Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-1_15-cv-00224/USCOURTS-alsd-1_15-cv-00224-3/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1331 Fed. Question: Personal Injury

---

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

PHILLIP HEATON, )

)

)

)

)

)

)

)

)

)

Plaintiff,

vs. CIVIL ACTION NO. 15-224-CG-C

GEICO INSURANCE COMPANY

OF ALABAMA,

Defendant.

ORDER and MEMORANDUM OPINION

This matter is before the Court on a motion for summary judgment filed by 

Defendant Geico Insurance Company of Alabama (“Defendant”) (Doc. 46), response 

in opposition filed by Plaintiff Phillip Heaton (“Plaintiff”) (Doc. 53), and reply by

Defendant (Doc. 54). For the reasons stated below, Defendant’s motion is 

GRANTED.

I. FACTUAL BACKGROUND

In July 2009, Plaintiff resided with his parents, Jasper and Mary Heaton, in 

Foley, Alabama. At that time, Jasper and Mary owned a 2008 Kia Optima insured 

with Defendant under an Alabama automobile insurance policy (“the Policy”).1 

(Doc. 46-4). The Policy contained uninsured/underinsured motorist coverage (“UIM 

coverage”). Id. at 4. As it pertains to UIM coverage, the Policy explained as follows:

 1 There is a question as to whether the Kia Optima is a 2008 or 2009. Since the 

Policy indicates it is a 2008, that is what the Court uses.

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 1 of 12
2

Under the Uninsured Motorists Coverage we will pay damages for 

bodily injury caused by accident which the insured is legally entitled to 

recover from the owner or operator of the uninsured auto or hit-andrun auto arising out of the ownership, maintenance or use of that auto.

The amount of the insured’s recovery for these damages will be 

determined by agreement between the insured or his representative 

and us. The dispute may be arbitrated if an agreement cannot be 

reached.

Id. at 14. UIM coverage, however, “does not apply to bodily injury to an insured if 

the insured or his legal representative has made settlement or has been awarded a 

judgment of his claim without [Defendant’s] prior approval.” Id. 

As it relates to UIM coverage, the person or persons named in the declaration 

are not the only persons covered. Instead, “relatives of [the person(s) named in the 

declaration] if residents of his household” are also provided UIM coverage. Id. 

Defendant does not contest that Plaintiff meets this criteria. (Doc. 46-1, p. 2). 

Bodily injury to any person covered includes injury “resulting [in] sickness, disease 

or death.” Id. at 7. Although the language above primarily speaks to uninsured 

motorist or autos, the Policy also covers underinsured motorist or auto situations in 

UIM coverage claims. Id. at 14.

While a resident of his parents’ home, Plaintiff’s nephew needed a way back 

to Galveston, Texas for work. (Doc. 46-2, p. 2). Plaintiff’s parents were unable to 

drive to Texas, so Plaintiff drove his nephew to Texas using the 2008 Kia Optima 

his parents owned. Id. While in Texas on July 23, 2009, Gerald Ray Rivera

(“Rivera”) struck the 2008 Kia Optima Plaintiff was driving. Plaintiff suffered 

extensive physical injury and the 2008 Kia Optima was totaled. Id. at 5.

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 2 of 12
3

On August 25, 2009, a Texas division of Defendant’s company wrote 

Plaintiff’s father, Jasper Heaton, in accordance with Texas law regarding recovery 

of any deductible Jasper Heaton paid under the Policy. The letter stated, in 

relevant part:

Please be advised that in accordance with Section 542.204 of the Texas 

Insurance Code, we are notifying you that with respect to recovery of 

your deductible or our subrogation interest, we do not intend to take 

further collection actions against the third party(ies) who may be liable 

for this claim. As such, we hereby authorize you to bring an action at 

your option and your expense against the responsible third party(ies), 

if any, in order to attempt to recover your deductible.

(Doc. 53, p. 3). Jasper Heaton had a $500.00 deductible for any collision damage the 

2008 Kia Optima sustained. (Doc. 46-4, p. 4). The extent of Plaintiff’s contact with 

Defendant was related to reimbursement of certain medication and mileage 

expenses under Defendant’s “med pay” portion of the policy, which totaled 

approximately $5,000.00. (Doc. 46-2, pp. 8–9). The Policy capped medical payments

at $5,000.00. (Doc. 46-4, p. 4).

On July 1, 2011, Plaintiff filed suit against Rivera and Kia Motors 

Corporation in a Texas court, under representation of a Texas attorney. (Doc. 46-2, 

p. 27). Relevant to the instant motion, Plaintiff brought a negligence claim against 

Rivera for the injuries he sustained in the accident. Id. 32. During the pendency of 

the suit, Plaintiff’s Texas attorney was aware of the Policy. Id. at 11. Plaintiff

spoke with his Texas attorney about adding Defendant to the suit because of

Rivera’s “minimal coverage.” Defendant, however, was never added and an UIM 

claim was never filed. Id. at 16. The Texas attorney told Plaintiff that he would 

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 3 of 12
4

have to retain an Alabama attorney if he wanted to file an UIM claim. Id. at 20. 

Plaintiff testified that he did not send a letter to Defendant informing it that the 

lawsuit had been initiated in Texas. Id. at 21. Further, Plaintiff testified that he 

was unaware of whether the Texas attorney wrote Defendant informing it of the 

Texas lawsuit. Id. But evidence suggests Defendant was aware that Plaintiff filed

suit against Rivera in a Texas court. (Doc. 53, p. 4).

On November 20, 2012, Plaintiff and Rivera reached a final settlement in the 

amount of $5,000.00 for the negligence claim. (Doc. 46-2, p. 35). Thereupon, the 

Texas court entered a final judgment, which denied any further claims against 

Rivera in regards to the accident. Id. Plaintiff testified that he has no knowledge of 

whether the Texas attorney ever communicated with Defendant prior to entering 

settlement with Rivera. Id. at 22. Additionally, Plaintiff did not inform Defendant 

of the settlement, settlement specifics, or a potential UIM claim prior to entering 

settlement with Rivera. Id. at 24–25.

On April 28, 2015, Plaintiff, acting pro se, initiated the present suit. (Doc. 1). 

On October 27, 2015, Plaintiff, then represented by counsel, filed his First Amended 

Complaint. (Doc. 25). Therein he claimed Defendant breached the Policy by “failing 

to pay Plaintiff’s bodily injury and pain and suffering claim” that falls under the

Policy’s UIM coverage. Id. at 4. 

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 56(a) provides that summary judgment shall 

be granted: “if the movant shows that there is no genuine dispute as to any material 

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 4 of 12
5

fact and the movant is entitled to judgment as a matter of law.” The trial court’s 

function is not “to weigh the evidence and determine the truth of the matter but to 

determine whether there is a genuine issue for trial.” Anderson v. Liberty Lobby, 

Inc., 477 U.S. 242, 249 (1986). The mere existence of a factual dispute will not 

automatically necessitate denial; rather, only factual disputes that are material 

preclude entry of summary judgment. Lofton v. Sec’y of Dep’t of Children & Family 

Servs., 358 F.3d 804, 809 (11th Cir. 2004). "If the evidence is merely colorable, or is 

not significantly probative, summary judgment may be granted." Anderson, at 249-

250. (internal citations omitted).

Once the movant satisfies his initial burden under Rule 56(c), the non-moving 

party "must make a sufficient showing to establish the existence of each essential 

element to that party's case, and on which that party will bear the burden of proof 

at trial." Howard v. BP Oil Company, 32 F.3d 520, 524 (11th Cir. 1994)(citing 

Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)). Otherwise stated, the nonmovant must “demonstrate that there is indeed a material issue of fact that 

precludes summary judgment.” See Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 

(11th Cir. 1991). The non-moving party “may not rely merely on allegations or 

denials in its own pleading; rather, its response .... must be by affidavits or as 

otherwise provided in this rule be set by out specific facts showing a genuine issue 

for trial.” Vega v. Invsco Group, Ltd., 2011 WL 2533755, at *2 (11th Cir. 2011). In 

reviewing whether a non-moving party has met its burden, the Court must draw all 

justifiable inferences in favor of the non-moving party. Tipton v. Bergrohr GMBHCase 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 5 of 12
6

Siegen, 965 F.2d 994, 998 – 99 (11th Cir. 1992) (citations omitted). Thus the inquiry 

is “whether the evidence presents a sufficient disagreement to require submission to 

a jury or whether it is so one-sided that one party must prevail as a matter of law.” 

Liberty Lobby, 477 U.S. at 251–52.

III. DISCUSSION

Defendant contends that summary judgment is due because Plaintiff 

forfeited his right to UIM coverage under the Policy by failing to provide Defendant 

“with prior notice of a negotiated settlement and executed release with [Rivera] and 

his liability insurance carrier.” (Doc. 46-1, p. 4). In support of its position, 

Defendant cites to Lambert v. State Farm Mutual Automobile Insurance Company, 

576 So. 2d 160 (Ala. 1991), and its progeny. 

In Lambert, the Alabama Supreme Court evaluated the legal landscape of 

consent-to-settle clauses in uninsured/underinsured insurance policies within 

Alabama. Finding such clauses did not violate public policy, the court concluded 

that consent-to-settle clauses were necessary “to protect the underinsured motorist

insurance carrier’s subrogation rights against the tort-feasor (sic), as well as to 

protect the carrier against the possibility of collusion between the insured and the 

tort-feasor (sic) at the carrier’s expense.” 576 So. 2d at 164 (citation omitted). 

However, this protection should be counterbalanced with the insured’s guarantee 

that he “will receive the benefits of the bargain he has made.” Id. at 166. 

Addressing these dual interests, the Lambert Court set forth procedures to be 

applied in the context of UIM claim disputes. Id. The court explained, in relevant 

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 6 of 12
7

part:

(1) The insured, or the insured’s counsel, should give notice to the 

underinsured motorist insurance carrier of the claim under the policy 

for underinsurance benefits as soon as it appears that the insured’s 

damages may exceed the tortfeasor’s limits of liability coverage.

(2) If the tort-feasor’s (sic) liability insurance carrier and the insured 

enter into negotiations that ultimately lead to a proposed compromise 

or settlement of the insured’s claim against the tort-feasor (sic), and if 

the settlement would release the tort-feasor (sic) from all liability, then 

the insured, before agreeing to the settlement, should immediately 

notify the underinsured motorist insurance carrier of the proposed 

settlement and the terms of any proposed release.

(3) At the time the insured informs the underinsured motorist 

insurance carrier of the tort-feasor’s (sic) intent to settle, the insured 

should also inform the carrier as to whether the insured will seek 

underinsured motorist benefits in addition to the benefits payable 

under the settlement proposal, so that the carrier can determine 

whether it will refuse to consent to the settlement, will waive its right 

of subrogation against the tort-feasor (sic), or will deny any obligation 

to pay underinsured motorist benefits. If the insured gives the 

underinsured motorist insurance carrier notice of the claim for 

underinsured motorist benefits, as may be provided for in the policy, 

the carrier should immediately begin investigating the claim, should 

conclude such investigation within a reasonable time, and should 

notify its insured of the action it proposes with regard to the claim for 

underinsured motorist benefits.

(4) The insured should not settle with the tort-feasor (sic) without first 

allowing the underinsured motorist insurance carrier a reasonable 

time within which to investigate the insured’s claim and to notify its 

insured of its proposed action.

(5) If the uninsured motorist insurance carrier refuses to consent to a 

settlement by its insured with the tortfeasor, or if the carrier denies 

the claim of its insured without a good faith investigation into its 

merits, or if the carrier does not conduct its investigation in a 

reasonable time, the carrier would, by any of those actions, waive any 

right to subrogation against the tort-feasor (sic) or the tortfeasor’s 

insurer.

(6) If the underinsured motorist carrier wants to protect its 

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 7 of 12
8

subrogation rights, it must within a reasonable time, and in any event 

before the tort-feasor (sic) is released by the carrier’s insured, advance 

to its insured an amount equal to the tort-feasor’s (sic) settlement 

offer.

Lambert, 576 So. 2d at 167. Any procedure implemented must take the facts and 

circumstances of each case into consideration. Id.

Since Lambert was handed down, the Alabama Supreme Court has routinely 

rejected an insured’s UIM coverage claim where the insured failed to provide prior 

notice of a settlement and release with a tortfeasor to the UIM insurer. See Downey 

v. Travelers Prop. Cas. Ins. Co., 74 So. 3d 952, 957 (Ala. 2011) (answering a federal 

court’s certified question and concluding that the insured’s failure to give prior 

notice to the UIM insurer of a proposed settlement and release of a tortfeasor 

forfeited the UIM coverage); Overstreet v. Safeway Ins. Co. of Alabama, 740 So. 2d 

1053, 1060 (Ala. 1999) (upholding the trial court’s grant of summary judgment in 

favor of the UIM insurer where the insured failed to provide the UIM insurer with 

notice of settlement with the tortfeasor prior to entry of such settlement); Allstate 

Ins. Co. v. Beavers, 611 So. 2d 348, 353 (Ala. 1992) (reversing the trial court’s 

summary judgment decision and ordering summary judgment in favor of the UIM 

insurer where the insured failed to provide notice of a proposed settlement and 

release to the UIM insurer prior to entry of said settlement); Brantley v. State Farm 

Mut. Auto. Ins. Co., 586 So. 2d 184, 187–88 (Ala. 1991) (upholding the trial court’s 

grant of summary judgment in favor of the UIM insurer where the insured failed to 

provide the UIM insurer with notice of an UIM claim prior to reaching a settlement 

agreement and release with a tortfeasor). 

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 8 of 12
9

Here, the Policy contained UIM coverage that Plaintiff could file a claim 

against, and Plaintiff was aware of it in some manner since he contemplated adding

Defendant to the Texas suit given Rivera’s “minimum coverage.” (Doc. 46-2, p. 16). 

The Policy clearly required Plaintiff obtain prior written consent from Defendant 

before settling with Rivera if Plaintiff intended to pursue an UIM claim. (Doc. 46-4, 

p. 14). This requirement comports with Alabama law. Plaintiff, however, neither 

offers evidence that he or his Texas attorney provided Defendant with notice of the 

settlement and release regarding Rivera prior to entering into the settlement nor 

does he dispute that he did not provide such notice to Defendant. 

In an attempt to circumvent his failure to notify Defendant of the settlement 

and release, Plaintiff contends that, under Defendant’s August 25, 2009, letter, he 

“was not required to provide Defendant [ ] with the ‘Lambert’ notice because 

[Defendant] had effectively, if not ambivalently, waived any notice” requirement 

when Defendant “specifically wrote that [it] was not pursuing its subrogation 

interest.” (Doc. 53, p. 1). Further, Plaintiff contends that Defendant was aware of 

the Texas lawsuit prior to the present action. Id. at 2. Defendant responds that the 

letter in question was not in any way related to a potential UIM claim or a waiver of 

its notice of settlement and settlement terms right. (Doc. 54, p. 2).

To begin with, Plaintiff’s contention that Defendant’s knowledge of the Texas 

lawsuit has some bearing can be quickly dismissed. “[T]he relevant notice is not 

notice of the action against the alleged tortfeasor, but notice of the intent to settle 

that action and to pursue UIM coverage for additional damages.” Ex parte Morgan, 

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 9 of 12
10

13 So. 3d 385, 389 (Ala. 2009).

In regards to the letter, as illustrated above, on August 25, 2009, Defendant 

sent a letter to Jasper Heaton, Plaintiff’s father, after the accident but before 

Plaintiff brought suit against Rivera. See (Doc. 53, p. 3). Defendant sent the letter 

in accordance with Texas law, which states, in its entirety:

(a) Notwithstanding any other provision of this code and except as 

provided by Subsection (b), if an insurer is liable to an insured for a 

claim that is subject to a deductible payable by the insured and a third 

party may be liable to the insurer or the insured for the amount of the 

deductible, the insurer shall:

(1) take action to recover the deductible against the third party 

not later than the first anniversary of the date the insured’s 

claim is paid; or

(2) pay the amount of the deductible to the insured.

(b) An insurer is not required to take action or pay the amount of the 

deductible as required by Subsection (a) if, not later than the earlier of 

the first anniversary of the date the insured’s claim is paid or the 90th 

day before the date the statute of limitations for a negligence action 

expires, the insurer:

(1) notifies the insured in writing that the insurer does not 

intend to take further collection actions against the third 

party; and 

(2) authorizes the insured to take further collection actions.

(c) This section applies regardless of whether the third party who may 

be liable for the amount of the deductible is insured or uninsured.

Tex. Ins. Code Ann. art. 542.204 (West 2004).

Review of this statute clarifies that the August 25, 2009, letter is not as 

sweeping as Plaintiff contends but limited to Defendant’s unwillingness to pay or 

seek recovery of any collision deductible paid by Jasper Heaton. To be sure, the 

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 10 of 12
11

title of the statute characterizes its nature as addressing an “Action to Recover 

Deductible.” Thus, the letter waived subrogation against Rivera as it relates to the 

deductible and merely authorized Jasper Heaton “to attempt to recover his 

deductible,” if he even paid one. (Doc. 53, p. 3). And the deductible relates to 

property damage the 2008 Kia Optima sustained, not physical injury Plaintiff 

suffered. 

Even given the deferential standard Plaintiff is due, it cannot be said 

Defendant “effectively, if not ambivalently, waived [in the letter] any notice” it was 

due according to Lambert for several reasons. First, Plaintiff cites no caselaw in 

support of his position. Second, under Alabama law, waiver of a contractual right 

occurs when a party voluntarily relinquishes a known right, benefit, or advantage. 

Buco Bldg. Constructors, Inc. v. Myrick, 863 So. 2d 1130, 1135 (Ala. Civ. App. 2003); 

Waters v. Taylor, 527 So. 2d 139, 141 (Ala. Civ. App. 1988). Nowhere does the letter 

allude to or intimate that Defendant was waiving its notice rights or subrogation 

rights against Rivera as they may relate to an UIM claim brought by Plaintiff under 

the Policy, expressly or implicitly. The letter does not even mention Plaintiff’s 

name or his injuries. Furthermore, when the August 25, 2009, letter was sent, 

Plaintiff had yet to file the Texas lawsuit. If the lawsuit had yet to be filed and 

there was no communication otherwise, Defendant could not be aware that a claim 

for UIM coverage was coming down the pike. If Defendant was unaware of an UIM 

claim regarding Plaintiff, it cannot be said to have knowing and voluntarily 

relinquished its right to notice of the settlement or subrogation under Lambert. 

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 11 of 12
12

Moreover, Lambert’s general rules contemplate that effective waiver occurs after 

notice of the potential settlement and UIM claim. See Lambert, 576 So. 2d at 167. 

This being because, after notice, the UIM insurer is afforded a reasonable time in 

which it may conduct an investigation and determine whether it wants to “refuse to 

consent to the settlement, [ ] waive its right of subrogation against the tortfeasor, or 

[ ] deny any obligation to pay underinsured motorist benefits.” Id. To conclude that 

the letter sent approximately two years before filing suit against Rivera was a 

waiver under Lambert of a then unknown right effectively renders Defendant’s 

right to investigate before consent an empty measure. 

Thus, Plaintiff forfeited his right to receive UIM benefits when he settled 

with Rivera and his insurer and gave a full release, without providing adequate 

notice to Defendant of the proposed settlement and of the terms of the release. 

Based on this, Defendant is due summary judgment as a matter of law.

IV. CONCLUSION

Given the above, Defendant’s Motion for Summary Judgment (Doc. 46) is 

GRANTED. 

DONE and ORDERED this 23rd day of January, 2017.

/s/ Callie V. S. Granade

SENIOR UNITED STATES DISTRICT JUDGE

Case 1:15-cv-00224-CG-C Document 56 Filed 01/23/17 Page 12 of 12