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MCCLAY v. FEDERAL KEMPER INS. CO.

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA


August 17, 1988

ANDREW J. McCLAY and MARJORIE J. McCLAY, individually and in their own right, and ANDREW J. McCLAY, Administrator of the Estate of BARBARA L. McCLAY
v.
FEDERAL KEMPER INSURANCE COMPANY

The opinion of the court was delivered by: VAN ANTWERPEN

MEMORANDUM AND ORDER

 FRANKLIN S. VAN ANTWERPEN, UNITED STATES DISTRICT JUDGE

 This is an action against an insurance carrier seeking a judgment in excess of the policy limits, based on the carrier's alleged bad faith in handling an insurance claim. Defendant Federal Kemper Insurance Company ("Federal") has moved for a summary judgment on the ground of res judicata, collateral estoppel, or both. Federal also seeks sanctions against plaintiffs on the ground of bad faith and violation of Fed.R.Civ.P. 11. For the reasons given below, Federal's motion for summary judgment will be granted and the motion for sanctions denied.

 Plaintiffs are the parents and heirs of the late Barbara McClay. In addition, Mr. McClay is the administrator of his daughter's estate. Federal was the insurer of Barbara McClay's automobile.

 On October 13, 1982, Federal issued its policy No. RA 67510. The policy named Barbara Lynn McClay as Insured and covered her 1979 Buick Opel. Three days later, at about 3:00 A.M. on October 16, 1982, Barbara McClay sustained fatal injuries in her car, driven by her friend Juan Francisco Reynoso.

 Following Barbara's death, the plaintiffs endeavored to settle their liability claim against Mr. Reynoso, and failing in that effort, brought suit in this court on October 12, 1984 under Civil Action No. 84-4925. The case was heard by United States District Judge Louis C. Bechtle, sitting with a jury. Federal defended Mr. Reynoso under the "Covered Person" clause of the policy. Since Mr. Reynoso maintained that Barbara McClay, not himself, was the driver, the carrier defended on that basis. The jury, on October 1, 1985, brought in a verdict against Mr. Reynoso which was molded by the court by order dated November 14, 1985 into a final verdict of $ 266,290.29. No appeal was taken by either side. Federal paid plaintiffs a total of $ 17,472.61 representing the liability limits of the insurance policy plus court costs.

 On November 4, 1985, plaintiffs filed a writ of execution and interrogatories on defendant carrier seeking the balance of the judgment, $ 251,290.29, plus interest from October 1, 1985. Both parties moved for summary judgment and by order filed May 15, 1986, Judge Bechtle granted summary judgment in favor of Federal. Plaintiffs appealed to the United States Court of Appeals for the Third Circuit, which by Judgment Order dated January 29, 1987 (filed in the District Court on March 11, 1987), affirmed the judgment of the District Court. The instant action was brought by plaintiffs in the Court of Common Pleas of Bucks County, No. 87-07125-15-2, by summons filed September 23, 1987, and Complaint filed November 19, 1987. It was removed to this court by Petition for Removal filed by Federal on December 4, 1987. Federal filed its Answer on January 6, 1988, and its Motion for Summary Judgment and Sanctions on May 17, 1988. In both its answer and its motion, Federal has raised the issues of res judicata and collateral estoppel.

 I agree with Federal. As the Supreme Court said in Allen v. McCurry, 449 U.S. 90, 94, 66 L. Ed. 2d 308, 101 S. Ct. 411 (1980): "Under res judicata a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action. Cromwell v. County of Sac., 94 U.S. 351, 352 [24 L. Ed. 195 (1877)]." The litigants in this action are the same persons who were involved in Civil Action No. 84-4925. See Appendix, p. 179. In both the garnishment part of that action and in this action, the claim was the same, the payment of an amount exceeding sixteen times the face value of the policy, based on the alleged bad faith of Federal in handling the claim. All possible theories for that claim were raised or could have been raised in the garnishment action. Judge Bechtle in his excellent opinion defined the plaintiffs' rights as follows:

 

". . . plaintiffs here can assert only the rights of Reynoso since plaintiffs have acquired Reynoso's rights by way of equitable subrogations. Plaintiffs have acquired no greater rights than those of Reynoso."

 Slip. Op. at p.6. Judge Bechtle, had before him all parties to the present action and the full record of the first action, over which he had presided since its inception. Having heard all of the arguments of both sides, he defined the rights of plaintiffs and determined that Federal had not acted in bad faith. That determination governs this action, unless, as they claim, plaintiffs have some right, independent of Francisco Reynoso, under Barbara McClay as owner of or claimant under Federal's insurance policy.

 To analyze that claim, I will review the rights and obligations involved here. Barbara McClay, as owner of the car, and Francisco Reynoso, as its driver, each had a common law obligation to see that it was driven safely, and to provide restitution to those harmed if it was not. In addition, Barbara McClay had a statutory obligation under 40 Pa. C.S.A. ยง 1009.104 (now repealed), to provide security for such restitution up to $ 30,000 for each occurrence, and $ 15,000 for each injured person. Barbara chose to provide such security by contracting with Federal for the minimum amount required by law. After Barbara was killed, an action was brought against Francisco as driver of the car. Federal did what it had contracted to do; it defended Francisco Reynoso and ultimately paid the policy limits. Plaintiffs have failed to cite, and I cannot find, any cases giving the owner of a policy any special rights, independent of the rights of the insured, when the owner of the policy is the claimant rather than being the insured.

 Consequently, Judge Bechtle's order in granting summary judgment in favor of Federal in Civil Action No. 84-4925 governs this action under the principle of res judicata, and summary judgment will be entered in favor of Federal in this action. Judge Bechtle's well-reasoned and comprehensive opinion, which sets forth in detail the facts of this litigation, is attached as an appendix to this memorandum.

 No sanctions for violation of Rule 11 will be assessed in this matter, although a similar situation in the future may well result in assessment of sanctions.

 An appropriate order follows.

 ORDER

 AND NOW, this 17th day of August, 1988, upon consideration of defendant Federal Kemper Insurance Company's Motions for Summary Judgment and Sanctions filed May 17, 1988, and plaintiffs' response thereto, it is hereby ORDERED and DECREED that:

 1. Summary judgment is entered in favor of defendant and against plaintiffs.

 2. The motion for sanctions is DENIED.

19880817

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