Miller v. Augusta Mutual Insurance , 157 F. App'x 632 ( 2005 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-2281
CHRISTINA MILLER, Administratrix of the Estate
of Travis L. Landis Hott,
Plaintiff - Appellant,
versus
AUGUSTA MUTUAL INSURANCE COMPANY,
Defendant - Appellee,
and
ROBERT M. LUTTRELL, JR.,
Defendant.
Appeal from the United States District Court for the Western
District of Virginia, at Harrisonburg. Samuel G. Wilson, District
Judge. (CA-03-052)
Argued: September 21, 2005 Decided: December 8, 2005
Before MOTZ, TRAXLER, and SHEDD, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Robert Woodrow Malone, GAMMON & GRANGE, McLean, Virginia,
for Appellant. Daniel Leroy Fitch, WHARTON, ALDHIZER & WEAVER,
P.L.C., Harrisonburg, Virginia, for Appellee. ON BRIEF: Robert B.
Adams, GAMMON & GRANGE, McLean, Virginia, for Appellant. Kristin
A. Zech, WHARTON, ALDHIZER & WEAVER, P.L.C., Harrisonburg,
Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
2
PER CURIAM:
Christina Miller’s son Travis Hott was shot and killed by his
friend Robert M. Luttrell, Jr. (“Mitch”). Miller filed this action
seeking a declaration that her wrongful death claim fell within the
scope of coverage of a homeowner’s insurance policy issued by
Augusta Mutual Insurance Company to Mitch’s parents. The district
court granted summary judgment in favor of Augusta Mutual, and
Miller appeals. For the reasons set forth below, we affirm the
decision of the district court.
I.
A.
On the night of September 14, 2001, 13-year-old Travis Hott
was spending the weekend with his best friend Mitch Luttrell, who
was then 17 years old. While the boys were watching television in
the living room, Mitch shot Travis at close range with a 9mm
pistol, killing him. Mitch’s parents were asleep in their bedroom
when the shooting occurred. The gun belonged to Mitch’s father;
Mitch had retrieved it from the gun safe earlier that evening. The
facts surrounding the shooting remain a mystery. Since the
shooting, Mitch has given different explanations, stating variously
that Travis shot himself; that Mitch accidentally sat on the gun,
which caused it to fire; and that Mitch was waving the gun around
3
and pulled the trigger without knowing that there was a bullet in
the chamber.
B.
The policy issued by Augusta Mutual requires written notice of
a potential claim to be made as soon as practical. The policy also
includes a cooperation clause that requires insureds to “secure and
give evidence.” J.A. 472.
On November 19, the attorney representing Miller notified the
insurance company that a wrongful death action would be filed.
Prior to that notice, Augusta Mutual (through its agent) had at
least some knowledge of the incident. Mrs. Luttrell, Mitch’s
mother, spoke to her insurance agent about the incident a few days
after it occurred, inquiring generally about the possibility of
coverage, but not giving the agent any details about the shooting.
And about ten days after the shooting, Miller personally visited
the insurance agent and spoke about the shooting, although Miller
at that time did not mention a lawsuit.
Over the next two months, Augusta Mutual made repeated efforts
to get a statement from Mitch and advised him and his parents of
their duties under the policy to cooperate with Augusta Mutual’s
investigation. By this time, however, it was clear that charges
would be filed against Mitch, and Mitch’s criminal attorneys
informed Augusta Mutual that they would not permit Mitch to make
4
any statements about the shooting while the criminal charges were
pending. A preliminary hearing on Mitch’s criminal charges was
held in December 2001. The state court found probable cause to
charge Luttrell with second-degree murder and use of a firearm in
the commission of a felony. In January 2002, a grand jury formally
indicted Mitch on those charges. Shortly after Mitch was indicted,
Miller filed in state court a wrongful death action against Mitch
and his father.
On January 21, 2002, Mitch and his parents gave statements
under oath as part of Augusta Mutual’s investigation of the
shooting. Mitch, who was accompanied by his criminal attorney,
refused to answer any questions about the shooting, asserting his
Fifth Amendment rights as his attorney advised him to do. Given
Mitch’s refusal to provide any statements to Augusta Mutual, the
company concluded that he breached his duty to cooperate. Augusta
Mutual thus declined to defend Mitch in Miller’s wrongful death
action.1 Mitch pleaded guilty to involuntary manslaughter in
September 2002 and was sentenced to 10 years imprisonment.
In October 2002, Miller voluntarily dismissed her state-court
wrongful death action. A week later, she filed in federal district
court (based on diversity of citizenship) another wrongful death
action against Mitch and his father. Augusta Mutual defended Mr.
1
The company did, however, provide a defense to Mr. Luttrell,
Mitch’s father, with regard to the wrongful death suit.
5
Luttrell, but still refused to defend Mitch. Mitch defaulted, and
on June 17, 2003, the district court granted judgment in favor of
Miller on the issue of Mitch’s liability for Travis’s death. The
court did not at that time consider the question of the damages to
which Miller might be entitled.
Shortly after the entry of default against Mitch, Miller filed
this action against Augusta Mutual, seeking a determination of her
rights under the Luttrells’ homeowners policy. Augusta Mutual
moved for summary judgment. In that motion, Augusta Mutual argued,
among other things, that the complaint should be dismissed for
failure to join the Luttrells, who Augusta Mutual contended were
indispensable parties. At a hearing on the pending motions, Miller
argued that, as a third-party beneficiary of the insurance policy,
she stood in Mitch’s shoes as to the coverage question and that he
was not a necessary party. After a discussion in chambers with the
district court, the parties agreed that Mitch would be joined as a
defendant. Miller amended her complaint and added Mitch as a
defendant.
Several months later, before ruling on Augusta Mutual’s still-
pending motion for summary judgment, the district court informed
the parties that it believed Mitch should be re-aligned as a
plaintiff, since his interests were adverse to Augusta Mutual and,
at least as to the basic question of whether there should be
coverage, consistent with Miller’s interests. However, because
6
Augusta Mutual was for purposes of diversity jurisdiction a citizen
of Virginia, aligning Mitch (also a Virginia resident) as a
plaintiff would destroy diversity jurisdiction. The court informed
the attorneys that if Mitch remained a party to the case, the court
would re-align him as a plaintiff and then dismiss the case for
lack of subject matter jurisdiction. Alternatively, if the parties
agreed, the court would dismiss Mitch from the action, retain
jurisdiction, and issue its ruling. The parties agreed to the
dismissal of Mitch from the action.
Thereafter, the district court ruled on Augusta Mutual’s
pending summary judgment motion. The court concluded that Mitch
breached his duty to cooperate by asserting his Fifth Amendment
rights and declining to give a statement to Augusta Mutual. The
court therefore concluded that the Augusta Mutual policy was void
as to Mitch and that Augusta Mutual had no obligation to defend
Mitch against Miller’s wrongful death claim or pay any judgment
that might ultimately be entered against him. This appeal
followed.
II.
On appeal, Miller contends that once the district court
dismissed Mitch as a defendant, she lacked standing to maintain
this declaratory judgment action, because Virginia law requires a
judgment to first be entered against the insured before a third
7
party can bring an action directly against the tortfeasor’s
insurer. Thus, Miller contends that the district court lacked
subject matter jurisdiction over her claim. On the merits of the
coverage question, she claims that the district court erred by
granting summary judgment in favor of Augusta Mutual.
III.
We consider first Miller’s claim that she lacked standing to
maintain the declaratory judgment action and that the district
court therefore lacked subject matter jurisdiction over her claim.
The Constitution limits federal court jurisdiction to cases
and controversies. See U.S. Const. art. III, § 2. The concept of
standing--which requires that the plaintiff have a sufficiently
personal stake in the outcome of the litigation--forms an
indispensable part of the Article III case-or-controversy
requirement. See Simon v. Eastern Kentucky Welfare Rights Org.,
426 U.S. 26, 38 (1976); White Tail Park, Inc. v. Stroube, 413 F.3d
451, 458 (4th Cir. 2005).2
Miller’s argument that she lacks standing is based on certain
aspects of Virginia law. Under Virginia law, direct actions by an
2
There is another branch of the standing doctrine--prudential
standing--that springs not from the Article III case-or-controversy
requirement but instead “embodies judicially self-imposed limits on
the exercise of federal jurisdiction.” Elk Grove Unified Sch.
Dist. v. Newdow, 542 U.S. 1, ___, 124 S. Ct. 2301, 2308 (2004)
(internal quotation marks omitted). In this case we are concerned
only with Article III standing requirements.
8
injured third-party against an insurer are not permitted until a
judgment has been entered against the insured tortfeasor. See
United Servs. Auto. Ass’n v. Nationwide Mutual Ins. Co., 241 S.E.2d
784, 788 (Va. 1978). Miller contends that by virtue of these
Virginia requirements, she lacked standing to maintain the
declaratory judgment action, because no final judgment had been
entered against Mitch when she commenced this action.3 Miller
contends that Mitch was a necessary and indispensable party from
the beginning, that his addition to the action cured the standing
problem because as an insured Mitch clearly had standing to ask for
a declaration of Augusta Mutual’s obligations, and that Mitch’s
subsequent dismissal from the action re-instated the previously
unrecognized standing problem.4
3
As mentioned previously, Mitch defaulted in the federal
wrongful death action. The district court entered an order holding
Mitch liable for Travis’s death, but, by the time the notice of
appeal in this case was filed, the court had not yet entered an
order awarding damages. The district court’s docket indicates that
the court has since entered an order awarding Miller damages in
excess of $250,000.
4
Miller and Augusta Mutual acquiesced in the district court’s
decision to dismiss Mitch, and Miller never argued below that she
lacked standing to maintain the declaratory judgment action.
Nonetheless, because standing implicates the subject-matter
jurisdiction of federal courts, we are obligated to ensure that the
constitutional standing requirements have been satisfied, whether
or not the issue has been timely raised by the parties. See
Juidice v. Vail, 430 U.S. 327, 331 (1977) (“Although raised by
neither of the parties, we are first obliged to examine the
standing of appellees, as a matter of the case-or-controversy
requirement associated with Art. III. . . .”).
9
Preliminarily, we note that whether a plaintiff in federal
court has standing to maintain an action is a question of federal,
not state law. See Phillips Petrol. Co. v. Shutts, 472 U.S. 797,
804 (1985) (“Standing to sue in any Article III court is, of
course, a federal question which does not depend on the party’s
prior standing in state court.”); White v. National Union Fire Ins.
Co., 913 F.2d 165, 167 (4th Cir. 1990) (“Federal standards guide
the inquiry as to the propriety of declaratory relief in federal
courts, even when the case is under the court’s diversity
jurisdiction.”). Thus, even if Virginia courts would conclude that
Miller lacked standing to pursue a declaratory judgment action
against Augusta Mutual,5 it does not follow from that conclusion
that Miller lacks standing to pursue a declaratory judgment action
in federal court. Whether Miller has standing to maintain this
declaratory judgment action is a question that must be resolved
under well-established principles of federal law.
A declaratory judgment may be issued only if the Article III
case-or-controversy requirements are satisfied. See 28 U.S.C.A. §
5It is not even clear that Virginia courts would conclude that
Miller lacked standing to maintain a declaratory judgment action in
state court. While Virginia law prohibits third-parties from
bringing direct actions against an insurer before judgment has been
entered, the Virginia Supreme Court has permitted (albeit without
discussion of the standing question) an injured party to bring a
declaratory judgment action against the tortfeasor’s insurer before
obtaining a judgment against the tortfeasor. See Craig v. Dye, 526
S.E.2d 9, 10 (Va. 2000); USAA Cas. Ins. Co. v. Hensley, 465 S.E.2d
791, 793 (Va. 1996); Providence Washington Ins. Co. v. Gheen, 439
S.E.2d 333, 333 (Va. 1994).
10
2201(a) (West 1994) (stating that “[i]n a case of actual
controversy within its jurisdiction,” a federal court “may declare
the rights and other legal relations of any interested party
seeking such declaration”); Aetna Life Ins. Co. v. Haworth, 300
U.S. 227, 241 (1937) (explaining that the “actual controversy”
requirement is synonymous with the Article III requirements).
“Although declaratory judgments are frequently sought in advance of
the full harm expected, they must still present a justiciable
controversy rather than abstract, hypothetical or contingent
questions.” St. Thomas-St. John Hotel & Tourism Ass’n v. United
States Virgin Islands, 218 F.3d 232, 240 (3d Cir. 2000) (internal
quotation marks omitted)).
Whether the subject of a declaratory judgment action is a
sufficiently live controversy rather than an abstract question “is
necessarily one of degree, and it would be difficult, if it would
be possible, to fashion a precise test for determining in every
case whether there is such a controversy.” Maryland Cas. Co. v.
Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941). “Basically, the
question in each case is whether the facts alleged, under all the
circumstances, show that there is a substantial controversy,
between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory
judgment.” Id.; see White, 913 F.2d at 167 (“The test for a case
or controversy, the constitutional inquiry, is whether the dispute
11
is definite and concrete, touching the legal relations of parties
having adverse legal interests.” (internal quotation marks
omitted)).
We believe these requirements are easily met in this case.
When Miller commenced this action, the district court in her
wrongful death case had already entered against Mitch a default
judgment on liability. Thus, while there was at the time of filing
a question about the extent of damages that would be awarded, there
was no doubt that some amount of damages would be awarded. The
certainty of a damage award against one of Augusta Mutual’s
insureds thus makes the coverage question definite and concrete.
Miller and Augusta Mutual clearly have adverse legal interests, and
a ruling that Augusta Mutual would or would not be required to
answer for the damages that would be assessed against Mitch would
resolve a real, concrete question based on existing facts.
Accordingly, we conclude that, as a matter of federal law, Miller
had standing in her own right to pursue her declaratory judgment
action against Augusta Mutual, without regard to whether Mitch was
a party to the action. See Maryland Casualty Co., 312 U.S. at 274(in case where insurance company brought declaratory judgment
action against its insured and third-party injured by its insured,
Court concluded that an actual controversy existed between the
insurance company and the injured third-party); American States
Ins. Co. v. Bailey, 133 F.3d 363, 368 (5th Cir. 1998) (in case
12
where insurer brought declaratory judgment action against its
insured and the parties injured by the insureds, court concluded
that there was a case or controversy even though injured parties’
claims against insured had not been reduced to judgment); Federal
Kemper Ins. Co. v. Rauscher, 807 F.2d 345, 353 (3d Cir. 1986)
(concluding that entry of default against tortfeasor in insurer’s
declaratory judgment action against tortfeasor and injured parties
did not require entry of judgment against injured parties, because
they had “standing to defend the declaratory judgment action
despite the absence of . . . the actual insured”); Vermont Mut.
Ins. Co. v. Everette, 875 F. Supp. 1181, 1186 (E.D. Va. 1995)
(applying Virginia law and concluding that actual controversy for
purposes of Declaratory Judgment Act existed between insurer and
injured third party despite entry of default judgment against
insured tortfeasors). Because Miller had standing to bring this
action, the district court had subject matter jurisdiction over her
claim.
IV.
We turn now to Miller’s challenges to the district court’s
rulings on the merits of her claim. The district court concluded
that by asserting his Fifth Amendment rights and refusing to
provide a statement to Augusta Mutual, Mitch breached his duty
under the policy to cooperate with Augusta Mutual’s investigation
13
of Miller’s claim. The district court thus granted summary
judgment in favor of Augusta Mutual. We review the district
court’s grant of summary judgment de novo, applying the same
standards as the district court. See Gallagher v. Reliance Std.
Life Ins. Co., 305 F.3d 264, 268 (4th Cir. 2002).
Under Virginia law, a duty-to-cooperate clause creates a
condition precedent to an insurer’s liability under the policy. A
material breach of the duty to cooperate relieves the insurer of
its liability under the policy, even if the insurer is not
prejudiced by the lack of cooperation. See Cooper v. Employers
Mut. Liability Ins. Co., 103 S.E.2d 210, 214 (Va. 1958). As the
district court concluded, Mitch breached his duty to cooperate when
he asserted his Fifth Amendment rights and declined to give a
statement. See Powell v United States Fidelity & Guaranty Co., 88
F.3d 271, 274 (4th Cir. 1996) (applying Virginia law and concluding
that insureds’ assertion of Fifth Amendment rights amounted to
breach of obligation to cooperate with insurer: “[T]hey may avoid
incriminating themselves by refusing to submit to relevant requests
made by USF&G under the policy provision, although to do so may
ultimately cost them insurance coverage. . . .”). Because Mitch
was the only other person in the room when Travis was shot, his
refusal to give a statement is clearly a material breach of his
duty to cooperate.
14
Miller does not directly dispute this analysis. That is, she
does not argue that an insured’s assertion of his Fifth Amendment
rights should not be viewed as a breach of the duty to cooperate.6
Instead, Miller makes various tangential arguments that she
believes undermine the district court’s ruling and render the
granting of summary judgment premature.
A.
Miller first contends that there is a question of fact as to
when Augusta Mutual received notice of the claim. Miller claims
that Augusta Mutual, through the agent that sold the Luttrells the
policy, knew about the shooting within a few days after it happened
6
Miller does, however, argue that Augusta Mutual failed to
prove that Mitch breached his duty of cooperation. Under Virginia
law, the insurer carries the ultimate burden of proving that the
insured breached his duty of cooperation. See Erie Ins. Exchange
v. Meeks, 288 S.E.2d 454, 456 (Va. 1982). Once Mitch asserted his
Fifth Amendment rights during the statement under oath, counsel for
Augusta Mutual clarified that Mitch was refusing to answer any
questions about the shooting, and the questioning ended. Miller
apparently believes that to prove a refusal to cooperate, Augusta
Mutual was required to ask a series of specific questions about
what happened the night of the shooting. See Brief of Appellant at
26 (“As [Augusta Mutual] has the burden of proving its insured’s
non-cooperation it cannot, as a matter of law, carry that burden
without a record of the information that it was trying to obtain.
All that this record shows is that the insured answered every
question that he was asked.”). This argument is without merit.
Mitch made it clear that he would not answer any questions about
the shooting, and the blanket invocation of his Fifth Amendment
rights sufficiently establishes his failure to cooperate.
15
but yet waited two months to begin investigating the case.7 Miller
contends that Augusta Mutual’s failure to immediately investigate
the claim makes Mitch’s subsequent breach of the policy
meaningless. See Continental Cas. Co. v. Burton, 795 F.2d 1187,
1193-94 (4th Cir. 1986) (stating that under Virginia law, “to
establish that the insured has breached a cooperation clause . . .,
the insurer must prove that the insured willfully breached the
clause in a material or essential particular and that the insurer
made a reasonable effort to secure the insured’s cooperation.”
(emphasis added)).
We disagree. Even assuming that the oral notices given by
Miller and Mrs. Luttrell to the insurance agent were sufficient,
the record establishes that Augusta Mutual made repeated
(unsuccessful) efforts to get information about the shooting from
the Luttrells. Even if, as Miller asserts, Augusta Mutual took no
action for two months after receiving oral notice of the incident,
we believe that Augusta Mutual’s efforts at investigating the
incident were reasonable as a matter of law. Miller’s assertion
7
As noted previously, Mrs. Luttrell spoke to her insurance
agent about the shooting a few days after it occurred, inquiring
generally about the possibility of coverage, but not giving the
agent any details about the shooting. And about ten days after the
shooting, Miller visited the insurance agent and spoke about the
shooting, although Miller at that time did not mention a lawsuit.
The shooting happened on September 14, 2001; Augusta Mutual began
formally investigating the incident on November 19, 2001, when
Miller’s attorney informed the company that a wrongful death action
would be filed.
16
that Augusta Mutual could have convinced Mitch to explain what
happened if the company had tried to interview him immediately
after the shooting (when he was giving conflicting statements to
the police) is sheer speculation that is insufficient to create a
genuine issue of material fact on this issue.
B.
Miller also contends that the policy did not require Mitch to
give a statement under oath, and that his assertion of his Fifth
Amendment rights therefore did not breach the policy. We disagree.
Although one section of the Augusta Mutual policy specifically
requires the insured to provide statements under oath when
requested, the liability section of the policy includes no such
requirement. That the liability section did not require a
statement under oath, however, does not mean that the Luttrells
could refuse to give such a statement if the company asked. The
liability section of the policy requires the insureds to “secure
and give evidence,” a requirement that is broad enough to require
the Luttrells to submit to an examination under oath if that is how
Augusta Mutual chose to proceed. Thus, even if the policy did not
require a statement under oath, Mitch’s refusal to give any
statement at all violated his obligation to “give evidence.” Cf.
MetLife Auto. & Home v. Cunningham, 797 N.E.2d 18, 22 (Mass. Ct.
App. 2003) (“The Belands first claim that the policy did not
17
require an examination under oath and, consequently, that
Cunningham’s assertion of his Fifth Amendment rights during the
course of the examination was of no consequence. That is simply a
non sequitur. Cunningham did not object to providing information
under oath; he more broadly objected to providing any information
in any form. The fact that he executed that objection during an
examination under oath was a mere happenstance.”).
C.
Miller also contends that Augusta Mutual breached its duty to
defend Mitch because it did not provide a separate attorney for him
when he was brought in to give a statement under oath. According
to Miller, this breach by Augusta Mutual rendered irrelevant
Mitch’s subsequent breach of his duty to cooperate. Again we
disagree. Through the policy, Augusta Mutual had a contractual
duty to defend the Luttrells, including Mitch, against claims by
third parties. The statement under oath, however, was part of
Augusta Mutual’s internal investigation of the incident, and
Augusta Mutual had no contractual obligation to provide Mitch with
an attorney in connection with the company’s own investigation of
the shooting. Augusta Mutual’s duty to defend thus was not
triggered by the taking of the statement under oath.
18
D.
Finally, Miller argues that Augusta Mutual was obligated to
inform Mitch when he gave his statement that the assertion of his
Fifth Amendment rights would relieve Augusta Mutual of its duty to
indemnify or defend him. Miller does not contend that any policy
provision required Augusta Mutual to inform Mitch of the
contractual consequences of his impending breach of contract, nor
does she point to any Virginia law that imposes such a requirement.
Instead, she contends that the requirement is simply a “matter of
good conscience, fair dealing, public policy, and pure equity.”
Brief of Appellant at 28.
It is not the place of a federal court sitting in diversity to
create new law based on our view, or a litigant’s view, of the
commands of good conscience or fair dealing. Instead, our role is
to apply the governing state law, or, if necessary, predict how the
state’s highest court would rule on an unsettled issue. See, e.g.,
Private Mortgage Inv. Servs., Inc. v. Hotel & Club Assocs., Inc.,
296 F.3d 308, 312 (4th Cir. 2002). Given the absence of any
authority for Miller’s argument either in the language of the
policy or the requirements of Virginia law, we reject her claim
that Augusta Mutual was required to inform Mitch about the
consequences of asserting his Fifth Amendment rights.8
8
In any event, we note that Augusta Mutual consistently
reminded the Luttrells of their duty to cooperate, see J.A. 432,
434, and that shortly before the statements-under-oath were taken,
19
V.
To summarize, we conclude that Miller had standing in her own
right to maintain this declaratory judgment action against Augusta
Mutual. The district court’s decision to dismiss Mitch from the
action therefore did not deprive the court of subject matter
jurisdiction over Miller’s declaratory judgment claim. On the
merits of Miller’s claim, we agree with the district court that
Mitch breached his duty of cooperation and that Augusta Mutual was
therefore relieved of its duties under the policy.
Accordingly, the district court’s order granting summary
judgment in favor of Augusta Mutual is affirmed.
AFFIRMED
Augusta Mutual specifically advised Mitch and his parents of the
consequences of a failure to cooperate. See J.A. 416-17.
20