Mission Insurance Company v. Mackey

• Decision Date: 09 June 1971
• Docket Number: Civ. A. No. 18604-3.
• Court: U.S. District Court — Western District of Missouri
• Parties: MISSION INSURANCE COMPANY, Plaintiff, v. James MACKEY, Linda Kathleen Hale, Larry Hale, Donna Litner Foster and MFA Mutual Ins. Co., Defendants.

340 F. Supp. 824

MISSION INSURANCE COMPANY, Plaintiff, v. James MACKEY, Linda Kathleen Hale, Larry Hale, Donna Litner Foster and MFA Mutual Ins. Co., Defendants.

Civ. A. No. 18604-3.

United States District Court, W. D. Missouri, W. D.

June 9, 1971.

Jack G. Beamer, McKenzie, Williams, Merrick, Beamer & Stubbs, Kansas City, Mo., for plaintiff.

James R. Mackey, pro se.

E. J. Murphy, Butler, Mo., Thomas A. Sweeney, Popham, Popham, Conway, Sweeney & Fremont, Kansas City, Mo., for other defendants.

JUDGMENT OF DISMISSAL FOR LACK OF DIVERSITY JURISDICTION

WILLIAM H. BECKER, Chief Judge.

This is an action for a declaratory judgment "declaring and determining the rights of the parties under the policies of insurance issued by the plaintiff and MFA Mutual Insurance Company" in which it is alleged that defendant Mackey has made demand on both plaintiff and defendant MFA Mutual Insurance Company to defend actions for damages (resulting from the alleged negligence of defendant Mackey) brought in the state courts against defendant Mackey by the defendants Hale. Jurisdiction of the federal court is invoked under the diversity statute, § 1332, Title 28, United States Code. In the second amended complaint filed by plaintiff, it is alleged that plaintiff is a citizen of California, "is incorporated in the State of California ... and has its principal office^* in Los Angeles, California"; that defendants Hale and Mackey are citizens of Missouri; and that defendant MFA Mutual Insurance Company is also a citizen of Missouri, "is incorporated in the State of Missouri ... and has its principal place of business in the State of Missouri."

It appears, however, that under a proper alignment of the parties, MFA Mutual Insurance Company should be aligned as a party plaintiff with Mission Insurance Company. Because MFA Mutual Insurance Company, like the defendants, is a Missouri citizen, the required complete diversity between all plaintiffs on the one hand and all defendants on the other hand is lacking. See Universal Underwriters Insurance Company v. Wagner (C.A.8) 367 F.2d 866, 870. In the same case, it was said, at 870:

"It is the duty of the federal courts to look beyond the pleading and to arrange the parties according to their sides in the dispute. The court must inquire into `the principal purpose of the suit' and the `primary and controlling matter in dispute.' The controversy must be `actual' and `substantial'."

From the pleadings and the stipulations of the parties herein, it appears that the interest of plaintiff and defendant MFA Mutual Insurance Company is precisely the same interest in the suit. According to the pleadings, defendant James Mackey was operating, at the time of the accident, a 1966 Plymouth owned by Lawrence and Velma Mackey. Plaintiff was the liability insurer for James Mackey, who held Mission Insurance Company Policy No. AUT (075) 902500 insuring James R. Mackey and a 1957 Chevrolet four-door hardtop. That policy provided for coverage with respect to the use of another automobile "provided the actual use thereof is with the permission of the owner." Similarly, according to the answer of defendant MFA Mutual Insurance Company, its policy covering the 1966 Plymouth involved in the accident and owned by Lawrence and Velma Mackey requires for coverage if it be operated "with the permission of answering defendant's named insured, Lawrence Mackey or his wife, Velma Mackey." In Standard Pretrial Order No. 2 filed herein on December 24, 1970, it is agreed by the parties that:

"The plaintiff, Mission Insurance Company, and defendant MFA Mutual Insurance Company each deny that their insurance policies cover James Mackey at the time that he allegedly upset said Plymouth automobile and defendants Linda and Larry Hale were allegedly injured, for the reason that the said James Mackey did not have permission to drive said automobile and said automobile was not insured under the Mission Insurance policy."

From the foregoing it appears that both plaintiff insurance company and defendant MFA Mutual Insurance Company will be seeking to prove exactly the same fact — that defendant James Mackey did not have permission to operate the 1966 Plymouth automobile. Thus, the only conceivable controversy would be between the insurance companies on the one hand and the individual parties on the other hand, who, possibly for more complete coverage in case of the exhaustion of one policy limit, would be seeking to prove that defendant James Mackey did have permission to operate the 1966 Plymouth. In Nationwide Mutual Insurance Company v. Vaughn (W. D.Va.) 307 F.Supp. 805, 807, it was held that when one insurer was attempting to prove absence of permission and another insurer would attempt to prove lack of "reasonable cause to believe that the driver had the permission of Strange the owner to use the automobile," no realignment of the insurers on the same side of the suit was necessary because "two separate requirements" of varying difficulty were being attempted to be proved. In the case at bar, however, the insurers will be on the same side of the single litigable issue in this case. It therefore appears that the two insurers in this case should be aligned as plaintiffs and this cause accordingly dismissed for lack of complete diversity between all plaintiffs on the one hand and all defendants on the other.

The parties contend that another issue — one on which the insurers must necessarily be adverse parties — exists. This issue is described as follows in Standard Pretrial Order No. 2:

"In the event both insurance companies are found to be legally obligated to defend said suits and pay said judgments, which company is the primary insurer and which company is the excess insurer?"

In United States Fidelity & G. Co. v. Millers Mutual Fire Insurance Company of Texas (C.A.8) 396 F.2d 569, 571, n. 2, however, it was noted that, where the issue of coverage is not at stake, the district court may appropriately refuse to entertain the issue between insurers "disputing who is the `primary' or `excess' carrier." Further, in Farmers Elevator Mutual Ins. Co. v. Carl J. Austad & Sons, Inc. (C.A.8) 366 F.2d 555, 557, it was pointed out that it is "a much preferable practice in advancing the administration of justice" for one company to assume responsibility by processing, defending and paying the claim or judgment and then proceeding to litigate its contentions of coverage with the other carrier. See also Universal Underwriters Insurance Company v. Wagner, supra, 367 F.2d at 871, n. 7.

It therefore appears that, under United States Fidelity & G. Co. v. Millers Mutual Fire Insurance Company of Texas, supra, (C.A.8) 396 F.2d at 571, n. 2, on the one issue currently cognizable as ripe for controversy, the two insurers in this cause are aligned on the same side of the dispute and that there is therefore no diversity of citizenship between all plaintiffs on the one hand and all defendants on the other.

For the foregoing reasons, on May 20, 1971, this Court entered its order directing plaintiff to show cause within 10 days why this action should not be dismissed for lack of jurisdiction. In the same order, the other parties to this action were also given their option of filing suggestions in response to the show cause order.

Only plaintiff responded to the order. In the response filed on May 28, 1971, plaintiff contended (1) that, under the precedents established in this circuit, federal jurisdiction of declaratory judgment actions is not to be denied because the insured's liability is unresolved;¹ (2) that there is a second distinct factual issue in this case (in addition to the issue of whether defendant James Mackey had permission to operate the vehicle of Lawrence and Velma Mackey) whether Mission's policy coverage "was ... in effect while Mackey was driving said Plymouth because there is no proof that the vehicle described in the Mission policy, a 1957 Chevrolet, was withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction" and therefore Mission and MFA Mutual will not be on the same side of every issue; and (3) that the actions of Mission against the individual defendants on the one hand, and MFA Mutual, on the other, are completely separable and that therefore:

"If the court still believes that the realignment of MFA from defendant to plaintiff, then plaintiff requests that before any order is issued that the plaintiff be notified and given time to file a motion to dismiss as to one or more of the defendants in order to preserve diversity of citizenship and avoid further delay. Pingel v. Coleman Co. D.C., 250 F.Supp. 52 521."

On the only issues currently litigable in this Court, however, it is readily apparent that the interests of plaintiff and defendant MFA Mutual are identical. As noted above, they are indisputably on the same side of the "permission" issue. Further, under the literal terms of the Mission Insurance policy, the issue of whether that policy applied to the 1966 Plymouth being driven by defendant Mackey as a "temporary substitute automobile" is relevant only to the purported question of whether Mission, if "permission" is shown, is a "primary" or "excess" insurer. The policy is clear, from the following...