Emcasco Ins. Co. v. Davis, Civ. No. 90-2082.

• Decision Date: 12 December 1990
• Docket Number: Civ. No. 90-2082.
• Citation: 753 F. Supp. 1458
• Parties: EMCASCO INSURANCE COMPANY, Plaintiff, v. Melvin DAVIS, et al., Defendants.
• Court: U.S. District Court — Western District of Arkansas

753 F. Supp. 1458

EMCASCO INSURANCE COMPANY, Plaintiff, v. Melvin DAVIS, et al., Defendants.

Civ. No. 90-2082.

United States District Court, W.D. Arkansas, Fort Smith Division.

December 12, 1990.

Robert L. Jones, III, Jones, Gilbreath, Jackson & Moll, Fort Smith, Ark., for plaintiff.

J. Randall McGinnis, Warner & Smith, Fort Smith, Ark., Jeffrey E. Levin, Clarksville, Ark., John Bynum, Bynum & Bourne, Russellville, Ark., Julius C. Acchione, Acchione & King, Donald S. Ryan, Dodds, Kidd, Ryan & Moore, Little Rock, Ark., William F. Smith, Mobley & Smith, David L. Gibbons, Gibbons & Walker, Russellville, Ark., Tim Boone, Huckabay, Munson, Rowlett & Tilley, Little Rock, Ark., Thomas B. Pryor, Pryor, Barry, Smith and Karber, David R. Ferguson, Mark W. Webb, Asst. U.S. Attys., Fort Smith, Ark., for defendants.

MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

Statement of the Case

This action was instituted by Emcasco Insurance Company by the filing of a complaint in interpleader. It is unclear from the complaint whether the action is filed under the provisions of Rule 22 of the Federal Rules of Civil Procedure or the statutory interpleader provisions of 28 U.S.C. §§ 1335, 1397, and 2361. It is, however, clear that the court has subject matter jurisdiction of this matter and that the venue is proper irrespective of whether the insurance carrier intended to proceed by means of statutory interpleader or the interpleader procedure authorized by Rule 22.

Emcasco issued a liability insurance policy covering a vehicle owned by Mike and Judy Gronstal with policy limits of $65,000. According to the complaint, the insured vehicle driven by insured Mike Gronstal was involved in a serious automobile accident on June 28, 1989, causing serious personal injuries to Melvin Davis and Dovie Davis.

When it became apparent that medical expenses incurred by Mr. and Mrs. Davis would far exceed the policy limits, this interpleader action was filed, naming the Gronstals, the Davises and numerous medical providers, as well as another insurance carrier (State Farm Mutual Automobile Insurance Company, which had paid some of the medical expenses) and the Secretary of the United States Department of Health and Human Services (Medicare) as defendants.

Emcasco paid the policy limits into the registry of the court and requested an order of the court "discharging it from all further liability to the defendants and from the duty to defend any lawsuits which may have been or may be filed for bodily injury and property damage against Michael Gronstal, and requiring the defendants to interplead herein and to assert their claims to the interpleaded funds or forever be barred." The carrier also sought an award of reasonable attorney's fees incurred in the interpleader action.

Most of the named defendants filed answers or other pleadings making claims for medical expenses exceeding $160,000. Subsequently, Emcasco requested that the court restrain the Davises from proceeding in a state court action which had been filed seeking damages from Michael Gronstal for their injuries suffered. Before that matter could be heard and decided, the court was advised that the Gronstals had filed bankruptcy, and that there was no longer need for a restraining order.

By a letter to the attorneys for the parties, the court suggested that it appeared from the file that there was no question of fact to be determined by a trier of fact, and sought consent that the issues could be decided by the court on the file before it. The attorneys for several parties specifically advised the court by letter that they agreed with the court's suggestion, and no party objected to that procedure.

Therefore, the court understands that all parties have agreed that the issues may be decided by the court on the record now before it. In view of that, although several parties have filed various motions and other pleadings, including certain discovery requests, a motion for summary judgment, and various cross-claims and counterclaims, the court believes that the issues to be decided, on the record presently before the court, are:

a) Whether Emcasco is entitled to an order discharging it from further liability on the insurance policy issued by it, including any further duty to defend its insured;

b) Whether it is entitled to an award of attorney's fees and expenses, and, if so, the amount of such award; and

c) A determination of the distribution to be made of the amount in the registry of the court.

Those issues will be discussed in turn below.

Is Emcasco Entitled to an Order Discharging It From Further Liability on the Insurance Policy It Issued Including Any Further Duty to Defend Its Insured?

The insuring agreement in the policy of insurance provides:

INSURING AGREEMENT

A. We will pay damages for `bodily injury' or `property damage' for which any `insured' becomes legally responsible because of an auto accident. Damages include pre-judgment interest awarded against the `insured.' We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted. We have no duty to defend any suit or settle any claim for `bodily injury' or `property damage' not covered under this policy.

Of course, a policy of insurance is nothing more than a contract between the insurance carrier and its insured, and it is to be governed by the ordinary rules of interpretation of contracts. 12 G. Couch Couch on Insurance 2d, § 45:294 at 620 (1981), and Perkins v. Clinton State Bank, 593 F.2d 327 (8th Cir.1979). The law is well settled in Arkansas that the language used in an insurance policy is to be construed in its "plain, ordinary, popular" sense. CNA Ins. Co. v. McGinnis, 282 Ark. 90, 666 S.W.2d 689, 691 (1984).

Thus, the question becomes whether the insurance carrier and its insureds agreed, through the provision quoted above, that the insurance carrier could meet its obligations to the insured by filing a lawsuit in federal court, naming the insureds and persons and entities that might claim damages as the result of a covered accident as defendants, and paying its policy limits into the registry of the court, leaving the insureds to fend for themselves.

A fair reading of the insuring agreement is that the insurance carrier agreed that it would:

a) Pay damages for which the insureds became legally responsible;

b) Pay all defense costs incurred in settling or defending claims against the insureds; and

c) Continue to pay damages for which the insureds were legally responsible and continue to provide a defense to insureds until the limits of liability had been exhausted by the payments of damages for which the insureds were legally responsible.

The insurance carrier and the insureds did not agree that the insurance carrier could rid itself of the liabilities assumed by it and contracted for by the insureds by the carrier filing a lawsuit in federal court and dumping the policy limits into the registry of that court, thus abandoning the insureds. If the insurance carrier had intended that it have that option, it could have said so in plain and unmistakable terms so the insureds and others like them could determine whether they wanted to do business with that insurance carrier or some other carrier that would provide them with more meaningful protection.

This court firmly believes that, when the average insurance purchaser goes into an agent's office and purchases an insurance policy, he intends to purchase more than the policy limits afforded. In addition to protection to the extent of those policy limits, the insureds desire, need, and purchase much more than that. In addition to the right to a defense specifically set forth in this policy and others like it, insureds intend to hire the expertise of that carrier to take care of them in times of need, and they rightfully believe that the insurance carrier has agreed to provide those services. They expect, and the insurance carrier agrees to provide, expert assistance in the administration of claims made against them. They contracted for experts within the insurance company to collect and assimilate all of the information necessary after an accident to determine whether they are liable and, if so, the dollar amount of their liability. They contract for the services of the insurance carrier in attempting to settle claims made against them and, if that proves not to be possible, to defend them in lawsuits that are filed. They do not contract for an insurance policy in which an insurance carrier quickly assesses the claims against them and "throws in the towel", providing them with none of the services that they contracted for and expected except provision of the liability limits dumped into a court, leaving them dangling at the mercy of claimants with substantial claims to make against them.

In this court's view, not only does the average insurance purchaser purchasing an insurance policy not intend that the insurance carrier hired by it have the right to meet its obligations by the simple expediency of paying the money into the registry of the court and blithely walking away from the duties it assumed when it issued the policy, the language of this policy does not authorize that. The insurance carrier agreed that it would, to the limits of the liability provided by it, pay any damages for which the insured "becomes legally responsible because of an auto accident" and to settle or defend any claims made, paying the costs incurred in making such settlements or defending such claims. It agreed that it would continue to provide those services until "our limit of liability for this coverage has been exhausted" by payment of those claims for which the insured was "legally responsible". The insurance contract, of course written by the carrier, did not...