State Farm Fire & Casualty Co. v. Tashire

Brief Fact Summary.

State Farm Fire & Casualty Company (Plaintiff) brought an action of interpleader to determine insurer’s liability for the actions of Clark (Defendant), in an action filed in the State of California.

Synopsis of Rule of Law.

In actions where a plaintiff may be exposed to multiple liability, the interpleader statute provides that persons who may have claims against the insurance companies be joined as defendants and required to interplead without first obtaining a judgment against their insured.

Facts.

A Greyhound bus collided with a pickup truck, killing two passengers on the bus and injuring thirty-three others, including the bus driver, driver of another car and its passenger. One of the dead passengers and ten of the injured were Canadian citizens and the rest of the individuals were United States citizens. Litigation began when four of the injured passengers filed suit in California state courts, seeking damages in excess of one million dollars. The defendants were Greyhound Lines, Inc., a California corporation; Nauta, the bus driver; Clark, the driver of the other car; and Glasgow, the passenger of the other car who was also the car’s owner (Defendants). The individual Defendants were residents of Oregon. Before the trial, Plaintiff, an Illinois company, brought this action of interpleader in the United States District Court for the District of Oregon. Plaintiff’s complaint stated at the time of the car accident, it had an insurance policy with Clark, the driver of the car, which provided for bodily injury liability up to $10,000 per person and $20,000 per occurrence and for legal representation of the driver. It further alleged that the damages sought in suits filed in California far exceeded the amount of its maximize liability under the policy in aggregate. Thus, Plaintiff paid $20,000 to the court and asked the court to require all claimants to establish claims against Clark and insurer in this proceeding, and to discharge Plaintiff from all further obligations under Clark’s policy. Plaintiff alternatively expressed conviction that the policy issued to Clark excluded coverage for accidents resulting from his operation of a truck that belonged to someone else and was being used in the business of another. The complaint requested that the court find that the insurer had no duty to Clark and refund the $20,000. Clark, Nauta, Glasgow, Greyhound Lines and the prospective claimants were joined as defendants. Jurisdiction was based on Rule 22 of the Federal Rules of Civil Procedure, the federal interpleader statute and diversity. An injunction sought by Plaintiff was granted by the Untied States District Court for the District of Oregon which provided that all suits against Clark, State Farm, Greyhound, and Nauta be prosecuted in the interpleader proceeding. On interlocutory appeal, Court of Appeals for the Ninth Circuit reversed and concluded that interpleader was not available in the circumstances of this case. The Supreme Court of the United States granted certiorari to resolve the conflict of grounds for granting interpleader and to consider the administration of federal interpleader.

Issue.

Whether in the absence of a state law or contractual provision for direct action suits against the insurance company, the company is required to wait until persons asserting claims against its insured have reduced claims to judgment before seeking to invoke the benefits of federal interpleader? Whether federal jurisdiction was proper? Note: This issue was raised on the court’s own motion.

Held.

No and Yes. The court held that the injunction to join all Defendants in the insurance company’s litigation was improper, and it remanded the case to modify the injunction to be consistent with this decision. Further, the decision of United States Court of Appeals for the Ninth Circuit on the jurisdictional question is reversed. The 1948 revisions removed the requirement that the insurance company wait until at least two claimants reduced their claims to judgments. Interpleader statutes were designed to remedy the difficulties: the race to obtain judgments and the potential unfairness to claimants. Therefore, Plaintiff properly invoked the interpleader jurisdiction. Even though Plaintiff properly invoked interpleader jurisdiction, it does not entitle Plaintiff to an order enjoining prosecution of suits against it outside the confines of the interpleader proceeding. An insurance company should not be allowed to determine that dozens of tort plaintiffs must be compelled to raise their claims in a single forum of the insurance company’s choosing. Interpleader was never intended to be used as a means to solve all problems of multi-party litigation. Therefore, the interpleader statute did not authorize the injunction entered in the present case. The court found that federal jurisdiction was proper because the interpleader statue only requires minimal diversity, in other words diversity of citizenship between two or more claimants without regard to the fact that other rival claimants may be co-citizens.

Discussion.

In actions where a plaintiff may be exposed to multiple liability, the interpleader statute provides that persons who may have claims against the plaintiff be joined as defendants and required to interplead without first obtaining a judgment.