Progressive Specialty Insurance Company v. Hall et al

Filing 32

MEMORANDUM OPINION- Signed by Magistrate Judge John E Ott on 7/15/2016. (AVC)

FILED
2016 Jul-15 PM 03:53
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
PROGRESSIVE SPECIALITY
INSURANCE COMPANY,
Plaintiff,
v.
EMMETT R. HALL, et al.,
Defendants.

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Case No.: 2:14-cv-02047-RDP

MEMORANDUM OPINION
This action arises out of a claim for underinsured motorist (“UIM”) benefits submitted by
the Halls to Progressive following a single-vehicle automobile accident in which Marina Noelle,
a passenger in the vehicle, suffered serious injuries. Progressive seeks a declaratory judgment
regarding the total amount of UIM benefits available under three insurance policies insuring nine
vehicles owned by members of the Hall family. Progressive contends that the three policies
provide a maximum of $700,000 in UIM benefits, while the Halls contend that the maximum
UIM benefits total $900,000. The Halls also filed a counterclaim asserting claims against
Progressive for (1) breach of contract, (2) bad-faith failure to pay the policy limits for UIM
coverage, and (3) negligent/wanton hiring, training, and supervision in connection with the
structuring of their UIM coverage, as well as a claim based on respondeat superior. (Doc. 5).
On June 20, 2016, the Magistrate Judge entered a Report and Recommendation. (Doc. #
28). The parties were allowed fourteen (14) days in which to file objections to the
recommendations made by the Magistrate Judge. (Id.). On July 5, 2016, Plaintiff-Counter
Defendant Progressive Specialty Insurance Company (“Plaintiff” or Progressive”) and

Defendants-Counter Claimants Emmett Hall, Valerie Hall, and Marina Noelle Hall (the “Halls”
or “Defendants”) each filed objections to the Magistrate Judge’s Report and Recommendation
(the “Report”). (Docs. # 29, 30). The court addresses each, in turn.
I.

Standard of Review
In reviewing a Magistrate Judge’s Report and Recommendation, a district court “shall

make a de novo determination of those portions of the report or specified proposed findings or
recommendations to which objection is made.”

28 U.S.C. § 636(b)(1)(C). “Parties filing

objections to a magistrate’s report and recommendation must specifically identify those findings
objected to. Frivolous, conclusive, or general objections need not be considered by the district
court.” United States v. Shultz, 565 F.3d 1353, 1361 (11th Cir. 2009) (other citations omitted).
“The district judge must ‘give fresh consideration to those issues to which specific objection has
been made by a party.’” King v. Ferguson Enters., Inc., 971 F. Supp. 2d 1200, 1205 (N.D. Ga.
2013) (quoting Jeffrey S. v. State Bd. of Educ. of Ga., 896 F.2d 507, 512 (11th Cir. 1990)).
Absent objection, a district court judge “may accept, reject, or modify, in whole or in part, the
findings and recommendations made by the magistrate judge,” 28 U.S.C. § 636(b)(1)(C), and
need only be satisfied that no clear error exists on the face of the record.

Smith v. E-

Backgroundchecks.com, Inc., 81 F. Supp. 3d 1342, 1346 (N.D. Ga. 2015) (citation omitted); see
also Fed. R. Civ. P. 72.
II.

Analysis
After careful review, the court concludes that each party’s objections are due to be

overruled and the Magistrate Judge’s Report and Recommendation are due to be adopted.

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A.

Plaintiff’s Objections are Due to be Overruled

Plaintiff’s objections consist of three “suggested corrections or additions” to the Report.
(Doc. # 29 at p. 1). Specifically, Plaintiff suggests the addition of language to the Report’s Facts
section, and a clarification that there has been no liability determination as to a wantonness claim
against Jacob Miller.

(Id. at pp. 1-2).

The court determines that Plaintiff’s “objections”

consisting of suggested additions to the Report are not proper legal ground for objection, and the
court need not undertake a de novo review of them. See Leatherwood v. Anna’s Linens Co., 384
Fed. Appx. 853, 857 (11th Cir. 2010) (finding that the only objections entitled to de novo review
were those identifying specific findings set forth in the report and recommendation and
articulating “a legal ground for objection”) (citations omitted). The “facts” referenced in the
language that Plaintiff has suggested are preserved in the record, and it is not necessary to adopt
them in the Report. (Compare Doc. # 28 with Doc. # 29 ¶¶ 1 & 2). For the reasons stated in
more detail below, there is no error in the Report, and Plaintiff’s suggestions would in no way
bolster the conclusions therein.
Moreover, the court has conducted a de novo review of the objection regarding whether
there was a liability determination on wantonness (Doc. # 29 at ¶ 3), and determines it is due to
be overruled. It is true that no jury or judge has made a legal determination as to wantonness
liability by Jacob Miller (and, to be sure, the court is not making any ruling whatsoever regarding
that issue here). But the Magistrate Judge specifically addressed that issue and found that, for
the purposes of the motion for judgment on the pleadings, a prima facie case of wantonness by
Miller had been established. (Doc. # 28 at p. 22). The undersigned agrees that the Magistrate
Judge’s finding comports with Alabama law on bad faith.

(See id. (quoting LeFevre v.

Westberry, 590 So. 2d 154, 160 (Ala. 1991))). Thus, the Report is not in error.

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B.

Defendants’ Objections are Due to be Overruled

Defendants have raised four objections: (1) their damages “far exceeded” the amounts
referenced in the Report; (2) the Report mischaracterizes the duties of an uninsured/underinsured
motorist (“UIM”) insurer; (3) the Report’s finding of no bad faith by Plaintiff was erroneous; and
(4) because the Report recognized an ambiguity in the insurance policies at issue, a jury should
necessarily resolve it and other purported ambiguities. (Doc. # 30). The court addresses each
objection, in turn.
1.

Defendants’ Objection One

Defendants strenuously object to the Report’s findings that “the liability settlement with
Travelers had fully compensated Maria Noel[le] for her damages” and that “the Halls’ settlement
with Travelers more than covered the total amount of damages they were seeking at that time.”
(Doc. # 30 at p. 2 (quoting Doc. # 28 at pp. 26-27)). According to Defendants, the information
available at that time (and upon which the Magistrate Judge relied), was only “the extent of
Marina Noelle’s past medical and other out-of-pocket expenses up to the mediation” on July 17,
2014, and did not account for future medical expenses or pain and suffering. (Doc. # 30 at pp. 23). Consequently, Defendants argue, the Report’s findings do not account for Alabama’s law on
damages in personal injury cases, which includes as a component compensatory damages for
pain and suffering. (Id. at pp. 4-6). And, Defendants assert, had the Report fully appreciated
Alabama personal-injury damages law, “it would be apparent Progressive knew well in advance
of its October 2014 settlement offers that any amount of money it offered under the insurance
policies could not come close to fully compensating Marina Noelle’s damages.” (Id. at pp. 5-6).
The underlying facts of this case are truly tragic. But, this action concerns UIM policies.
It is not a personal injury matter. Obviously, Defendants objection is designed to save their bad

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faith counterclaim. However, their objection actually adds support to the Report’s finding that
the extent of the damages for which Jacob Miller would be liable has not been decided, and thus
bolsters the Report’s conclusion that Progressive acted in good faith. 1 (See Doc. # 28 at pp. 2427). The court finds no error in the Report and determines that this objection is due to be
overruled.
2.

Defendants’ Objection Two

Defendants’ second objection, which concerns the Report’s characterization of UIM
insurers, is also due to be overruled. They argue that the Report’s adoption of the Alabama
Supreme Court’s rulings that UIM insurers act as a hybrid of first-party and third-party insurers,
and thus stand in an adversarial relationship with the insured until liability and damages are
determined, fails to appreciate the requirement of good faith and fair dealing. (Doc. # 30 at pp.
6-8). In support of their argument, Defendants cite language from Sanford v. Liberty Mut. Ins.
Co., 536 So. 2d 941, 942 (Ala. 1988). (Id. at p. 7). But in Sanford, the court was faced with an
erroneous trial court ruling that concluded, as a matter of law, UIM insurers could not be liable
for a bad faith claim under any set of circumstances; the Sanford court held that UIM insurers
can in fact face such claims. Sanford, 536 So. 2d at 942. The Alabama Supreme Court
recounted the policy reasons why UIM insurers must be able to face bad faith claims. See id. To
be sure, the court did not create a specific legal duty or define the specific first-party/third-party
proportions of the hybrid nature of UIM insurers. Here, the facts in the pleadings demonstrate
that Progressive acted with good faith and fair dealing in its handling of Defendants’ UIM claim.
That is all that is required under Alabama law. The Report reached that correct conclusion.

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Moreover, the Alabama Supreme Court found in LeFevre that a legitimate dispute as to damages existed
when the UIM insurer received various conflicting reports as to the plaintiff’s damages, and that it was not bad faith
to not anticipate future medical expenses. See 590 So. 2d at 161-62.

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3.

Defendants’ Objection Three

For similar reasons, Defendants’ third objection is also due to be overruled: the wellpleaded facts show that Progressive acted in good faith. Defendants contend that the Report does
not address whether Progressive had a legitimate basis to offer a $500,000 settlement on October
20, 2014, which was followed by an offer of the full policy limits of $700,000 three days later,
on October 23, 2014. (Doc. # 30 at pp. 8-9). In support of the contention that a “low-ball offer
without justification” is indicative of bad faith, Defendants cite to two cases from the Western
District of Pennsylvania. (Id. at pp. 9-10). See Seto v. State Farm Ins. Co., 855 F. Supp. 2d 424
(W.D. Pa. 2012); Rankin v. State Farm Mutual Auto. Ins. Co., No. 11-331, 2011 WL 2118031
(W.D. Pa. Apr. 27, 2011). Those cases are not binding on this court, and, in any event, involve
Pennsylvania’s law of bad faith—not Alabama’s.
Alabama law unequivocally requires that “there can be no breach of an [UIM] contract,
and therefore no bad faith, until the insured proves that he is legally entitled to recover.”
LeFevre, 590 So. 2d at 158 (quoting Quick v. State Farm Mut. Auto Ins. Co., 429 So. 2d 1033,
1035 (Ala.1983)). Again, as discussed above, the Report correctly concluded that the damages
to which Defendants are legally entitled to recover were not yet determined as of October 2014
(and, the court notes, based on the pleadings, still have not been truly legally determined). (Doc.
# 28 at pp. 25-27). Even if Miller’s liability carrier (Travelers) quickly determined that Miller’s
liability as to the three passengers in his car exceeded his liability policy’s limit of $1.5 million,
that does not mean that the Halls’ total damages were then known, nor does that indicate what
portion of that $1.5 million constituted damages owed to the Halls. In fact, the portion of
damages “owed” was not determined until the July 17, 2014 mediation. (Docs. # 5 & 7 at ¶¶ 21,
23). And, the portion the mediating parties agreed to was intended to cover the then-known

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damages. (See id. at ¶¶ 18, 20; see also Doc. # 1 at ¶ 6). The Report properly recognized that
Progressive was investigating the Halls’ claims, both before and after the mediation (and even
through the start of this case), to determine what damages may be owed under the UIM policies
after Miller’s insurer paid its share. (See Doc. # 28 at pp. 26-27).
The foregoing (and other well-pleaded) facts, which show a thirteen-month period of
time between the accident and Plaintiff’s offer to tender first $500,000 and then, three-days later,
the fully policy limits, do not indicate that Plaintiff acted in bad faith (particularly where, as here,
a dispute existed as to the actual total policy limit). The LeFevre decision is squarely on point.
There, the Alabama Supreme Court found that the defendant UIM carrier did not act in bad faith
when, after a period of approximately fifteen months, the damages to which the plaintiff was
legally entitled still had not been determined, the UIM insurer offered less than the full policy
limit to settle the claim. LeFevre, 590 So. 2d at 161. The plaintiff refused that settlement offer,
and the UIM carrier offered the policy limits two months later. Id. The Alabama Supreme Court
determined that the insured failed to carry his burden of proving a lack of insurance by the
tortfeasor, the tortfeasor’s legal liability, proximate cause, and damages. Id. at 162 (citation
omitted). “There can be no breach of an insured motorist contract, and therefore no bad faith,
until the insured proves that he is legally entitled to recover [damages from the uninsured
motorist].” Id. (quoting Quick, 429 So. 2d at 1035) (bracketed portions in LeFevre). Here, just
as in LeFevre, “there was a legitimate dispute concerning the amount of damages,” and there is
“no evidence of bad faith on the part of [Progressive] in failing to tender the entire policy limits
for approximately [thirteen] months.” Id. For these reasons, the court concludes there is no error
in the Report’s findings and recommendations concerning Defendants’ bad faith counterclaim.

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4.

Defendants’ Objection Four

The court is not entirely clear as to the basis of Defendants’ fourth objection.
Apparently, it goes like this: because the Report recognizes an ambiguity in two of the three
UIM policies, the matter should be assessed by a jury. (See Doc. # 30 at pp. 16-17). Defendants
do not cite any Alabama or federal case law in support of this argument. Instead, they cite to an
Illinois appellate court opinion. (Id. (citing Johnson v. Davis, 883 N.E.2d 521, 529 (Ill. App. Ct.
2007))). Nor do Defendants specify why they read three ambiguities into the policies. (See id. at
p. 17). Cf. King, 971 F. Supp. 2d at 1205 (a judge must ‘give fresh consideration to those issues
to which specific objection has been made by a party.’”). “The fact that the parties interpret the
insurance policy differently does not make the insurance policy ambiguous.” Twin City Fire Ins.
Co. v. Alfa Mutual Ins. Co., 817 So, 2d 687, 692 (Ala. 2001) (citing Tate v. Allstate Ins. Co., 692
So.2d 822, 824 (Ala. 1997)). “[A]mbiguities or uncertainties in an insurance policy should be
resolved against the insurer.” Twin City Fire, 817 So. 2d at 692 (citation omitted). “Where the
parties disagree on whether the language in an insurance contract is ambiguous, a court should
construe language according to the meaning that a person of ordinary intelligence would
reasonably give it.” Id. (citation omitted).
The Magistrate Judge noted an ambiguity on the first page of the Declarations of the two
multiple-vehicle policies (“The policy limits shown for a vehicle may not be combined with the
limits for the same coverage on another vehicle”). (Doc. # 28 at p. 13). This ambiguity would
seem to apply to the entirety of the policies. (See Docs. # 27-1, 27-2). In other words, it is a
general disclaimer. However, the following language contained in Part III of all three policies
expressly states:
if coverage under this Part III applies to more than one covered auto, our limit of
liability under this policy will be the amount shown on the declarations page for
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coverage under this Part III multiplied by the number of covered autos listed on
this policy as covered under Part III, not to exceed three.
(Doc. # 27-1 at p. 12, Doc. # 27-2 at p. 12). This limiting language is clear and unambiguous.
See Twin City Fire, 817 So. 2d at 692 (“If an insurance policy is clear and unambiguous in its
terms, then there is no question of interpretation or construction.”) (citation omitted). No other
coverage Parts in the policies contain any similar express limits of liability. Without question,
Part III’s limitation is more specific than the general disclaimer at the start of the Declarations
page, and it is axiomatic that “[s]pecific terms and exact terms are given greater weight than
general language.” Ex parte Dan Tucker Auto Sales, Inc., 718 So. 2d 33, 36 (Ala. 1998) (quoting
Restatement (Second) of Contracts § 203(c) (1981)).
Moreover, and in any event, a reasonable policyholder of ordinary intelligence would
read the clear limiting language in Part III to mean that only three vehicles per policy may be
stacked. It is this specific language that is central to this case—not the general ambiguity
recognized in the Report.

As the Report correctly concluded, “this apparent ambiguity is

immaterial.” (Doc. # 28 at p. 14). Further, the Magistrate Judge properly construed the policies
in terms of the insured, and in favor of maximum coverage. There is no error in the Report, and
Defendants’ fourth objection is due to be overruled.
III.

Conclusion
After careful consideration of the record in this case, the Magistrate Judge’s Report and

Recommendation, and the parties’ objections thereto, the court hereby OVERRULES the
parties’ objections and ADOPTS the Report of the Magistrate Judge.

The court further

ACCEPTS the recommendations of the Magistrate Judge that Plaintiff’s motion to strike be
denied and motion for judgment on the pleadings be granted.
A separate order in accordance with the Memorandum Opinion will be entered.
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DONE and ORDERED this July 15, 2016.

_________________________________
R. DAVID PROCTOR
UNITED STATES DISTRICT JUDGE

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