DONALDSON v. OLD REPUBLIC INSURANCE COMPANY, No. 4:2014cv00256 - Document 14 (M.D. Ga. 2015)
Court Description: ORDER granting 3 Motion to Dismiss for Failure to State a Claim. Ordered by US DISTRICT JUDGE CLAY D LAND on 5/11/2015 (vac).
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IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF GEORGIA COLUMBUS DIVISION BRYAN ALLEN DONALDSON, * Plaintiff, * vs. * CASE NO. 4:14-CV-256 (CDL) OLD REPUBLIC INSURANCE COMPANY, * Defendant. * * O R D E R Plaintiff Bryan Allen Donaldson was involved in an automobile accident with an eighteen-wheel tractor-trailer. The driver Old of the tractor-trailer was insured by Republic Insurance Company (“Old Republic”). Defendant Alleging that the driver of the tractor-trailer was negligent, Donaldson sued Old Republic directly in the Superior Court of Muscogee County pursuant to Georgia’s Direct Action Statute, O.C.G.A. §§ 40-1112(c) and 40-2-140(d)(4). Old Republic timely removed action to this Court based on diversity of the parties. Republic now moves to dismiss the action, contending the Old that Alabama law applies, and that Alabama law does not authorize a direct action against an insurance carrier until the injured party obtains a judgment against the insured. The Court agrees: Alabama law applies, and Donaldson’s claim against Old Republic is premature. The Court, therefore, dismisses Donaldson’s claim. DISCUSSION For purposes of this motion, the following is undisputed: the motor vehicle accident giving rise to this action occurred in Auburn, Alabama, and Donaldson has not obtained a judgment against the allegedly negligent driver insured by Old Republic. Georgia law permits a direct action against an insurance carrier under these circumstances, but Alabama law does not. law applies, this action may proceed. If Georgia If Alabama law applies, it must be dismissed. A federal court sitting in diversity uses the choice-of-law rules of the state in which it sits. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). looks to Georgia’s choice-of-law rules. Court first nature. determines whether the The Court, therefore, Under those rules, the issue is procedural in If it is, the principle of lex fori requires the Court to apply the law of the forum. Federated Rural Elec. Ins. Exch. v. R.D. Moody & Assocs., Inc., 468 F.3d 1322, 1325 (11th Cir. 2006) (per curiam). Id. If the issue is not procedural, then the Court must determine the nature of the action. cases, the Court uses the law of the state where occurred, according to the rule of lex loci delicti. the dispute involves the validity, 2 nature, In tort the tort Id. construction, If or interpretation of a contract, then the Court applies the principle of lex loci contractus and uses the law of the state where the contract was formed. I. Id. Is The Issue Procedural? Donaldson brings this action pursuant to Georgia’s direct action statute, which provides that an injured party can “join in the same action the motor carrier and the insurance carrier.” O.C.G.A. Donaldson § 40-1-112(c); contends see that also the O.C.G.A. direct § 40-2-140(d)(4). action statute is a procedural rule because it allows an injured party to join an insurance carrier to a suit against the insured. Donaldson points to various cases describing the direct action statute, when used as a joinder mechanism, as procedural. See, e.g., Johnson v. Woodard, 208 Ga. App. 41, 46, 429 S.E.2d 701, 705 (1993) (Beasley, J., concurring in part and dissenting in part) (“Whether joinder is allowed is a matter of procedure[.]”). Thus, Donaldson contends that this dispute raises a procedural issue, and that the rule of lex fori therefore requires the Court to apply Georgia law to the dispute. The Court concludes that Georgia’s direct action statute is both procedural and substantive. The statute allows an injured party to join an insurance carrier to an action against the insured. an But it also creates a separate cause of action against insurance carrier, because it allows 3 an injured party to recover a judgment directly against the insurance carrier without first obtaining a judgment against the insured. In the latter situation, the Court finds that the question of whether an injured party may bring a separate suit against an insurance carrier directly without first obtaining a judgment against the insured is not sufficiently procedural to warrant application of this forum’s law. Little case law exists on this issue, but the few federal district courts in Georgia that have addressed the issue reached a similar conclusion. Sur. Co., 234 Louisiana’s F. direct Supp. action 41, 42 statute See Shapiro v Aetna Cas. & (N.D. Ga. 1963) substantive, (declaring rather than procedural, in nature); see also Hidalgo v. Ohio Sec. Ins. Co., Civil Action No. 4:10-CV-183-HLM, 2011 U.S. Dist. LEXIS 46002, at *9 (N.D. Ga. Feb. 24, 2011) (interpreting a dispute brought pursuant to Georgia’s direct action statute as a suit sounding in tort, not as one raising a procedural issue). II. Is the Claim Based in Tort or Contract? Because the issue of whether Donaldson can sue Old Republic directly is not procedural, the Court next must determine whether Donaldson’s claim sounds in contract or tort. Donaldson argues that the claim sounds in contract because he is a thirdparty beneficiary to the contract between the insurance carrier and the insured. party Notwithstanding Donaldson’s status as a third- beneficiary, the present 4 dispute does not involve the validity, nature, construction, breach, or interpretation of the insurance contract. implicate the Donaldson’s underlying direct insurance action contract—the provides funds to satisfy the judgment—but the based in contract. claim may contract claim is not See Federated, 468 F.3d at 1325-26. Donaldson’s claim is based on the tortious conduct of Old Republic’s insured. “While the cause of action . . . is not on the tort, nevertheless the tort constitutes the real cause of action, and the liability of the insurance carrier on its policy, issued as required by law, is merely ancillary . . . .” Addington v. Ohio S. Express, Inc., 118 Ga. App. 770, 771-72, 165 S.E.2d 658, 659 (1968) (internal quotation marks omitted); see also Md. Cas. Co. v. Dobson, 57 Ga. App. 594, 594, 196 S.E. 300, 302 (1938). Consequently, under the principle of lex loci delicti, the Court applies the law of the state where the tort occurred. Donaldson was injured in a car accident in Auburn, Alabama. The Court, therefore, must apply Alabama law. “[A] direct action against an insurance carrier [is] not allowable under Alabama law because an injured party cannot bring a direct action against the insurance carrier, absent a final judgment against its insured.” 894 So. omitted); 2d 643, see State Farm Mut. Auto. Ins. Co. v. Brown, 648 also (Ala. Ala. 2004) Code 5 (internal § 27-23-2. quotation Here, marks Donaldson attempts to bring a claim against Old Republic without first obtaining a final judgment against its insured. does not recognize this cause of action. Alabama law Consequently, the Court must dismiss Donaldson’s action. III. Georgia’s Public Policy Exception Donaldson argues that even if traditional choice-of-law principles support the application of Alabama law, the Court should public not apply policy circumstances, Alabama of the courts law because state applying of it is contrary Georgia. Georgia law In will to the limited displace the traditional choice-of-law analysis for the sake of fidelity to Georgia’s public policy. But this dispute does not call for such extreme action—application of Alabama law to this dispute does not substantially violate Georgia public policy. Under Georgia law, courts do “not apply the substantive law of the place where the tort was committed if application of the foreign law ‘contravenes policy . . . .’” [Georgia’s] established public Alexander v. Gen. Motors Corp., 219 Ga. App. 660, 661, 466 S.E.2d 607, 609 (1995) (quoting S. Ry. Co. v. Decker, 5 Ga. App. 21, 25, 62 S.E. 678, 680 (1908)), rev’d on other grounds in Alexander v. Gen. Motors. Corp., 267 Ga. 339, 339, 478 S.E.2d 123, 123-24 (1996). exception applies when “the foreign Georgia’s public policy statute is designed to redress an injury, but prescribes a form of redress which is 6 radically system dissimilar of omitted). to anything jurisprudence.” existing Id. in (internal [Georgia’s] quotation own marks The party seeking to invoke the exception bears the burden of demonstrating that it applies. Id. Georgia’s direct action statute is designed “to protect the public against injuries caused by the motor carrier’s negligence,” Andrews v. Yellow Freight Sys., Inc., 262 Ga. 476, 476, 421 S.E.2d 712, 713 (1992), and “facilitate suit against, and liability of, [insurance] carriers.” Johnson, 208 Ga. App. at 45, 429 S.E.2d at 704. Alabama also has a direct action statute, but it requires the injured party to first obtain a judgment against the insured before bringing a direct action against the insurance carrier. Although different from Georgia’s statute, action statute is not “radically dissimilar.” Ga. App. at 661, 466 S.E.2d at 609. Alabama’s direct Alexander, 219 An injured party, in both Alabama and in Georgia, can sue an insurance carrier directly to recover for their losses. step to such actions: Alabama simply adds an additional An injured party must first obtain a judgment against the policyholder, and then sue the insurance carrier. See Ala. Code § 27-23-2 (“[I]f the judgment [against the insured] is not satisfied within 30 days after the date when it is entered, the judgment creditor may proceed against the . . . insurer to reach and apply the insurance money to the 7 satisfaction of the judgment.”); Brown, 894 So. 2d at 648 (internal quotation marks omitted) (“The injured party, however, can bring an action against the insurer only after he has recovered a judgment against the insured”); Wiggins v. State Farm Fire & Cas. Co., 686 So.2d 218, 220 (Ala. 1996) (concluding that an insurance injured party carrier, as can long against the insured). bring as a he direct first action receives Thus, Alabama law still against a an judgment achieves the policy goal of facilitating suits against insurance carriers. In sum, Alabama’s direct action statute “is not radically dissimilar to Georgia law but rather pursues a similar public policy by somewhat different methods.” Alexander, 219 Ga. App. at 662, 466 S.E.2d at 610. The Court therefore finds that Georgia’s not public policy does prevent the application of Alabama law in this case. CONCLUSION Alabama law governs this dispute. Donaldson cannot, at this time, sue And under Alabama law, Old Republic directly. Accordingly, this action is dismissed without prejudice. IT IS SO ORDERED, this 11th day of May, 2015. S/Clay D. Land CLAY D. LAND CHIEF U.S. DISTRICT COURT JUDGE MIDDLE DISTRICT OF GEORGIA 8
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