State Farm Mutual Automobile Insurance Company v. McWhite
Filing
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ORDER granting 9 Motion to Dismiss for Lack of Jurisdiction, dismissing the action with prejudice. Signed by Honorable Joseph F. Anderson, Jr. on 03/28/216.(bshr, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
State Farm Mutual Automobile Insurance
Company,
C/A No. 3:15-cv-4749-JFA
Plaintiff,
vs.
ORDER
DuPont McWhite,
Defendant.
I.
Introduction
This matter is before the Court on Dupont McWhite’s (“Defendant”) motion to dismiss for
lack of subject matter jurisdiction. ECF No. 9. State Farm (“Plaintiff”) seeks a declaratory
judgment as to whether it owes Defendant, its insured driver, underinsured motorist (“UIM”)
coverage under two policies. Defendant moved to dismiss this suit on the grounds that the parties
are not diverse and that the amount in controversy has not been met. The matter has been fully
briefed, and the Court held oral argument on Monday, March 14, 2016.
II.
Factual and Procedural History
This declaratory judgment action has its factual basis in an underlying state court suit for
damages resulting from an automobile accident. There, Defendant was severely injured while
driving his Ford Ranger in Lexington County in 2012. He brought suit against the at-fault driver.
The at-fault driver’s liability policy (“at-fault policy”) paid out its limits of liability coverage in
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the amount of $25,000. Defendant alleges that his damages are in excess of that amount and seeks
UIM coverage from his own insurer, Plaintiff.
Plaintiff issued Defendant three automobile insurance policies: 1) a policy on his Ford
Ranger (“Ranger policy”) with liability limits of $25,000 and no UIM coverage; 2) a policy on his
Toyota Highlander (“Highlander policy”) with UIM coverage of $50,000; and 3) a policy on his
Toyota CRV (“CRV policy”) with UIM coverage of $50,000. At the time of the accident,
Defendant was driving his Ford Ranger without UIM coverage.
Despite the absence of UIM coverage in the Ranger policy, the language of the policy
provides that the insured can receive $25,000 of UIM coverage from one of the “at home” vehicles’
policies. Thus, pursuant to that language, Plaintiff remitted to Defendant $25,000 in UIM coverage
from the “at home” Highlander policy. This payment was made prior to the initiation of both the
state and federal litigation.
In this action, Plaintiff seeks a declaration that no UIM coverage is available under the
Ranger policy, that no stacking is permissible beyond that provided for in the policy language, and
that if the Ranger policy is reformed to include UIM coverage, recovery be limited to $25,000 per
vehicle. Defendant moved to dismiss for lack of subject matter jurisdiction claiming the amount
in controversy is not in excess of $75,000.
III.
Legal Standard
Federal courts are courts of limited jurisdiction and, as such, may only hear and decide
cases when given the authority to do so by the United States Constitution and by federal statute.
In re Bulldog Trucking, Inc., 147 F.3d 347, 352 (4th Cir. 1998).
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In a motion to dismiss pursuant to Rule 12(b)(1), the burden rests with the plaintiff to prove
that federal subject-matter jurisdiction is proper. McNutt v. Gen. Motors Acceptance Corp., 298
U.S. 178, 189 (1936); Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). “[T]he absence of
jurisdiction may be raised at any time during the case, and may be based on the court's review of
the evidence.” Lovern v. Edwards, 190 F.3d 648, 654 (4th Cir. 1999); see Gibbs v. Buck, 307 U.S.
66, 72, 59 S.Ct. 725, 83 L.Ed. 1111 (1939).
“Determining the question of subject matter jurisdiction at the outset of the litigation is
often the most efficient procedure.” Lovern, 190 F.3d at 654. The “district court may address its
lack of subject matter jurisdiction in two ways.” Id. It “may find insufficient allegations in the
pleadings, viewing the alleged facts in the light most favorable to the plaintiff, similar to an
evaluation pursuant to Rule 12(b)(6),” or, “after an evidentiary hearing, the court may weigh the
evidence in determining whether the facts support the jurisdictional allegations.” Id. (internal
citations omitted); see Adams, 697 F.2d at 1219 (same).
IV.
The Governing Law
A. Diversity Jurisdiction
Under § 1332, district courts “shall have original jurisdiction of all civil actions where the
matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is
between . . . citizens of different States.” 28 U.S.C. § 1332.
1. Complete Diversity
It is a long-settled rule that in order to invoke diversity jurisdiction, the petitioner must
show “complete diversity”—that is, that it does not share citizenship with any defendant. Doctor's
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Associates, Inc. v. Distajo, 66 F.3d 438, 445 (2d Cir. 1995) (citing C.T. Carden v. Arkoma Assocs.,
494 U.S. 185, 187 (1990)).
Although the statute does not define citizenship, courts have held that it is the individual's
domicile which is the state the individual considers her permanent home. Gambelli v. United
States, 904 F. Supp. 494, 496 (E.D. Va. 1995) aff'd, 87 F.3d 1308 (4th Cir. 1996). Further, a
corporation is deemed a citizen of every state in which it is incorporated and the state where is has
its principal place of business. 28 U.S.C. § 1332(c)(1).
2. Amount in Controversy
On a motion to dismiss an action based on diversity of citizenship for want of the requisite
jurisdictional amount, the sum claimed by the plaintiff controls if the claim appears to be made in
good faith. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938). However, if
from the face of the pleading it is apparent to a legal certainty that there could be no recovery of
the amount claimed, then the complaint will be dismissed. Id. at 289; see also 5 Charles Alan
Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 1350 (3d ed.)
(“[T]he claim is deemed to be made in good faith so long as it is not clear to a legal certainty that
the claimant could not recover a judgment exceeding the statutorily mandated jurisdictional
amount, a matter on which the party challenging the district court's jurisdiction has the burden.”).
“In actions seeking declaratory or injunctive relief, it is well established that the amount in
controversy is measured by the value of the object of the litigation.” Hunt v. Wash. State Apple
Adver. Comm'n, 432 U.S. 333, 347 (1977). Where the lawsuit seeks a declaration of no liability,
the value of the relief sought is measured by the value of the liability that would follow if liability
were found to exist. See e.g., Budget Rent–A–Car, Inc. v. Higashiguchi, 109 F.3d 1471, 1473 (9th
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Cir. 1997) (finding the maximum liability under a rental agreement is “relevant to determining the
amount in controversy only if the validity of the entire insurance policy is at issue”); Biotronik,
Inc. v. Medtronic USA, Inc., 840 F. Supp. 2d 1251, 1257 (D. Or. 2012) (same); Matsuda v. Wada,
128 F. Supp. 2d 659, 663–64 (D. Haw.2000); 14A Wright, Miller, et al, § 3708 (“with regard to
actions seeking declaratory relief, the amount in controversy is the value of the right or the liability
of the legal claim to be declared”).
In declaratory actions filed by insurers, the maximum “amount in controversy” necessary
for diversity jurisdiction is the maximum limit of the insurer's liability under the policy. State Farm
Mut. Auto. Ins. Co. v. Narvaez, 149 F.3d 1269 (10th Cir. 1998). “Generally, where an automobile
liability policy is involved in proceedings for declaratory judgment, the ‘amount in controversy’
for jurisdictional purposes is the maximum amount for which the insurer could be held liable under
the policy.” Morgan v. Liberty Mut. Ins. Co., 261 F. Supp. 709, 712 (D.S.C. 1966); see also Grange
Mut. Cas. Co. v. Safeco Ins. Co. of Am., 565 F. Supp. 2d 779, 784 (E.D. Ky. 2008) (holding that
“the policy limits should not control when the entirety of the policy is not ‘in dispute,’ but rather
only a claim on that policy.”).
B. South Carolina Automobile Insurance Law
This Court must apply South Carolina’s substantive law in resolving this diversity action.
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78–80 (1938).
In South Carolina, an insurer is obligated to offer “at the option of the insured, underinsured
motorist coverage up to the limits of the insured liability coverage.” S.C. Code Ann. § 38-77-160.
In the absence of a meaningful offer, the court will reform an automobile insurance policy to afford
coverage up to the limits of the insured's liability coverage. State Farm Mut. Auto. Ins. Co. v.
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Wannamaker, 354 S.E.2d 555 (S.C. 1987) (expressly adopting Hastings v. United Pacific Ins. Co.,
318 N.W.2d 849 (Minn.1982)).
UIM coverage follows the individual insured rather than the vehicle insured; thus, UIM
coverage, like UM, is “personal and portable.” Nationwide Mut. Ins. Co. v. Rhoden, 398 S.C. 393,
399, 728 S.E.2d 477, 480 (2012) (quoting Burgess v. Nationwide Mut. Ins. Co., 373 S.C. 37, 41,
644 S.E.2d 40, 42 (2007)).
Additionally, an insured may “stack” coverages from multiple automobile policies. See
Giles v. Whitaker, 297 S.C. 267, 268, 376 S.E.2d 278, 279 (1989). “Stacking is defined as the
insured's recovery of damages under more than one policy until all of his damages are satisfied or
the limits of all available policies are met.” Id.
However, an insured may only stack UIM coverage “from other policies in an amount
equal to the coverage on the car involved in the accident.” § 38-77-160; see generally Gambrell v.
Travelers Ins. Co.'s, 280 S.C. 69, 310 S.E.2d 814 (1983); Garris v. Cincinnati Ins. Co., 280 S.C.
149, 311 S.E.2d 723 (1984); Nationwide Mut. Ins. Co. v. Howard, 288 S.C. 5, 339 S.E.2d 501
(1985); and S. Carolina Farm Bureau Mut. Ins. Co. v. Mooneyham, 304 S.C. 442, 405 S.E.2d 396
(1991).
V.
Discussion
A.
Complete Diversity of the Parties
In this case, the parties are diverse because Plaintiff is a citizen of Illinois and Defendant
is a citizen of South Carolina.
The parties agree that Defendant is a citizen of South Carolina. However, they disagree as
to Plaintiff’s citizenship. Plaintiff properly alleges that it is a citizen of Illinois because it is both
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incorporated there and maintains its principal place of business there. ECF No. 1. Defendant
argues that because Plaintiff “owns real property, maintains numerous agents, employees, and
offices from which it conducts its business operations in the State of South Carolina” that Plaintiff
is a citizen of South Carolina. ECF No. 9.
Defendant confuses the Constitutional considerations affecting the exercise of personal
jurisdiction with the related considerations of diversity citizenship affecting the exercise of subject
matter jurisdiction. The Court has no reason to doubt the Plaintiff’s allegations concerning its state
of incorporation and the location of its principal place of business. 1
Accordingly, the Court finds the parties to be diverse.
B.
Amount in Controversy
The $75,000 amount in controversy requirement is not met in this case because there is a
legal certainty that Plaintiff’s liability is, at the most, $50,000.
1. UIM Coverage
First, the parties agree that Defendant’s Ranger policy, on its face, did not have UIM
coverage. However, that policy nonetheless entitled Defendant to $25,000 of UIM coverage from
one of his two “at home” vehicles that did have UIM coverage. Pursuant to that policy language,
Defendant received $25,000 from the Highlander policy. 2 ECF. No. 16-2.
Next, for this motion, the Court must assume that Plaintiff’s offer of UIM coverage on the
Ranger policy failed the test laid out by the South Carolina Supreme Court in Wannamaker. Hence,
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At oral argument, defense counsel essentially ceded this point.
The parties do not dispute the validity of this payment. Thus, the Court will not include the payment as part of the
“amount in controversy.” Nevertheless, the Court notes that, even if it was taken into consideration, the result would
be the same. Exactly $75,000 is still a single penny shy of the jurisdictional requirement.
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this Court would look to reform that policy to include UIM coverage to the extent of the liability
coverage on that vehicle. Here, Defendant had liability coverage at the minimum limits of $25,000.
Thus, by operation of law, Defendant would be entitled to $25,000 of UIM coverage from the
Ranger policy.
Additionally, because UIM coverage is personal and portable, Defendant could seek
damages under other policies until his damages were satisfied or the limits of the available policies
were met. Here, Plaintiff already paid and Defendant already received $25,000 under the
Highlander policy. Thus, Defendant could now look only to the CRV policy, which had UIM limits
of $50,000.
However, Defendant’s recovery under the CRV policy is limited by the amount of UIM
coverage available on the Ford Ranger – the “measuring vehicle.” Because the Court reformed the
Ranger policy to include only the minimum limits of $25,000, Defendant could only recover
$25,000 from the $50,000 CRV policy.
Therefore, under the three policies, Plaintiff’s maximum potential liability is $50,000 or
$25,000 from the reformed Ranger policy stacked with $25,000 from the CRV policy.
2. Attorney’s Fees
In its complaint, Plaintiff seeks attorney’s fees “for defending the underlying case and
prosecuting this declaratory action.” ECF No. 1.
Generally, attorney's fees are not included in the amount in controversy calculation, but
courts have created two exceptions to this rule: “(1) if the fees are provided for by contract; or (2)
if a statute mandates or allows payment of attorney's fees.” 15–102 Moore's Federal Practice, Civil
§ 102.106(6)(a); see also Francis v. Allstate Ins. Co., 709 F.3d 362 (4th Cir. 2013).
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Here, neither party suggests either a contractual obligation to pay attorney fees or a
statutory authorization providing for their collection. Further, this case is readily distinguishable
from the case cited by Plaintiff, Francis v. Allstate, supra. There, the dispute involved the scope
of the insurer’s duty to defend under Maryland law. Here, the only dispute is the extent of the
insurer’s liability under the two policies.
Accordingly, the Court will not include attorney’s fees in its calculation of the amount in
controversy.
VI.
Conclusion
Based on the aforementioned case law, the amount in controversy does not exceed the
$75,000 threshold. Rather, “the value of the object of the litigation” is $50,000 and thus, less that
the jurisdictional requirement. Accordingly, it is hereby ordered that Defendant’s Motion to
Dismiss (ECF No. 9) is GRANTED, and this action is DISMISSED.
IT IS SO ORDERED.
March 28, 2016
Columbia, South Carolina
Joseph F. Anderson, Jr.
United States District Judge
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