State Farm Mut. Auto. Ins. Co. v. Causey, 2:05-cv-379-WKW.

• Decision Date: 09 March 2007
• Docket Number: No. 2:05-cv-379-WKW.,2:05-cv-379-WKW.
• Citation: 509 F.Supp.2d 1026
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff, v. Brenda CAUSEY and Kenneth W. Causey, Defendants.
• Court: U.S. District Court — Middle District of Alabama

Page 1026

509 F.Supp.2d 1026

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff, v. Brenda CAUSEY and Kenneth W. Causey, Defendants.

No. 2:05-cv-379-WKW.

United States District Court, M.D. Alabama, Northern Division.

March 9, 2007.

Angela Christine Taylor, Constance Taylor Buckalew, Michael Baird Beers, Beers Anderson Jackson Patty & Van Heest PC, Charles W. Rutter, Jr., Nix Holtsford Gilliland Higgins & Hitson PC, Montgomery, AL, for Plaintiff.

Andall B. James, Robert Lester Pittman, James & Pittman, PC, Montgomery, AL, for Defendants.

MEMORANDUM OPINION AND ORDER

W. KEITH WATKINS, District Judge.

State Farm Mutual Automobile Insurance Company ("State Farm") brings this declaratory judgment action to establish the rights of Defendants Brenda Causey and Kenneth W. Causey ("Defendants"), who are insureds of State Farm under Brenda Causey's uninsured-underinsured motorist ("UM/UIM") coverage,¹ stemming from a collision with a street-sweeper vehicle owned by the City of Montgomery and operated by one of its employees. State Farm asks the court to declare that it has no obligation to pay UIM benefits to the defendants as a result of the This cause is before the court for consideration of the parties' cross motions for summary judgment. (Dots. # 14 and 27.) For the reasons set forth below, Defendants' motion (Doc. # 14) is due to be DENIED, State Farm's motion (Doc. 27) is due to be GRANTED, and State Farm's request for declaratory judgment is due to be GRANTED.

I. FACTS AND PROCEDURAL HISTORY

On May 8, 2004, a City street-sweeper collided with Brenda Causey's vehicle. In 2005, the City settled the Causeys' claim against it and its employee for $100,000, which was its policy limits and the statutory maximum in Alabama for recovery against a municipality and its employee.² Mrs. Causey now seeks recovery against her UIM carrier, State Farm, for underinsured motorist benefits for damages over the statutory cap. Having investigated Mrs. Causey's claim, State Farm agrees that the total value of her claim against the City is at least $175,000. The parties agree that there are no disputed material facts. The only issue involves a question of law: when the alleged tortfeasor is a municipality which enjoys the benefit of a statutory cap on damages, can an insured recover UIM benefits in excess of the statutory cap from the insured's own UIM carrier?³

II. JURISDICTION AND VENUE

Because more than $75,000 is in controversy State Farm is a citizen of a different state than Defendants, this court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332. The parties do not contest personal jurisdiction or venue, and the court finds adequate allegations in support of both.

III. SUMMARY JUDGMENT STANDARD

Summary judgment should be granted only if "there is no issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). It "is justified only for those cases devoid of any need for factual determinations." Offshore Aviation v. Transcon Lines, Inc., 831 F.2d 1013, 1016 (11th Cir.1987) (internal quotation marks and citation omitted); see also United States v. Oakley, 744 F.2d 1553, 1555-56 (11th Cir.1984) (recognizing that cross-motions may be probative of the absence of a factual dispute where they reflect general agreement by the parties as to the dispositive legal theories and material facts). Because of the absence of a factual dispute in this case, and the parties' agreement as to the governing law and the material facts, the motions for summary judgment will be addressed and resolved as a matter of law. In diversity cases, federal courts are required to apply the law of the state in which they sit. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ("Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state.").

IV. DISCUSSION

Because Brenda Causey collided with a City vehicle, the threshold question is whether that vehicle is an "uninsured motor vehicle" under the terms of the policy. Defendants are insured under a policy which provides:

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 caused by accident arising out of the operation, maintenance or use of an uninsured motor vehicle.

Uninsured Motor Vehicle — means:

1. a land motor vehicle, the ownership, maintenance or use of which is:

. . . . .

b. insured or bonded for bodily injury liability at the time of the accident; but ...

. . . . .

(3) the sum of the limits of liability under all bonds and policies that apply are less than the damages the insured is legally entitled to recover.

(Policy 11.) The policy language tracks Alabama law governing UIM coverage:

(a) No automobile liability or motor vehicle liability policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unles's coverage is provided therein or supplemental thereto, ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom....

(b) The term "uninsured motor vehicle" shall include, but is not limited to, motor vehicles with respect to which ...

(4) The sum of the limits of liability under all bodily injury liability bonds and insurance policies available to an injured person after an accident is less than the damages which the injured person is legally entitled to recover.

Ala.Code § 32-7-23 (1975). UIM coverage is a subset of UM coverage, created by subsection (b)(4) of § 32-7-23. See, e.g., State Farm Mut. Auto. Ins. Co. v. Scott, 707 So.2d 238 (Ala.Civ.App.1997). "It differs from typical UM coverage because UM coverage takes the place of nonexistent liability coverage. UIM coverage pays in excess of existing liability coverage, where the liability coverage is inadequate to fully compensate the claimant." Alabama Ins. Guar. Asp'n v. Hamm, 601 So.2d 419, 423 (Ala.1992) (internal citation omitted).

The policy and the statute link the definition of uninsured motor vehicle to "legally entitled to recover," a phrase which is not defined in the policy or in the statute. Defendants contend "legally entitled to recover" denotes the damages necessary to fully compensate Defendants for their injuries. State Farm contends "legally entitled to recover" is what Defendants could be awarded in a court of law in a direct action against the City and its employee, i.e., $100,000 due to the statutory cap. There is no dispute that the municipal cap applies to Defendants' claim against the City and its employee. See Benson v. City of Birmingham, 659 So.2d 82, 84 (Ala. 1995) (holding that judgments must be reduced to $100,000 "when a defendant is determined to be a governmental entity"). State Farm characterizes the cap as a defense available to the insurance carrier because it is available to the tortfeasor. Defendants insist the cap is merely a post-verdict remedy, and that this situation is no different than where a claimant's recovery against the tortfeasor is limited by the tortfeasor's policy limits.

The relationship of the UM statute to Alabama's cap on awards against municipalities and their employees has not been specifically addressed by the Alabama Supreme Court. However, that Court has clearly interpreted the phrase "legally entitled to recover" and its interaction with other statutory and doctrinal bars to recovery. Based upon a careful reading of the applicable state precedent, this court finds that Defendants are "legally entitled to recover" under their UIM coverage what they could recover in a direct suit against the tortfeasors who damaged them. If, in a direct suit against those tortfeasors, Defendants' recovery would be limited to a statutory maximum, as Defendants' recovery is limited here by Alabama's municipal cap, then that statutory maximum applies to Defendants' UIM claim against their insurer.

This result is required by a recent opinion of the Alabama Supreme Court on the meaning of "legally entitled to recover." In Ex parte Carlton, 867 So.2d 332 (Ala. 2003), the Supreme Court expressly overruled a line of cases which had held that an insured could recover UM benefits despite bars to recovery from the tortfeasor created by statute or immunity doctrines. Id. at 338. As a passenger, Carlton was injured because of the negligent driving of his co-employee during the course of their employment. Id. at 333. He received workers' compensation benefits from his employer, but those benefits were presumably insufficient to make him whole. Id. He sought damages under the uninsured motorist coverage from his mother's insurance company, which refused to pay. Id. The insurer did not dispute that he was an insured under his. mother's policy but claimed that he was not "legally entitled to recover" under both the UIM statute and the policy because he could not recover anything in a direct suit against the tortfeasors — his co-employee and his employer. The insurer's specific argument was that Carlton could not recover because Alabama's Workers' Compensation Act, Ala.Code § 25-5-1 et seq., makes workers' compensation benefits the exclusive remedy when one is injured by a co-employee tortfeasor. See id. § 25-5-11.

The insured in Carlton relied upon a line of Alabama cases which held that an insured could recover UM benefits despite bars to recovery from the tortfeasor created by statute or immunity doctrines. See Hogan v. State Farm Mut. Auto. Ins. Co.,...