Appeal Back to District Court on Coverage Claim by Injured

Barry Zalma
Jun 21, 2023

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Jacob E. Godlove, Sr., and Kayla Kelley, on behalf of themselves and the Estate of Jacob Godlove, Jr., (collectively, Appellants), appealed to the District Court’s order denying their motion to intervene in an insurance-coverage dispute. In County Hall Insurance Company, Inc. v. Mountain View Transportation, LLC; John R. Humes, Jacob E. Godlove; Kayla Kelley; Estate Of Jacob Godlove, Jr., No. 22-2397, United States Court of Appeals, Third Circuit (June 16, 2023) the Third Circuit deal with changed circumstances.

FACTS

Godlove and Kelley, who was pregnant at the time with Godlove, Jr., were in a motor-vehicle accident with a tractor-trailer owned by Mountain View Transportation, LLC and driven by John R. Humes. Godlove and Kelley, on behalf of themselves and the Estate, sued Mountain View and Humes in state court for the resulting injuries, including the death of Godlove, Jr., which occurred two months after the accident.

Mountain View’s insurer, County Hall Insurance Company, Inc., claimed its insurance policy did not cover the accident because Humes was not listed on the relevant schedule of drivers. The letter also informed Mountain View that County Hall would defend the state-court tort action under a reservation of rights.

County Hall filed a federal court case against Mountain View and Humes, seeking a declaration that the policy did not cover the accident. After Mountain View and Humes failed to respond, the Clerk of Court entered a default against them at County Hall’s request.

After Appellants filed the state-court declaratory judgment action, County Hall moved the District Court for a default judgment in this federal action. The same day, Appellants moved to intervene in this action and to strike the entry of default.

The District Court denied the motion to intervene and the motion to strike.

During the pendency of the appeal, Appellants settled the underlying state-court tort suit against Mountain View and Humes, who were represented by counsel under County Hall’s reservation of rights. Appellants obtained a $1,000,000 judgment against Mountain View and Humes and an assignment of rights under any insurance policies.

Soon after, Appellants again sought a declaration in state court that the insurance policy covered the accident-this time standing in the shoes of Mountain View and Humes. That action remains pending.

When the District Court entered its order denying the motion to intervene, Appellants were only “plaintiffs who ha[d] asserted tort claims against the insured.” In the District Court’s words, they were “strangers to [the] insurance contract.” That is no longer so.

ANALYSIS

First, Appellants now have a judgment against Mountain View and Humes. Second, they have a purported assignment of rights under Mountain View’s insurance policy and have sued County Hall in state court on that basis.

The Third Circuit concluded that since the District Court might reach a different conclusion on the motion to intervene in view of the changed circumstances; or the purported assignment of rights might require or permit party substitution of the Federal Rules of Civil Procedure; and because no declaratory judgment has been entered it might be appropriate for the District Court to stay this action pending resolution of the state-court declaratory judgment action.

The Third Circuit, therefore exercised judicial restraint and refused to express any view on the propriety of the stated possibilities. For that reason the Third Circuit decided to avoid making a decision and allow the District Court to evaluate the changed circumstances in the first instance.

Consistent with that principle, the Third Circuit vacated the District Court’s order and remanded the case back to the District Court for further proceedings.

ZALMA OPINION

When facts change after a ruling by a district court on an insurance coverage issue it is inappropriate for an appellate court to stomp on the jurisdiction of the trial court. Noting that the changed facts could have resulted in multiple different resolutions the Third Circuit exercised required judicial restraint and required to trial court to decide the issues by taking into consideration the changed facts exercising the wisdom accorded to King Solomon.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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