Magras v. Puerto Rican American Ins. Co., Civ. No. 82-51.

• Decision Date: 19 November 1982
• Docket Number: Civ. No. 82-51.
• Citation: 551 F. Supp. 427
• Parties: Diane MAGRAS, Suzette Magras, Titania Felix and Patrice Felix, Minors, by Titania Magras, Guardian, and Titania Magras, Individually, Plaintiffs, v. PUERTO RICAN AMERICAN INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Virgin Islands

551 F. Supp. 427

Diane MAGRAS, Suzette Magras, Titania Felix and Patrice Felix, Minors, by Titania Magras, Guardian, and Titania Magras, Individually, Plaintiffs, v. PUERTO RICAN AMERICAN INSURANCE COMPANY, Defendant.

Civ. No. 82-51.

District Court, Virgin Islands, D. St. Thomas and St. John.

November 19, 1982.

Bernard Van Sluytman, Charlotte Amalie, St. Thomas, V.I., for plaintiffs.

Douglas A. Brady, Christiansted, St. Croix, V.I., for defendant.

MEMORANDUM AND ORDER

CHRISTIAN, Chief Judge.

This case puts into issue the legal basis, if any, on which an injured person may recover from an insurer a judgment previously entered against its insured. Plaintiffs obtained, in a separately docketed action in this court, a default judgment against two persons insured under an automobile insurance policy issued by defendant. Magras v. Raimer, Civ. No. 78-285 (D.V.I. Order of Jan. 3, 1980). Plaintiffs now seek to recover that judgment directly from the insurance carrier.

The general rule is that in the absence of an applicable statute or of a "public liability" provision in the insurance policy, "a person may not maintain a suit against the insurer to recover a judgment rendered against the insured..." Couch on Insurance 2d (Rev. ed.) § 45.785 (1981).

The Virgin Islands has no statute which authorizes a direct action by the injured party against the insurer of the tortfeasor. Nor is there any applicable procedural rule through which such an action could be inferred. See, Singh v. August, 10 V.I. 389 (D.V.I.1974). (Virgin Islands has no rule comparable to that which the Florida Supreme Court found to authorize a direct action in Shingleton v. Bussey,¹ 223 So.2d 713 (Fla.1969)). In the present case, moreover, it is undisputed that the automobile insurance policy issued by the defendant to the judgment debtor does not contain a so-called "public liability" clause which might, under some circumstances, "inure to the benefit of injured third persons." Couch, supra.

Plaintiffs urge that the Court adopt, as several other jurisdictions have, the third party beneficiary analysis of the Restatement (Second) of Contracts §§ 302-315 (1981) as the basis for a direct action against the insurer of a judgment debtor. However, even if such a cause of action were to be recognized, the rights of any third-party beneficiary are merely coextensive with and "limited by the terms of the underlying promise." 2 Williston On Contracts (3rd ed.) § 807 (1959). In other words, the "rights of the judgment creditor of the insured are no greater than those of the insured, in whose shoes he stands." Fidelity Casualty Company of New York v. McConnaughy, 228 Md. 1, 179 A.2d 117, 120 (1962). Hence, the injured third party who seeks recovery against an insurer under a third party promise theory must establish that the insured had fully performed its own obligations under the insurance policy.

In the case at bar, it is undisputed that the insureds failed in every respect to comply with paragraph 3 of the insurance policy issued by defendant. That provision reads in pertinent part as follows:

If claim is made or suit brought against the insured, he shall immediately forward to the company every demand, notice, summons or other process received by him or representative...

Supplemental Memorandum of Defendant. Inasmuch as the insureds, into whose "shoes" the present plaintiffs wish to step, neglected to notify defendant of the pendency of any claim or suit against them or even of the existence of the underlying accident, it is unlikely that defendant would have been required to perform its obligations under the policy. Where "no reason for the delay in or absence of notification appears, other than indifference or hostility of the insured to the accident and to the injured party's claim" the terms of policy have been breached, and thus any attempt by a third party to enforce the promise must fail. Lewis v. The Home Insurance Company, 314 A.2d 924, 926 (Del.Super. 1973). While it is true, that an insurer may in some instances, be...