11th Circuit Reverses Premature “Declaratory Judgment” for Auto Insurance Company

Insurance companies will often file what are known as “declaratory judgment” lawsuits following an auto accident. Basically, the insurer wants a judge to declare that it is not responsible for defending or indemnifying its policyholders against any personal injury lawsuits that arise from the accident. These actions normally turn on the language of the specific policy at issue, as well as any exclusions allowed under Georgia insurance law.

Progressive Mountain Insurance Company v. Middlebrooks

But can an insurer obtain a declaratory judgment before anyone has even filed a personal injury claim? The U.S. 11th Circuit Court of Appeals in Atlanta recently confronted this question. This case, Progressive Mountain Insurance Company v. Middlebrooks, deals with a September 2017 auto accident in Albany, Georgia. A man was driving a Ford to a local dealership for repair when it collided with a bus. Both the driver and the owner of the Ford held separate insurance policies from Progressive Mountain.

A few months after the accident, Progressive filed a declaratory judgment action in federal court against both policyholders. Progressive argued it was not obliged to cover either party for any damages arising from the accident. However, at that point nobody had actually filed a lawsuit. Progressive itself simply stated that two women “claim to have sustained bodily injuries as the result of the subject collision.” But there were no additional facts presented.

Nevertheless, the trial judge granted summary judgment to Progressive, holding it was not required to indemnify or defend any of the parties that might be sued in connection with the accident. One of the defendants, the insurer for the Ford dealership, appealed the judge’s ruling to the 11th Circuit. On February 25, 2020, the appeals court vacated the district judge’s summary judgment order and returned the case for further proceedings.

Here, the trial court concluded in a footnote to its summary judgment order that Progressive’s claims were “ripe” for decision, even though nobody had actually filed a personal injury lawsuit in connection with the accident. The 11th Circuit took issue with this. The appeals court said it had “substantial concerns about the ripeness of the case it hand.” That said, it was possible the controversy could become ripe–i.e., someone could file a lawsuit–while the matter was still pending before the district court. In any event, it was premature for the district court to award summary judgment to Progressive without sorting out the “thorny questions concerning the issue of ripeness.”

The 11th Circuit also pointed out there were potential problems with Progressive’s decision to invoke the subject-matter jurisdiction of the federal courts. Under the law, a federal court can only hear a civil case where the “amount in controversy exceeds the sum of $75,000 and the action is between citizens of different states.” Progressive insisted it met the $75,000 threshold as the “maximum coverage” of the two insurance policies each exceeded that amount. Again, the 11th Circuit noted that nobody had actually filed an insurance claim or lawsuit. Even if someone does eventually file a claim, it was speculative at this stage to state it would exceed $75,000.