Helms v. Nationwide Insurance Co. of America

280 F.R.D. 354, 2012 WL 481642, 2012 U.S. Dist. LEXIS 18434
CourtDistrict Court, S.D. Ohio
DecidedFebruary 14, 2012
DocketNo. 1:11-cv-410
StatusPublished
Cited by7 cases

This text of 280 F.R.D. 354 (Helms v. Nationwide Insurance Co. of America) is published on Counsel Stack Legal Research, covering District Court, S.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Helms v. Nationwide Insurance Co. of America, 280 F.R.D. 354, 2012 WL 481642, 2012 U.S. Dist. LEXIS 18434 (S.D. Ohio 2012).

Opinion

MEMORANDUM OPINION AND ORDER

STEPHANIE K. BOWMAN, United States Magistrate Judge.

This breach of contract and bad faith case was filed by Plaintiffs against their insurer in state court, but was removed by Defendant to this Court on the basis of diversity jurisdiction. Thereafter, the parties consented to final disposition before the undersigned magistrate judge, pursuant to 28 U.S.C. § 636(c). (Doc. 7).

Although the parties appeared before the Court for a preliminary pretrial conference in September 2011, no scheduling order has yet been entered pending the Court’s disposition of Defendant Nationwide’s motion to strike Plaintiffs’ first and second amended complaints. In addition to Defendant’s pending motion to strike, the Court on its own initiative notes a potential issue concerning service on the defendant recently named in the amended complaint, Joshua Sanders.

I. Factual and Procedural Background

On February 23, 2010, Plaintiff William Helms was involved in an automobile accident in Hamilton County, Ohio. Plaintiffs allege that the accident was caused by the negligence- of another driver, Joshua Sanders. Sanders is alleged to have been insured by Progressive Casualty Insurance Company (“Progressive”). Mr. Helms alleges that he sustained serious injuries during the accident,1 resulting in significant monetary damages. His wife, Gail Helms, alleges damages resulting from the loss of her husband’s companionship. (Doc. 3). Plaintiffs had an active underinsured motorist (“UIM”) policy at the time of the accident, which is alleged to include UIM coverage in the amount of $300,000 per person. (Id.).

Rather than filing suit against Sanders and/or Progressive, Plaintiffs initiated suit in state court against their own insurer, Defendant Nationwide Insurance Company of America, for breach of contract and bad faith concerning payment under their UIM policy. On June 23, 2011, Defendant removed the litigation to this Court based upon the parties’ diversity of citizenship, and simultaneously moved to dismiss based upon Plaintiffs’ alleged failure to join a necessary party under Rule 19, Fed.R.Civ.P. Defendant Nationwide argued that Sanders, the actual tortfeasor, was a necessary party, and that Plaintiffs could not proceed under their UIM policy without also naming the negligent driver.

In its motion to dismiss, Nationwide represented that it has already advanced $100,000 to the Plaintiffs in recognition of the coverage provided by Sanders’ liability policy. Defendant did so in compliance with Ohio law that holds that a UIM insurer may advance the tortfeasor’s policy limits in lieu of granting consent to settle, in order to preserve the insurer’s subrogation rights. See Bogan v. Progressive Cas. Ins. Co., 36 Ohio St.3d 22, 521 N.E.2d 447 (1988) (overruled in part on other grounds by Ferrando v. Auto-Owners Mut. Ins. Co., 98 Ohio St.3d 186, 781 N.E.2d 927 (2002)).

On September 12, 2011, the Court denied Defendants’ motion to dismiss based partly on the lack of information concerning whether Sanders was a “necessary,” party, but without prejudice to Defendants to renew their motion following further development of the record.2 The Court reasoned that: (1) Ohio law governing an underinsured motorist [356]*356claim requires proof that the insured is “entitled to recover” from the underinsured driver, but does not mandate that an insured actually file suit against the negligent driver; (2) Ohio law requires courts to look to the express terms of the insurance policy to determine the conditions that an insured is required to fulfill prior to bringing a UIM claim; (3) only where a failure to file suit breaches a contractual duty — for example, an insured’s duty to preserve an insurer’s subrogation rights — can an insurer contend that the filing of suit is a prerequisite to coverage; and (4) the express language of the policy at hand suggested that suit against Sanders was discretionary absent the fulfillment of certain conditions, which Defendant failed to prove had occurred at the time of their motion.3 (Doc. 10).

However, because the policy language at issue stated both that the insured must preserve the insurer’s subrogation rights, and that the insured must “do whatever is proper to secure” subrogation rights and “do nothing to prejudice them,” (Doc. 8-1 at 24), the Court also agreed with Defendant that Plaintiffs could not simply abandon all claims against the negligent driver. Citing Ohio case law, the Court explained:

[T]he statement in Bogan that the injured party may not, voluntarily or otherwise, abandon his claim against the tortfeasor in order to proceed directly against his own insurer remains true both as a general principle and in the context of the policy at issue in this case. To the extent that an insured will lose his right to pursue UIM if, by his activity (i.e., settlement without his insurer’s consent), or inactivity (i.e., failing to provide timely notice until following the expiration of the statute of limitations), he fails to preserve the insured’s subrogation rights.

id at 12. In other words, in order to recover UIM benefits, a plaintiff must prove that his damages exceed the tortfeasor’s policy limits. Thus, a plaintiff who ignores the tortfeasor in proceeding against his own UIM insurer does so at his peril; no liability will accrue if the injured party abandons his underlying claim to the prejudice of the UIM insurer.

Defendant’s prior motion to dismiss was denied without prejudice after the Court concluded that “this Court cannot determine whether Plaintiffs’ failure to file suit directly against the Tortfeasor has yet prejudiced or impeded the Defendant’s subrogation rights.” At the time the Defendant filed its motion, neither party had presented any evidence as to whether Plaintiffs had ever pursued any claim at all against Sanders, or whether pursuing such a claim would be futile because Sanders is judgment-proof. See Ponser v. St. Paul Fire & Marine Insurance Company et al., 104 Ohio St.3d 621, 628, 821 N.E.2d 173, 179 (Ohio 2004).

As the Court previously stated: “Ohio law supports a finding of presumptive prejudice to the Defendant’s subrogation rights where an insured fails to pursue any claim against the tortfeasor prior to suing his ... insurer” (Doe. 10 at 14). However, the Court explained that Plaintiffs could overcome that presumption by proving:

a) the Tortfeasor is without assets, such that abandonment results in no prejudice to the Defendant’s rights;
b) they are pursuing their claim in a manner so as to avoid prejudice (through extrajudicial settlement, for example); or
c) some other circumstance exists that avoids any prejudice to the Defendant.

(Id.). On September 15, 2011, following entry of the Court’s Memorandum Opinion denying Defendant’s motion to dismiss, the parties [357]*357appeared through counsel for a preliminary pretrial conference.

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Bluebook (online)
280 F.R.D. 354, 2012 WL 481642, 2012 U.S. Dist. LEXIS 18434, Counsel Stack Legal Research, https://law.counselstack.com/opinion/helms-v-nationwide-insurance-co-of-america-ohsd-2012.