UIM benefits under the Days' State Farm policy. The UIM coverage in the Days' State Farm policy states:

We will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle. Bodily injury must be sustained by an insured and caused by an accident arising out of the operation, maintenance or use of an underinsured motor vehicle.

(Policy at 13.) The Limits of Liability provision of State Farm policy's UIM coverage provides:

1. The amount of coverage is shown on the declarations page under "Limits of Liability — W — Each Person, Each Accident." Under "Each Person" is the amount of coverage for all damages due to bodily injury to one person. "Bodily injury to one person" includes all injury and damages to others resulting from this bodily injury. Under "Each Accident" is the total amount of coverage, subject to the amount shown under "Each Person," for all damages due to bodily injury to two or more persons in the same accident.

. . .

5. The most we pay any one insured is the lesser of:

a. the difference between the "each person" limit of this coverage and the amount paid to the insured by or for any person or organization who is or may be held legally liable for the bodily injury; or

b. the difference between the amount of the insured's damages for bodily injury and the amount paid to the insured by or for any person or organization who is or may be held legally liable for the bodily injury.

Subject to 5.a. and 5.b. above, the maximum amount payable to all insureds under this coverage is the difference between the "Each Accident" limit of liability of this coverage and the amount paid all insureds by or for any person or organization who is or may be held legally liable for the bodily injury.

(Policy at 15.) The State Farm policy's UIM coverage provides a per-person liability limit of $100,000 and a per-accident liability limit of $300,000. (Policy Coverages.)

State Farm denied the Clark children's UIM claims. Merry Clark then filed suit on behalf of the Clark children against State Farm in Indiana state court. State Farm successfully removed the case to the United States District Court for the Southern District of Indiana, invoking the district court's diversity jurisdiction. The district court subsequently granted State Farm's motion for summary judgment. It found that Indiana's underinsured motor vehicle statute, Indiana Code § 27-7-5-4(b), requires the court to compare the relevant limits in the claimant's UIM policy to the actual amount available to the claimant under the other insurer's policy. Under the Indiana statute, if the amount available to the claimant is less than the claimant's insurance policy's relevant UIM liability limit (i.e., per-person or per-accident), the other vehicle is deemed an underinsured motor vehicle and UIM coverage is invoked. Id. Since more than one of the Clarks were injured in the collision, the district court looked to the amount actually available to the Clarks collectively under Akers' per-accident liability limit ($300,000) and compared that amount to the UIM per-accident coverage in the Days' State Farm policy ($300,000). It concluded that the vehicle Akers operated was not an underinsured motor vehicle because the per-accident liability limit contained in Akers' insurance policy (the full amount of which was paid to the Clark family) was equal to the State Farm policy's UIM per-accident coverage. The Clark children appeal.

II.

We first examine whether this court may exercise jurisdiction over this case. During oral argument, the panel questioned the parties regarding whether this case satisfied the amount in controversy requirement of 28 U.S.C. § 1332. Specifically, the panel questioned whether diversity jurisdiction was proper if neither of the Clark children's individual claims on appeal exceeds $75,000 (i.e., $75,000 by S.C. and $25,000 by A.C.). It is well settled that while an individual plaintiff's multiple claims against a single defendant may be aggregated to determine diversity jurisdiction, the separate claims of multiple plaintiffs against a single defendant cannot be aggregated to meet the jurisdictional requirement. See Sarnoff v. Am. Home Prods. Corp., 798 F.2d 1075, 1077 (7th Cir.1986) (stating that "when there is more than one plaintiff each one's claim must exceed the statutory minimum . . . [and those] claims cannot be aggregated" (citing Hixon v. Sherwin-Williams Co., 671 F.2d 1005, 1007-09 (7th Cir.1982)). The amount in controversy requirement, however, must be determined by the district court at the beginning of the suit, and is not dependent on subsequent dismissal of individual claims used to satisfy the jurisdictional threshold. Johnson v. Wattenbarger, 361 F.3d 991, 993 (7th Cir.2004) ("Whether § 1332 supplies subject-matter jurisdiction must be ascertained at the outset; events after the suit begins do not affect the diversity jurisdiction.").

In their supplemental briefs, the parties argued that the amount in controversy requirement was satisfied because the Clark children's original complaint included claims against State Farm for bad faith seeking compensatory and punitive damages, in addition to their breach of contract claims currently before this court. The district court granted summary judgment in favor of State Farm on both claims, but the Clark children only elected to appeal their breach of contract claim. "Generally, we give plaintiffs the benefit of the doubt in these matters, but a complaint will be dismissed if it appears to a legal certainty that the claim is really for less than the jurisdictional amount." Del Vecchio v. Conseco, Inc., 230 F.3d 974, 978 (7th Cir. 2000) (internal quotations omitted) ("We have no quarrel in principle with the idea that punitive damages may sometimes be taken into account in deciding whether the proper amount is in controversy."). Indiana law recognizes a cause of action against an insurer for breaching its duty to exercise good faith in evaluating claims, and it permits recovery of punitive damages. Erie Ins. Co. v. Hickman, 622 N.E.2d 515, 518-20 (Ind.1993) (stating that "the recognition of an independent tort for the breach of the insurer's obligation to exercise good faith provides the tort upon which punitive damages may be based"). Accordingly, we give both of the Clark children the benefit of the doubt that their original contractual and bad faith claims sought total damages in excess of $75,000, and find that the district court properly exercised its diversity jurisdiction.

III.

On appeal, the Clark children argue that the district court erred in granting summary judgment in favor of State Farm. Specifically, the Clark children claim that State Farm's denial of their claims breached the terms of its policy's UIM coverage because, although the Clark family collectively received a settlement from Akers' insurance company equal to State Farm's UIM per-accident liability limit ($300,000), A.C.'s and S.C.'s individual recoveries from Akers ($75,000 and $25,000, respectively) were less than the State Farm policy's UIM per-person liability limit ($100,000). They arrive at their calculation by first asserting that Indiana's underinsured...