The Midwestern Indemnity Co. v. Malissa Brooks

United States Court of Appeals
For the Eighth Circuit
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No. 14-2016
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The Midwestern Indemnity Company
lllllllllllllllllllll Plaintiff - Appellee
v.
Malissa Brooks; Bradley Brooks
lllllllllllllllllllll Defendants - Appellants
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Appeal from United States District Court
for the Western District of Missouri - Kansas City
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Submitted: January 13, 2015
Filed: March 2, 2015
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Before RILEY, Chief Judge, COLLOTON and KELLY, Circuit Judges.
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RILEY, Chief Judge.
Malissa Brooks seeks to “stack”1 her underinsured motorist (UIM) coverage
limits after a negligent driver struck Brooks as she rode her bicycle. Her insurer,
Midwestern Indemnity Company (Midwestern), moved for summary judgment on the
basis that Brooks’s policy unambiguously prohibits UIM coverage stacking. The
district court2 agreed and granted summary judgment in Midwestern’s favor. Because
Brooks’s policy clearly forbids stacking, we affirm.3
I. BACKGROUND
A. Facts
On September 19, 2011, Brooks was riding her bicycle when Clyde Lawrence
negligently struck her with his car. Lawrence afterward passed away of unrelated
causes. Brooks and her husband, Bradley Brooks, filed suit in Missouri state court
against Lawrence’s estate (estate), which soon settled for the $50,000 limit of
Lawrence’s auto insurance policy. In this settlement, the Brookses agreed not to seek
additional recovery from Lawrence’s estate, heirs, or insurer, but the Brookses
retained the right to seek recovery from Midwestern.
The Brookses’ auto insurance policy with Midwestern provides UIM bodily
injury coverage for several vehicles. On the declarations page for the UIM
endorsement, the policy states, “Insurance is provided where a premium entry is
1
As relevant here, “‘[s]tacking’ refers to an insured’s ability to obtain multiple
insurance coverage benefits for an injury . . . from multiple coverages provided for
within a single policy, as when an insured has one policy which covers more than one
vehicle.” Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132, 135 (Mo. 2009)
(en banc) (quotation omitted). Although the Brookses sometimes refer to their five
UIM “policies,” there is actually only one policy with multiple covered vehicles.
2
The Honorable Ortrie D. Smith, United States District Judge for the Western
District of Missouri.
3
Our appellate jurisdiction arises under 28 U.S.C. § 1291.
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shown for the coverage.” This page lists “Underinsured Motorist Bodily Injury” with
liability limits of $100,000 per-person and $300,000 per-accident. Next to this, a
premium amount appears for each of five vehicles, indicating the Brookses pay five
UIM premiums for UIM coverage, one for each of the five vehicles. After the
Brookses settled with the Lawrence estate, Midwestern paid the Brookses $100,000,
declaring this per-person limit is the maximum amount for a single application of the
policy’s UIM coverage.
B. Procedure
In March 2013, Midwestern filed suit against the Brookses in federal court,
seeking a judicial declaration that its UIM coverage limits for multiple vehicles do not
stack to multiply the per-person limit. The Brookses moved to dismiss the federal
case, contending their state suit against the estate (which had already been settled, but
not dismissed from the state court’s docket) was a “pending, parallel state proceeding
encompass[ing] the same dispute at issue in” Midwestern’s federal case.
In May 2013, before the district court ruled on this motion, the Brookses
amended their state court complaint to add Midwestern as a defendant. Midwestern
removed that suit to federal court, asserting diversity jurisdiction—both Brookses are
Missouri citizens, and the parties all agree Midwestern is not. Midwestern contended
that, although the estate was a named defendant, the court could ignore its Missouri
citizenship and lack of consent to removal, because the settlement agreement between
the Brookses and the estate extinguished all claims against the estate and Lawrence’s
heirs, leaving the estate with no real interest in the lawsuit. Although the Brookses
contested the removal, the district court agreed with Midwestern, concluding that
when the estate is ignored, complete diversity exists and removal was proper. The
district court thereafter consolidated the two cases into the present action.
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In this consolidated suit, Midwestern and the Brookses filed cross-motions for
summary judgment on the stacking issue. Granting summary judgment in
Midwestern’s favor, the district court determined the plain language of the policy
makes it “quite clear” intra-policy stacking is prohibited and the per-person limit for
any one accident is $100,000.
II. DISCUSSION
A. Diversity Jurisdiction and Removal
The Brookses’ initial argument rests on two facts: first, the estate, also a
defendant, did not consent to removal; second, both the Brookses and the estate, by
virtue of Lawrence’s citizenship, are citizens of Missouri for purposes of diversity, see
28 U.S.C. § 1332(c)(2) (deeming estates to have the same state citizenship as
decedents). The Brookses thus challenge removal and jurisdiction. See 28 U.S.C.
§§ 1332(a)(1) (requiring diversity of citizenship); 1441(a) (requiring federal courts to
have “original jurisdiction” for removal); 1446(b)(2)(A) (requiring all properly joined
and served defendants to “join in or consent to the removal of the action”).
Though we generally must look to all defendants in assessing diversity and
consent to removal, “the presence of nominal or formal or unnecessary parties has no
controlling significance for removal purposes,” Bradley v. Md. Cas. Co., 382 F.2d
415, 419 (8th Cir. 1967), and “may be ignored in determining whether diversity
jurisdiction exists,” Slater v. Republic-Vanguard Ins. Co., 650 F.3d 1132, 1134 (8th
Cir. 2011). In a classic enunciation of this rule, Justice Story wrote for the Supreme
Court: “This Court will not suffer its jurisdiction to be ousted by the mere joinder or
non-joinder of formal parties; but will rather proceed without them, and decide upon
the merits of the case between the parties, who have the real interests before it,
whenever it can be done without prejudice to the rights of others.” Wormley v.
Wormley, 21 U.S. (8 Wheat.) 421, 451 (1823) (emphasis added). A party therefore
“‘may be ignored’” for diversity and removal purposes if that party is not a “‘real
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party in interest.’” Cascades Dev. of Minn., LLC v. Nat’l Specialty Ins., 675 F.3d
1095, 1098 (8th Cir. 2012) (quoting Iowa Pub. Serv. Co. v. Med. Bow Coal Co., 556
F.2d 400, 404 (8th Cir. 1977)).
The Brookses maintain “the Estate . . . was not a nominal party . . . because the
[UIM endorsement] required The Estate’s presence in the litigation.” The Brookses’
only basis for this assertion is policy language requiring them to “exhaust[]” the
underinsured motorist’s liability coverage and prove they are “legally entitled” to
recover from the motorist. Neither policy condition demands the estate’s presence in
the lawsuit, nor would the requirement of such a procedural formality give the estate
any real interest in the dispute between the Brookses and Midwestern.
In Bradley, we addressed whether removal was proper despite the absence of
consent from two third-party defendants when the parties to the third-party action all
stipulated “as to the compromise and settlement of the third-party action.” Bradley,
382 F.2d at 419. As then-Judge Blackmun wrote for the panel, the third-party
defendants, “[f]or all practical purposes, . . . went out of the lawsuit when that
stipulation was executed.” Id. “Their interest in the suit from that point on was a
fragile one,” and were therefore ignored “for removal purposes.” Id.; see also R.C.
Wegman Constr. Co. v. Admiral Ins. Co., 629 F.3d 724, 726 (7th Cir. 2011) (“[A]
party isn’t permitted to destroy federal diversity jurisdiction by naming as a defendant
someone against whom he does not seek relief.” (citing Walden v. Skinner, 101 U.S.
577, 589 (1879))). The situation here is precisely the same: through the settlement,
the Brookses waived all their claims against the estate and its insurer. We agree with
the district court that “once the claims against [the estate] were settled the continuation
of the suit against [it] was a nullity; the addition of Midwestern Indemnity was the
equivalent of taking a new dispute against a new party and placing it in the shell that
was the original suit against [the estate].” Thus, diversity jurisdiction exists and
removal was proper.
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B. Stacking
The Brookses argue the district court erred in reading their policy to limit their
UIM coverage to $100,000, and the Brookses assert they should be permitted to stack
the UIM coverage for their five covered vehicles. We review the district court’s grant
of summary judgment de novo, viewing the record in the light most favorable to the
non-moving party—here, the Brookses. See Moody v. Vozel, 771 F.3d 1093, 1096
(8th Cir. 2014). “The parties and the district court agree Missouri law applies to this
diversity action.” Crain v. State Farm Mut. Auto. Ins. Co., 744 F.3d 582, 583 n.1 (8th
Cir. 2014).
As a matter of public policy, Missouri courts have invalidated “attempts by
insurance companies to prohibit the stacking of uninsured motorist coverage.” Jordan
v. Safeco Ins. Co. of Ill., 741 F.3d 882, 884 (8th Cir. 2014) (emphasis added). But
“[b]ecause Missouri does not require UIM coverage, ‘the existence of the coverage
and its ability to be stacked are determined by the contract entered between the
insured and the insurer.’” Daughhetee v. State Farm Mut. Auto. Ins. Co., 743 F.3d
1128, 1131 (8th Cir. 2014) (quoting Rodriguez v. Gen. Accident Ins. Co. of Am., 808
S.W.2d 379, 383 (Mo. 1991) (en banc)). Consequently, “general rules of contract
construction apply,” and the “key” question is whether the policy unambiguously
prohibits stacking or “is reasonably open to different constructions” as to the
permissibility of stacking. Id. at 1131-32 (quotations omitted). If the former is true,
we must enforce the contract to prohibit stacking; if the latter is true, the policy is
ambiguous and we must construe the policy to permit stacking. See id. at 1132.
The starting point here is the UIM endorsement’s Limit of Liability provision,
which states:
A. The Limit Of Liability shown in the Schedule or in the Declarations
for each person for Underinsured Motorists Coverage is our maximum
limit of liability for all damages, including damages for care, loss of
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services or death, arising out of “bodily injury” sustained by any one
person in any one accident. Subject to this limit for each person, the
Limit Of Liability shown in the Schedule or in the Declarations for each
accident for Underinsured Motorists Coverage is our maximum limit of
liability for all damages for “bodily injury” resulting from any one
accident.
This is the most we will pay regardless of the number of:
1. “Insureds”;
2. Claims made;
3. Vehicles or premiums shown in the Schedule or in the
Declarations; or
4. Vehicles involved in the accident.
(Emphasis added). This language emphasizes that the $100,000 per-person limit
shown on the declarations page is the most Midwestern covers for “‘bodily injury’
sustained by any one person in any one accident.” (Emphasis added). In plain terms,
the provision prohibits any attempt to stack these limits “regardless of the number of
. . . Vehicles or premiums shown . . . in the Declarations.”
Although this anti-stacking limitation is unambiguous, we have also said that
“[i]f a policy has ‘clauses that claim to prohibit stacking and also contain[s] clauses
that appear to authorize stacking,’ coverage is ambiguous and must be resolved in
favor of the insured.” Daughhetee, 743 F.3d at 1132 (emphasis added) (quoting
Jordan, 741 F.3d at 885). We understand the Brookses to argue that elements of the
UIM endorsement’s declarations page “appear to authorize stacking,” id., making the
policy ambiguous on this point.
The declarations page reads, “Insurance is provided where a premium entry is
shown for the coverage.” Because a premium entry is shown for each of five vehicles,
the Brookses maintain they were promised a stack of five UIM coverage limits for any
single accident. In their view, the payment of an additional premium for each
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additional vehicle must signify an increase in the coverage limit; otherwise, the
Brookses believe, Midwestern is improperly charging them more in premiums despite
providing no more coverage. As part of this argument, the Brookses contend that
injuries to Brooks herself would also receive no broader coverage by adding more
“covered autos”—she would be covered in whatever car she drives because UIM
“‘coverage is floating, personal accident insurance that follows the insured individual
wherever [she] goes rather than insurance on a particular vehicle.’” (Quoting Fanning
v. Progressive Nw. Ins. Co., 412 S.W.3d 360, 365 (Mo. Ct. App. 2013)).
In Missouri, “[i]nsurance policies are read as a whole, and the risk insured
against is made up of both the general insuring agreement as well as the exclusions
and definitions.” Todd v. Mo. United Sch. Ins. Council, 223 S.W.3d 156, 163 (Mo.
2007) (en banc). “The declarations state the policy’s essential terms in an abbreviated
form, and when the policy is read as a whole, it is clear that a reader must look
elsewhere to determine the scope of coverage.” Floyd-Tunnell v. Shelter Mut. Ins.
Co., 439 S.W.3d 215, 221 (Mo. 2014) (en banc). “The ‘declarations’ are introductory
only and subject to refinement and definition in the body of the policy.”4 Peters v.
Farmers Ins. Co., 726 S.W.2d 749, 751 (Mo. 1987) (en banc).
In this case, the declarations page only indicates the vehicles for which
“[i]nsurance is provided,” giving readers no hint whether the indicated limits can be
combined for a single accident. This is not enough, in view of the clear Limit of
Liability provision, to create an ambiguity. The plain language of that anti-stacking
4
At points, the Brookses suggest that to limit UIM coverage to $100,000,
Midwestern would have had to include this limitation on the declarations page. But
Missouri Supreme Court precedent shows a reader cannot rely on a declarations page
to outline the precise scope of coverage. See, e.g., Floyd-Tunnell, 439 S.W.3d at 221.
There is no requirement that a limitation or exclusion appear on the declarations page
absent policy language stating otherwise. See Naeger v. Farmers Ins. Co., 436 S.W.3d
654, 660 (Mo. Ct. App. 2014).
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provision must be offset by another provision “appear[ing] to authorize stacking,”
Daughhetee, 743 F.3d at 1132 (emphasis added), not simply failing to prohibit it. In
Missouri, a policy is not ambiguous just because its broad statement of coverage is
later cabined by policy definitions or exclusions, see Floyd-Tunnell, 439 S.W.3d at
221, and that is all the Limit of Liability provision does here. Seeing nothing on the
declarations page which can be reasonably read to counter the Limit of Liability
provision’s anti-stacking mandate, we find no ambiguity.5
Nor is our conclusion altered by the Brookses’ proposition that their additional
premiums signify Midwestern is either overcharging them or implicitly promising a
higher coverage limit. Our research has revealed no Missouri case allowing stacking
solely because multiple premiums were paid. In fact, cases from the Missouri Court
of Appeals suggest clear policy language controls even in such situations. See, e.g.,
Allstate Ins. Co. v. Miller, 425 S.W.3d 146, 146 (Mo. Ct. App. 2014) (per curiam)
(“Miller argues that, because she paid two different premiums for underinsured
motorists coverage on two different vehicles in a single policy, she should be entitled
to recover up to the full limit of liability on each vehicle . . . . But because the policy
5
In the final pages of their brief, the Brookses compare the Other Insurance
clause and the facts of this case to those in Jordan, 741 F.3d at 884, and emphasize
that in Jordan, we applied the holding of Ritchie, 307 S.W.3d at 137-39, to read the
policy as permitting stacking. The factual similarities between Jordan and this case
do not imply the same conclusion where the legal issues and material facts are distinct.
In Jordan, the parties agreed the policy’s Other Insurance clause would make the
policy ambiguous as to stacking and disagreed only as to whether the policy required
the insured to occupy her vehicle—a question not in dispute here. See Jordan, 741
F.3d at 885. To the extent the Brookses contend the Other Insurance clause creates
an ambiguity as to stacking, as in Ritchie, 307 S.W.3d at 138, the clause in the present
case is readily distinguishable. Unlike Ritchie, see id. at 137, the Other Insurance
clause here is expressly “[s]ubject to all other provisions of this policy, including”
specifically “the Limit of Liability provision” prohibiting stacking. With this express
limitation, the Other Insurance clause cannot reasonably be read to authorize stacking.
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expressly and unambiguously disallows stacking, Miller’s claim is without merit.”);
Hall v. Allstate Ins. Co., 407 S.W.3d 603, 610 (Mo. Ct. App. 2012) (“We . . . must
evaluate policies as a whole, and read as a whole, the policy clearly, uniformly, and
unambiguously prohibits stacking of [UIM] coverages, regardless of the number of
cars insured or number of premiums paid.”).
Contrary to the Brookses’ assumptions, each premium does correspond with an
increase in coverage. First, although UIM coverage generally “follows the insured,”
Fanning, 412 S.W.3d at 365, the Brookses’ policy contains an owned vehicle
exclusion, which restricts coverage from “following” Brooks when she drives a
vehicle she owns but did not choose to cover with the UIM endorsement. The added
premiums thus correspond with more owned cars in which Brooks’s injuries are
covered. Second, in addition to covering the named insureds and their family
members, the UIM endorsement also covers bodily injury sustained by “[a]ny other
person ‘occupying’ ‘your covered auto.’” (Emphasis added). Payment for each
additional “covered auto” buys coverage by the UIM endorsement for non-named,
non-family passengers and drivers in that vehicle.
III. CONCLUSION
The Brookses’ UIM coverage in the Midwestern policy makes plain that
stacking is prohibited. We affirm the district court’s well-reasoned opinion and
judgment.
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