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Allstate Insurance Co. v. Simpson

United States District Court, S.D. Mississippi, Southern Division

August 24, 2018




         BEFORE THE COURT in these consolidated cases are the Motion [21] for Summary Judgment filed by Jeremy Cherry and the Motion [23] for Summary Judgment filed by Allstate Insurance Company. After consideration of the Motions, related pleadings, the record, and relevant legal authority, the Court finds that Cherry's Motion [21] should be denied and that Allstate's Motion [23] should be granted in part and denied in part. Plaintiff's bad faith claim will be dismissed with prejudice.

         I. BACKGROUND

         A. Factual background

         For purposes of resolving both Motions [21], [23] for Summary Judgment, the parties do not dispute the basic facts of this case. Michelle Simpson (“Simpson”) carried an automobile insurance policy (the “Policy”) with Allstate Insurance Company (“Allstate”), effective February 20, 2017. See Policy [1-3] at 6-45. The Policy included uninsured motorist insurance coverage for bodily injury and property damage. Id. at 7. The only vehicle listed in the Policy declarations was Simpson's 2006 Ford Taurus. Id. at 6.

         The Policy afforded coverage for an “insured person” for “bodily injury” and “property damage” when caused by accident, and when such injury or damage arose out of the ownership, maintenance, or use of an uninsured automobile. Policy [1-3] at 21, 35. The Policy defined “insured person” as, among others, the named insured or any resident relative. Id. at 36. “Bodily injury” included physical harm to the body, id. at 25, and “property damage” was defined as “damage to or destruction of the insured auto, including loss of use, and the personal property owned by an insured person which is contained in the insured auto at the time of the accident, ” id. at 36 (emphasis added). In turn, “insured auto” was defined as “any auto or utility auto you own which is described in the Policy Declarations, ” and includes for purposes of uninsured motorist coverage a “replacement auto, ”[1]an “additional auto, ”[2] a “substitute auto, ”[3] and a “non-owned auto.”[4] Id. at 25.

         Jeremy Cherry (“Cherry”) is Simpson's adult grandson. Cherry owned a GMC truck that was registered in his own name during the time period covered by the Policy. See Cherry's Mot. [21] at 2. Cherry lived with Simpson, but neither he nor his truck was identified as an additional driver or insured vehicle on the Allstate Policy. Id. Cherry did not carry separate insurance on his truck.

         On April 5, 2017, Cherry was driving his GMC truck when he was involved in an automobile collision with another motorist, Tony A. Stallworth (“Stallworth”), whom Cherry claims was uninsured at the time. Cherry made a claim upon Simpson's Allstate Policy demanding payment under the uninsured motorist provision for bodily injury to himself and property damage to his truck. According to a preliminary estimate [21-1] supplied by Cherry, his truck sustained $14, 495.61 in damage.

         For purposes of Allstate's present Motion [23], “Allstate assumes that, as Cherry alleges, Stallworth was uninsured.” Allstate's Mem. [24] at 2 n.1. Allstate does not contest that Cherry is afforded bodily injury coverage under the Policy as a resident relative of Simpson's, and the parties have resolved that claim. See Stipulation [16] at 1. What remains of the coverage dispute is the issue of whether the property damage to Cherry's truck is covered.

         The parties agree that the unambiguous language of the Policy excludes from coverage the property damage to Cherry's truck. See, e.g., Allstate's Compl. [1] at 4; Cherry's Resp. [25] at 2.[5] Cherry argues, however, that the Mississippi Uninsured Motorist Act, Mississippi Code §§ 83-11-101, et seq. (the “UM Act”), mandates coverage for such damage as a matter of law, regardless of the language contained in the Policy.

         B. Procedural history

         On June 23, 2017, Allstate filed a Complaint [1] for Declaratory Judgment against Simpson and Cherry in this Court (the “Lead Case”), Compl. [1] at 1-6, seeking a declaratory judgment that uninsured motorist property damage benefits are not recoverable under the Policy for Cherry's property damage claim, and that any bad faith, punitive damages, and/or extra-contractual damages are not legally viable in this coverage dispute. Id. at 6.

         On June 28, 2017, Cherry initiated a separate lawsuit in the Circuit Court of Jackson County, Mississippi, against both Stallworth and Allstate. See Cherry v. Stallworth, No. 1:17cv219 (the “Member Case”). The Complaint in the Member Case advanced a negligence claim against Stallworth and uninsured motorist and bad faith claims against Allstate. See Member Case Compl. [1-1] 4-13. Allstate removed that case to this Court, invoking diversity jurisdiction pursuant to 28 U.S.C. § 1332, see Member Case Notice of Removal [1] at 1, and then filed a Motion to Sever Cherry's claims against the non-diverse party Stallworth and remand the severed claims to state court, see Member Case Mot. [7] at 1. The Court granted Allstate's Motion to Sever and retained jurisdiction over Cherry's claims against Allstate in the Member Case. See Member Case Order [9] at 10.

         Upon Allstate's Motion, the Court next consolidated the Lead Case and the Member Case, which both remain pending. See Order [13] at 3. Cherry and Allstate have now filed cross Motions [21], [23] for Summary Judgment, asking the Court to resolve the question of whether there is uninsured motorist property damage coverage for Cherry's truck under the Policy and under Mississippi law. In addition, or in the alternative, Allstate seeks summary judgment on Cherry's bad faith claim.


         A. Subject-matter jurisdiction

         Allstate filed the Lead Case in this Court on the basis of diversity jurisdiction. See Allstate's Compl. [1] at 2 (citing 28 U.S.C. § 1332).[6] 28 U.S.C. § 1332(a)(1) provides that “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(a)(1). The record supports the conclusion that Allstate is a citizen of Delaware and Illinois for diversity purposes, and that Simpson and Cherry are citizens of Mississippi. The parties are therefore completely diverse.

         Allstate's Complaint [1] asserts that the amount-in-controversy exceeds $75, 000.00. Allstate's Compl. [1] at 2. While Simpson and Cherry did not file a motion to dismiss for lack of subject-matter jurisdiction, in support of its Motion [23] for Summary Judgment Allstate has supplied an e-mail from Cherry's counsel in which counsel questions whether the amount in controversy is satisfied. See EMail [23-3] at 2 (“the amount in controversy, even by the language in your pleading, is far less than $75, 000”).

         The Court has a continuing duty to examine its subject-matter jurisdiction. Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982); Warren v. United States, 874 F.2d 280, 281-82 (5th Cir. 1989). Federal courts are courts of limited jurisdiction, having subject-matter jurisdiction only over those matters specifically designated by the Constitution or Congress. Halmekangas v. State Farm Fire and Cas. Co., 603 F.3d 290, 292 (5th Cir. 2010). Courts “must presume that a suit lies outside this limited jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking the federal forum.” Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001). The party invoking the Court's jurisdiction bears the burden of establishing diversity jurisdiction. Bynane v. Bank of New York Mellon for CWMBS, Inc. Asset-Backed Certificates Series 2006-24, 866 F.3d 351, 355 (5th Cir. 2017).

         When a plaintiff insurer seeks a declaratory judgment regarding the scope of coverage afforded by an insurance policy, the amount in controversy is assessed according to the value of the right to be protected, which is the plaintiff insurer's potential liability under the policy, plus potential attorneys' fees, penalties, statutory damages, and punitive damages. Hartford Ins. Grp. v. Lou-Con Inc., 293 F.3d 908, 911-12 (5th Cir. 2002) (citing St. Paul Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998)). The potential liability under the policy is not necessarily equal to the policy limit, but is based upon what the insured actually seeks to recover. Id.

         Allstate's Complaint [1] in the Lead Case relies upon the $50, 000.00 policy limit and Cherry's bad faith and punitive damages claims to establish that the amount in controversy is satisfied. It is clear that, although Cherry's truck may have only sustained $14, 495.61 in damage, see Estimate [21-1] at 1-3, [7] Cherry's pleadings seek full policy limits from Allstate. In the Member Case, Cherry raises a “continuing demand for payment of his bodily injury and property damage claims up to the sum of the Uninsured Motorist Coverage limits set for [sic] on the Simpson declaration page.” Cherry's Compl. [1-1] at 8. In addition, Cherry seeks an award of punitive damages. Considering Cherry's Complaint [1-1] in the Member Case as the object of the Lead Case, Allstate's potential liability under the Policy, coupled with potential attorneys' fees and punitive damages, exceeds the $75, 000.00 threshold.

         Even if Allstate's potential liability for actual property damages is limited to $14, 495.61, the Court finds that the amount in controversy nevertheless exceeds $75, 000.00. An award of punitive damages in a “single digit ratio” to the $14, 495.61 in compensatory damages could easily exceed $75, 000.00. See generally, e.g., Gentiva Certified Healthcare Corp. v. Rayborn, No. 5:14-CV-97-DCB-MTP, 2016 WL 164322, at *3 (S.D.Miss. Jan. 13, 2016) (holding that the requisite $75, 000.00 jurisdictional amount compared to a potential $13, 000.00 compensatory award is less than a 6 to 1 ratio, well within the “single digit ratio” which the Supreme Court suggests complies with due process) (citing State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003)).

         Based upon the foregoing, Allstate has carried its burden of demonstrating that the amount in controversy in this particular case exceeds the sum or value of $75, 000.00, exclusive of interest and costs. See 28 U.S.C. § 1332(a). The Court finds that it has subject-matter jurisdiction pursuant to 28 U.S.C. § 1332.

         B. Summary judgment standard

         Federal Rule of Civil Procedure 56(a) provides that summary judgment is appropriate “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. Bennett v. Hartford Ins. Co. of Midwest, 890 F.3d 597, 604 (5th Cir. 2018) (quotation omitted).

         C. Interpretation of insurance policies under Mississippi law

         The parties do not dispute that Mississippi law governs the claims in this case. Mississippi courts treat the language and provisions of insurance policies as contracts, subject to the same rules of interpretation as other contracts. Pulliam v. Alfa Ins. Co., 238 So.3d 620, 627 (Miss. Ct. App. 2018) (citing Hayne v. The Doctors Co., 145 So.3d 1175, 1180 (Miss. 2014)). When a policy's language is clear and unambiguous, it must be enforced as written. Id. “Any ambiguity in the policy is construed against the insurer, and exclusions in uninsured motorist policies are strictly construed.” Boatner v. Atlanta Speciality Ins. Co., 115 F.3d 1248, 1251 (5th Cir. 1997). However, if the provisions of an uninsured motorist insurance policy conflict with Mississippi's Uninsured Motorist Act, the statutory provisions prevail and are incorporated into the policy. Dunnam v. State Farm Mut. Auto. Ins. Co., 366 So.2d 668, 670 (Miss. 1979).

         D. Mississippi's Uninsured Motorist Act

         Unless the insured rejects it in writing, an automobile liability insurance policy in Mississippi must contain

an endorsement or provisions undertaking to pay the insured all sums which he shall be legally entitled to recover as damages for bodily injury or death from the owner or operator of an uninsured motor vehicle . . . .

Miss. Code § 83-11-101(1) (emphasis added).[8] Such a policy must also contain

an endorsement or provisions undertaking to pay the insured all sums which he shall be legally entitled to recover as damages for property damage from the owner or operator of an uninsured motor vehicle . . . .

Miss. Code Ann. § 83-11-101(2) (emphasis added). “Obviously the purpose of uninsured motorist insurance is to benefit the insured by making available compensation for his property damage, bodily injuries or death.” State Farm Mut. ...

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