Drew v. Safeco Insurance Company of Illinois, Case No. 13—14514, 2014 WL 4215441 (11th Cir. Aug. 27, 2014)
On behalf of Safeco, Butler Pappas obtained summary judgment and successfully defended the appeal in this uninsured motorist (UM”) coverage action. The Eleventh Circuit held that UM benefits under an automobile insurance policy were not owed to a claimant who was not a member of the named insured’s family and who was injured while riding as a passenger in the insured automobile driven by the named insured’s family member. The court stated the vehicle in which the claimant was riding did not qualify as an “uninsured motor vehicle,” as defined in the policy.
This case has particular significance with respect to the court’s rulings on subject matter jurisdiction and standing. The case illustrates how a federal court may permit a realignment of the parties in cases where the interests of a non-diverse co-defendant are not truly adverse to the plaintiff. If the interests of the non-diverse defendant and the plaintiff are aligned, a party may move to realign the parties and have a non-diverse co-defendant treated as a plaintiff, resulting in complete diversity.
In this case, Safeco removed the action to federal court on the basis of diversity of citizenship, arguing successfully that its co-defendant (the injured passenger who was seeking UM benefits) was properly a plaintiff rather than a co-defendant and that his realignment made the parties completely diverse.
Additionally, the court held that the named insured had standing to bring the declaratory judgment action even though the injured passenger, not the named insured, was the party seeking UM benefits and the injured passenger did not appeal the judgment. The court noted that if the named insured is successful in proving that Safeco wrongfully denied UM coverage, then she will succeed in enforcing the terms of her policy and mitigating her liability for the passenger’s injuries.
On May 4, 2012, Zachary Dooling was riding in an automobile driven by his friend Daemon Drew (“Daemon”) when the car was involved in an accident. Lesa Tavarez, the driver of the other vehicle, died, while her passenger was seriously injured. Additionally, Dooling sustained injuries causing damages exceeding $200,000. Appellant Darcel Drew (“Drew”), Daemon’s aunt, owned the vehicle he was driving. Appellee Safeco Insurance Company of Illinois (“Safeco”) insured Drew’s vehicle through a policy Drew purchased, and Daemon was a rated driver on the policy. The policy’s liability limits were paid to the Tavarez family, leaving nothing for Dooling’s injuries. Dooling made a demand under the UM provisions of the policy. Safeco denied the claim, explaining that the vehicle could not be both insured by the liability portion of the policy and uninsured under the terms of the same policy.
After Safeco denied Dooling’s UM claim, Dooling sued Drew, Daemon, and Dartland Drew (Darcel’s brother and Daemon’s father). Drew (a citizen of Florida) subsequently brought this declaratory judgment action in Florida state court, where she named Safeco (a citizen of Illinois and Massachusetts) and Dooling (a citizen of Florida) as co-defendants.
Safeco removed the action to federal court on the basis of diversity of citizenship, arguing Dooling was properly a plaintiff rather than a defendant and that his realignment would make the parties completely diverse. The district court granted Safeco’s motion to realign. The parties filed cross-motions for summary judgment. The district court granted Safeco’s motion in part and entered judgment in its favor and against Drew and Dooling, finding that while Drew had standing, Dooling was not covered by the UM provision. Drew appealed. Dooling did not appeal.
The court addressed two key issues regarding jurisdiction. First, the court address whether complete diversity exists when the parties agreed that the plaintiff and one of the co-defendants (Dooling) were both citizens of Florida and the notice of removal alleged only that Dooling was a “resident” of Florida. Next, the court addressed the issue of whether the named insured has standing to bring this declaratory judgment action given that Dooling, the party seeking UM benefits for his injuries, decided not to appeal the district court’s ruling that Dooling was not entitled to UM benefits.
The coverage issue addressed by the court was whether the district court erred in granting summary judgment in favor of Safeco based on its conclusion that the UM provision of Drew’s policy did not cover Dooling’s injury.
The court upheld the district court’s realignment of Dooling as a plaintiff rather than a defendant and held that complete diversity of citizenship exists. Even though Safeco, in its notice of removal, alleged only that Dooling was a Florida “resident,” not a Florida citizen, the parties agreed that Dooling is a Florida citizen and, thus, the parties’ representations cured the deficient jurisdictional allegations to allow the appeal to proceed. The court further held that the named insured (Drew) has the standing to bring this declaratory judgment action because Drew stands to suffer an economic injury if she does not receive the coverage to which she is entitled under the policy, and Dooling’s suit against her threatens to compound that economic injury.
Additionally, the court held that the district court did not err in finding that the UM provision did not cover Dooling’s claim because the vehicle in which Dooling was riding did not qualify as an “uninsured motor vehicle.”
In reaching its decision on the jurisdiction issues, the court noted that defective allegations of jurisdiction may be amended in the trial or appellate courts, pursuant to 28 U.S.C. § 1653. A party’s admissions and other evidence can bring about amendment and cure pleading deficiencies related to citizenship. In this case, in its notice of removal, Safeco alleged that it was an Illinois corporation with principal place of business in Massachusetts, thereby making it a citizen of states other than Florida. Additionally, Safeco alleged that Drew was a citizen of Florida. However, the court stated it was unclear whether there was complete diversity because Safeco alleged only that Dooling, whom the district court had realigned as a plaintiff, was a Florida “resident,” not a Florida citizen. The court emphasized that citizenship, rather than residence, is relevant to establishing diversity jurisdiction under 28 U.S.C. § 1332. Although the notice of removal was silent on whether Dooling was a Florida citizen, the parties agreed that Dooling is a Florida citizen. The court noted that Drew “argued as much in her motion to remand.” Thus, the court found that Drew’s representations cured the deficient jurisdictional allegations to allow Drew’s appeal to proceed.
In holding that Drew satisfied the requirements for standing in this declaratory judgment action, the court explained that Drew satisfied all three requirements for establishing standing, including: (1) that she sustained an injury in fact, (2) that there exists a causal link between the defendant’s conduct and the injury, and (3) that a favorable verdict will likely redress the injury. All three requirements were met, the court stated because Drew stands to suffer an economic injury if she does not receive the coverage to which she is entitled under the policy, and Dooling’s suit against her threatens to compound that injury. If Drew is successful in her declaratory judgment action, she will succeed in enforcing the terms of her policy with Safeco and mitigating her liability for Dooling’s injuries. Thus, she has standing to seek a declaration regarding whether the denial of Dooling’s UM claim was proper.
In holding that the UM provision of Drew’s policy did not cover Dooling’s UM claim, the court relied on the plain meaning of the term “uninsured motor vehicle” set forth in the policy. The policy states that UM coverage exists where an insured “is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury.” A vehicle available for the regular use of a named insured’s family member and covered under the liability portion of the policy, similar to the vehicle in which Dooling was riding, is generally not an “uninsured motor vehicle.” Specifically, the policy states:
“[U]ninsured motor vehicle does not include any vehicle or equipment:
1. Owned by or furnished or available for the regular use of you or any family member unless it is a [sic] your covered auto to which Part A of the policy applies and liability coverage is excluded for any person other than you or any family member for damages sustained in the accident by you or any family member.”
The court explained that the foregoing provision states the general rule in Florida: “[A] vehicle cannot be both an uninsured and insured vehicle under the same policy.” Travelers Ins. Co. v. Warren, 678 So. 2d 324, 328 (Fla. 1996). The court noted that the foregoing principal is known as the “your auto” or “resident relative” exclusion.
The court further explained that the general rule is subject to one exception. Specifically, as indicated in the foregoing provision, a car insured under the liability policy can be an uninsured vehicle for the purposes of the UM provision if “liability coverage is excluded for any person other than” the named insured or her family member “for damages sustained in the accident by” the named insured or a family member. Although the Florida Supreme Court has not confronted the issue, a Florida appellate court has considered a substantively identical exception. In Small v. New Hampshire Indem. Co., 915 So. 2d 714, 716 (Fla. 5th DCA 2005), the court interpreted the exception to apply when: (1) a person other than a named insured or her family member is operating the vehicle, (2) the named insured or her family member suffers injury, and (3) some other provision of the policy excludes liability coverage for the non-family member driving the vehicle. Id. at 716. Thus, in Small, the exception did not apply when the named insured was injured while a passenger in the insured vehicle, which her husband was driving.
The court ruled that nothing prevents the application of the “your auto” exclusion. Daemon, a family member of the named insured, was operating the vehicle, and Dooling – neither the named insured nor a family member – is the injured claimant. The court stated that the exception is “inartfully drafted,” Small, 915 So. 2d at 716, but is susceptible to “only one meaning and therefore unambiguous.” Thus, the court concluded that the exception does not apply to Dooling’s claim.