Voyager Indemnity Insurance Company v. Gifford

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA

ASHEVILLE DIVISION

CIVIL CASE NO. 1:21-cv-00242-MR

VOYAGER INDEMNITY INSURANCE )

COMPANY, )

Plaintiff, )

) MEMORANDUM OF

vs. ) DECISION AND ORDER

)

DAKOTA GIFFORD and AMAZIAH )

DONDERO, )

)

Defendants. )

________________________________ )

THIS MATTER is before the Court on the Plaintiff’s Motion for Default

Judgment [Doc. 13].

I. PROCEDURAL BACKGROUND

The Plaintiff, Voyager Indemnity Insurance Company (“Plaintiff”), filed

a Complaint for Declaratory Judgment against Defendants Dakota Gifford

(“Gifford”) and Amaziah Dondero (“Dondero”) on September 10, 2021 [Doc.

1], and a First Amended Complaint for Declaratory Judgment against Gifford

and Dondero on November 29, 2021 [Doc. 6]. The Plaintiff’s First Amended

Complaint seeks a declaration that the Plaintiff owes no duty to defend or

indemnify Gifford under an insurance policy issued by the Plaintiff to

DoorDash, Inc. (“DoorDash”), for the claims asserted against Gifford by

Dondero in an underlying tort lawsuit, Amaziah Dondero v. Dakota Gifford,

20-CVS-1464, which is pending in the North Carolina General Court of

Justice in Henderson County. [Doc. 6 at 1-2]. The Amended Complaint

asserts that the allegations in the underlying action fail to raise the possibility

of liability under the policy the Plaintiff issued to DoorDash, and thus the

Plaintiff may withdraw its defense of Gifford. [Id. at 1, 11].

On October 12, 2021, the Plaintiff filed a proof of service indicating that

Dondero was served on September 13, 2021, and Gifford was served on

October 2, 2021. [Doc. 4]. On December 17, 2021, the Plaintiff filed a proof

of service indicating that the First Amended Complaint was served on

Dondero on December 2, 2021, and on Gifford on December 6, 2021. [Doc.

7, Doc. 8]. Dondero and Gifford did not make an appearance or otherwise

defend the action. On February 8, 2022, the Plaintiff filed a Motion for Entry

of Default against Dondero and Gifford. [Doc. 10]. On February 11, 2022, the

Clerk entered a default against Dondero and Gifford. [Doc. 11].

On April 21, 2022, this Court entered an Order directing the Plaintiff to

file an appropriate motion or otherwise take further action with respect to

Dondero and Gifford. [Doc. 12]. On April 22, 2022, the Plaintiff filed the

present Motion for Default Judgment. [Doc. 13].

II. STANDARD OF REVIEW

Rule 55 of the Federal Rules of Civil Procedure provides for the entry

of a default when “a party against whom a judgment for affirmative relief is

sought has failed to plead or otherwise defend.” Fed. R. Civ. P. 55(a). Once

a defendant has been defaulted, the plaintiff may then seek a default

judgment. If the plaintiff’s claim is for a sum certain or can be made certain

by computation, the Clerk of Court may enter the default judgment. Fed. R.

Civ. P. 55(b)(1). “In all other cases, the [plaintiff] must apply to the court for

a default judgment.” Fed. R. Civ. P. 55(b)(2).

“The defendant, by his default, admits the plaintiff’s well-pleaded

allegations of fact . . . .” Ryan v. Homecomings Fin. Network, 253 F.3d 778,

780 (4th Cir. 2001) (quoting Nishimatsu Constr. Co. v. Houston Nat’l Bank,

515 F.2d 1200, 1206 (5th Cir. 1975)). A defendant, however, “is not held . . .

to admit conclusions of law.” Id. (alteration in original) (quoting Nishimatsu,

515 F.2d at 1206). The Court therefore must determine whether the alleged

facts state a claim for relief. GlobalSantaFe Corp. v. Globalsantafe.com, 250

F. Supp. 2d 610, 612 n.3 (E.D. Va. 2003).

III. FACTUAL BACKGROUND

The well-pleaded factual allegations of the Plaintiff’s Amended

Complaint are deemed admitted by virtue of the Defendants’ default. Ryan,

253 F.3d at 780. The following is a summary of the relevant and admitted

facts.

The Plaintiff is a corporation organized and existing under the laws of

the State of Georgia with its principal place of business located in the State

of Georgia. [Doc. 6 ¶ 2]. Gifford is a resident and citizen of Greenville, South

Carolina. [Id. ¶ 3]. Dondero is a resident and citizen of Asheville, North

Carolina. [Id. ¶ 4].

A. The Voyager Policy

The Plaintiff issued Commercial Auto Insurance policy number

FAR1300006 to DoorDash, for the policy period of September 1, 2019, to

September 1, 2020 (“Policy”). [Id. ¶ 10]. The Policy contains various

coverages related to commercial automobile exposures, including liability

coverage. [Id.]. The Policy contains the following relevant language in its

Liability insuring agreement:

We will pay all sums an insured legally must pay as

damages because of bodily injury or property

damage to which this insurance applies, caused by

an accident and resulting from the ownership,

maintenance or use of a covered auto within the term

of coverage . . . .

We have the right and duty to defend any insured

against a suit asking for such damages or a covered

pollution cost or expense. However, we have no duty

to defend any insured against a suit seeking

damages for bodily injury or property damage or a

covered pollution cost or expense to which this

insurance does not apply. We may investigate and

settle any claim or suit as we consider appropriate.

[Id. ¶ 12]. The Policy also contains the condition that Voyager “cover[s]

accidents and losses during the term of coverage and within the coverage

territory. The coverage territory is the United States of America, its territories

and possessions and Canada.” [Id. ¶ 13].

The Policy includes an endorsement that extends limited coverage to

contractors operating on behalf of DoorDash as delivery drivers. [Id. ¶ 13].

The Delivery Endorsement provides the following definition of delivery

operators:

Delivery operator means:

1. A person or entity who has entered into a contract

with the named insured to operate a covered auto to

provide delivery to customer(s) through the named

insured’s delivery application; or

2. A person who has been hired, retained, or

contracted by an entity where such entity has a

contract with the named insured to operate a covered

auto or to provide delivery to customer(s) through the

named insured’s delivery application.

[Id. ¶ 15]. The Policy further provides that:

For any delivery operator the term of coverage

begins at the time the delivery operator accepts a

delivery request made through a delivery application

and begins operating a covered auto for delivery. The

term of coverage ends when the delivery operator

has completed the delivery request(s) made through

the delivery application.

[Id.]. Thus, pursuant to the Policy, an independent contractor performing

deliveries for DoorDash qualifies for coverage under the Policy only after he

or she accepts an order and begins to use his or her automobile for delivery,

and coverage terminates upon completion of the delivery. [Id. ¶ 16].

B. The Underlying State Tort Action

Dondero commenced suit against Gifford on or about September 17,

2020, in a lawsuit captioned Amaziah Dondero v. Dakota Gifford, 20-CVS

1464, in the General Court of Justice, Superior Court Division, Henderson

County, North Carolina (the “Underlying Action”). [Id. ¶ 17]. Dondero’s

complaint asserts a single cause of action for negligence against Gifford. [Id.

¶ 18]. In the Underlying Action, Dondero alleges that on August 4, 2020, he

was a pedestrian legally in a crosswalk along Haywood Road in Asheville,

North Carolina. [Id. ¶ 20]. Dondero alleges that at 7:00 p.m., as he crossed

the crosswalk, Gifford negligently operated his vehicle while turning left from

Haywood Road. [Id. ¶ 21]. As a result of Gifford’s alleged negligence,

Dondero claims Gifford crashed his vehicle into Dondero. [Id. ¶ 22]. Dondero

alleges that this incident resulted in his sustained permanent injury, physical

pain and mental suffering, scarring and disfigurement, and medical costs in

excess of $25,000. [Id. ¶ 23].

In his original complaint, Dondero alleged that Gifford was operating

his vehicle “in the course of making a food delivery for Door Dash at the time

of the [accident].” [Id. ¶ 24]. Based on the allegations in the original

complaint, the Plaintiff concluded it had a duty to defend Gifford against the

suit pursuant to the complaint, the Policy, and North Carolina law. [Id. ¶ 25].

Accordingly, the Plaintiff agreed to defend Gifford against the suit subject to

a complete reservation of its rights. [Id. ¶ 26]. However, at the time that the

Plaintiff agreed to defend Gifford, the Plaintiff possessed information

indicating that Gifford was not within the term of coverage at the time of the

accident. [Id. ¶ 28]. Specifically, the Plaintiff’s named insurer, DoorDash,

provided the Plaintiff with a copy of Gifford’s activity log on August 4, 2020,

showing that Gifford had completed his last delivery before the time of the

accident and had not accepted a new delivery. [Id. ¶¶ 29-31].

On November 2, 2020, Dondero filed an amended complaint in the

Underlying Action. [Id. ¶ 42]. The amended complaint removed the original

allegation that Gifford was making a DoorDash delivery at the time of the

accident but was otherwise identical to the original complaint. [Id. ¶ 44]. The

amended complaint included no reference to DoorDash, and DoorDash is

not, and has never been, a party to the Underlying Action. [Id. ¶ 44-45].

Counsel for Dondero deposed Gifford in the Underlying Action on May

3, 2021. [Id. ¶ 35]. During that deposition, Gifford admitted he had completed

an order shortly before the collision, had not accepted a new order, and thus

was not in the course of making a delivery for DoorDash at the time of the

accident. [Id. ¶¶ 38-39].

IV. DISCUSSION

A. Basis for Exercising Jurisdiction

The Plaintiff’s Amended Complaint seeks a declaratory judgment to

determine the rights, obligations, and liabilities of the parties under the

Policy. [Id. ¶ 49]. The Federal Declaratory Judgment Act provides that a

federal district court “may declare the rights and other legal relations of any

interested party seeking such declaration, whether or not further relief is or

could be sought.” 28 U.S.C. § 2201(a). The Supreme Court has “repeatedly

characterized the Declaratory Judgment Act as ‘an enabling act, which

confers a discretion on the courts rather than an absolute right upon the

litigant.’” Wilton v. Seven Falls Co., 515 U.S. 277, 284 (1995) (quoting Pub.

Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 241 (1952)). As such,

the decision to entertain a declaratory judgment action is left to the sound

discretion of the Court. Id. at 287.

The Fourth Circuit has explained that a “declaratory judgment action is

appropriate ‘when the judgment will serve a useful purpose in clarifying and

settling the legal relations in issue, and . . . when it will terminate and afford

relief from the uncertainty, insecurity, and controversy giving rise to the

proceeding.’” Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 256 (4th Cir.

1996) (quoting Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 324 (4th Cir.

1937)).

Here, a declaratory judgment will settle what, if any, legal obligation

exists regarding the Plaintiff’s continued defense of Gifford in the Underlying

Action. Adjudication of the Plaintiff’s obligations under the Policy will clarify

whether there is any potential for Gifford to sustain liability on a claim covered

by the Policy and afford relief from uncertainty to all parties. Accordingly, a

declaratory judgment is appropriate.

However, “the Declaratory Judgment Act does not enlarge the

jurisdiction of the federal courts; it is ‘procedural only.’” Vaden v. Discover

Bank, 556 U.S. 49, 70 n.9 (2009) (quoting Aetna Life Ins. Co. v. Haworth,

300 U.S. 227 (1937)). Therefore, the Court must possess “an independent

basis for jurisdiction over the parties.” Volvo Constr. Equip. N. Am., Inc. v.

CLM Equip. Co., 386 F.3d 581, 592 (4th Cir. 2004). Here, the Plaintiff is a

citizen of the State of Georgia and Gifford and Dondero are citizens of South

Carolina and North Carolina, respectively. [Doc. 6 ¶¶ 3-4]. The amount in

controversy in this case exceeds $75,000. [Id. ¶ 5]. As such, the Court has

diversity jurisdiction over the Plaintiff’s claims. See 28 U.S.C. § 1332.

The Court must also have personal jurisdiction over Gifford and

Dondero to render a valid default judgment. The Court has personal

jurisdiction over Dondero because he is domiciled in North Carolina. See,

e.g., Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924

(2011). For the Court to have personal jurisdiction over Gifford, the Plaintiff

must prove, by a preponderance of the evidence, that exercising jurisdiction

will (1) comply with the forum state’s long-arm statute and (2) comport with

the due process requirements of the Fourteenth Amendment. See Carefirst

of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir.

2003) (citation omitted). Because North Carolina’s long-arm statute has been

construed to extend as far as due process allows, Christian Sci. Bd. of Dirs.

of First Church of Christ, Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir.

2001), this two-pronged test is collapsed into the single inquiry of whether

the exercise of personal jurisdiction over the defendant comports with due

process. Universal Leather, LLC v. Koro AR, S.A., 773 F.3d 553, 559 (4th

Cir. 2014).

The Plaintiff’s Amended Complaint contains jurisdictional facts

sufficient to support the exercise of personal jurisdiction over Gifford by

stating that the acts and omissions that gave rise to the Underlying Action

occurred within North Carolina and that the Underlying Action is pending in

North Carolina state court. [Doc. 6 ¶¶ 17-23]. Given those contacts with the

forum, Gifford should have reasonably anticipated being haled into this court.

The Plaintiff has also complied with its obligations to effectuate service

of process by serving Gifford and Dondero with a summons and a copy of

the Complaint pursuant to Federal Rule of Civil Procedure 4. [Doc. 7, Doc.

8]. Finally, the venue is proper under 28 U.S.C. § 1391(b). Accordingly, this

Court has jurisdiction over this matter and will proceed to address the merits

of the Plaintiff’s Motion for Default Judgment.

B. Voyager’s Duty to Defend

The Plaintiff’s Amended Complaint seeks a declaration that it has no

duty to defend Gifford in the Underlying Action. [Doc. 6 ¶ 49]. In a diversity

case such as this, the Court applies the conflict of laws rules of the forum

state. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941). North

Carolina law specifies that all contracts insuring interests within the state

“shall be deemed to be made therein” and “are subject to the laws thereof.”

N.C. Gen. Stat. § 58-3-1. Thus, North Carolina insurance law principles apply

to the present matter.

North Carolina applies the “comparison test” to determine whether an

insurer has a duty to defend. Harleysville Mut. Ins. Co. v. Buzz Off Insect

Shield, LLC, 364 N.C. 1, 6, 692 S.E.2d 605, 610 (2010). Under this test,

courts read the insurance policy and the complaint side-by-side to determine

whether the facts, as alleged in the pleadings, are covered by the language

of the policy. Id.

In the present case, the Plaintiff argues that the Court should apply the

comparison test to the amended complaint in the Underlying Action, as

opposed to the original complaint which alleged Gifford was driving for

DoorDash at the time of the accident. [Doc. 13-1 at 7]. While it appears there

is no North Carolina decision specifically holding that courts should apply the

comparison test to the operative version of a pleading in an underlying

action, North Carolina law provides that an amended complaint “has the

effect of superseding the original complaint,” Hyder v. Dergance, 76 N.C.

App. 317, 319-20, 332 S.E.2d 713, 714 (1985), and North Carolina courts

have referenced amended complaints when applying the comparison test,

see, e.g., Eubanks v. State Farm Fire & Cas. Co., 126 N.C. App. 483, 488-

89, 485 S.E.2d 870, 873 (1997); Buzz Off, 364 N.C. at 9, 692 S.E.2d at 612.

Accordingly, the Court concludes that the amended complaint controls for

the purposes of determining whether the Plaintiff has a duty to defend.1

The relevant policy language here provides that, for DoorDash delivery

operators, “the term of coverage begins at the time the delivery operator

accepts a delivery request made through a delivery application and begins

operating a covered auto for delivery. The term of coverage ends when the

delivery operator has completed the delivery request(s) made through the

delivery application.” [Doc. 6 ¶ 15]. The operative version of the complaint

does not mention DoorDash or otherwise allege that Gifford was engaged in

a delivery at the time of the accident. [See Doc. 6 at Ex. 7]. Thus, the

pleadings do not allege facts that are covered under the Plaintiff’s policy.

However, “where the insurer knows or could reasonably ascertain facts

that, if proven, would be covered by its policy, the duty to defend is not

dismissed because the facts alleged in a third-party complaint appear to be

outside coverage.” Waste Mgmt. of Carolinas, Inc. v. Peerless Ins. Co., 315

N.C. 688, 691, 340 S.E.2d 374, 377 (1986). In other words, “[t]he duty to

1 Numerous other courts have approached this issue similarly. See, e.g., Primrose

Operating Co. v. Nat’l Am. Ins. Co., 382 F.3d 546, 552 (5th Cir. 2004) (“As ‘an amended

pleading completely supersedes prior pleadings, . . . the duty to defend rests on the most

recent pleading.’” (quoting Guaranty Nat’l Ins. Co. v. Vic Mfg. Co., 143 F.3d 192, 194 (5th

Cir. 1998)) (applying Texas law); State Farm Fire & Cas. Co. v. Higgins, 788 So.2d 992,

995 (Fla. Dist. Ct. App. 2001) (“When an amended complaint supersedes an earlier one,

the allegations of the amended complaint control the duty to defend.”).

defend is ‘excused only if the facts alleged in the complaint do not even

arguably fall within the policy coverage and an independent investigation

reveals no extrinsic facts demonstrating coverage.’” Auto-Owners Ins. Co. v.

Potter, 242 F. App’x 94, 100 (4th Cir. 2007) (emphasis added) (quoting St.

Paul Fire & Marine Ins. Co. v. Vigilant Ins. Co., 724 F. Supp. 1173, 1177

(M.D.N.C. 1989)).

In the present case, in accordance with North Carolina law, the Plaintiff

investigated whether extrinsic facts demonstrated coverage. Rather than

demonstrating that the underlying facts fell within the Policy’s coverage, this

investigation revealed that the underlying facts were definitively not within

the scope of coverage. Authenticated DoorDash records and Gifford’s own

deposition testimony established that, at the time of the accident, Gifford had

completed a delivery and had not accepted another. [Doc. 6 ¶¶ 29-31, 38].

Although this investigation indicated that the facts of the Underlying

Action were not covered by the Policy, the Plaintiff was not relieved of its

duty to defend while the operative version of the complaint in the Underlying

Action included the allegation that Gifford was engaged in a DoorDash

delivery at the time of the accident. See Waste Mgmt., 315 N.C. at 692, 340

S.E.2d at 378 (holding that the insurer is bound to defend “groundless, false

or fraudulent” lawsuits if the facts as alleged in the complaint are arguably

covered by the policy). However, now that the operative complaint does not

allege facts arguably covered by the Policy and no facts demonstrating

coverage have been revealed through the Plaintiff’s investigation, the

Plaintiff does not have a duty to defend Gifford.

C. Voyager’s Duty to Settle

The Plaintiff’s Amended Complaint seeks a declaration that it has no

duty to settle the claim in the Underlying Action. [Doc. 6 ¶ 49]. While no North

Carolina court has directly addressed whether an insurer has a duty to settle

where no duty to defend exists, numerous courts who have confronted this

question have held that there is no duty to settle noncovered actions. See,

e.g., Rocor Intern, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 77

S.W.3d 253, 261 (Tex. 2002) (“[A]n insurer generally has no obligation to

settle a third-party claim against its insured unless the claim is covered under

the policy.”); Peerless Lighting Corp. v. Am. Motorist Ins. Co., 98 Cal. Rptr.

2d 753, 766 (Cal. Ct. App. 2000) (“[S]ince [the insurer] had no duty to defend

the underlying action, it had no duty to settle it.”); Trotter v. State Farm Mut.

Ins. Co., 297 S.C. 465, 475, 377 S.E.2d 343, 349 (1988) (“[T]he rule [that a

liability insurer owes its insured a duty to settle a personal injury claim

covered by the policy if settlement is the reasonable thing to do] does not

apply if [the claim] is not covered by the policy.”); see also Restatement of

Liability Insurance § 25 cmt. a (Am. L. Inst. 2019) (“An insurer has no duty to

settle noncovered legal actions.”).

Further, to hold that the Plaintiff has a duty to settle a claim that falls

outside of the scope of coverage of the Policy runs counter to the plain

language of the Policy, which states that Voyager will pay “all sums . . . to

which this insurance applies.” [Doc. 6 at Ex. 1]. Thus, it has no obligation to

pay damages in noncovered actions. Accordingly, based on the language of

the policy and the conclusions of other courts who have confronted this

issue, the Court concludes that the Plaintiff has no duty to settle the

Underlying Claim.

D. Voyager’s Duty to Indemnify

The Plaintiff’s Amended Complaint seeks a declaration that it has no

duty to indemnify Gifford in the Underlying Action. [Doc. 6 ¶ 49]. The duty to

defend is broader in scope than the duty to indemnify; an “insurer’s duty to

defend is ordinarily measured by the facts as alleged in the pleadings; its

duty to pay is measured by the facts ultimately determined at trial.” Buzz Off,

364 N.C. at 7, 692 S.E.2d at 610 (internal quotations omitted) (quoting Waste

Mgmt., 315 N.C. at 691, 340 S.E.2d at 377).

Here, because the operative complaint in the Underlying Action does

not allege facts that fall within the Policy’s coverage, there is no possibility

that the facts as ultimately determined at trial would be covered by the Policy.

Thus, as the Plaintiff has no duty to defend Gifford in the Underlying Claim,

it does not have a duty to indemnify him.

E. Voyager’s Request to Withdraw Its Defense of Gifford

The Plaintiff’s Amended Complaint seeks a declaration that it is

permitted to withdraw its defense of Gifford in the Underlying Action. [Doc. 6

¶ 49]. However, this request by the Plaintiff falls outside of the Court’s

authority pursuant to the Declaratory Judgment Act. While the Plaintiff cites

to an unpublished Fourth Circuit case that held that an insurer is “entitled to

rely” upon a district court’s declaratory judgment that it has no duty to defend

in deciding to withdraw its defense, Auto-Owners Ins. Co., 242 F. App’x at

102 (emphasis added), the Plaintiff cites no authority supporting the

argument that a declaration of permission to withdraw is within the Court’s

authority pursuant to the Declaratory Judgment Act.2 Accordingly, the Court

limits its declarations to the legal obligations of the Plaintiff—specifically, that

the Plaintiff has no duty to defend or indemnify Gifford in the Underlying

Action, and that the Plaintiff has no duty to settle the Underlying Action.

2 To the extent the Plaintiff requests that counsel be allowed to withdraw from the matter,

that is a determination left to the state court. See N.C. Gen. Stat. § 15A-144.

IT IS, THEREFORE, ORDERED that the Plaintiff's Motion for Default

Judgment [Doc. 13] is GRANTED, and the Court hereby declares that the

Plaintiff does not have a duty to defend, settle, or indemnify with respect to

the Underlying Action.

The Clerk of Court is respectfully instructed to enter a default judgment

consistent with this Order against the Defendants Dakota Gifford and

Amaziah Dondero.

IT IS SO ORDERED.

Signed: October 1, 2022

Martifi Reidinger Ls,

Chief United States District Judge lll

18