Syed Shah v. State Farm Mut. Auto. Ins. Co.

Decision Date21 July 2005
Docket NumberNo. A1-04-072.,A1-04-072.
Citation377 F.Supp.2d 748
CourtU.S. District Court — District of North Dakota

Rodney E. Pagel, Pagel Weikum, PLLP, Bismarck, ND, for Plaintiff.

Thomas L. Zimney, Zimney Foster Johnson Dittus & Flaten, Grand Forks, ND, for Defendant.


HOVLAND, Chief Judge.

Before the Court are cross motions for summary judgment. The action arises out of the defendant's denial of a claim for underinsured motorist benefits. The parties seek a decision from the Court declaring whether the Plaintiff is entitled to underinsured motorist coverage under the insurance contract. The principal issue concerns the choice of law applicable to this insurance contract dispute involving an automobile accident that occurred in Canada. The case turns on the proper interpretation and application of the underinsured motorist benefits provision of the insurance policy issued by State Farm. For the reasons set forth below, the Court grants the Plaintiff's Motion for Summary Judgment and denies the Defendant's Motion for Summary Judgment.


This action was commenced in state court on May 13, 2004, with the mailing of a summons and complaint to the Commissioner of Insurance for the State of North Dakota. An admission of service was executed by the Insurance Commissioner on May 17, 2004. The defendant, State Farm Mutual Automobile Insurance Company (State Farm), mailed its answer to the state court on June 1, 2004. On June 3, 2004, State Farm removed the action to federal court. Jurisdiction is based upon diversity of citizenship with State Farm being an Illinois corporation and Shah a resident of North Dakota. The complaint is for breach of contract and requests a declaratory judgment finding Shah is entitled to underinsured motorist benefits. Shah specifically requests compensation for non-economic damages which are non-recoverable under Manitoba law. The facts of this case are largely undisputed.

On May 23, 1998, the plaintiff, Sher Ali Syed Shah (Shah), was a passenger and invited occupant in an automobile owned and operated by Kingsley Austin (Austin). The vehicle was involved in an accident in Winnipeg, Manitoba. Austin was an "Insured" under a policy providing automobile insurance coverage (including underinsured motorist coverage) issued by State Farm to Austin. Shah was also an "Insured" under such policy because he was a lawful occupant of the Austin vehicle. The owner and operator of the other vehicle involved in the accident was Clifford Murray (Murray). At the time of the accident, Murray was a Canadian citizen and resident of Manitoba, Canada. It is alleged that Murray rear-ended the Austin vehicle. Shah was a citizen of Pakistan lawfully residing in Pembina, North Dakota. At the time the State Farm insurance policy was issued to Austin, he operated a business in Pembina, North Dakota, and was a resident of North Dakota.

Murray's automobile was insured by Manitoba Public Insurance Corporation of Manitoba (MPIC), policy number A02297223. The policy provided coverage for legal liability arising from the ownership and operation of Murray's vehicle. The coverage provided for (1) income replacement equal to 90-percent of net income computed on a yearly basis subject to an annual maximum of $55,000; (2) payment of up to $100,000 for permanent impairment; and (3) payment of medical and paramedical care, including transportation and lodging without any maximum limit.

The Manitoba Public Insurance Act provides that MPIC is the only entity against whom claims can be filed for injuries and damages resulting from a motor vehicle accident in Manitoba involving a Manitoba insured. The applicable provision, 19(1), provides as follows:

Actions against corporation only

19(1) No action or other proceeding lies against any person other than the corporation for the purpose of enforcing any claim, or right in relation to the operations engaged in or carried on pursuant to this Act.

The Manitoba Public Insurance Corporation Act (Act) provides that no tort action is available against the driver, and that compensation for a victim of an accident who is not a Manitoba resident is determined on a fault basis. The applicable provisions and language of the Act provide as follows:

No tort actions

72 Notwithstanding the provisions of any other Act, compensation under this Part stands in lieu of all rights and remedies arising out of bodily injuries to which this Part applies and no action in that respect may be admitted before any court.

Entitlement of non-resident re accident in Manitoba

75(1) Notwithstanding section 73, a victim, or a dependant of a victim, of an accident that occurs in Manitoba who is not resident in Manitoba is entitled to compensation under this Part

(a) in accordance with any agreement between the corporation and a government or an agency of the government of the place of residence of the victim; or

(b) if no agreement exists, to the extent that the corporation determines the victim is not responsible for the accident.

Following the accident on May 23, 1998, Shah flew from Winnipeg to Pakistan as planned. While in Pakistan, Shah was treated for injuries he allegedly sustained in the accident. Upon returning to the United States two months after the accident, Shah began medical treatment in Hallock, Minnesota, where the majority of his medical treatment was received.

Shah allegedly sustained injuries as a result of the May 23, 1998, automobile accident. He submitted an "Application for Compensation" to MPIC. MPIC determined that Shah was entitled to income replacement in the amount of $12,628.17 (full-time) and $2,850.19 (part-time). Shah was paid these amounts by MPIC. MPIC also determined that Shah was entitled to receive a permanent impairment award and he was paid the sum of $3,259.92. Shah received other additional benefits from MPIC in the amount of $1,512.41. See Defendant State Farm Mutual Automobile Insurance Company's Statement of Undisputed Material Facts.

At the time of the accident, Austin's automobile was insured by State Farm with liability limits for bodily injury in the amount of $100,000 per person and $300,000 per accident. The insurance policy also provided for underinsured and uninsured motorist coverage in the same amount as the liability limits.

On July 13, 1998, Shah filed an application for personal injury protection (PIP) benefits with State Farm. Thereafter, he submitted medical bills and related expenses which State Farm paid in the total amount of $9,570.18.

The State Farm policy issued to Austin contained the following provisions:

Deciding Fault and Amount — Coverages U and W

Two questions must be decided by agreement between the insured and us:

1. Is the insured legally entitled to collect damages from the owner or driver of an uninsured motor vehicle or an underinsured motor vehicle; and

2. If so, in what amount?

If there is no agreement, then:

2. If either party does not consent to arbitrate these questions or if the arbitrators selected by each party cannot agree on the third arbitrator, the insured shall:

a. file a lawsuit in the proper court against the owner or driver of the uninsured motor vehicle or underinsured motor vehicle and us, or if such owner or driver is unknown, against us; and

b. upon filing, immediately give us copies of the summons and complaints filed by the insured in that action; and

c. secure a judgment in that action. The judgment must be the final result of an actual trial and an appeal, if an appeal is taken.

3. If the insured files suit against the owner or driver of the uninsured motor vehicle or underinsured motor vehicle, we have the right to defend on the issues of the legal liability of and the damages owed by such owner or driver.

There has been no agreement between Shah and State Farm that entitles Shah to collect damages from the owner/driver (Murray) of the underinsured motor vehicle. No lawsuit has been filed against Murray because such suits are prohibited under Canadian law, and no judgment has been entered in favor of Shah against Murray or MPIC.

The State Farm policy issued to Austin also contained the following provision:

3. The most the company will pay is the lesser of:

a. the amount of compensatory damages established but not recovered by an agreement, settlement, or judgment with or for the person or organization legally liable for the bodily injury; or

b. the limits of liability of these coverages.

The State Farm policy issued to Austin provided underinsured motorist coverage (UIM). The relevant language of the coverage provision states as follows:

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

The State Farm insurance policy was drafted to conform to North Dakota law. The policy expressly provides that all coverages which the insured pays for will apply in any state and in Canada. In that regard, the policy language provides:

Where Coverage Applies

The coverage you chose apply

1. in the United States of America, its territories and possessions or Canada; or

2. while the insured vehicle is being shipped between their ports.

The liability, no-fault and physical damage coverages also apply in Mexico within 50 miles of the United States border. A physical damage coverage loss in Mexico is determined on the basis of cost at the nearest United States point.

Death, dismemberment and loss of sight coverage applies anywhere in the world.

State Farm has denied Shah's claim for UIM benefits on the grounds that because Shah is not "legally...

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2 cases
  • Carpenter v. Grinnell Mut. Reinsurance Co.
    • United States
    • U.S. District Court — District of North Dakota
    • December 31, 2019
    ...the phrase "legally entitled to recover" in the context of underinsured motorist coverage); Shah v. State Farm Mut. Auto. Ins. Co., 377 F. Supp. 2d 748, 754, 759 (D.N.D. 2005) (same); Perius v. Nodak Mut. Ins. Co., 2010 ND 80, ¶ 12, 782 N.W.2d 355 ("To recover on his claim against Nodak for......
  • Buckeye State Mut. Ins. Co. v. Roe
    • United States
    • U.S. District Court — Northern District of Indiana
    • December 18, 2013
    ...the insured was legally entitled to recover as uninsured motorists benefits from Delaware accident); Syed Shah v. State Farm Mut. Auto Ins. Co., 377 F. Supp. 2d 748, 757 (D.N.D. 2005) (holding North Dakota's tort choice of law rules required the application of North Dakota law to determine ......

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