IN THE UNITED STATES DISTRICT COURT 

 FOR THE SOUTHERN DISTRICT OF ALABAMA 

 SOUTHERN DIVISION 

PROGRESSIVE SPECIALTY )

INSURANCE COMPANY, )

 )

Plaintiff, ) 

 ) 

v. ) CIVIL ACTION 08-0719-WS-B 

 ) 

E&K TRUCKING, INC., et al., ) 

 ) 

Defendants. )

ORDER

 This matter comes before the Court on defendant George Dial’s Motion to Dismiss (doc. 

41) and his Statement of Objection (doc. 44) to the Magistrate Judge’s Report and 

Recommendation (doc. 39). The issues presented in these filings have been briefed and are now 

ripe for disposition. 

I. Background.

 In December 2006, George Dial allegedly sustained permanently disabling injuries in 

Monroeville, Alabama when a load of lumber fell on him after a safety footing device on a trailer 

collapsed.1

 This incident has spawned a pair of lawsuits, including one in this District Court and 

one in the Circuit Court for Clarke County, Alabama. 

 A. The State and Federal Lawsuits. 

 In the Clarke County action, which commenced in July 2008, Dial sued Willie Kidd and 

E&K Trucking, Inc., on theories of negligence and wantonness. In bringing such claims, Dial 

alleged that he “was employed as an independent contractor and/or employee” of Kidd and 

E&K, and that they “negligently and/or wantonly maintained [the] safety footing device which 

caused the incident.” (Doc. 48, Exh. A, ¶¶ 7, 10.) Dial also interposed a claim against 

 1

 In one pleading, Dial described these events in the following terms: “While 

waiting to attach a loaded trailer, the safety footing device collapsed causing trailer to tilt and the 

load to come down on Plaintiff. The load hit Plaintiff’s back and caused him to become 

disabled.” (Doc. 48, Exh. A, ¶ 8.) 

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defendant Kidd under Alabama Code § 25-5-11(c)(2), alleging that Kidd had breached a duty to 

repair or maintain the trailer’s safety guard provided by the manufacturer. (Id., ¶¶ 19-20.) In 

answer to Dial’s complaint, Kidd and E&K denied all material allegations and invoked the 

affirmative defenses of improper venue, immunity, contributory negligence, assumption of the 

risk, set-off, and last clear chance. (Doc. 48, Exh. B.) The Clarke County action remains 

pending today, although it has been stayed. 

 In December 2008, nearly five months after Dial filed the state court action, Progressive 

Specialty Insurance Company brought a declaratory judgment action in this District Court 

against named defendants E&K, Kidd, and Dial. In its Complaint (doc. 1), Progressive alleged 

that it had issued a policy of commercial auto insurance to E&K, that Dial was a listed driver on 

the policy, and that the truck Dial was operating at the time of the accident was an insured 

automobile under that policy. Nonetheless, Progressive seeks a declaration that it is owes no 

duty to defend or indemnify E&K or Kidd in relation to the Clarke County action because “Dial 

was acting as an employee of E&K and Kidd at the time of this accident,” such that E&K and 

Kidd “are not entitled to liability coverage for any actions filed against them by Dial.” (Doc. 1, 

¶ 10.)2

 On its face, the Progressive policy excluded coverage for bodily injury to E&K 

employees injured within the course of their employment. Accordingly, the singular question 

presented in this declaratory judgment action is whether Dial was an employee (in which case 

the Progressive policy would appear to exclude coverage) or an independent contractor (in which 

case the cited exclusions to coverage would not apply) with respect to E&K and Kidd. 

Progressive’s Complaint identifies no other types of policy exclusions or other provisions that it 

contends would excuse it from defending and indemnifying E&K and Kidd in the underlying 

state court action. 

B. Progressive and the Stay of the Clarke County Action. 

 Progressive was not initially joined as a party in Dial’s state court lawsuit. However, in 

January 2009, Progressive obtained leave to intervene in the Clarke County action “for the 

 2

 Specifically, Progressive invokes a policy exclusion for obligations for which an 

insured “may be held liable under workers’ compensation,” as well as an exclusion for bodily 

injury to the “employee of any insured arising out of ... [t]hat employee’s employment by any 

insured.” (Doc. 1, ¶ 10.) 

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purpose of filing a motion to stay the proceedings.” (Doc. 48, Exh. C, at 1.) It appears that no 

party has asserted any causes of action against Progressive in the state court action, nor has 

Progressive filed a complaint in intervention in that case to join any claims against any other 

party. The state court judge granted Progressive’s request for intervention on January 15, 2009. 

(Doc. 48, Exh. E.)3

 Contemporaneously with its motion for intervention, Progressive filed a motion to stay 

Dial’s lawsuit against E&K and Kidd. The motion to stay expressly identified the pending 

declaratory judgment action in this District Court, and alleged that “[i]t will promote judicial 

economy and efficiency to first have a resolution of the coverage issues before the parties incur 

the expense of preparing for trial and conducting the trial of this case.” (Doc. 48, Exh. D, ¶ 3.) 

The state court evidently deemed this contention persuasive, inasmuch as it granted 

Progressive’s motion to stay by endorsement on April 13, 2009. (Doc. 48, Exh. F.) Thus, the 

Clarke County Circuit Court has voluntarily stepped aside to allow this District Court to resolve 

the insurance coverage issues posed by Progressive before authorizing the state court action to 

resume. The Court’s understanding is that the Clarke County action remains stayed today, 

awaiting resolution of these declaratory judgment proceedings. 

C. E&K’s Pattern of Noncompliance and Nonparticipation. 

 The most significant development to date in this declaratory judgment action concerns 

the status of E&K. Progressive filed a return of service (doc. 5) reflecting service of process on 

E&K via certified mail on January 10, 2009. When E&K and Kidd did not answer or respond to 

the complaint in a timely manner, the Clerk of Court entered a default (doc. 12) against both 

defendants on February 18, 2009, pursuant to Rule 55(a), Fed.R.Civ.P.4

 3

 This is so, despite the requirement that a motion to intervene “shall be 

accompanied by a pleading setting forth the claim or defense for which intervention is sought.” 

Rule 24(c), Ala.R.Civ.P. By all appearances, Progressive has never filed a pleading setting forth 

any claims or defenses in the Clarke County action. 

4

 Defendant George Dial also failed to file an answer or other responsive pleading 

for quite some time and, indeed, did not answer the Complaint and Amended Complaint until 

March 9, 2010, some 13 months after Progressive first returned service on him. (See docs. 7, 

34.) Nonetheless, the Clerk of Court did not enter a default against Dial in the interim for the 

simple reason that Progressive did not request same. To this day, Dial apparently denies that he 

has been properly served with process in this action. 

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 Thereafter, this action was delayed for several months upon the revelation that there were 

ongoing Chapter 11 bankruptcy proceedings initiated by E&K. (Doc. 14.) On September 8, 

2009, however, Magistrate Judge Bivins entered an Order (doc. 23) providing for this litigation 

to move forward because the Bankruptcy Court had granted Progressive’s request for relief from 

the automatic stay to litigate this declaratory judgment action. A short time later, E&K 

submitted a letter (authored by Kidd) stating that E&K lacked the means to obtain counsel and 

that the company no longer exists. (Doc. 26.) On February 26, 2010, Judge Bivins entered an 

Order in which she (i) cited appropriate authority for the proposition that corporations such as 

E&K are forbidden from appearing in federal court pro se, (ii) indicated that E&K must obtain 

counsel on or before March 22, 2010, and (iii) cautioned E&K that failure to comply in a timely 

manner “could result in sanctions, including the entry of a default judgment.” (Doc. 30, at 3.) 

E&K did not obtain counsel; instead, Kidd simply refiled his previous letter stating that E&K 

could not afford a lawyer and did not exist. (Doc. 35.) 

 In light of the foregoing circumstances, Magistrate Judge Bivins entered a Report and 

Recommendation (doc. 39) on April 16, 2010, recommending entry of default against E&K for 

failure to comply with her directive that it obtain counsel.5

 Neither E&K nor Kidd has submitted 

objections to that Report and Recommendation; however, Dial has done so. 

 5

 In so doing, Judge Bivins suggested that the February 18, 2009 Clerk’s Entry of 

Default against E&K was ineffective because it “did not take into account the fact that E&K had 

filed a Chapter 11 Bankruptcy Petition” and Progressive had not obtained relief from the 

automatic stay prior to seeking that default. (Doc. 39, at 3.) This Court agrees. The record 

reflects that E&K had filed for Chapter 11 protection in the U.S. Bankruptcy Court for the 

Southern District of Alabama on May 8, 2008 (doc. 10, Exh. A, at 3), and that Progressive was 

not authorized by the Bankruptcy Court to commence this litigation against E&K thereafter. 

Accordingly, the Clerk’s Entry of Default (doc. 12) dated February 18, 2009 is set aside as to 

defendant E&K, inasmuch as E&K was at that time protected by the automatic stay provisions of 

11 U.S.C. § 362. Nothing herein rescinds or modifies the Clerk’s Entry of Default as to 

defendant Willie Kidd; to the contrary, the Court specifically finds that Kidd remains in default 

today and that he is barred from participating in these proceedings as to liability except insofar as 

he may petition the Court to set aside the default pursuant to Rule 55(c), Fed.R.Civ.P. See, e.g., 

Tyco Fire & Sec., LLC v. Alcocer, 2007 WL 542583, *3 (11th Cir. Feb. 22, 2007) (“The entry of 

a default against a defendant ... severely limits the defendant’s ability to defend the action.”); 

Twist and Shout Music v. Longneck Xpress, N.P., 441 F. Supp.2d 782, 783 (E.D. Tex. 2006) 

(“The effect of the entry of default is that it cuts off the defendants’ right to appear in the case 

with respect to liability issues.”). 

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II. Dial’s Motion to Dismiss. 

 Logically, it makes sense to address Dial’s Motion to Dismiss prior to considering his 

Objections to the Report and Recommendation. After all, if the Motion to Dismiss is granted, 

this entire action will evaporate, thereby mooting Dial’s stated concerns as to the Report and 

Recommendation. The premise of Dial’s Motion is that this Court should exercise its discretion 

to refrain from hearing this declaratory judgment action because of the pendency of the Clarke 

County action, in which Dial contends the same or similar legal issues have been joined by and 

between the same parties. Progressive disputes the existence of any such overlap. 

 A. Governing Legal Principles. 

 It is well-settled that the Declaratory Judgment Act (under which Progressive brought this 

action) is properly “understood to confer on federal courts unique and substantial discretion in 

deciding whether to declare the rights of litigants.” Wilton v. Seven Falls Co., 515 U.S. 277, 

286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). Indeed, the Supreme Court has “repeatedly 

characterized the Declaratory Judgment Act as an enabling Act, which confers a discretion on 

the courts rather than an absolute right upon the litigant.” Id. at 287 (citations omitted). As the 

Eleventh Circuit has observed, the Act “only gives the federal courts competence to make a 

declaration of rights; it does not impose a duty to do so.” Ameritas Variable Life Ins. Co. v. 

Roach, 411 F.3d 1328, 1330 (11th Cir. 2005); see also Prudential Ins. Co. of America v. Doe, 140 

F.3d 785, 789 (8th Cir. 1998) (“The Supreme Court’s decision in Wilton ... vests the district 

courts with broad discretion in deciding whether to hear a declaratory judgment action.”). “The 

desire of insurance companies ... to receive declarations in federal court on matters of purely 

state law has no special call on the federal forum.” Westchester Surplus Lines Ins. Co. v. Romar 

House Ass’n, Inc., 2008 WL 5412937, *2 (S.D. Ala. Dec. 29, 2008) (quoting State Auto Ins. 

Companies v. Summy, 234 F.3d 131, 136 (3rd Cir. 2000)). 

 Nearly seven decades ago, the Supreme Court opined that it would be both 

“uneconomical” and “vexatious” for a federal district court to hear a declaratory judgment 

action, concurrently with ongoing proceedings involving the same parties and same legal issues 

(not arising under federal law) in state court. Brillhart v. Excess Ins. Co. of America, 316 U.S. 

491, 495, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). Brillhart admonished lower courts scrupulously 

to avoid “[g]ratuitous interference with the orderly and comprehensive disposition of a state 

court litigation.” Id. In the wake of Brillhart, courts in this Circuit have long recognized that 

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they have discretion to “decline to entertain a declaratory judgment action on the merits when a 

pending proceeding in another court will fully resolve the controversy between the parties.” 

Ven-Fuel, Inc. v. Department of the Treasury, 673 F.2d 1194, 1195 (11th Cir. 1982); see also 

Federal Reserve Bank of Atlanta v. Thomas, 220 F.3d 1235, 1247 (11th Cir. 2000) (“A court may 

exercise its discretion to dismiss a declaratory judgment action in favor of a pending state court 

proceeding that will resolve the same state law issues.”). 

B. Exercise of Discretion using Ameritas Guideposts.

 In Ameritas Variable Life Ins. Co. v. Roach, the Eleventh Circuit furnished district courts 

with detailed guidance in how to wield their Wilton/Brillhart discretion under the Declaratory 

Judgment Act in the presence of parallel state proceedings. Ameritas emphasized the importance 

of balancing interests of federalism, comity, and efficiency in determining whether to hear a 

declaratory judgment action in those circumstances. 411 F.3d at 1330-31.6

 To assist district 

courts in this endeavor, Ameritas promulgated a non-exhaustive set of “guideposts” to be 

considered, including: (i) the state’s interest in deciding the matter; (ii) whether a judgment in the 

federal action would completely resolve the controversy; (iii) whether the declaratory judgment 

action would clarify the parties’ legal relations; (iv) whether the federal action amounts to 

procedural fencing; (v) whether a ruling in the federal action would increase friction between 

federal and state courts or otherwise encroach on state proceedings; (vi) whether a superior 

alternative remedy exists; (vii) whether underlying facts are important to informed resolution of 

the matter; (viii) whether the state court is better situated than the federal court to evaluate those 

facts; and (ix) the nexus (if any) between the underlying issues and state law/policy, and whether 

federal common or statutory law dictates a resolution of the declaratory action. See id. at 1331; 

see also Lexington Ins. Co. v. Rolison, 434 F. Supp.2d 1228, 1238-44 (S.D. Ala. 2006) (applying 

Ameritas guideposts in context of declaratory judgment action filed by insurer where putative 

 6

 These considerations have been echoed by other appellate courts. See, e.g.,

Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (federal court 

“should discourage litigants from filing declaratory actions as a means of forum shopping; and it 

should avoid duplicative litigation”); Mitcheson v. Harris, 955 F.2d 235, 237-39 (4th Cir. 1992) 

(citing as reasons to dismiss declaratory actions the philosophy of judicial federalism, as well as 

pragmatic concerns of efficiency and comity). 

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insured had filed state court action against insurer based on large money judgment against 

insured after insurer failed to defend insured). 

 Upon careful analysis of the Ameritas factors, the Court concludes that they militate 

strongly in favor of denying Dial’s Motion to Dismiss.7

 With regard to “the strength of the 

state’s interest in having the issues raised in the federal declaratory action decided in the state 

courts,” Ameritas, 411 F.3d at 1331, that interest is weak here, given that the presiding judge in 

the Clarke County action expressly deferred to a federal court’s resolution of those issues by 

granting the stay requested by Progressive. Surely, he would not have done so if there were a 

compelling state interest in having Alabama courts decide these issues. As for “whether the 

 7

 The parties’ briefs omit any discussion of Ameritas principles; instead, 

Progressive focuses its opposition exclusively on arguments that this action and the Clarke 

County action do not share common issues and that Dial’s Motion to Dismiss is untimely. 

Neither of those objections is persuasive. To be sure, there is some question as to whether the 

Clarke County action technically qualifies as a parallel state action for Wilton/Brillhart purposes. 

See, e.g., State Farm Fire and Cas. Co. v. Knight, 2010 WL 551262, *3 (S.D. Ala. Feb. 11, 

2010) (collecting cases as to what constitutes “parallel state court action” in Wilton/Brillhart

abstention context). But notwithstanding Progressive’s stubborn insistence to the contrary, it is 

absolutely clear that the question of whether Dial was an employee or independent contractor 

(which is the centerpiece of this declaratory judgment action) has been joined in, and is integral 

to, the Clarke County action. In the state court action, E&K and Kidd have expressly pleaded 

immunity as a defense. If Dial was their employee, then E&K and Kidd would enjoy immunity 

from his claims for injuries sustained in the course of his employment, as a matter of Alabama 

law. See, e.g., Parker v. Thyssen Min. Const., Inc., 428 So.2d 615, 617 (Ala. 1983) (“It is wellsettled that an action brought under our Workmen’s Compensation Act is the exclusive remedy 

in situations where the employee sues his employer for injury in the course of his 

employment.”); Slagle v. Reynolds Metals Co., 344 So.2d 1216, 1217 (Ala. 1977) (workers’ 

compensation act “[w]ithout question ... provides immunity for an employer for injuries arising 

out of and in the course of employment”). Thus, both this declaratory judgment action and the 

Clarke County action confront precisely the same question, to-wit: Dial’s status as an employee 

or independent contractor. 

As for Progressive’s alternative argument that the Motion to Dismiss is time-barred 

because it postdated Dial’s answer, this contention is soundly refuted by the text of Rule 12 and 

interpretive case law. See, e.g., Rule 12(h)(2), Fed.R.Civ.P. (defense of failure to state a claim 

on which relief can be granted may be raised in a pleading, by motion under Rule 12(c), or at 

trial); Vanzant v. Washington Metropolitan Area Transit Authority, 557 F. Supp.2d 113, 116 n.1 

(D.D.C. 2008) (“as a defendant may move for failure to state a claim at any time before the end 

of trial, and as the plaintiff has had ample notice as well as an opportunity to respond, the court 

cannot discern any prejudice in considering the argument on the merits”). The Motion to 

Dismiss is not untimely. 

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judgment in the federal declaratory action would settle the controversy,” id., it certainly could. If 

this Court were to determine that Dial was an employee of E&K and Kidd and that his 

complained-of injuries were suffered in the course of that employment, that determination could 

be conclusive as to both this federal declaratory action (in that Progressive’s policy exclusion 

would bar coverage) and the Clarke County action (in that E&K and Kidd’s immunity defense 

would be meritorious and Dial would be limited to worker’s compensation remedies).8

 

Moreover, it cannot seriously be disputed that “the federal declaratory action would serve a 

useful purpose in clarifying the legal relations at issue,” id., so as to favor denial of 

Wilton/Brillhart abstention. The parties obviously require clarification as to Dial’s employment 

status, and this action would decide just that. 

 Continuing on with the Ameritas guideposts, there is no indication in the record, and Dial 

does not argue, that this federal declaratory action is the product of improper “procedural 

fencing,” id. In fact, Progressive was not even a party to the Clarke County action when it filed 

the declaratory judgment action in federal court, and believed it could not join that state court 

action as an active litigant because it was furnishing a defense to E&K and Kidd therein. To 

Progressive, filing a declaratory judgment action was not an exercise in strategic maneuvering, 

but appeared to be its only means of being heard at all. Further, it is quite plain that the question 

of “whether the use of a declaratory action would increase the friction between our federal and 

state courts and improperly encroach on state jurisdiction,” id., must be answered in the negative 

here. Far from resenting or opposing federal encroachment, the Clarke County judge invited it 

by voluntarily stepping aside to allow this District Court to perform the heavy lifting. As for the 

next Ameritas guidepost, there is no “alternative remedy that is better or more effective,” id. If 

this Court were to abstain from hearing Progressive’s declaratory action, the result would be an 

awkward and unproductive stalemate. Both the federal and state courts would be deferring to 

each other with no one stepping forward to decide the issues joined in both cases. Additionally, 

the Court perceives no basis for concluding that the Clarke County court is “in a better position 

to evaluate [the underlying] factual issues than is the federal court,” id., so this guidepost cannot 

 8

 Dial recognizes as much when he admits in his reply brief that “if this case 

proceeds and Progressive obtains a judgment from this Court that there is no insurance coverage 

because Mr. Dial was an employee at the time of the accident, such a ruling will collaterally 

estop Mr. Dial from further litigating that issue in the state court action.” (Doc. 50, at 3.) 

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support abstention, either. Finally, while there may be a “nexus between the underlying factual 

and legal issues and state law and/or public policy,” id., that linkage is not so profound as to 

outweigh the other guideposts in this case, all of which point against abstention. 

 In short, after considering all of the relevant facts and circumstances, and paying special 

attention to the Ameritas guideposts, the Court concludes that it would not be appropriate to 

exercise its discretion under the Declaratory Judgment Act to abstain from hearing Progressive’s 

claims because of the pendency of parallel proceedings in state court. The essential point is this: 

The state court has clearly and unambiguously signaled that it wants the federal court to decide 

the insurance coverage issues raised by Progressive’s Complaint, even where those issues 

overlap or duplicate claims and defenses presented in the Clarke County action. The state court 

having ruled that Dial’s claims against Kidd and E&K will be stayed until this federal 

declaratory action is concluded, it would be the height of folly for this Court to volley the ball 

back across the net to the Clarke County court, effectively saying, “No, after you. I insist.” 

Such a game of “hot potato” would benefit no one. For all of these reasons, the Court will not 

exercise its discretion under Wilton/Brillhart principles to abstain from hearing Progressive’s 

declaratory action because of the pendency of related state court litigation. Accordingly, Dial’s 

Motion to Dismiss (doc. 41) is denied. This action will proceed at this time. 

III. Dial’s Objections to the Report and Recommendation.

 The remaining legal issue ripe for disposition at this time concerns Dial’s objections to 

the Report and Recommendation. As noted supra, the Magistrate Judge has recommended that a 

default be entered against E&K because that defendant “has failed to comply with the Court’s 

directive to secure counsel” and has wrongly assumed “that financial hardship somehow relieves 

it of the obligation to defend this action.” (Doc. 39, at 3-4.) 

 From review of the court file, it is absolutely clear that (i) E&K disregarded the 

Magistrate Judge’s specific directive that it retain counsel in this action; (ii) E&K never filed an 

answer or other responsive pleading, despite being served with process more than a year ago; and 

(iii) E&K exhibited unwillingness to defend against or participate in this action, instead 

proffering vague protestations that it does not know why its insurance carrier sued it and it does 

not have any money. The conclusion that E&K has no intention of defending itself in these 

proceedings is underscored by its failure to object to the Report and Recommendation 

recommending that it be defaulted. There is ample authority for the proposition that entry of 

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default against E&K would be an appropriate sanction under these circumstances. See, e.g., 

Equity Lifestyle Properties, Inc. v. Florida Mowing and Landscape Service, Inc., 556 F.3d 1232, 

1240 (11th Cir. 2009) (“A district court need not tolerate defiance of reasonable orders.”); Eagle 

Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298, 1306 (11th Cir. 2009) (“A court 

may impose sanctions for litigation misconduct under its inherent power.”); In re Knight, 833 

F.2d 1515, 1516 (11th Cir. 1987) (“Where a party offers no good reason for the late filing of its 

answer, entry of default judgment against that party is appropriate.”); Atlantic Recording Corp. 

v. Ellison, 506 F. Supp.2d 1022, 1025-26 (S.D. Ala. 2007) (“While modern courts do not favor 

default judgments, they are certainly appropriate when the adversary process has been halted 

because of an essentially unresponsive party.”) (citation omitted). 

 Faced with unmistakable evidence of noncompliance with court directives by its 

recalcitrant co-defendant, Dial nevertheless objects to the Report and Recommendation. 

Interestingly, Dial makes no pretense of justifying or excusing E&K’s behavior, and does not 

maintain that the sanction of default is impermissible in these circumstances. Instead, Dial’s sole 

objection is that, if E&K “is not interested in defending against Progressive’s suit, defendant Dial 

should be permitted to litigate the coverage issues.” (Doc. 44, at 2.) The timing and posture of 

this argument are perplexing. After all, the Report and Recommendation did not purport to 

adjudicate Dial’s rights as a defendant joined in this declaratory judgment action since its 

inception. (See doc. 1.) The Magistrate Judge offered no opinions as to whether Dial is or is not 

entitled to be heard on the coverage issues presented in Progressive’s Complaint. Furthermore, 

Dial identifies no authority for the proposition that entry of a default against E&K would 

somehow compromise or impair Dial’s ability to litigate the insurance coverage issues. By all 

appearances, if indeed Dial has a right to be heard on the coverage issues presented in this 

matter, that right is distinct from and independent of E&K’s status in the lawsuit, and would 

therefore survive any default entered against E&K. Certainly, Dial’s Objections do not identify 

any contrary authority.9

 The net result is that it is difficult to perceive -- and Dial has failed to 

explain -- how E&K’s default would affect him at all vis a vis coverage issues.

 9

 The parties’ briefs on this subject focus on the Eleventh Circuit’s decision in Mt. 

Hawley Ins. Co. v. Sandy Lake Properties, Inc., 425 F.3d 1308 (11th Cir. 2005). The Mt. Hawley

panel addressed the right of a third-party claimant to intervene in a declaratory judgment action 

between insurer and insured. Mt. Hawley involved a specific, narrow application of Rules 

(Continued) 

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 Simply put, Dial has not come forward with any persuasive reason why the Court should 

excuse E&K’s pattern of disregarding court orders and refusing to participate in this litigation. 

Nor has Dial demonstrated that its ability to litigate coverage issues will be diminished or 

destroyed if a default is entered against E&K. The Court finds that the Report and 

Recommendation is well-taken, that the severe sanction of default is appropriate given the 

circumstances presented here, and that lesser sanctions would be inadequate. Accordingly, the 

Report and Recommendation (doc. 39) is adopted as the opinion of this Court. Dial’s Statement 

of Objection (doc. 44) is overruled, and default is hereby entered against defendant E&K 

Trucking, Inc., based on its failure to comply with judicial directives to secure counsel, as well as 

its total lack of participation in this lawsuit. 

 Notwithstanding the parties’ briefing on the subject, there has been no motion that would 

place before the Court the issue of Dial’s standing to litigate coverage issues with Progressive in 

this action. Dial is a named defendant who has filed an answer. The claims joined between 

Progressive and Dial herein will proceed. In the absence of a proper motion and full briefing, the 

Court will not embark on a tangent here by rendering opinions as to a collateral issue raised by 

the parties in the context of objections to a Report and Recommendation that was entirely silent 

on the subject of Dial’s rights (or lack thereof) to litigate the insurance coverage issues.10

 

24(a)(2) and 24(b), Fed.R.Civ.P. By contrast, Dial is not attempting to intervene here. He does 

not have to intervene, because Progressive named him as a defendant at the outset of this case. 

As such, whether Dial could or could not meet the prerequisites of Rule 24 to intervene had 

Progressive not named him as a defendant is not a helpful inquiry. More generally, 

Progressive’s current position that Dial has a “purely speculative” interest in the insurance policy 

at issue, such that he has no standing to litigate coverage issues, cannot readily be reconciled 

with Progressive’s decision to name Dial as a defendant in this declaratory judgment action in 

the first place. (Doc. 49, at 7.) If Progressive believes that Dial has no cognizable legal right to 

be heard on the insurance coverage issues raised in the Complaint, then why did Progressive 

invite Dial to the party by suing him? 

10 Should either party see fit to file such a motion, it may be helpful for them to 

address Dial’s beneficiary status vis a vis the policy as a listed driver operating an insured 

vehicle. It may also be beneficial for the parties to consider and apply authorities under Alabama 

law concerning direct actions between third-party judgment creditors and insurers. See, e.g., 

Knox v. Western World Ins. Co., 893 So.2d 321, 323 (Ala. 2004) (injured third party lacks 

standing to bring declaratory judgment action against insurer until final judgment has been 

entered against insured, because Alabama law forbids injured third party “from bringing a direct 

(Continued) 

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IV. Conclusion. 

 For all of the foregoing reasons, it is hereby ordered as follows: 

1. Defendant George Dial’s Motion to Dismiss (doc. 41) is denied. 

2. The Clerk’s Entry of Default (doc. 12) dated February 18, 2009 is set aside as to 

defendant E&K Trucking, Inc., inasmuch as it is now clear that E&K was subject 

to the protections of the automatic stay in bankruptcy pursuant to 11 U.S.C. § 362 

at that time. 

3. Defendant Willie Kidd remains in default, and the Clerk’s Entry of Default (doc. 

12) remains in full force and effect against him. 

4. Defendant George Dial’s Statement of Objection (doc. 44) is overruled, and the 

Report and Recommendation (doc. 39) entered by the Magistrate Judge is 

adopted as the opinion of this Court. Default is hereby entered against defendant 

E&K Trucking, Inc. for the reasons stated supra. 

5. In light of the pendency of Progressive’s claims for declaratory judgment against 

defendant Dial, with such claims involving the same coverage issues joined 

against the defaulted defendants, no default judgment will be entered against 

E&K or Kidd until those remaining claims have been resolved. See generally 

Gulf Coast Fans, Inc. v. Midwest Electronics Importers, Inc., 740 F.2d 1499, 

1512 (11th Cir. 1984) (“even when defendants are similarly situated, but not 

jointly liable, judgment should not be entered against a defaulting defendant if the 

 

action against an insurer until such time as there is an unpaid judgment against the insured”); 

Maness v. Alabama Farm Bureau Mut. Cas. Ins. Co., 416 So.2d 979, 981 (Ala. 1982) (“Once an 

injured party has recovered a judgment against the insured, the injured party may compel the 

insurer to pay the judgment.”). Also, even cursory review of applicable case law reveals 

circumstances in which Alabama courts have grappled with the question of the impact of an 

insured’s default in a declaratory judgment action on an injured party’s rights against the insurer. 

See generally Casualty Reciprocal Exchange v. Wallace, 189 So.2d 861, 864 (Ala. 1966) 

(characterizing as “manifestly unsound” insurer’s argument “that a decree pro confesso rendered 

against an insured in a declaratory judgment suit brought by the insurer cuts off all rights of the 

injured parties”). It is not the place of a federal court to instruct the parties on how to go about 

litigating their cases. However, from these and other strands of case law, the Court is confident 

that the non-defaulted parties to this action will be able to devise appropriate strategies for how 

this case (and the parallel action in state court) should proceed. 

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other defendant prevails on the merits”). At that time, the Court will entertain any 

properly filed motion for default judgment by Progressive, and such motion must 

specify with particularity the form of default judgment sought. 

6. The Clerk’s Office is directed to mail a copy of this Order to E&K and Kidd at 

the following address: 86 Kidd Road, Lower Peachtree, AL 36571. The 

defaulting defendants are cautioned that, in light of their defaulted status, they are 

not entitled to, and will not receive, further notice of these proceedings, absent 

prompt affirmative steps on their part to set aside the default against them 

pursuant to Rule 55(b), Fed.R.Civ.P. 

7. The Clerk’s Office is directed to refer this matter to the Magistrate Judge for 

entry of a Rule 16(b) Scheduling Order, inasmuch as a Rule 26(f) Report (doc. 

36) was filed on April 1, 2010. 

DONE and ORDERED this 11th day of June, 2010. 

 s/ WILLIAM H. STEELE 

 CHIEF UNITED STATES DISTRICT JUDGE 

Case 1:08-cv-00719-WS-B Document 52 Filed 06/11/10 Page 13 of 13