Stakem v. Randolph, 3:04-CV-311.

• Decision Date: 12 May 2006
• Docket Number: No. 3:04-CV-311.,3:04-CV-311.
• Citation: 431 F.Supp.2d 782
• Parties: Daniel Joseph STAKEM, III, and wife, Carol Stakem, Plaintiffs, v. Kimber Lee RANDOLPH, Defendant.
• Court: U.S. District Court — Eastern District of Tennessee

431 F.Supp.2d 782

Daniel Joseph STAKEM, III, and wife, Carol Stakem, Plaintiffs, v. Kimber Lee RANDOLPH, Defendant.

No. 3:04-CV-311.

United States District Court, E.D. Tennessee, at Knoxville.

May 12, 2006.

W. Holt Smith, Madisonville, TN, for Plaintiffs.

Sarannah L. McMurtry, Law Offices of Permanent General, Nashville, TN, James S. MacDonald, Dunn, MacDonald, Coleman & Reynolds, PC, Knoxville, TN, for Defendant.

MEMORANDUM OPINION

SHIRLEY, United States Magistrate Judge.

This case arises out of a motor vehicle accident. The plaintiff Daniel Joseph Stakem and the plaintiffs' uninsured motorist ("UM") insurance carrier, State Farm Mutual Automobile Insurance Company ("State Farm") both move for summary judgment. For the reasons set forth below, the Motion for Summary Judgment by State Farm Mutual Automobile Insurance Company [Doc. 12] is GRANTED. The Motion for Summary Judgment by Plaintiff Daniel Joseph Stakem [Doc. 15] is DENIED.

I.

The underlying facts are undisputed. On July 20, 2003, the plaintiff Daniel Stakem was operating his motorcycle in the Great Smoky Mountains National Park with his wife Carol riding along as a passenger. The defendant Kimber Lee Randolph was an automobile traveling in the opposite direction. Ms. Randolph made a left turn in front of the plaintiffs' motorcycle, causing a collision. The motorcycle impacted the right rear quarter panel of Ms. Randolph's vehicle, and the Stakems were thrown from the motorcycle.

Mr. and Mrs. Stakem both received full per person policy limits of $25,000 from the liability carrier for Ms. Randolph, and the plaintiffs furnished releases. Mrs. Stakem also received two $100,000 payments, for a total of $200,000, representing the full policy limits available to her through her two policies of uninsured motorist coverage with the plaintiffs' uninsured/underinsured motorist insurance carrier, State Farm Mutual Automobile Insurance Company ("State Farm").¹

The parties proceeded to arbitrate Mr. Stakem's entitlement to additional potential benefits. The arbitration hearing was held on July 15, 2005. Both plaintiffs testified at the hearing, as did Florida neuropsychologist Dr. Douglas J. Mason. On August 10, 2005, the arbitrator submitted the Arbitration Award to this Court. [Doc. 11]. The arbitrator found that Mr. Stakem had suffered a "serious emotional injury" as a result of the defendant's negligence. The arbitrator further noted that "Dr. Mason testified that although Mr. Stakem has the potential to return to a reasonable level of functioning he may never completely recover." [Id.]. The arbitrator awarded Mr. Stakem medical expenses in the amount of $8,638.71; future medical expenses of $1,800.00; past and future pain and suffering in the amount of $30,000.00; and past and future loss of enjoyment of life in the amount of $30,000.00, for a total of $70,438.71 in damages. [Id.].

As Mr. Stakem has already received $25,000 from Ms. Randolph's liability carrier, the issue before the Court is whether Mr. Stakem has any benefits available to him under the State Farm policies that would pay the balance of the Arbitrator's Award in the amount of $45,438.71.

II.

As a threshold matter, the Court must address the plaintiffs' contention that this case should be decided under Tennessee's Uninsured Motorist ("UM") Statute, Tenn.Code Ann. § 56-7-1201, et seq. and Tennessee tort law. [Doc. 16]. Specifically, the plaintiffs contend that because State Farm invoked the arbitration provisions of the Tennessee Uninsured Motorist Statute, Florida law cannot be applied to determine whether the insurance policies provide for recovery of Mr. Stakem's damages. The plaintiffs argue that to apply Florida law would result in a waste of judicial resources because the plaintiffs already have an arbitration award under Tennessee law, but would also have the right under Florida law to pursue a trial by jury on the issue of insurance coverage. Thus, the plaintiffs argue, "the only reasonable way" for this case to proceed is for the Court to apply Tennessee law and enter a judgment in favor of Mr. Stakem for the entire arbitration award.

State Farm argues that the parties agreed to follow the arbitration procedures set forth in the Tennessee UM Statute, despite the fact that the Statute applies only to insurance policies "delivered, issued for delivery, or renewed in this state [Tennessee]." See Tenn.Code Ann. § 56-7-1201(a). State Farm argues that the parties did so because the arbitration procedures provided a relatively simple way to resolve the parties' dispute: if the arbitrator's award did not exceed the $25,000 payment previously made to Mr. Stakem, any coverage issues would be moot. If the arbitrator's award exceeded the previous $25,000 payment, then the parties would litigate the coverage issues pursuant to Tenn.Code Ann. § 56-7-1206(h)(5) ("Coverage issues shall be decided by a court of competent jurisdiction; the arbitrator shall decide issues of tort liability and damages only."). The parties' agreement to this effect is memorialized in the letter of attorney James MacDonald to attorney W. Holt Smith dated June 9, 2005:

Finally, as we discussed, under the provisions of T.C.A. 56-7-1206(h)(5) the arbitrator can decide only questions of "liability and damages" with coverage issues being reserved "to a court of competent jurisdiction," here, our local federal district court, Magistrate Judge Cliff Shirley.

[Doc. 19 Coll. Ex 1].

The Court agrees with State Farm that Tennessee law is not applicable to the issue currently before the Court. The parties agreed to arbitrate only the issues of liability and damages and to reserve any issues regarding coverage for the undersigned. Under Tennessee conflict of laws rules, which this Court must apply in this diversity action, the liability of an insurance company under a policy of insurance is determined by the law of the state where the contract for insurance was made. See Carr v. American Universal Ins. Co., 341 F.2d 220, 222 (6th Cir.1965); Hensley v. Miles, No. 2:01-cv-142, 2005 WL 1182528, at *3 (E.D.Tenn. May 18, 2005). In this case, the Stakems were both residents of Florida, and the subject insurance policies were written and delivered to them in the State of Florida. Accordingly, Florida law governs the interpretation of their policies. The plaintiffs' argument that Tennessee law should govern the interpretation of these insurance contracts simply because the underlying liability and damage issues were arbitrated in Tennessee is without merit.

III.

Having determined the applicable substantive law to be applied in this case, the Court turns to the substantive issues raised by the parties. State Farm first argues that there is no coverage because Mr. Stakem failed to comply with policy provisions and applicable Florida law, particularly the threshold requirements set forth in the Florida Motor Vehicle No-Fault Law ("No-Fault Law"), Fla. Stat. Ann. § 627.737(2), which are incorporated into the subject policy. Specifically, State Farm argues that Mr. Stakem cannot satisfy the threshold requirement of the existence of a permanent bodily injury within the required degree of medical probability because he failed to present proper medical proof at the arbitration proceeding. Further, State Farm contends that the vast bulk of Mr. Stakem's injuries "result from" the injuries to his wife, and consequently all applicable per person limits under the State Farm policies in question totaling $200,000 have been fully exhausted by virtue of presuit payment by State Farm to Mrs. Stakem. [Doc. 13].

Mr. Stakem argues that he is not required to meet the no-fault threshold in order to recover his damages because Florida's No-Fault Law does not apply to motorcycles, and thus, Mr. Stakem argues that he is entitled to receive UM benefits without satisfying any threshold requirement of the No-Fault Law. Mr. Stakem argues that applying the threshold requirements under these circumstances would be a denial of his constitutional right of access to the courts. Even if the terms of the Florida No-Fault Law were applied, Mr. Stakem contends that he has presented proof of a serious and permanent injury, separate and apart from his wife's injuries, and is therefore entitled to compensation under the terms of his insurance policy. [Doc. 15].

The relevant portions of the insurance policies at issue are identical in their terms and state, in pertinent part, as follows:

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

The bodily injury must be a serious injury as described in section 627.737(2) of the Florida Motor Vehicle No-Fault Law before we will pay for damages consisting of pain, suffering, mental anguish, or inconvenience.

In other words, pursuant to the State Farm policies, the insured may recover only economic damages, such as medical expenses or lost wages, unless the injury constitutes a "serious injury" within the meaning of section 627.737(2) of the No-Fault Law. That provision provides that a plaintiff may recover tort damages for pain, suffering, mental anguish, and inconvenience because of bodily injury, sickness, or disease arising out of the ownership, maintenance, operation, or use of such motor vehicle only in the event that the injury or disease consists in whole or in part of:

(a) Significant and permanent loss of an important bodily function.

(b) Permanent injury within a reasonable degree of medical probability, other than scarring or disfigurement.

(c) Significant and permanent scarring or disfigurement.

(d) Death.

Fla. Stat. Ann. § 627.737(2). These threshold requirements are incorporated into the Florida UM statutes as well. Specifically, Fla. Stat. Ann. § 627.727(7)...