Polensky v. Continental Cas. Co., No. A1-05-051.

• Decision Date: 07 November 2005
• Docket Number: No. A1-05-051.
• Parties: Myron POLENSKY and Shawn Polensky, Plaintiffs, v. CONTINENTAL CASUALTY COMPANY, CNA Companies, Continental Insurance Company, AmeriServe Transportation, Inc. and Randal Eggleston, Defendants.
• Court: U.S. District Court — District of North Dakota

397 F.Supp.2d 1164

Myron POLENSKY and Shawn Polensky, Plaintiffs, v. CONTINENTAL CASUALTY COMPANY, CNA Companies, Continental Insurance Company, AmeriServe Transportation, Inc. and Randal Eggleston, Defendants.

No. A1-05-051.

United States District Court, D. North Dakota, Southwestern Division.

November 7, 2005.

Albert J. Hardy, Hardy Maus & Nordsven PC, Dickinson, ND, for Plaintiffs.

Stanley N. Wilkins, Kansas City, MO, John C. Kapsner, Vogel Law Firm, Bismarck, ND, for Defendants.

ORDER GRANTING MOTION TO DISMISS OF DEFENDANTS' CONTINENTAL CASUALTY COMPANY, CNA COMPANIES, AND CONTINENTAL INSURANCE COMPANY

HOVLAND, Chief Judge.

Before the Court is Defendant Continental Casualty Company, CNA Companies, and Continental Insurance Company, "Motion to Dismiss" filed jointly on July 14, 2005. The Plaintiffs have filed a response opposing the motion. For the following reasons, the motion is granted.

I. BACKGROUND

On April 14, 1999, Myron Polensky, a North Dakota resident, was injured when struck from behind by a semi-tractor and trailer owned by the defendant, AmeriServe Transportation, Inc. (AmeriServe) and driven by AmeriServe employee, defendant Randy Eggleston, on Interstate Highway I-94 in Morton County, North Dakota. See Complaint, ¶ 6. AmeriServe is a Nebraska corporation with its principal place of business in Texas. See Plaintiffs' Statement of Material Facts, ¶ 3; Defendants' Reply to Plaintiffs' Statement of Material Facts, ¶ 3. Eggleston is a Missouri resident licensed in Kansas. See Plaintiffs' Statement of Material Facts, ¶ 2. AmeriServe was insured by Continental Casualty Company, an Illinois corporation. Id. at ¶ 4.

As a result of the accident, Myron filed a negligence action in Federal District Court for the District of North Dakota on April 5, 2005, naming AmeriServe,¹ Eggleston, Continental Casualty Company, CNA Companies, and Continental Insurance Company as defendants. See Docket No. 1. Thereafter, on July 14, 2005, defendants Continental Casualty Company, CNA Companies, and Continental Insurance Company (collectively referred to as the "defendant insurance companies") jointly filed the present motion to dismiss.

II. LEGAL DISCUSSION

The defendant insurance companies filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. "The standard for a district court to employ in ruling on a motion to dismiss is clear." Crumpley-Patterson v. Trinity Lutheran Hosp., 388 F.3d 588, 590 (8th Cir.2004). "A district court must accept the allegations contained in the complaint as true, and all reasonable inferences from the complaint must be drawn in favor of the nonmoving party." Id. (citing Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Hafley v. Lohman, 90 F.3d 264, 266 (8th Cir.1996)). "[D]ismissal is inappropriate `unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" McCormack v. Citibank, N.A., 979 F.2d 643, 646 (8th Cir.1992) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). "A motion to dismiss should be granted `as a practical matter ... only in the unusual case in which there is some insuperable bar to relief.'" Strand v. Diversified Collection Service, Inc., 380 F.3d 316, 317 (8th Cir.2004) (citing Frey v. Herculaneum, 44 F.3d 667, 671 (8th Cir.1995) (quoting Bramlet v. Wilson, 495 F.2d 714, 716 (8th Cir.1974))). It is clear that under the Federal Rules, it is not necessary to plead every fact with formalistic particularity. BJC Health System v. Columbia Cas. Co., 348 F.3d 685, 688 (8th Cir.2003). A pleading which sets forth a claim for relief shall contain a short and plain statement of the claim showing that the pleader is entitled to relief. Fed.R.Civ.P. 8(a).

The defendant insurance companies seek dismissal because North Dakota law does not permit an injured party to bring a direct action against an insurance company, namely, Continental Casualty Company; and CNA Companies and Continental Insurance Company did not write the insurance policy at issue in this case and are no longer existing business entities. The Court will explore the propriety of a direct action in the present case.

It is well-established that North Dakota law does not permit an "unfettered, direct cause of action against an insurance company." Molzahn v. Allstate Ins. Co., 305 F.Supp.2d 1113, 1117 (D.N.D.2004) (citing Dvorak v. Am. Family, 508 N.W.2d 329, 331 (N.D.1993) ("Absent a clause in the insurance contract bestowing the right to bring a direct action against the insurer, an injured party's claim must be asserted against the tortfeasor, not the tortfeasor's insurer.")). Nebraska law similarly provides as follows: "The Nebraska Supreme Court has stated, [A]s a general rule, there is no privity between an insured person and the tortfeasor's liability insurer. For this reason, direct actions against liability insurance carriers based on the negligence of the insured are not permitted in Nebraska." German Mut. Ins. Co. of Dodge County v. Federated Mut. Ins. Co., 606 N.W.2d 856, 859 (Neb.App.2000) (citing Medical Protective Co. v. Schrein, 255 Neb. 24, 582 N.W.2d 286, 290 (1998)).² However, Nebraska law allows direct actions under limited circumstances:

§ 44-508. Liability insurance; automobiles; bankruptcy of insured; policy provisions; reciprocity.

The policies or contracts of insurance covering legal liability for injury to person or persons caused through the ownership, operation, use or maintenance of automobiles issued by any domestic or foreign company shall, if approved by the Department of Insurance, contain a provision to the effect that the insolvency or bankruptcy of the assured shall not release the company from the payment of damages for injury sustained or loss occasioned during the life of the policy, and, in case of such insolvency or bankruptcy, an action may be maintained within the terms and limits of the policy by the injured person or his or her heirs against the insurer company.

Neb. Rev. St. § 44-508. Nebraska's narrow direct action statute "permits an insured party to bring a direct action against an automobile liability insurer in the event that the insured is insolvent or bankrupt." Molina v. Am. Alternative Ins. Corp., 270 Neb. 218, 699 N.W.2d 415, 419 (2005). As previously stated, AmeriServe is bankrupt. Under the circumstances, Nebraska law would allow a direct action against the defendant insurance companies, whereas North Dakota law would not.

The Court's exercise of jurisdiction over this dispute is predicated upon the parties diversity of citizenship pursuant to 28 U.S.C. § 1332. It is well-established that in diversity of citizenship cases, the district court must apply the choice of laws rules of the state in which it sits. Perkins v. Clark Equip. Co., 823 F.2d 207, 208 (8th Cir.1987). Before engaging in such an analysis, the Court must determine whether Nebraska's direct action statute is substantive or procedural.

A. SUBSTANTIVE VS. PROCEDURAL

It is equally well-established that under traditional choice of law principles, the law of the forum state governs on matters of procedure. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 778 n. 10, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984) (citing Restatement (Second) of Conflict of Laws § 122 (1971)); see Am. Std. Life & Acc. Ins. Co. v. Speros, 494 N.W.2d 599, 602 (N.D.1993) ("Matters of procedure and remedial rights are governed by the law of the forum where relief is sought."); Am. Hardware Mut. Ins. Co. v. Dairyland Ins. Co., 304 N.W.2d 687, 689 n. 1 (N.D.1981) ("The court's procedural rules remain in effect even though foreign law is to govern resolution of substantive issues."). Characterizing direct action statutes as either procedural or substantive has long been recognized as problematic throughout the country. State Trading Corp. of India Ltd. v. Assuranceforeningen Skuld, 921 F.2d 409, 414-15 (2d. Cir.1990) (citing Speidel, Extraterritorial Assertion of the Direct Action Statute: Due Process, Full Faith and Credit and the Search for Governmental Interest, 53 Nw. U.L.Rev. 179, 212-14 (1958); Note, Direct-Action Statutes: Their Operational and Conflict-of-Law Problems, 74 Harv. L.Rev. 357, 387-89 (1960)). Not surprisingly, some courts have found direct action statutes to be procedural, see e.g., Moore v. United Services, Auto. Ass'n, 808 F.2d 1147, 1153-54 (5th Cir.1987); Dechand v. Ins. Co. of State of Pa., 732 F.Supp. 1120, 1122 (D.Kan.1990); Davis v. Furlong, 328 N.W.2d 150, 152-53 (Minn.1983); Macey v. Crum, 249 Ala. 249, 30 So.2d 666, 668 (1947), while others have found them to be substantive in nature. See e.g., Skuld, 921 F.2d 409, 416; Collins v. Am. Auto. Ins. Co., 230 F.2d 416, 422 (2d. Cir.1956); Allstate Ins. Co. v. Stanley, 282 F.Supp.2d 1342, 1343 (M.D.Fla.2003); Richards v. Select Ins. Co., Inc., 40 F.Supp.2d 163, 167-68 (S.D.N.Y.1999); Oltarsh v. Aetna Ins. Co., 15 N.Y.2d 111, 256 N.Y.S.2d 577, 204 N.E.2d 622 (1965).

The question becomes whether the North Dakota Supreme Court would label the Nebraska direct action statute as substantive or procedural under North Dakota law. See Doan v. Consumer Testing Lab., Inc., 2 F.Supp.2d 1209, 1212 (W.D.Ark.1998) (internal citations omitted)("Arkansas conflict-of-laws rules would require application of Louisiana law only if the relevant Louisiana law would be characterized as `substantive,' rather than `procedural.' If the right to bring a direct action against an insurer would be characterized as `procedural,' however, then an Arkansas state court would apply Arkansas law and dismiss the action. Thus, the court must determine whether Louisiana' direct action statute is substantive or procedural under Arkansas law."); Nelms v. State Farm Mut. Aut. Ins. Co., 463 F.2d 1190, 1192 (5th Cir.1972) (emphasis in original) ("A ...