Clark, Merry v. State Farm Mutual ( 2007 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-4596
MERRY CLARK, on behalf of
and as next friend of A.C., Minor,
and S.C., Minor,
Plaintiff-Appellant,
v.
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 05 C 822—John Daniel Tinder, Judge.
____________
ARGUED SEPTEMBER 19, 2006—DECIDED JANUARY 8, 2007
____________
Before RIPPLE, MANION, and WOOD, Circuit Judges.
MANION, Circuit Judge. Merry Clark, on behalf of her two
minor children A.C. and S.C., sued State Farm Mutual
Auto Insurance Company (“State Farm”), alleging that
State Farm breached the terms of its insurance policy’s
underinsured motor vehicle (“UIM”) provision when it
denied the Clark children’s UIM claims. The district
court concluded that the driver of the automobile that
2 No. 05-4596
injured the Clark children was not operating an under-
insured motor vehicle as defined by Indiana’s under-
insured motorist statute. Accordingly, the district court
held that the Clark children were not entitled to recovery
under the terms of the policy’s UIM provision and
granted summary judgment in favor of State Farm. The
Clark children appealed. We affirm.
I.
Merry Clark, her then husband, Robert Clark, and their
minor children, A.C. and S.C. (collectively “the Clarks”),
were involved in a motor vehicle collision in Crawfords-
ville, Indiana. All of the Clarks sustained injuries as a
result of the collision. At the time of the collision, the
Clarks were operating an automobile owned by Jerald
and Martha Day, which was insured under a liability
policy issued by State Farm. The driver of the other
vehicle involved in the collision, Billy Akers, allegedly
caused the collision due to his negligence. Akers died from
the injuries he sustained in the collision. He was insured
under a liability policy issued by American Family Mutual
Insurance Company (“American Family”).
Akers’ American Family policy contained liability limits
of $100,000 per person and $300,000 per accident. American
Family settled Merry and Robert Clark’s claims against
it for a payment of $100,000 each, leaving $100,000 of the
policy’s per accident limit remaining to resolve A.C.’s and
S.C.’s (collectively “the Clark children”) claims. Merry
Clark accepted on behalf of the Clark children, and with
State Farm’s consent entered into a settlement for the
remainder of Akers’ American Family per-accident policy
limit. Pursuant to the final settlement, A.C. received
$75,000 and S.C. received $25,000.
No. 05-4596 3
Following the final settlement with American Family,
Merry Clark submitted a claim to State Farm on behalf
of the Clark children for UIM benefits under the Days’
State Farm policy. The UIM coverage in the Days’ State
Farm policy states:
We will pay damages for bodily injury an insured is
legally entitled to collect from the owner or driver of an
underinsured motor vehicle. Bodily injury must be
sustained by an insured and caused by an accident
arising out of the operation, maintenance or use of an
underinsured motor vehicle.
(Policy at 13.) The Limits of Liability provision of State
Farm policy’s UIM coverage provides:
1. The amount of coverage is shown on the declara-
tions page under “Limits of Liability—W—Each
Person, Each Accident.” Under “Each Person” is
the amount of coverage for all damages due to
bodily injury to one person. “Bodily injury to one
person” includes all injury and damages to others
resulting from this bodily injury. Under “Each
Accident” is the total amount of coverage, sub-
ject to the amount shown under “Each Person,” for
all damages due to bodily injury to two or more
persons in the same accident.
...
5. The most we pay any one insured is the lesser of:
a. the difference between the “each person”
limit of this coverage and the amount paid to
the insured by or for any person or organiza-
tion who is or may be held legally liable for
the bodily injury; or
4 No. 05-4596
b. the difference between the amount of the
insured’s damages for bodily injury and the
amount paid to the insured by or for any per-
son or organization who is or may be held
legally liable for the bodily injury.
Subject to 5.a. and 5.b. above, the maximum amount
payable to all insureds under this coverage is the
difference between the “Each Accident” limit of liabil-
ity of this coverage and the amount paid all insureds
by or for any person or organization who is or may be
held legally liable for the bodily injury.
(Policy at 15.) The State Farm policy’s UIM coverage
provides a per-person liability limit of $100,000 and a per-
accident liability limit of $300,000. (Policy Coverages.)
State Farm denied the Clark children’s UIM claims.
Merry Clark then filed suit on behalf of the Clark children
against State Farm in Indiana state court. State Farm
successfully removed the case to the United States Dis-
trict Court for the Southern District of Indiana, invoking
the district court’s diversity jurisdiction. The district
court subsequently granted State Farm’s motion for sum-
mary judgment. It found that Indiana’s underinsured
motor vehicle statute, Indiana Code § 27-7-5-4(b), requires
the court to compare the relevant limits in the claimant’s
UIM policy to the actual amount available to the claimant
under the other insurer’s policy. Under the Indiana stat-
ute, if the amount available to the claimant is less than
the claimant’s insurance policy’s relevant UIM liability
limit (i.e., per-person or per-accident), the other vehicle
is deemed an underinsured motor vehicle and UIM
coverage is invoked. Id. Since more than one of the
Clarks were injured in the collision, the district court
looked to the amount actually available to the Clarks
No. 05-4596 5
collectively under Akers’ per-accident liability limit
($300,000) and compared that amount to the UIM per-
accident coverage in the Days’ State Farm policy ($300,000).
It concluded that the vehicle Akers operated was not an
underinsured motor vehicle because the per-accident
liability limit contained in Akers’ insurance policy (the
full amount of which was paid to the Clark family) was
equal to the State Farm policy’s UIM per-accident coverage.
The Clark children appeal.
II.
We first examine whether this court may exercise juris-
diction over this case. During oral argument, the panel
questioned the parties regarding whether this case satisfied
the amount in controversy requirement of 28 U.S.C. § 1332.
Specifically, the panel questioned whether diversity
jurisdiction was proper if neither of the Clark children’s
individual claims on appeal exceeds $75,000 (i.e., $75,000
by S.C. and $25,000 by A.C.). It is well settled that while
an individual plaintiff’s multiple claims against a single
defendant may be aggregated to determine diversity
jurisdiction, the separate claims of multiple plaintiffs
against a single defendant cannot be aggregated to meet
the jurisdictional requirement. See Sarnoff v. Am. Home
Prods. Corp., 798 F.2d 1075, 1077 (7th Cir. 1986) (stating that
“when there is more than one plaintiff each one’s claim
must exceed the statutory minimum . . . [and those] claims
cannot be aggregated” (citing Hixon v. Sherwin-Williams Co.,
671 F.2d 1005, 1007-09 (7th Cir. 1982)). The amount in
controversy requirement, however, must be determined by
the district court at the beginning of the suit, and is not
dependent on subsequent dismissal of individual claims
used to satisfy the jurisdictional threshold. Johnson v.
6 No. 05-4596
Wattenbarger, 361 F.3d 991, 993 (7th Cir. 2004) (“Whether
§ 1332 supplies subject-matter jurisdiction must be ascer-
tained at the outset; events after the suit begins do not
affect the diversity jurisdiction.”).
In their supplemental briefs, the parties argued that the
amount in controversy requirement was satisfied be-
cause the Clark children’s original complaint included
claims against State Farm for bad faith seeking compensa-
tory and punitive damages, in addition to their breach of
contract claims currently before this court. The district
court granted summary judgment in favor of State Farm on
both claims, but the Clark children only elected to ap-
peal their breach of contract claim. “Generally, we give
plaintiffs the benefit of the doubt in these matters, but
a complaint will be dismissed if it appears to a legal
certainty that the claim is really for less than the jurisdic-
tional amount.” Del Vecchio v. Conseco, Inc., 230 F.3d 974,
978 (7th Cir. 2000) (internal quotations omitted) (“We have
no quarrel in principle with the idea that punitive dam-
ages may sometimes be taken into account in deciding
whether the proper amount is in controversy.”). Indiana
law recognizes a cause of action against an insurer for
breaching its duty to exercise good faith in evaluating
claims, and it permits recovery of punitive damages. Erie
Ins. Co. v. Hickman, 622 N.E.2d 515, 518-20 (Ind. 1993)
(stating that “the recognition of an independent tort for
the breach of the insurer’s obligation to exercise good
faith provides the tort upon which punitive damages may
be based”). Accordingly, we give both of the Clark chil-
dren the benefit of the doubt that their original contractual
and bad faith claims sought total damages in excess of
$75,000, and find that the district court properly exercised
its diversity jurisdiction.
No. 05-4596 7
III.
On appeal, the Clark children argue that the district
court erred in granting summary judgment in favor of
State Farm. Specifically, the Clark children claim that
State Farm’s denial of their claims breached the terms of
its policy’s UIM coverage because, although the Clark
family collectively received a settlement from Akers’
insurance company equal to State Farm’s UIM per-accident
liability limit ($300,000), A.C.’s and S.C.’s individual
recoveries from Akers ($75,000 and $25,000, respectively)
were less than the State Farm policy’s UIM per-person
liability limit ($100,000). They arrive at their calculation by
first asserting that Indiana’s underinsured motor vehicle
statute defines an underinsured motor vehicle in terms of
the limits of coverage “available” for payment from other
insurers. Because the law does not make a distinction
between a policy’s UIM per-person and per-accident
liability limits, they claim the per-person liability limit
should apply. With four people injured, this would total
$400,000. The aggregate per-accident liability limit under
Akers’ American Family policy is $300,000. Thus, the
Clark children argue that the combined $100,000 they
received ($75,000 to A.C. and $25,000 to S.C.) is $100,000
less than the total of the State Farm policy’s UIM provi-
sion’s per-person liability limit ($200,000), thus making
Akers underinsured. Because, under the Clark children’s
formulation, $100,000 still is available to them under the
State Farm policy’s UIM provision, they claim the dis-
trict court erred in granting summary judgment in favor
of State Farm.
We review the district court’s grant of summary judg-
ment de novo. Sornberger v. City of Knoxville, 434 F.3d 1006,
1012 (7th Cir. 2006). The district court concluded, and
8 No. 05-4596
the parties agree, that there are no material disputed facts
and this appeal only involves a question of law. This
appeal exclusively focuses on whether the district court
properly concluded that Akers was not operating an
underinsured motor vehicle as defined under Indiana
Code § 27-7-5-4(b),1 and whether that finding entitled
State Farm to a judgment as a matter of law, Fed. R. Civ. P.
56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986). To make that determination, our task is to apply
the Indiana law as we believe the Supreme Court of
Indiana would if faced with the same issue. See Wolverine
Mut. Ins. v. Vance ex rel. Tinsley, 325 F.3d 939, 942 (7th Cir.
2003). Accordingly, we look to the way the Indiana
courts have construed Indiana’s underinsured motorist
statute.
Indiana’s underinsured motorist statute allows insurers
and their insured to set their own UIM liability limits,
but it prescribes the comparative mechanism for deter-
mining whether an insured is eligible to collect under a
policy’s UIM provision. See Corr v. Am. Family Ins., 767
N.E.2d 535, 540-41 (Ind. 2002). The statute defines an
underinsured motor vehicle as follows:
(b) For the purpose of this chapter, the term
underinsured motor vehicle, subject to the terms and
conditions of such coverage, includes an insured
motor vehicle where the limits of coverage available for
payment to the insured under all bodily injury liability
policies covering persons liable to the insured are less
1
It is undisputed that in this diversity action, the substantive
law of the forum, Indiana, controls. See Erie R.R. Co. v. Tompkins,
304 U.S. 64, 78 (1938).
No. 05-4596 9
than the limits for the insured’s underinsured motorist
coverage at the time of the accident, but does not include
an uninsured motor vehicle as defined in subsec-
tion (a).
Ind. Code § 27-7-5-4(b) (emphasis added).
At the time the district court issued its opinion granting
summary judgment in favor of State Farm, some uncer-
tainty in the Indiana case law remained regarding which
liability limit—per-person or per-accident—the court
should compare to determine whether a vehicle meets
the statute’s definition of underinsured motor vehicle.
The Court of Appeals of Indiana held in Allstate Insurance
Co. v. Sanders, 644 N.E.2d 884 (Ind. Ct. App. 1994), that the
proper comparison is between the relevant per-accident
liability limit when there are multiple-injured claimants. Id.
at 886-87. “[T]he statute’s focus is on placing the insured
in the position he would have occupied if the tortfeasor
had liability coverage qual to his underinsured motorist
limits.” Id. at 887. In a subsequent case, however, the
Supreme Court of Indiana held in Corr v. American Family
Insurance, 767 N.E.2d 535 (Ind. 2002), that the court must
look to the actual amount available to the claimant and
compare that amount to the other policy’s UIM per-person
liability limit when there is a single-injured claimant. Id. at
538-40. The Clark children argue that the Supreme Court
of Indiana’s decision in Corr implicitly overruled the
Appellate Court of Indiana’s decision in Sanders. Specifi-
cally, the Clark children assert that Corr stands for the
proposition that, regardless of whether there are multiple-
injured claimants or a single-injured claimant, the
proper method for determining whether a vehicle is
underinsured is by comparing the amount actually avail-
able to each individual claimant with the other policy’s
10 No. 05-4596
UIM per-person liability limit. Under the Clark children’s
proposed method, the four people injured in the collision
with Akers would each have UIM coverage for up to
$100,000 (an aggregate of $400,000), even though the
State Farm policy’s UIM per-accident liability limit was
$300,000.
Less than two weeks after the Clark children filed their
appellate brief, the Court of Appeals of Indiana ad-
dressed this exact issue in Grange Insurance Co. v. Graham,
843 N.E.2d 597 (Ind. Ct. App. 2006), a case which is both
factually and legally analogous to this case. The Graham
court resolved the issue in accord with the district court’s
interpretation of Indiana Code § 27-7-5-4(b),2 and rejected
the argument that Corr implicitly overruled Sanders. Id. at
601. Quoting Sanders, the Graham court stated that the
statute’s guiding principle is to place “ ‘the insured in the
position he would have occupied if the tortfeasor had
liability coverage equal to [the insured’s] underinsured
motorist limits.’ ” Id. (quoting Sanders, 644 N.E.2d at 887).
To effectuate that principle, the Graham court noted that
different approaches are necessary for claims involving
multiple-injury claimants and claims involving single-
injury claimants. Id. at 601-02. Like the district court in
this case, the Graham court found that when there are
multiple injured claimants seeking to recover under a
single UIM policy, the court will “look not only to the per-
person limitation with respect to each individual claim-
ant, but also to the per-accident limit with respect to the
total of all of the claims.” Id.
The Graham court explained that its approach effectu-
ates the Indiana statute’s goal of “‘giv[ing] the insured
2
The Clark children did not file a reply brief.
No. 05-4596 11
the recovery he or she would have received if the
underinsured motorist had maintained an adequate
policy of liability insurance.’ ” Id. at 602 (quoting Corr,
767 N.E.2d at 540). “ ’[A]dequate’ in this context is de-
fined by the insured’s underinsurance policy.” Id. The
Graham court found that the total amount available to
the multiple claimants from the other tortfeasor’s insur-
ance policy’s per-accident liability limit was $300,000. Id.
That was the same amount available under the multiple
claimants’ own policy’s UIM per-accident liability limit. Id.
Thus, the Graham court held that the other tortfeasor
was not an underinsured motorist within the meaning
of Indiana Code § 27-7-5-4(b), and the multiple claimants
were not entitled to collect under the UIM provision
in their own policy.
The Court of Appeals of Indiana’s analysis in Graham is
thoroughly reasoned and soundly decided. We thus find
that the Supreme Court of Indiana likely would apply
the same reasoning if faced with the issues presented
in Graham. Accordingly, we apply that reasoning here.
Under the Graham approach, we first determine if Akers
was operating an underinsured motor vehicle at the
time of the collision. Because this case involves multiple-
injured claimants, we compare the actual amount avail-
able to the Clarks under the per-accident liability limit in
Akers’ American Family policy to the UIM per-accident
liability limit in the Days’ State Farm policy. If the per-
accident liability limit in Akers’ American Family policy
and the amount actually available to the Clarks were
equal to or greater than the UIM per-accident liability
limit in the Days’ (the car owners) State Farm policy,
then Akers was not operating an underinsured motor
vehicle within the meaning of Indiana Code § 27-7-5-4(b).
12 No. 05-4596
As noted above, the Clarks collectively recovered
$300,000 from American Family, which was the full ex-
tent of Akers’ insurance policy’s per-accident liability.
That was the same amount that the Clarks could have
recovered under the UIM per-accident liability limit in
the Days’ State Farm policy. Because the potential per-
accident recovery was the same under both policies, the
Clarks’ recovery from Akers’ insurer was adequate.
Accordingly, we affirm the district court’s conclusion
that Akers was not an underinsured motorist and A.C and
S.C. were not entitled collect from State Farm.
IV.
The district court granted summary judgment in favor
of State Farm because Akers was not operating an
underinsured motor vehicle as defined by Indiana Code
§ 27-7-5-4(b), since the Clarks’ collective recovery from
Akers’ insurer was equal to the UIM per-accident lia-
bility limit in State Farm’s policy. The district court’s
analysis was in accord with Indiana case law interpret-
ing § 27-7-5-4(b), and it was reinforced by the Court of
Appeals of Indiana’s recent decision in Grange Insurance Co.
v. Graham, 843 N.E.2d 597 (Ind. Ct. App. 2006). Accord-
ingly, the district court’s grant of summary judgment is
AFFIRMED.
No. 05-4596 13
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—1-8-07