GEICO Casualty Company v. Hollandsworth et al

Filing 14

ORDER denying 6 motion to dismiss for lack of jurisdiction; denying 8 motion to dismiss for lack of jurisdiction. Signed on 7/23/18 by Chief District Judge Greg Kays. (Law Clerk)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
GEICO CASUALTY COMPANY,
Plaintiff,
v.
PATRICIA HOLLANDSWORTH and
RICHARD AGUILAR,
Defendants.

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No. 4:18-CV-00197-DGK

ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS
This declaratory judgment action concerns insurance coverage related to a lawsuit filed in
the Circuit Court of Jackson County, Missouri (“Underlying Lawsuit”).1 The Underlying Lawsuit
stems from a car accident between Defendants Patricia Hollandsworth (“Hollandsworth”) and
Richard Aguilar (“Aguilar”). After Plaintiff Geico Casualty Company (“GEICO”) moved to
intervene in the Underlying Lawsuit, Aguilar voluntarily dismissed his case without prejudice.
Now before the Court are Aguilar’s and Hollandsworth’s motions to dismiss for lack of
subject matter jurisdiction (Docs. 6 and 8). Defendants argue that because the Underlying Lawsuit
was dismissed, there is no case or controversy between the parties and GEICO’s complaint is moot.
For the following reasons, the motions are DENIED.
Background
On August 25, 2017, Aguilar sued Hollandsworth in state court for damages arising out of
an auto accident. Hollandsworth sought coverage under an insurance policy issued by GEICO.
GEICO determined Hollandsworth was not covered by the policy, but offered to provide
Hollandsworth with a defense subject to a reservation of rights. In a letter sent to Hollandsworth,
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Aguilar v. Hollandsworth, No. 1716-CV20532 (Jackson Cty., Mo. Cir. Ct. dismissed Mar. 2, 2018).

GEICO stated “GEICO is providing you with a defense subject to this reservation of rights with
regard to the claims asserted by Plaintiff Richard Aguilar, in a lawsuit styled Aguilar v.
Hollandsworth, Case No. 1716-CV20532 pending in the Circuit Court of Jackson County,
Missouri.”

Hollandsworth rejected GEICO’s offer and demanded that GEICO provide an

unconditional defense.
On March 2, 2018, Hollandsworth notified GEICO that she had entered into an agreement
with Aguilar, pursuant to Mo. Rev. Stat. § 537.065, to limit Aguilar’s recovery presumably to the
limits of the GEICO policy. Upon that notice, GEICO moved to intervene in the Underlying
Lawsuit. Before the state court could rule on GEICO’s motion, Aguilar voluntarily dismissed his
case without prejudice.
Discussion
Defendants contend that because the Underlying Lawsuit was dismissed, this case is now
moot, and must be dismissed for lack of subject matter jurisdiction.
“The ripeness doctrine flows both from the Article III ‘cases’ and ‘controversies’
limitations and also from prudential considerations for refusing to exercise jurisdiction.” Pub.
Water Supply Dist. No. 10 of Cass Cnty., Mo. v. City of Peculiar, Mo., 345 F.3d 570, 572 (8th Cir.
2003). It is well settled that the ripeness inquiry requires the examination of both “the fitness of
the issues for judicial decision and the hardship to the parties of withholding court consideration.”
Id. at 572-73. A party seeking judicial relief must necessarily satisfy both prongs to at least a
minimal degree. Neb. Pub. Power Dist. v. MidAmerican Energy Co., 234 F.3d 1032, 1039 (8th
Cir. 2000).
The fitness prong requires examination of the definiteness or certainty of a claim, to
“safeguard[] against judicial review of hypothetical or speculative disagreements.” Id. at 1038.

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“Whether a case is ‘fit’ depends on whether it would benefit from further factual development.”
Pub. Water Supply, 345 F.3d at 573. “The case is more likely to be ripe if it poses a purely legal
question and is not contingent on future possibilities.” Id. An insurance coverage dispute is “fit”
for review where it presents a purely legal issue involving the interpretation of the insurance policy
and does not depend on the facts developed in the underlying liability case. See, e.g., Capitol
Indem. Corp. v. Miles, 978 F.2d 437, 438 (8th Cir. 1992) (refusing to dismiss as unripe an insurer’s
declaratory judgment action to determine indemnity coverage because insured made a demand and
the insurer contends it owes the insured no money, establishing a controversy between the parties).
The hardship prong recognizes that a party need not wait until a threatened injury actually
occurs, but requires examination of the immediacy and extent of the alleged threatened harm. Neb.
Pub. Power, 234 F.3d at 1038. “Abstract injury is not enough. It must be alleged that the plaintiff
has sustained or is immediately in danger of sustaining some direct injury as the result of the
challenged statute or official conduct.” O’Shea v. Littleton, 414 U.S. 488, 494, (1974) (internal
quotations and citations omitted).

The threatened “injury must be ‘certainly impending.’”

Paraquad, Inc. v. St. Louis Hous. Auth., 259 F.3d 956, 958–59 (8th Cir. 2001) (quoting Babbitt v.
United Farm Workers Nat’l Union, 442 U.S. 289, 298 (1979)).
GEICO argues there is a controversy between the parties because Aguilar’s case was
dismissed without prejudice, allowing him to re-file it, Hollandsworth has not withdrawn her claim
for coverage or admitted there is no coverage under the GEICO policy, Aguilar has not released
Hollandsworth or GEICO from liability, and Hollandsworth does not state she will refrain from
pursuing coverage under the GEICO policy in some other forum.

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Defendants respond that GEICO limited its offer to defend subject to a reservation of rights
only as to the Underlying Lawsuit and because that case has been dismissed, there is no
controversy between the parties.
The Court finds GEICO satisfies both the fitness and hardship prongs because its claimed
injury is not contingent on any future possibilities nor is it speculative. GEICO meets the fitness
prong because this lawsuit is purely a question of law, namely, was Hollandsworth a covered
individual under the policy. No additional factual development is necessary to decide this case.
Additionally, the Court finds GEICO’s alleged injury is impending because the dispute between
the Defendants is not resolved. Aguilar has not released Hollandsworth or GEICO from liability,
Hollandsworth has not withdrawn her claim against GEICO, nor has she stated she will not pursue
coverage under the GEICO policy. Cf. Acuity v. Exceptional Prof’ls, Inc., No. 08-3374-CV-SRED, 2010 WL 11508580, *1 (W.D. Mo. Feb. 3, 2010) (finding no case or controversy after the
underlying lawsuit was dismissed because the insureds stated they were no longer pursuing their
claims against the insurance company).
Hollandsworth’s demand for defense from GEICO in the dispute between her and Aguilar
is enough to create an actual controversy and gives GEICO the right file a declaratory judgment
action to determine whether coverage exists under the GEICO policy. See Clarendon Nat’l Ins.
Co. v. United Fire & Cas. Co., 571 F.3d 749, 752 (8th Cir. 2009) (stating demand for the insurer
to be involved in the defense of an anticipated lawsuit between injured parties is enough to create
an actual controversy); see also Aetna Cas. & Sur. Co. v. Gen. Dynamics Corp., 968 F.2d 707, 711
(8th Cir. 1992) (recognizing a live justiciable controversy over a declaratory judgment action
where an insured “made a clear demand for payment of defense and indemnity costs” against its
insurer even though “no suits had yet been filed nor any settlements reached[.]”).

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Conclusion
The motions to dismiss (Docs. 6 and 8) are denied.
IT IS SO ORDERED.
Date: July 23, 2018

/s/ Greg Kays
GREG KAYS, CHIEF JUDGE
UNITED STATES DISTRICT COURT

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