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Allstate Insurance Co. v. Scarbrough

United States District Court, N.D. Mississippi, Oxford Division

March 20, 2017




         This matter comes before the Court on Allstate Insurance Company's (“Allstate”) Motion for Partial Summary Judgment as to the Automobile Liability Policy of Robert and Denise Scarbrough [135]. John Robert Scarbrough (“John”) and Kimberly and Rachel Holloway (collectively “the Holloways”) have responded in opposition to the motion, to which Allstate filed a reply. Having reviewed the submissions of the parties, in addition to relevant evidence and authorities, the Court is now prepared to rule.

         I. Factual and Procedural Background

         After growing up in Georgia, John Robert Scarbrough began attending the University of Mississippi in 2006 and eventually received his degree in December 2013. On April 6, 2012, John was involved in an automobile accident in Oxford, Mississippi. At the time of the accident, John was driving his white 2004 Toyota Tundra truck, which was titled in his name. Kimberly Holloway, one of John's co-workers at Proud Larry's restaurant in Oxford, and her sister, Rachel Holloway, were passengers in the truck at the time of the accident and allegedly suffered multiple injuries.[1]

         At the time of the accident, John maintained an automobile liability policy issued by GEICO Insurance Company (“GEICO”). Moreover, John's parents, Robert and Denise Scarbrough, maintained two insurance policies with Allstate-an automobile liability policy and an umbrella policy. Both policies were undisputedly in effect at the time of the accident. Moreover, the Holloways' parents, Lewis and Starlyn Holloway, maintained a policy with State Farm Mutual Automobile Insurance Company (“State Farm”) that provided uninsured motorist coverage for both Lewis and Starlyn, along with any resident relatives.

         About a year later, on April 26, 2013, the Holloways filed an action in state court in Hinds County, Mississippi, attempting to obtain recovery for the injuries they sustained in the accident. In their complaint, the Holloways asserted negligence and gross negligence against John and negligent entrustment against Robert and Denise-his parents. The Holloways also asserted gross negligence and malicious conduct claims against GEICO and its agent, Dawn Lawson, due to GEICO's failure to provide payment to the Holloways under John's automobile liability policy. In addition, the Holloways asserted claims against State Farm for its failure to provide timely payment for their injuries under the uninsured motorist policy.

         The case was later transferred to the Circuit Court of Lafayette County, Mississippi. At some point thereafter, the Holloways became aware of the Allstate policies that had been issued to Robert and Denise. The Holloways believed that the Allstate policies provided coverage for their injuries and that Allstate had unlawfully attempted to the hide existence of the policies from them. Thus, on July 3, 2015, the Holloways filed a motion to amend their complaint to add Allstate as a defendant.

         On July 8, 2015, Allstate filed a separate action in this Court, requesting that it issue a declaratory judgment that neither of the policies issued to Robert and Denise provided coverage for the Holloways' injuries. Specifically, Allstate asserted that the policies had not been triggered because “various requirements of the policies are not met. For one, the alleged tortfeasor, John Scarbrough, was not a resident of the household of the insureds at the time of the accident.” In the amended complaint, Allstate asserts that it filed this action because “it has become evident that [Rachel and Kimberly Holloway] will seek to invoke the Allstate policies of Robert M. and Denise Scarbrough.” Allstate joined the Holloways as necessary parties to the action, asserting that their rights may be affected by the case's outcome.

         Thereafter, on July 16, 2015, the Holloways filed their amended complaint in the Lafayette County Circuit Court action adding Allstate as a defendant, seeking a declaration that the Allstate policies issued to Robert and Denise do, in fact, provide coverage for their injuries and further alleging bad faith breach of contract and fraud.

         Returning to the present action, on April 4, 2016, the Holloways filed an answer to the amended complaint, a crossclaim against John Scarbrough, a counterclaim against Allstate, and a third party complaint against GEICO, Dawn Lawson, and State Farm. These claims mirror the claims made by the Holloways in the underlying state court action, largely containing language identical to their state court complaint. On November 7, 2016, this Court issued an order denying motions to dismiss filed by Allstate and John but granting GEICO and Dawn Lawson's motions to dismiss since those parties were improperly joined in this action pursuant to Federal Rule of Civil Procedure 14. Moreover, the Court also issued an order on December 15, 2016, separating the trials for the Holloways' personal injury claims against John and the claims concerning the coverage issues associated with the Allstate policies.

         Allstate has filed two motions for partial summary judgment-one concerning the automobile liability policy and one concerning the umbrella policy. This order will address Allstate's motion as to the automobile liability policy, and the Court will consider the motion as to the umbrella policy in a separate order. The present motion has been fully briefed by the parties, and upon due consideration of the parties' arguments, in addition to relevant case law and evidence, the Court finds that the motion should be granted.

         II. Summary Judgment Standard

         Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine dispute of material fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). At the summary judgment stage, the court must “draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence.” Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). Once the moving party shows there is no genuine dispute as to any material fact, the nonmoving party “must come forward with specific facts showing a genuine factual issue for trial.” Harris ex rel. Harris v. Pontotoc Cty. Sch. Dist., 635 F.3d 685, 690 (5th Cir. 2011). “[A] party cannot defeat summary judgment with conclusory allegations, unsubstantiated assertions, or ‘only a scintilla of evidence.' ” Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007) (quoting Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)). “If the nonmoving party fails to meet this burden, the motion for summary judgment must be granted.” Little, 37 F.3d at 1075.

         III. Discussion

         As a preliminary matter, the Court notes that the contract at issue-the Allstate liability policy-contains a choice of law clause, specifically stating that “any and all claims or disputes in any way related to this policy shall be governed by the laws of Georgia.” This Court has previously recognized that when a contract contains a choice of law clause, the law of the chosen state will be applied to govern the parties' contractual rights and duties unless: “(1) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (2) applying the chosen state's law would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.” Lagrone Const., LLC v. Landmark, LLC, 40 F.Supp.3d 769, 777 (N.D. Miss. 2014) (quoting Restatement (Second) of Conflict of Laws § 187 (1971)).

         Applying this standard, the Court finds that Georgia law-the law chosen by the parties-should govern this dispute. The two policyholders, Robert and Denise, are Georgia citizens. Additionally, the parties have not identified any fundamental policy of Mississippi that the application of Georgia law would violate. In fact, none of the parties raise this issue in their arguments whatsoever. The Court will therefore apply Georgia contract law to the extent that such law is necessary in deciding this matter but notes that Georgia and Mississippi law appear to be largely similar in the areas relevant to this case.

         Under Georgia law, “[w]hen an insurance contract is deemed to be ambiguous, it will be construed liberally against the insurer and most favorably for the insured.” State Farm Mut. Auto Ins. Co. v. Staton, 685 S.E.2d 263, 265 (2009). However, the court “may not strain the construction of the policy so as to discover an ambiguity.” Id. at 265-66 (quoting Shaw v. State Farm Mut. Ins. Co., 129 S.E.2d 85 (1962)). The rule of liberal construction cannot be used to create an ambiguity where one does not exist, and “where the language fixing the extent of liability of an insurer is unambiguous and but one ...

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