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Easterling v. Progressive Specialty Insurance Co.

Supreme Court of Alabama

September 15, 2017

Hershel Eugene Easterling, individually and as personal representative of the Estate of Charlotte Easterling
v.
Progressive Specialty Insurance Company

         Appeal from Chilton Circuit Court (CV-15-900095)

          SHAW, Justice.

         Hershel Eugene Easterling, both individually and as the personal representative of the estate of Charlotte Easterling, appeals from a summary judgment in favor of Progressive Specialty Insurance Company ("Progressive") on his claims seeking uninsured/underinsured-motorist ("UIM") benefits. We reverse and remand.

         Facts and Procedural History

         In December 2014, Hershel and his wife, Charlotte Easterling, were injured when their vehicle was rear-ended in Chilton County by a vehicle driven by Ashley Marie McCartney. In April 2015, the Easterlings sued McCartney in the Chilton Circuit Court, alleging that McCartney behaved negligently and/or wantonly at the time of the accident. The Easterlings' complaint also named Progressive, their insurer, as a defendant and included a count seeking to recover UIM benefits from Progressive.

         Following the filing of the underlying action, Charlotte died.[1] Subsequently, an estate was opened and Hershel was appointed personal representative of Charlotte's estate. The trial court later granted Hershel's motion seeking to substitute himself, in that capacity, as a named plaintiff.[2]

         Before trial, McCartney filed a "Suggestion of Bankruptcy" informing the trial court of her initiation of bankruptcy proceedings[3] and asserting, as a result, that, because the underlying action was allegedly "founded on a claim that a bankruptcy discharge would release, " the instant case "should be ceased."[4] In response, Progressive filed a motion and supporting brief requesting a summary judgment in its favor on Hershel's UIM claim. Specifically, Progressive argued that, under Alabama law, a plaintiff may seek to recover UIM benefits from his insurer only if the plaintiff is "legally entitled to recover damages" from the tortfeasor. See § 32-7-23(a), Ala. Code 1975.[5] Progressive contended that, because McCartney's bankruptcy filing "foreclose[d] [McCartney's] legal obligation to pay debts" -- including any judgment recovered against her by Hershel -- Hershel was not legally entitled to recover from McCartney in excess of McCartney's own liability-insurance policy limits and, thus, Hershel's claim for UIM benefits accordingly failed as a matter of law.

         In support of its position, Progressive cited, and sought to have applied, the rationale of cases in which this Court has interpreted the phrase "legally entitled to recover" to prevent the recovery of UIM benefits, including a workers' compensation plaintiff's inability to recover from a co-employee and a plaintiff's inability to recover damages in excess of a statutory cap when the defendant is a governmental entity. See Kendall v. United Servs. Auto. Ass'n, 23 So.3d 1119, 1125 (Ala. 2009) ("In this case, Kendall could recover no more than the statutory maximum of $100, 000 in damages from the County under § 11-93-2, Ala. Code 1975. Because Kendall had already recovered the statutory maximum of $100, 000, she was no longer 'legally entitled to recover' damages from the [tortfeasors]; therefore, she could not recover UIM benefits from her insurer."), and Ex parte Carlton, 867 So.2d 332, 338 (Ala. 2003) ("The workers' compensation benefits Carlton received are his only remedy against his employer. ... Therefore, Carlton is not 'legally entitled to recover damages from the owner or operator of an uninsured vehicle' as the plain language of § 32-7-23(a), Ala. Code 1975, or the clear and unambiguous provisions of his mother's State Farm policy require. Thus, he may not recover uninsured-motorist benefits under the policy."). Progressive maintained that its reasoning was not contrary to the purpose behind Alabama's statute requiring UIM coverage but that it was, instead, part and parcel of the purported condition precedent to recovery under that statute, namely, "the legal entitlement to recover from the tortfeasor the amount sought from the [UIM] carrier."

         In his response to Progressive's motion, Hershel disagreed that the Bankruptcy Code operated to prevent recovery as Progressive alleged. According to him, "[t]he [B]ankruptcy [C]ode ... is not set up to protect ... [an] entity from payments which they are contractually obligated to pay through an agreement with an innocent third party." He further observed that, according to 11 U.S.C. § 524(e), "discharge of the debtor [in bankruptcy] does not affect the liability of any other entity ... for such debt." According to those principles, Hershel maintained that the authorities cited by Progressive were inapposite and that Progressive's summary-judgment motion was due to be denied.

         Following a hearing, [6] the trial court granted Progressive's motion based on the holding that, because of McCartney's Chapter 7 bankruptcy filing, "[Hershel could] no longer obtain a judgment that ... McCartney would be responsible for that would invoke the UM/UIM carrier to pay." The trial court, finding "no just reason for delay, " certified its judgment as final pursuant to the requirements of Rule 54(b), Ala. R. Civ. P.

         Subsequently, Hershel filed a postjudgment motion requesting that the trial court "reconsider" its summary-judgment ruling. Before the trial court's disposition of that request, Hershel filed a notice of appeal to this Court.[7]

         Standard of Review

'"This Court's review of a summary judgment is de novo. Williams v. State Farm Mut. Auto. Ins. Co., 886 So.2d 72, 74 (Ala. 2003). We apply the same standard of review as the trial court applied. Specifically, we must determine whether the movant has made a prima facie showing that no genuine issue of material fact exists and that the movant is entitled to a judgment as a matter of law. Rule 56(c), Ala. R. Civ. P.; Blue Cross & Blue Shield of Alabama v. Hodurski, 899 So.2d 949, 952-53 (Ala. 2004). In making such a determination, we must review the evidence in the light most favorable to the nonmovant. Wilson v. Brown, 496 So.2d 756, 758 (Ala. 1986). Once the movant makes a prima facie showing that there is no genuine issue of material fact, the burden then shifts to the nonmovant to produce 'substantial evidence' as to the existence of a genuine issue of material fact. Bass v. SouthTrust Bank of Baldwin County, 538 So.2d 794, 797-98 (Ala. 1989); Ala. Code 1975, § 12-21-12. '[S]ubstantial evidence is evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved.' West v. Founders Life Assur. Co. of Fla., 547 So.2d 870, 871 (Ala. 1989)."'
"Prince v. Poole, 935 So.2d 431, 442 (Ala. 2006) (quoting Dow v. Alabama Democratic Party, 897 So.2d 1035, 1038-39 (Ala. 2004))."

Brown v. W.P. Media, Inc., 17 So.3d 1167, 1169 (Ala. 2009). Additionally, "'[t]his Court reviews de novo a trial court's [application] of a statute, because only a question of law is presented.'" State Farm Mut. Auto. Ins. Co. v. Bennett, 974 So.2d 959, 961 (Ala. 2007) (quoting Scott Bridge Co. v. Wright, 883 So.2d 1221, 1223 (Ala. 2003)).

         Discussion

         The issue presented is whether the bankruptcy discharge of a UIM defendant prevents an injured plaintiff from being able to recover UIM benefits under the plaintiff's own insurance policy. Hershel contends that the trial court erred in answering the foregoing question in the affirmative and in entering a summary judgment in favor of Progressive. More specifically, according to Hershel, the reasoning advanced by Progressive and accepted by the trial court is both contrary to the effect of a bankruptcy discharge, as indicated by the Bankruptcy Code, and unsupported by Alabama law. In support of his position, Hershel cites authority, including In re Jet Florida Systems, Inc., 883 F.2d 970, 973 (11th Cir. 1989), for the proposition that a bankruptcy discharge protects only the filing debtor and "will not act to enjoin a creditor from taking action against another who also might be liable to the creditor, " including, in particular, an insurer that may be secondarily liable.

         Progressive, on the other hand, argues that the trial court's ruling was correct in that it represents a "logical extension" of this Court's interpretation of the phrase "legally entitled to recover" under § 32-7-23(a) as discussed in Kendall and Ex parte Carlton, supra. Progressive maintains that this case involves a similar impediment to Hershel's recovery of UIM benefits because, it argues, the automatic stay and ultimate discharge of a tortfeasor's personal liability for damages via bankruptcy proceedings effectively "forecloses the ... legal obligation to pay debts." (Progressive's brief, at p. 3.) Progressive further contends that Jet and other cases on which Hershel relies stand only for the well settled proposition that a plaintiff may, despite the tortfeasor's bankruptcy filing, proceed against the tortfeasor's own insurer but do not hold that the plaintiff may go beyond that permitted recovery and seek UIM benefits from the plaintiff's own insurer.

"'This Court has held that "legally entitled to recover" means that "the insured must be able to establish fault on the part of the uninsured motorist, which gives rise to damages and must be able to prove ...

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