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Watts v. Farmers Insurance Exchange

United States District Court, N.D. Alabama, Eastern Division

April 27, 2018

RODNEY WATTS, personal representative of the estate of LEIAH WATTS; C.W., by and through his father and next best friend, RODNEY WATTS; J.W., by and through his father and next best friend RODNEY WATTS; CURTIS WATTS, personal representative of the estate of EVELYN WATTS; BARRY MCBURNETT, personal representative of the estates of FAYE HOWARD and MARY ADAIR; RENEE STONE, individually and as mother and next best friend of V.S.; and TAMMY MCBURNETT, individually, Plaintiffs,
v.
FARMERS INSURANCE EXCHANGE; FARMERS GROUP, INC.; MID-CENTURY INSURANCE CO.; and Fictitious Parties 1, 2, 3, and 4, Defendants.

          MEMORANDUM OPINION AND ORDER

          VIRGINIA EMERSON HOPKINS United States District Judge

         I. Introduction and Procedural History[1]

         Plaintiffs bring this case against Defendants Farmers Insurance Exchange (the “Exchange”), Farmers Group Inc. (the “Group”), and Mid-Century Insurance Co. (“Mid-Century”) (collectively the “Defendants”) (Doc. 23). It was originally filed in the Circuit Court of Talledega County, Alabama. (Doc. 1-1 at 15). It was subsequently removed to the Northern District of Alabama on August 28, 2017. (Doc. 1). Following oral argument on previously filed motions to dismiss, Watts filed his Amended Complaint on November 30, 2017. (Doc. 23).

         The Defendants then filed two motions to dismiss and one motion to strike on December 14, 2017. (Docs. 24, 25, 26). First, the Defendants filed a Motion To Dismiss Watts's claims based on fraud. (Doc. 24). Second, the Defendants filed a Motion To Dismiss Watts's claims based on breach of contract and bad faith. (Doc. 25). Third, the Defendants filed a Motion To Strike one of the exhibits attached to the Amended Complaint. (Doc. 26). The parties have responded (Docs. 30, 31, 32) and replied (Docs. 34, 35, 36). The Court held oral argument on these issues on October 18, 2017, and on April 25, 2018. Accordingly, the motions are ripe for review.

         II. Relevant Background

         The following relevant background is copied verbatim from the Amended Complaint:

         STATEMENT OF FACTS; THE UNDERLYING ACCIDENT

16. On or about July 16, 2016, Leiah Watts was driving a 2014 Ford Expedition Truck on Alabama Highway 21 in Winterboro in Talladega, County, Alabama. Traveling with her as passengers were the following family members: M. Faye Howard, Mary Adair, Evelyn Foshee Watts, Tammy McBurnett, Renee Stone, [C.W.], [J.W.] and [V.S.].
17. In the afternoon, while the Watts family was traveling on Alabama Highway 21 in Winterboro in Talladega County, Alabama around 1:40 in the afternoon, the Expedition in which they were riding was struck by a vehicle driven by Wiley Marsh “Pete” Whitworth.
18. Wiley Mash “Pete” Whitworth was the “at fault” driver in the accident; that is, Mr. Whitworth was the sole cause of the accident. The Alabama Uniform Traffic Crash Report, attached hereto as Exhibit B, states that Mr. Whitworth's vehicle was the “primary contributing unit.” See, Exh. B., p. 1. Mr. Whitworth's liability insurance, State Farm, has offered its policy limits in this case, tacitly recognizing that Mr. Whitworth is at fault in the accident. See, Exh. C. In addition, representatives of the Defendants have stated that, with respect to the UM coverage at issue in this lawsuit, this case is a policy limits case. See, Exh. D.
19. Liability in this case is, therefore not contested.
20. As a result of this accident, the plaintiffs and/or their decedents suffered the following injuries:
a) Leiah Gatlin Watts was killed;
b) M. Faye Howard was killed;
c) Mary Adair was killed;
d) Evelyn Foshee Watts was killed; e) Tammy McBurnett suffered severe injuries that have required, to date, over twenty separate surgeries;
f) Renee Stone suffered serious injuries to her collarbone and arm as well as soft tissue injuries all over her body and nerve damage;
g) [C.W.] suffered serious injuries including a broken arm and lacerations to his head;
h) [V.S.] suffered serious psychological injuries as a result of being within the zone of danger at the time of the collision and watching the deaths and injuries of family members that included her grandmother, aunts and mother;
i) [J.W.] suffered serious psychological injuries as a result of being within the zone of danger at the time of the collision and watching the deaths and injuries of family members that included his grandmother, aunts and mother.

         STATEMENT OF FACTS: UNDERINSURED MOTORIST COVERAGE UNDER THE FARMERS/MID-CENURY POLICY

21. At the time of the accident, Rodney Watts and Leiah Watts had in full force and effect an automobile insurance policy issued and underwritten by Mid-Century Insurance Company, policy number 19292-84-84. The policy included UM/UIM coverage and insured a total of five vehicles. The policy was issued on June 18, 2016.
22. Under an intercompany insurance pooling agreement, Farmer's Exchange agreed to assume 51.75% of all premiums, risks and liabilities accrued by Mid-Century Insurance Company, while Mid-Century Insurance Company assumed 16% of all premiums, risks and liabilities accrued under its policies, including the policy issued to Rodney and Leiah Watts.
23. Upon information and belief, Farmer's Group, Inc. provided all administrative services in reference to the Watts' policy, including but not limited to the writing of the insurance policy, collection of premiums and evaluation of claims.
24. Rodney Watts purchased the automobile insurance policy from Farmers' agent, Nicole Ponder, in Oxford, Alabama. The purchase was done over the phone before the policy was issued on June 16, 2018. Rodney Watts talked to the agent about the policy. Rodney Watts told the agent that because the Watts' owned the Expedition, which was one of the vehicles he was getting insurance on, they often had a lot of extended family members riding with them on family trips, and he wanted to be sure they were protected in the event of an accident.
25. The agent went over the amount of liability and collision and other coverages and the terms of the policy that Rodney Watts was purchasing. When the agent got to the UIM section of the policy, she told Rodney Watts that he had five cars insured and that he had UIM coverage for all five cars and for all people in the vehicle. She assured him that all persons riding in any of the insured vehicles, including the Expedition, would have UM coverage up to $150, 000 per person in the event of an accident.
26. When Rodney Watts received the policy, he read the policy, including endorsements. Based upon his attempt to read the policy and the wording of the policy written by Farmers Group, Inc. employees for Mid-Century Insurance Company, it looked like what the agent told him was the truth.

         27. In the Alabama endorsement to the policy that sets forth the applicable uninsured motorist limits, the policy explains the following:

(1) The limit of liability for Uninsured Motorist coverage stated in the Declarations for each person for the occupied insured car, plus the sum of the highest limits of liability for Uninsured Motorists coverage stated in the Declarations for each person applicable to any other insured car on the policy, up to a maximum of two additional limits, is our maximum limit of liability for all damages.

         While the policy does list a maximum limit of liability per accident in the amount of $100, 000 plus two additional coverages for a total of $300, 000, the policy also explains that that maximum limit is “subject to the limit for each person” which means the $150, 000 per injured person limit trumps the maximum liability language.

28. The Alabama Uninsured Motorist Statute also provides that an insurance company may only legally restrict stacking under a single policy covering multiple vehicles to two coverages per injured person. § 32-7-23(c), Code of Alabama (1975).
29. After the terrible accident on July 16, 2016, Rodney Watts was told for the first time that he only had coverage for three vehicles for everyone in the vehicle rather than five and that the Defendants refused to pay $150, 000 per death or injury but rather insisted that the most they owed for all of the deaths and injuries in the accident combined was $300.000.00.
30. Had Rodney Watts known that the Defendants would only pay on three coverages, he would have obtained different insurance coverages in different amounts.
31. The deaths and injuries listed above were caused by an underinsured motorist as that term is defined in ยง 32-7-23(b)(4), Code of Alabama (1975). Accordingly, each person injured, or each estate of an individual killed in the accident is entitled to receive up to $150, 000 under the Farmers Insurance automobile policy. By unlawfully restricting the amount offered to the injured individuals and the decedents' estates to a total of ...

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