McHone et al v. Diamond S Express Inc et al
ORDER granting 55 Defendant's Motion for Summary Judgment. Plaintiff's 60 Counter-Motion is denied. Plaintiff's are directed to file a status report on or before April 18, 2014 advising the Court as to which, if any, claims are remaining in the case. Signed by Judge James M. Moody Jr. on 4/14/2014. (jak)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
CHRISTIE MCHONE and
DIAMOND S EXPRESS, INC., et al
STATE FARM MUTUAL AUTOMOBILE
On December 15, 2008, Plaintiff Christie McHone and Jessie Whirley were involved in a
motor vehicle accident on Interstate 40 in West Memphis, Arkansas. McHone was driving a
2000 Pontiac Grand Prix and Whirley was driving a 1999 International Harvester diesel tractortrailer. Plaintiff Orande Anderson was a passenger in McHone’s vehicle at the time of the
McHone, a Tennessee resident, owned the Grand Prix she was driving. The vehicle was
insured by Defendant State Farm Mutual Automobile Insurance Company (“State Farm”). The
State Farm policy included coverage for uninsured motor vehicles with bodily injury limits of
$100,000 for each person. The truck which Whirley was driving was owned by Diamond S.
Express, Inc. and insured by Gramercy Insurance Company (“Gramercy”) with a limit of
$1,000,000. Whirley, a resident of Mississippi, was found to be at fault in the accident. Mr.
Whirley died four days after the accident. Ms. McHone sustained permanent bodily injury from
On December 7, 2011, Plaintiffs filed suit against Defendants Diamond S. Express, Inc.,
M.C. Mauney, individually and in his capacity as sole shareholder, officer and director of
Diamond S. Express, Inc., Thomas A. Young, as Special Administrator for the Estate of Jessie
D. Whirley, Deceased, and John Does 1, 2, and 3 in the Circuit Court of Crittenden County,
Arkansas (the “McHone case”). The Defendants removed the McHone case to this Court on
January 10, 2012 based upon diversity of citizenship, 28 U.S.C. § 1332.
On December 4, 2012, a delinquency proceeding was initiated by the Texas Insurance
Commission against Gramercy Insurance Company. Upon commencement of these proceedings,
the District Court of Travis County, Texas, enjoined Gramercy from engaging in future
insurance related activities, appointed a rehabilitator, seized all assets of Gramercy, enjoined
claimants from pursuing or enforcing claims or judgments and authorized the rehabilitator to
disregard obligations contained in insurance policies issued by Gramercy. (Order of Court, ECF
No. 56 at p. 36). A stay was ordered in the McHone case on December 19, 2012.
On March 4, 2013, Ms. McHone’s counsel notified State Farm of the potential for an
uninsured motorist claim. McHone’s counsel also notified State Farm of a tentative settlement
agreement between McHone and Anderson and the Gramercy rehabilitator on behalf of the
Gramercy insureds. State Farm consented to allow Plaintiffs to proceed with their settlement.
McHone and Anderson settled with, and released, all Gramercy insureds on March 7, 2013 for
the sum of $300,000.
On March 14, 2013, State Farm notified McHone that no uninsured motorist benefit was
payable as a result of the loss. Plaintiffs subsequently amended their Complaint to add State
Farm as a defendant. State Farm filed a counterclaim against and a motion for summary
judgment of all claims against it.
Standard for Summary Judgment
Summary judgment is appropriate only when there is no genuine issue of material fact, so
that the dispute may be decided solely on legal grounds. Holloway v. Lockhart, 813 F.2d 874
(8th Cir. 1987); Fed. R. Civ. P. 56. The Supreme Court has established guidelines to assist trial
courts in determining whether this standard has been met:
The inquiry is the threshold inquiry of determining whether there
is a need for trial -- whether, in other words, there are genuine
factual issues that properly can be resolved only by a finder of fact
because they may reasonably be resolved in favor of either party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
The Eighth Circuit Court of Appeals has cautioned that summary judgment should be
invoked carefully so that no person will be improperly deprived of a trial of disputed factual
issues. Inland Oil & Transport Co. v. United States, 600 F.2d 725 (8th Cir. 1979), cert. denied,
444 U.S. 991 (1979). The Eighth Circuit set out the burden of the parties in connection with a
summary judgment motion in Counts v. M.K. Ferguson Co., 862 F.2d 1338 (8th Cir. 1988):
[T]he burden on the moving party for summary judgment is only to
demonstrate, i.e., ‘[to] point out to the District Court,’ that the
record does not disclose a genuine dispute on a material fact. It is
enough for the movant to bring up the fact that the record does not
contain such an issue and to identify that part of the record which
bears out his assertion. Once this is done, his burden is
discharged, and, if the record in fact bears out the claim that no
genuine dispute exists on any material fact, it is then the
respondent’s burden to set forth affirmative evidence, specific
facts, showing that there is a genuine dispute on that issue. If the
respondent fails to carry that burden, summary judgment should be
Id. at 1339. (quoting City of Mt. Pleasant v. Associated Elec. Coop., 838 F.2d 268, 273-274 (8th
Cir. 1988) (citations omitted)(brackets in original)). Only disputes over facts that may affect the
outcome of the suit under governing law will properly preclude the entry of summary judgment.
Anderson, 477 U.S. at 248.
Discussion of the Law
In this case, the Court must apply the choice-of-law rules of Arkansas. U.S. Fire
Insurance Company v. Kresser Motor Service, Inc., 26 F.3d 91, 94 (8th Cir. 1994). In Arkansas,
“[c]hoice-of-law questions regarding insurance coverage have traditionally been resolved by
applying the law of the state where the insurance contract was made (the lex loci contractus
rule).” Southern Farm Bureau Cas. Ins. Co. v. Craven, 89 S.W.3d 369, 372 (Ark. App. 2002)
(citing Robert A. Leflar, Luther McDougal, & Robert Felix, American Conflicts Law § 153 (4th
ed.1986); Restatement (Second) Conflict of Laws § 193 (1971); John Hancock Mut. Life Ins.
Co. v. Ramey, 140 S.W.2d 701 (Ark. 1940) (holding that the rights and liabilities of the parties to
an insurance contract should be determined with regard to the law of the state where the contract
was made)). Arkansas courts may also consider the significant contacts test in determining
choice of law questions. “The contacts to be taken into account include (1) the place of
contracting; (2) the place of negotiation of the contract; (3) the place of performance; (4) the
location of the subject matter of the contract; and (5) the domicile, residence, nationality, place
of incorporation and place of business of the parties.” Craven, 89 S.W.3d at 372 (citing
Restatement (Second) Conflict of Laws § 188 (1971)). McHone’s auto insurance contract was
made, negotiated, and performed in Tennessee and McHone was also a resident of Tennessee.
Pursuant to either test, the Court finds that the law of Tennessee is applicable to this case.
At issue is whether Plaintiff Christie McHone is entitled to recover uninsured motorist
benefits in the amount of $100,000 from State Farm pursuant to her insurance policy. Under the
policy, uninsured motor vehicle coverage applies if at the time of an accident the “insuring
company is or becomes insolvent.” (Policy, ECF No. 43-1 at p. 16). Plaintiff claims that
Gramercy was insolvent and the Gramercy policy ceased to exist on December 4, 2012 upon
commencement of receivership. Therefore, Plaintiff claims she was entitled to uninsured
motorist coverage on that date.
The Court finds it unnecessary to determine when Gramercy became insolvent for
purposes of the insurance policy. Based upon the application of Tennessee’s uninsured motorist
statutes, even if Gramercy was insolvent on December 4, 2012 and State Farm is liable to
McHone for $100,000 in uninsured motorist benefits, State Farm is entitled to a credit for the
settlement proceeds which McHone received from Gramercy’s receiver on behalf of Gramercy
and its insureds. See Tenn. Code Ann. § 56-7-1201 et seq; Green v Johnson, 249 S.W.3d 313
(Tenn. 2008) (holding that settlement proceeds may be offset against the limits of an uninsured
motorist policy); Poper v. Rollins, 90 S.W.3d 682 (Tenn. 2002) (same); Lowe v. State Farm Mutl
Ins. Co., 463 F.Appx. 408 (5th Cir. 2012) (Under Tennessee statute, insured could not recover
from uninsured motorist insurer where settlement proceeds from tortfeasor exceeded policy
limits). In other words, State Farm is entitled to a credit of $300,000 based upon McHone’s
settlement which exceeds the $100,000 uninsured motorist policy limits of her insurance policy.
Therefore, State Farm is not liable to Plaintiff McHone.
For this reason, Defendant’s Motion for Summary Judgment (ECF No. 55) is
GRANTED. Plaintiff’s Counter-Motion for Summary Judgment (ECF No. 60) is DENIED.
Plaintiffs are directed to file a status report on or before April 18, 2014 advising the Court as to
which, if any, claims are remaining in the case.
IT IS SO ORDERED this 14th day of April, 2014.
James M. Moody Jr.
United States District Judge
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