Court Opinion

ID: 2967923
Source: CourtListenerOpinion
Date Created: 2015-09-22 03:46:55.146012+00
Date Added: 2024-06-11T15:28:19.852596
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
                 FOR THE FOURTH CIRCUIT

LEONA BREWER, as Personal                
Representative of the Estate of
EDWARD ROSE, deceased,
                  Plaintiff-Appellant,
                  v.
NATIONAL INDEMNITY COMPANY, a
Nebraska Corporation; W. E.
KINGSLEY COMPANY, a Kentucky
Corporation,
             Defendants-Appellees,
                 and
JOE MAYNARD; NORMA JEAN
MAYNARD and GREGORY MAYNARD,                No. 03-1531
d/b/a Maynard’s Wrecker Service;
DENISE M. GAUZE, as Executrix of
the Estate of HERBERT MAYNARD,
d/b/a Maynard’s Used Auto Parts;
JOE A. YOUNG; JOE A. YOUNG
INSURANCE AGENCY, INC., a Kentucky
Corporation; DEBORAH L. HANSHAW,
                        Defendants,
                 and
NATIONWIDE MUTUAL INSURANCE
COMPANY; EMILY HOWELL; MANUUEL
ROSE; RHONDA MESSER,
               Parties in Interest.
                                         
2                BREWER v. NATIONAL INDEMNITY CO.

LEONA BREWER, as Personal                
Representative of the Estate of
EDWARD ROSE, deceased,
                  Plaintiff-Appellant,
                  v.
NATIONAL INDEMNITY COMPANY, a
Nebraska Corporation; W. E.
KINGSLEY COMPANY, a Kentucky
Corporation,
             Defendants-Appellees,
                 and
JOE MAYNARD; NORMA JEAN
MAYNARD and GREGORY MAYNARD,                     No. 03-1696
d/b/a Maynard’s Wrecker Service;
DENISE M. GAUZE, as Executrix of
the Estate of HERBERT MAYNARD,
d/b/a Maynard’s Used Auto Parts;
JOE A. YOUNG; JOE A. YOUNG
INSURANCE AGENCY, INC., a Kentucky
Corporation; DEBORAH L. HANSHAW,
                        Defendants,
                 and
NATIONWIDE MUTUAL INSURANCE
COMPANY; EMILY HOWELL; MANUUEL
ROSE; RHONDA MESSER,
               Parties in Interest.
                                         
           Appeals from the United States District Court
     for the Southern District of West Virginia, at Charleston.
           Elizabeth V. Hallanan, Senior District Judge.
                           (CA-02-48-2)

                       Argued: January 22, 2004

                       Decided: March 24, 2004
                  BREWER v. NATIONAL INDEMNITY CO.                    3
        Before MOTZ, KING, and DUNCAN, Circuit Judges.

Published Order of Certification to the Supreme Court of Kentucky.
The Order of Certification was prepared by Judge King and entered
by Judge Motz, as the Judge presiding, with the concurrences of
Judge King and Judge Duncan.

                             COUNSEL

ARGUED: Jennifer Sue Fahey, BAILEY & GLASSER, LLP,
Charleston, West Virginia, for Appellant. Anita Rose Casey, MAC-
CORKLE, LAVENDER, CASEY & SWEENEY, PLLC, Charleston,
West Virginia, for Appellees. ON BRIEF: Brian A. Glasser, BAI-
LEY & GLASSER, LLP, Charleston, West Virginia, for Appellant.

            ORDER OF CERTIFICATION TO THE
             SUPREME COURT OF KENTUCKY

    This Court, exercising the privilege afforded by the Common-
wealth of Kentucky pursuant to Kentucky Rule of Civil Procedure
76.37 (entitled "Certification of question of law"), hereby requests the
Supreme Court of Kentucky to exercise its discretion to answer a cer-
tified question of law in this cause. The answer to this certified ques-
tion may be determinative of the cause now pending before this
Court; Kentucky law is applicable thereto; and there is no controlling
precedent in the decisions of the Supreme Court of Kentucky or the
Court of Appeals of Kentucky.1 Pursuant to Rule 76.37(3), this Order
of Certification sets forth the following:

      (a) Question of law;
  1
  The privilege afforded by Rule 76.37 is invoked on this Court’s own
motion. See Ky. R. Civ. P. 76.37(2).
4                 BREWER v. NATIONAL INDEMNITY CO.
      (b) Statement of relevant facts and nature of the contro-
          versy;

      (c) Names of appellant and appellees; and

      (d) Names and addresses of counsel.

(a) Question of Law

    The question of law being certified (the "Question") is as follows:

      Whether a fiduciary may maintain an action against an
      insurer for negligently underinsuring its insured, where the
      fiduciary, the insurer, and the insured have executed an
      agreement in which:

          (1) the fiduciary settled a wrongful death claim
              against the insured for the maximum limit of
              the insurance policy, which the insurer
              agreed to pay to the fiduciary in consider-
              ation for the insured’s release;

          (2) the insured assigned to the fiduciary the right
              to pursue its claim that the insurer negli-
              gently underinsured its insured; and

          (3) the insurer agreed to litigate with the fidu-
              ciary the claim that it negligently underin-
              sured its insured.

(b) Statement of Relevant Facts and Nature of the Controversy

                                   (i)

   On November 29, 2001, Edward Rose, a West Virginia resident,
was involved in an accident while operating a Ford Mustang automo-
bile on Route 52 in Mingo County, West Virginia. Rose’s automobile
collided with a 1999 Ford Rollback truck operated by Joe Maynard,
a resident of Kentucky. Maynard was employed by a Kentucky busi-
                   BREWER v. NATIONAL INDEMNITY CO.                         5
ness known as Maynard’s Wrecker Service or as Maynard’s Used
Auto Parts, and he was acting in the scope of such employment when
the accident occurred. Maynard’s negligence proximately caused the
accident, which resulted in Mr. Rose’s death. J.A. 92-96.2

   The Ford Rollback truck operated by Maynard was a commercial
vehicle insured by National Indemnity Company, a Nebraska corpora-
tion ("National Indemnity"). National Indemnity provided liability
coverage on the Ford vehicle in the maximum sum of $100,000, pur-
suant to its policy No. 70TRE673998 (the "Policy"). The Policy was
issued in Kentucky on July 31, 2001, in the name of Norma Jean
Maynard DBA: Maynard’s Wrecker Service, P.O. Box 869, Inez, KY
41224. J.A. 51, 81.

                                     (ii)

   On December 17, 2001, Leona Brewer, the Administratrix of the
Estate of Edward Rose, deceased, initiated a civil action against Joe
Maynard and Joe Maynard, d/b/a Maynard’s Wrecker Service, Civil
Action No. 01-C-363, in the Circuit Court of Mingo County, seeking
damages for Mr. Rose’s death.3 On January 18, 2002, this civil action
was removed to the United States District Court for the Southern Dis-
trict of West Virginia, at Charleston, and it was filed in the district
court as Civil Action No. 2:02-0048.

   On July 10, 2002, Brewer filed an amended complaint in the dis-
trict court, naming as additional defendants Norma Jean Maynard and
Gregory Maynard, d/b/a Maynard’s Wrecker Service; Denise M.
Gauze, as Executrix of the Estate of Herbert Maynard, d/b/a May-
nard’s Used Auto Parts; and National Indemnity, among others.4 J.A.
  2
     The "J.A." citations utilized in this Order of Certification refer to the
Joint Appendix filed in this Court by the parties to this appeal. See Fed.
R. App. P. 30.
   3
     On December 17, 2001, Brewer was appointed as Administratrix of
the Estate of Edward Rose, deceased, by the Clerk of the County Com-
mission of Mingo County, West Virginia. J.A. 99.
   4
     In this Order of Certification, the defendants Joe Maynard, Norma
Jean Maynard, Gregory Maynard, Denise M. Gauze, Maynard’s Wrecker
Service, and Maynard’s Used Auto Parts, are collectively referred to as
"the Maynards."
6                 BREWER v. NATIONAL INDEMNITY CO.
27. In Count I of the amended complaint, Brewer alleged a wrongful
death claim against the Maynards (the "Death Claim"). In the
amended complaint’s Count II, Brewer alleged that National Indem-
nity had negligently breached its duty to provide the Maynards with
the minimum amount of commercial liability insurance coverage
mandated by 49 C.F.R. § 387.303 (the "Coverage Claim"). Under the
terms of 49 C.F.R. § 387.303, freight vehicles of 10,001 pounds or
more that carry non-hazardous property in interstate commerce are
required to be insured with the minimum coverage of $750,000. Con-
tending that National Indemnity’s negligence proximately caused the
Maynards to be underinsured at the time of the fatal accident, the
Coverage Claim sought to have the Policy modified to provide the
minimum coverage of $750,000, as mandated by the federal regula-
tions. On August 20, 2002, National Indemnity sought dismissal of
the Coverage Claim pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure, which Brewer opposed. J.A. 35.

   While the motion to dismiss was pending, Brewer, the Maynards,
and National Indemnity entered into a partial settlement agreement
with respect to the pending civil action, entitled "Release and Settle-
ment Statement" (the "Settlement Statement"). J.A. 155. Brewer exe-
cuted the Settlement Statement in West Virginia on December 14,
2002, and it was executed in Nebraska by National Indemnity on
December 19, 2002. Joe Maynard, Norma Jean Maynard, and Denise
M. Gauze executed the Settlement Statement in Kentucky on January
6, 2003, and it was executed in Kentucky by Gregory Maynard on
January 13, 2003. J.A. 159-61.

  Pursuant to the Settlement Statement, National Indemnity, on
behalf of the Maynards, agreed, inter alia, to partially compromise the
Death Claim by "pay[ing] the $100,000 limits of the Policy [to
Brewer] in exchange for a release of the Maynards."5 J.A. 155.
National Indemnity also agreed to further litigate the Coverage Claim
    5
    With respect to the release of the Maynards, Brewer agreed to "seek
satisfaction of the Settlement in the amount of $100,000 from National
Indemnity." Further, Brewer agreed that, to the extent that "any other lia-
bility insurance proceeds are adjudicated to be available" for the Death
Claim, she would seek recovery "only from an entity other than the May-
nards." J.A. 156.
                  BREWER v. NATIONAL INDEMNITY CO.                    7
with Brewer. J.A. 155. The Settlement Statement provided, in one of
its Whereas clauses, that National Indemnity "has agreed to litigate
further with [Brewer] her claim that the Maynards were required by
law to carry greater liability limits in the amount of $750,000 and that
National Indemnity . . . should have so advised and insured the May-
nards." J.A. 155.

  The Settlement Statement, in its Section III, also provided, in perti-
nent part:

     Assignment to Administratrix of the Maynard’s Rights
      for Indemnification and Other Claims Arising from
      the Failure to Provide Federal and State Minimum
                   Coverage Under the Policy

    The Maynards hereby assign and transfer to [Brewer] all
    rights and causes of action for indemnification which the
    Maynards may have under the Policy purchased from
    National Indemnity . . . and W.E. Kingsley Company, as
    said Policy may apply to the claims asserted by [Brewer]
    against the Maynards in Civil Action No. 2:02-0048
    whether under the terms of the policy, contract or by opera-
    tion of law.

    The Maynards further assign and transfer to [Brewer] all
    rights and causes of action which the Maynards may have
    against National Indemnity . . . and W.E. Kingsley Com-
    pany for extracontractual, statutory or common law liability
    arising out of the claim that National Indemnity . . . and
    W.E. Kingsley Company or any other entity allegedly failed
    to provide federal and state minimum limits of coverage as
    asserted by [Brewer] in Civil Action No. 2:02-0048.

J.A. 157-58.

   On January 17, 2003, four days after the last party thereto executed
the Settlement Statement, Brewer filed her second amended com-
plaint in the district court. The second amended complaint named W.
8                 BREWER v. NATIONAL INDEMNITY CO.
E. Kingsley Company ("Kingsley"), a Kentucky corporation, as an
additional defendant to the Coverage Claim.6 J.A. 92.

   On March 4, 2003, both National Indemnity and Kingsley (herein-
after "National Indemnity" refers to both National Indemnity and
Kingsley) moved the district court to dismiss the Coverage Claim,
pursuant to Rule 12(b)(6). J.A. 103. In that motion, National Indem-
nity asserted that Brewer lacked privity of contract with National
Indemnity and lacked standing to maintain and pursue the Coverage
Claim.7 J.A. 106. Brewer opposed the motion to dismiss, maintaining
that she possessed privity with National Indemnity because the May-
nards had, in agreeing to and executing the Settlement Statement,
assigned to her their rights arising out of the Policy. By Memorandum
Opinion and Order of March 28, 2003 (the "March Order"), the court
dismissed the Coverage Claim for lack of standing pursuant to Rule
12(b)(1) of the Federal Rules of Civil Procedure. J.A. 125; see Brewer
v. Maynard, No. 118 Civ. 2:02-0048 (S.D. W. Va. Mar. 28, 2003).

   In dismissing the Coverage Claim, the district court concluded that,
because Edward Rose lacked privity of contract with National Indem-
nity, Brewer lacked standing to pursue the Coverage Claim on the
Estate’s behalf. J.A. 130. In assessing the assignment made in the Set-
tlement Statement, the court reasoned that, because it could not iden-
tify any authority supporting Brewer’s position that she possessed
privity of contract with National Indemnity "by ‘stepping into the
shoes’ of the Maynards," it lacked subject matter jurisdiction over the
claim against National Indemnity. J.A. 132-33.

 On April 21, 2003, Brewer sought relief from the district court’s
March Order under Rule 60(b) of the Federal Rules of Civil Proce-
    6
     With the second amended complaint, Brewer alleged that National
Indemnity "and/or" Kingsley issued the Policy to the Maynards, and that
National Indemnity "and" Kingsley negligently underinsured the May-
nards. J.A. 94, 96.
   7
     In moving to dismiss, National Indemnity also contended that the sec-
ond amended complaint was defective because the Maynards did not uti-
lize the 1999 Ford Rollback truck in interstate commerce. National
Indemnity asserted that it consequently possessed no duty to ensure that
the Policy satisfied the requirements of 49 C.F.R. § 387.303. J.A. 108.
                  BREWER v. NATIONAL INDEMNITY CO.                       9
dure, again asserting that the Settlement Statement provided her with
standing to maintain and pursue the Coverage Claim. J.A. 134.
Brewer also asserted, for the first time, that National Indemnity was
equitably estopped from denying that she possessed standing because
it had executed the Settlement Statement in exchange for a release of
its insureds. J.A. 146. On April 25, 2003, Brewer filed a notice of
appeal from the March Order. J.A. 164.

   On April 29, 2003, National Indemnity sought entry of a final judg-
ment under Rule 54(b) of the Federal Rules of Civil Procedure, and
requested a stay of the underlying action pending Brewer’s appeal.
On May 29, 2003, the district court, by Memorandum Opinion and
Judgment Order (the "Judgment Order"), denied Brewer’s request for
Rule 60(b) relief, and it certified the March Order as a Rule 54(b) judg-
ment.8 J.A. 170. On June 9, 2003, Brewer filed a notice of appeal
from the Judgment Order. J.A. 180. We possess jurisdiction pursuant
to 28 U.S.C. § 1291.

                                   (iii)

   In her appeal to this Court, Brewer maintains that the Maynards’
assignment of the Coverage Claim to her, with the approval of
National Indemnity, was permissible under both West Virginia and
Kentucky law. National Indemnity, on the other hand, asserts that the
Coverage Claim was not assignable under the law of either jurisdic-
tion, and that the district court properly dismissed it. The Settlement
Statement is silent on the issue of whether West Virginia or Kentucky
law governs the Question. Consequently, we must, as an initial mat-
ter, apply West Virginia’s choice-of-law rules to the issue of whether
West Virginia or Kentucky law governs resolution of the Question.9
   8
     In the Judgment Order, the district court did not address Brewer’s
contention that National Indemnity was equitably estopped from denying
that she possessed standing because of the Settlement Statement. Brewer
first raised this issue in her Rule 60(b) motion after entry of the March
Order. Accordingly, that issue was not properly before the district court,
and it is not properly before this Court. See Fed. R. Civ. P. 60(b) (autho-
rizing relief from judgment or order only in limited circumstances not
applicable here).
   9
     In proceedings where there is no controlling constitutional provision
or act of Congress, a federal court must apply the substantive law of the
10                BREWER v. NATIONAL INDEMNITY CO.
   Pursuant to West Virginia’s choice-of-law rules, the law of the
state "ha[ving] the most significant relationship to the transaction and
the parties" governs the rights and duties of the parties with respect
to an issue in contract in the absence of an effective choice by the par-
ties. See Restatement (Second) of Conflict of Laws (the "Second
Restatement") § 188 (1971); Lee v. Saliga, 373 S.E.2d 345 (W. Va.
1988) (utilizing Second Restatement approach and holding Pennsyl-
vania law applicable in construing insurance policy because Pennsyl-
vania possessed most significant relationship to transaction and
parties). In determining whether West Virginia or Kentucky has the
most significant relationship to the assignment of the Coverage Claim
and the parties to this dispute, section 188 of the Second Restatement
directs us to consider the choice-of-law principles specified in its sec-
tion 6, which include, inter alia, the relevant policies of the forum and
other interested states, and the protection of justified expectations. See
Second Restatement § 6. In considering these principles, we are to
take into account relevant contacts, such as the location of the subject
matter of the contract, the place of its negotiation, and the residences
of the parties. Id. § 188.

   The Coverage Claim, and the Maynards’ assignment thereof, has
its roots in Kentucky. The Policy underlying the Coverage Claim was
issued in Kentucky to provide liability insurance on a business vehicle
utilized by the Maynards. The Maynards are residents of Kentucky,
and their business is headquartered in the Commonwealth. If National
Indemnity negligently underinsured the Maynards, the negligent act
occurred in Kentucky, where the Policy was procured and issued, and
where the Maynards and National Indemnity formed their contractual
relationship. Furthermore, if the assignment of the Coverage Claim is
permissible under Kentucky law, Brewer will merely "step into the
shoes" of the Maynards. See Entroth Shoe Co. v. Johnson, 85 S.W.2d
686, 687 (Ky. Ct. App. 1935). The Coverage Claim does not lose its

state in which it sits, including the state’s choice-of-law rules. See Erie
R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Klaxon Co. v. Stentor Elec.
Mfg. Co., Inc., 313 U.S. 487, 496 (1941) (observing that forum state’s
choice-of-law rules are substantive). Because this action was removed to
the Southern District of West Virginia, we must apply West Virginia’s
choice-of-law rules.
                  BREWER v. NATIONAL INDEMNITY CO.                     11
Kentucky roots by virtue of being litigated by a West Virginia plain-
tiff in a West Virginia federal court. And litigation of the Coverage
Claim will, in any event, continue to center upon whether National
Indemnity negligently underinsured the Maynards.

   Finally, at oral argument, counsel seemed to agree that Kentucky,
rather than West Virginia, bears the most significant relationship to
the Coverage Claim, the assignment thereof, and the parties. In these
circumstances, Kentucky law governs the Question, and our certifica-
tion thereof is appropriately addressed to the Supreme Court of Ken-
tucky.

                                   (iv)

   We turn next to the contentions of the parties regarding the merits
of the Question. Brewer maintains that the Coverage Claim, although
in form a negligence action, is grounded in the Maynards’ contractual
relationship with National Indemnity and that it is properly assignable
like any other contract claim. In support of this proposition, Brewer
relies on a decision of the Court of Appeals of Kentucky holding that,
although a claim in tort is generally not assignable in Kentucky, this
rule does not apply to a tort founded upon contract and growing out
of a contractual relationship. See Grundy v. Manchester Ins. & Indem.
Co., 425 S.W.2d 735, 737 (Ky. Ct. App. 1968) (holding assignable
to injured party insured’s claim against liability insurer for bad faith
in negotiating settlement). Although relevant, this decision focused on
the validity of an assignment of a bad faith claim, rather than on an
assignment of an unliquidated negligent underinsurance claim.10

  On the other hand, National Indemnity contends that the assign-
  10
    In support of her position that the Coverage Claim is assignable,
Brewer also relies on certain other Kentucky authorities. See Steedly v.
London & Lancashire Ins. Co., Ltd., 416 F.2d 259, 262 (6th Cir. 1969)
(holding assignable to injured party insured’s claim against insurer for
negligently failing to claim contribution); Terrell v. W. Cas. & Sur. Co.,
427 S.W.2d 825 (Ky. Ct. App. 1968) (holding assignable to injured party
insured’s claim against insurer for judgment in excess of policy limits).
Although perhaps pertinent, these authorities do not squarely address or
resolve the Question.
12               BREWER v. NATIONAL INDEMNITY CO.
ment of the Coverage Claim is invalid under Kentucky law, maintain-
ing that there are no authoritative decisions of the Supreme Court of
Kentucky or the Court of Appeals of Kentucky explicitly recognizing
the validity of such an assignment. Furthermore, National Indemnity
contends that assignment of the Coverage Claim is analogous to the
assignment of an unliquidated legal malpractice claim, which the
Court of Appeals of Kentucky has deemed contrary to public policy.
See Coffey v. Jefferson County Bd. of Educ., 756 S.W.2d 155, 157
(Ky. Ct. App. 1998) ("Our view that a chose in action for legal mal-
practice is not assignable is predicated on the uniquely personal
nature of legal services and the contract out of which a highly per-
sonal and confidential attorney-client relationship arises, and public
policy considerations based thereon.") (quoting Goodley v. Wank &
Wank, Inc., 62 Cal. App. 3d 389, 395 (1976)). Finally, National
Indemnity asserts that the unliquidated Coverage Claim is grounded
solely in tort, and thus nonassignable in that it does not arise out of
a contractual relationship.

   In sum, we are unable to identify any controlling precedent on the
Question in the decisions of the Supreme Court of Kentucky or the
Court of Appeals of Kentucky. See Ky. R. Civ. P. 76.37. Accordingly,
the Question is properly subject to review and consideration by the
Supreme Court of Kentucky on certification, as its answer may be
determinative of this cause. Id.

(c) Names of Appellant and Appellees

     Appellant

     Leona Brewer, as Personal Representative of the Estate of
       Edward Rose, deceased.

     Appellees

     National Indemnity Company, a Nebraska Corporation; and
       W. E. Kingsley Company, a Kentucky Corporation.

(d) Names and Addresses of Counsel

     Counsel for Leona Brewer
                 BREWER v. NATIONAL INDEMNITY CO.                   13
    Brian A. Glasser, Esquire
    Jennifer S. Fahey, Esquire
    BAILEY & GLASSER, LLP
    227 Capitol Street
    Charleston, West Virginia 25301

    Counsel for National Indemnity Company and W. E. Kings-
    ley Company

    Anita R. Casey, Esquire
    MACCORKLE, LAVENDER, CASEY & SWEENEY,
    PLLC
    300 Summers Street
    Post Office Box 3283
    Charleston, West Virginia 25332

                              ORDER

  Pursuant to the foregoing, and exercising the privilege made avail-
able to this Court by Rule 76.37 of the Kentucky Rules of Civil Pro-
cedure, it is hereby ORDERED:

    (1) that the Question be, and the same hereby is, certified
        to the Supreme Court of Kentucky;

    (2) that the Clerk forward to the Supreme Court of Ken-
        tucky, under our official seal, a copy of this Order of
        Certification; and

    (3) that to the extent requested by the Supreme Court of
        Kentucky, the Clerk provide that Court with the origi-
        nal or copies of all or such portion of the record before
        this Court as the Supreme Court of Kentucky deems
        necessary to a determination of the Question.

  This Order of Certification is entered by Judge Motz, as the Judge
presiding in this Court, pursuant to Rule 76.37(4) of the Kentucky
14                 BREWER v. NATIONAL INDEMNITY CO.
Rules of Civil Procedure, with the concurrences of Judge King and
Judge Duncan.11

                                       FOR THE COURT:

                                       DIANA GRIBBON MOTZ
                                       United States Circuit Judge
  11
     This Court initially hears and decides appeals by randomly selected
panels consisting of three of its judges. 4th Cir. R. 34(c) ("The Court ini-
tially hears and decides cases in panels consisting of three judges with
the Chief Judge or most senior active judge presiding."). This appeal was
assigned to a panel consisting of Judge Motz, Judge King, and Judge
Duncan, which heard oral argument in Richmond, Virginia, on January
22, 2004. This Order of Certification has been prepared by Judge King,
and it is entered by Judge Motz, as the Judge presiding in this Court. Ky.
R. Civ. P. 76.37(4).