AMERICAN MILLENNIUM INSURANCE COMPANY v. USA FREIGHT SOLUTION, INC.

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

AMERICAN MILLENNIUM INSURANCE )

COMPANY, )

)

Plaintiff, )

)

v. ) 1:18cv1023

)

USA FREIGHT SOLUTIONS, INC., )

RIDER CABALLERO ACOSTA, and )

SHEYANNE CHAVERS, )

)

Defendants. )

MEMORANDUM ORDER

This declaratory judgment action returns to this court for

the third time pursuant to Plaintiff American Millennium Insurance

Company’s motion (Doc. 25) to alter or amend and for

reconsideration of the court’s February 13, 2020 Memorandum Order

dismissing this case without prejudice (Doc. 23). For the reasons

set forth below, the motion will be denied.

Plaintiff seeks a declaratory judgment that the insurance

policy it issued to Defendant USA Freight Solutions, Inc. (“USA

Freight”) provides no coverage for damages arising out of an

automobile accident that occurred in West Palm Beach, Florida, on

September 10, 2018. The complaint alleges that Defendant Sheyanne

Chavers, riding as a passenger in a car on Interstate 95, was

injured when her car rear-ended a truck, driven by Rider Caballero

Acosta, and swerved off the highway into a concrete barrier. (Doc.

1 ¶¶ 9-13.) Plaintiff alleges that “Chavers has made a claim to

[it] seeking to recover for the injuries she sustained during the

accident . . . under the policy issued to USA Freight.” (Id.

¶ 29.) There is no allegation of any pending lawsuit against

anyone, including any litigation by Chavers against USA Freight or

Acosta.

No Defendant responded to Plaintiff’s complaint in the

present action or made an appearance. Consequently, Plaintiff

requested, and the Clerk of Court entered, default. (Docs. 12,

13.)

Plaintiff then moved for summary judgment and default

judgment. (Docs. 17, 19.) This court indicated its intention to

deny the motions and to dismiss Plaintiff’s action for lack of

standing, lack of ripeness, and lack of a persuasive reason for

the court to exercise its discretion under the Declaratory Judgment

Act and allowed Plaintiff an opportunity to demonstrate why the

court should do otherwise. (Doc. 21 at 3.) Plaintiff filed a

memorandum, urging the court to grant its motions. (Doc. 22.)

After careful consideration, the court entered a Memorandum Order

denying the motions without prejudice on the grounds that the

action was not justiciable and, alternatively, that the court

should not exercise its discretion under the Declaratory Judgment

Act to entertain the motions. (Doc. 23.)

In the present motion, Plaintiff seeks reconsideration and/or

amendment of the court’s Memorandum Order pursuant to Federal Rules

of Civil Procedure 59(e) and 60(b). “A Rule 59(e) motion may only

be granted in three situations: (1) to accommodate an intervening

change in controlling law; (2) to account for new evidence not

available at trial; or (3) to correct a clear error of law or

prevent manifest injustice.” Mayfield v. Nat’l Ass’n for Stock

Car Auto Racing, Inc., 674 F.3d 369, 378 (4th Cir. 2012) (internal

quotation marks omitted) (quoting Zinkand v. Brown, 478 F.3d 634,

637 (4th Cir. 2007)). Such a motion allows a district court to

correct its own errors, but it does not serve as a vehicle for a

party to raise new arguments or legal theories that could have

been raised before the judgment. See Pac. Ins. Co. v. Am. Nat’l

Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998). Rule 59(e) is

an “extraordinary remedy,” to be used only “sparingly.” Id.

(quoting 11 Wright et al., Federal Practice & Procedure § 2810.1,

at 124 (2d ed. 1995)). Rule 60(b) provides that “[o]n motion and

just terms, the court may relieve a party or its legal

representative from a final judgment, order, or proceeding for the

following reasons: (1) mistake, inadvertence, surprise, or

excusable neglect; (2) newly discovered evidence that, with

reasonable diligence, could not have been discovered in time to

move for a new trial under Rule 59(b) . . . or (6) any other reason

that justifies relief.” Fed. R. Civ. P. 60(b). The rule also

permits the court to correct clerical mistakes arising from

oversight or omission. Fed. R. Civ. P. 60(a). Like Rule 59(e),

Rule 60(b) is an extraordinary remedy that should be imposed only

in “exceptional circumstances.” Mayfield, 674 F.3d at 378.

Because Plaintiff’s motion was filed twenty-five days after this

court’s judgment, there is no timeliness issue under either ground.

See Fed. R. Civ. P. 59(e) (requiring filing within 28 days of entry

of judgment); 60(c) (requiring filing within one year of entry of

the judgment or order for subsections (1) and (2), otherwise within

a “reasonable time”). However, motions filed within 28 days are

considered under Rule 59(e). See Robinson v. Wix Filtration Corp.,

599 F.3d 403, 412 & n.11 (4th Cir. 2010); MLC Auto, LLC v. Town of

S. Pines, 532 F.3d 269, 280 (4th Cir. 2008).

Plaintiff argues first that it has a new fact: namely, a

February 21, 2020 letter from a Texas-based debt collection firm,

T.L. Thompson & Associates, Inc., addressed to Acosta, in care of

Plaintiff’s law firm, which states an intention to seek subrogation

on behalf of Chavers’s insurer, State Farm Mutual Automobile

Insurance, for $7,381.98. (Doc. 25-1.) Presumably this is what

State Farm paid Chavers. The letter states that the firm

“intend[s] to pursue all means available under the law to recover

the amount of the damages sustained in the loss.” (Id.) Plaintiff

concludes that Acosta “[a]pparently” gave Plaintiff’s name to

either the collection firm or State Farm. (Doc. 25 at 3.)

Plaintiff argues this letter demonstrates a concrete injury that

is actual and imminent. (Id.)

The letter is a new piece of evidence, but it does not create

a concrete and imminent injury. The letter directs Acosta that

“[i]f you had insurance coverage at the time of the loss, indicate

the name of your insurance carrier and the policy information in

the space provided below” and states that the collection firm “will

file a claim on your behalf with your insurance carrier for the

damages reflected above.” (Id.) In other words, in so far as the

insurance coverage question goes, the letter only requests

insurance information and suggests the collection firm will sue in

Acosta’s name for coverage. Yet there remains no legal action

against either Acosta or Plaintiff, a fact this court noted

earlier. (Doc. 23 at 2.) And there is no demand by Acosta to

defend any action. Even if there were, in North Carolina the duty

to defend arises from the language of a complaint, yet there is

none. See Westfield Ins. Co. v. Nautilus Ins. Co., 154 F. Supp.

3d 259, 264 (M.D.N.C. 2016) (“The duty to defend is generally

determined by analyzing the pleadings in the underlying

lawsuit.”); Waste Mgmt. of Carolinas, Inc. v. Peerless Ins. Co.,

340 S.E.2d 374, 378 (N.C. 1986) (noting that the courts employ the

comparison test, where “the pleadings are read side-by-side with

the policy to determine whether the events as alleged are covered

or excluded.”) Only a letter from a debt collection agency has

been sent. To state the obvious, there is no indication of any

debt owed -- no judgment that can be pursued for collection.

Thus, Plaintiff’s conclusion that Acosta has “seemingly

caused a subrogation claim to be made” is an overstatement. (Doc

25 at 4.) It is unclear what, if anything, the debt collection

agency will -- indeed can -- do. In fact, in language that parrots

a collection notice, the letter invites Acosta to dispute the

validity of the claim. (Doc. 25-1.) Yet there is no indication

whether he has done so and, if so, the debt collection agency’s

response. To the extent Plaintiff suggests that the letter should

be construed as a request by Acosta for defense or indemnity

because it was sent to Acosta but at the address of the law firm

representing Plaintiff, this is speculation. Acosta did not bother

to respond to the present lawsuit seeking a declaration of no

coverage for this very accident; it is unlikely he would claim

coverage in this fashion. Instead, the letter appears to be a

fishing expedition for insurance coverage couched in the language

of a debt collection.

Given these facts, Plaintiff’s reliance on Progressive N.

Ins. Co. v. Jones, Case No. 1:18CV00009, 2020 WL 216011, *2 n.4

(W.D. Va. Jan. 14, 2020), is misplaced. In that case, the court

decided the coverage issue where there was an actual underlying

lawsuit; here there is no such action. Similarly, Plaintiff’s

reliance on T.H.E. Ins. Co. v. Dowdy’s Amusement Park, 820 F. Supp.

238 (E.D.N.C. 1993), is unhelpful. There, the court identified

the question as “whether [the insurer]’s potential duty to defend

or settle this case [was] sufficiently at issue to constitute an

actual controversy, even though no complaint against its insured

has yet been filed.” Id. at 239. In that case, a settlement

demand had been made, and the court cited the insurer’s concern

for significant pre-litigation factual investigation that would

need to be done. No such circumstances have been raised in the

present case.

Second, Plaintiff argues that the court’s Memorandum Order

labored under a mistake of fact. In the course of its opinion,

the court stated that “Chavers has only made a demand directly to

Plaintiff, as insurer of USA Freight, for payment, which Plaintiff

has apparently simply rejected.” (Doc. 23 at 4.) The court’s

statement was based on the fact that Plaintiff nowhere indicated

that it had made any payment to Chavers. Plaintiff states now

that it never rejected Plaintiff’s demand, “cognizant of North

Carolina’s laws regarding bad faith in making an incorrect

determination to deny coverage.” (Doc. 25 at 4.) Plaintiff

concludes that a declaration from the court as to coverage would

relieve it of any concern as to a duty to defend Acosta. (Id. at

4-5.) No doubt it would be convenient for Plaintiff to have a

judicial decree that there is no coverage for Acosta for the

accident. But that is not the standard. For the reasons noted

above, the duty to defend depends on the allegations of a

complaint, and to date no complaint has been filed by anyone in

connection with the accident.

Any claim implicating Plaintiff remains purely hypothetical

and contingent. Neither USA Freight nor any alleged insured has

been found liable for Chavers’s injuries. Plaintiff is unaware of

any lawsuit involving any of the alleged parties to the accident.

Chavers only made a payment demand directly to Plaintiff, as

insurer of USA Freight, which Plaintiff has apparently not paid.1

There is no allegation that Chavers, or anyone on her behalf, has

proffered even a good faith argument that Plaintiff’s policy is in

any way implicated in this accident. Rather, Plaintiff alleges

that at the time of the accident, Acosta was not an insured, he

was not USA Freight’s employee, and the truck he was driving was

not a covered auto under Plaintiff’s policy. (Doc. 1 ¶¶ 26-28.)

And now Chavers’s insurer, State Farm, has apparently retained a

collection agency to send a letter to Acosta, even though there is

no evidence of a debt. With no pending lawsuit by anyone, no

notice by USA Freight of any litigation against it, and no demand

1 As the court noted earlier, Florida, where the accident occurred, does

not permit an injured party who is not an insured to directly sue the

alleged tortfeasor’s insurer without first obtaining a settlement or

verdict against the tortfeasor. Fla. Stat. § 627.4136; see also Kong

v. Allied Prof’l Ins. Co., 750 F.3d 1295, 1300-01 (11th Cir. 2014).

Neither North Carolina nor New Jersey recognize any cause of action by

a third party against an insurer for bad faith or unfair refusal to

settle. Lee v. Mut. Cmty. Sav. Bank, SSB, 525 S.E.2d 854, 857 (N.C. Ct.

App. 2000); Murray v. Allstate Ins. Co., 507 A.2d 247, 250 (N.J. Super.

Ct. App. Div. 1986).

by USA Freight or even by Acosta that Plaintiff indemnify or defend

it from a suit, Plaintiff’s alleged injury remains hypothetical.

For these same reasons, Plaintiff’s claim is not ripe. There

is neither a claim for indemnity nor a claim for defense. See

Trustgard Ins. Co. v. Collins, 942 F.3d 195, 200 (4th Cir. 2019).

And even if the claims were justiciable, the court should refrain

from exercising its discretion under the Declaratory Judgment Act

to hear this case.

For the reasons stated,

IT IS THEREFORE ORDERED that the Plaintiff’s motion to alter

and amend and for reconsideration (Doc. 25) is DENIED WITHOUT

PREJUDICE.

/s/ Thomas D. Schroeder

United States District Judge

May 1, 2020