Opinion ID: 1433963
Heading Depth: 1
Heading Rank: 3

Heading: effect of prior federal proceedings

Text: Central to the district court's grant of summary judgment on the Vaught's breach of contract claim was the court's ruling that Dairyland was bound by the decision in the federal tort action. Dairyland claims it cannot be bound by the result of the federal proceedings because it was not a party to that action. Dairyland further argues that by refusing to agree to intervention, the Vaughts left Dairyland vulnerable to a suit for bad faith if it did in fact intervene. Under these circumstances, Dairyland argues it would be unfair to make it choose between intervening and facing a possible action for bad faith, or being bound by a decision to which it was not a party. The Vaughts, citing case law from other jurisdictions, argue that once insurers have been given notice that their insured has filed suit against an uninsured motorist, they must either intervene or be bound by the decision. We begin by noting that as a general rule a nonparty is not precluded from relitigating matters decided in a prior action simply because it passed by an opportunity to intervene. 18 Wright et al., Federal Practice and Procedure, § 4452, p. 446 (West 1981). The Vaughts argue that insurance cases are an exception to this rule. We find our recent decision in Anderson v. Farmers Insurance Co., 130 Idaho 755, 947 P.2d 1003 (1997), dispositive on this issue. In Anderson, the insured obtained a default judgment against an uninsured motorist without having given the insurer notice of the suit. The insured then attempted to collect uninsured motorist benefits from the insurer on the basis of the default judgment. When the insurer refused to pay and demanded arbitration, Anderson filed suit claiming bad faith. In affirming a grant of summary judgment for the insurer, this Court held that regardless of notice, an insurer has no duty to intervene on behalf of an uninsured motorist and cannot be bound by a decision to which it was not a party under either claim preclusion or issue preclusion. If anything, the facts in this case are more compelling than in Anderson. Here, Dairyland did not simply fail to intervene, but decided not to intervene at the request of its insureds, the Vaughts. Because Anderson controls, we must conclude that the district court erred in holding that Dairyland was bound by the federal court's decision holding the uninsured motorist partially responsible for the accident and, therefore, we reverse the grant of summary judgment in favor of the Vaughts on their breach of contract claim. We are aware that our decision not to hold non-party insurers bound may result in multiple litigation. The Vaughts, however, had it within their power to avoid multiple litigation. The Vaughts could have stipulated to Dairyland's intervention or, under Fed. R.Civ.P. 60, the Vaughts could have joined Dairyland as a party to the litigation. Once made a party, there is no question that Dairyland would have been bound by the federal court decision; however, the Vaughts made a strategic decision not to include Dairyland in the federal court action.