Firemen's Insurance Company of Washington, D.C. v. Harrington

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION

CASE NO. 3:23-CV-00028-FDW-SCR

FIREMEN'S INSURANCE COMPANY OF )

WASHINGTON, D.C.,

)

Plaintiff, )

)

v. ) ORDER

)

RUSSELL ANRAY HARRINGTON, )

)

Defendant. )

)

THIS MATTER is before the Court sua sponte as to whether this Court has jurisdiction

over this matter, which the Court concludes must be determined prior to ruling on the pending

Motion for Summary Judgment.

I. Background1

Plaintiff Firemen’s Insurance Company of Washington, D.C., (“Fireman’s”) filed this suit

against Russell Anray Harrington (“Harrington”) seeking a declaratory judgment “pursuant to N.C.

Gen. Stat. § 1-253, et seq., and/or 28 U.S.C. § 2201, et seq.,” to determine Fireman’s coverage

obligations in a lawsuit and claims arising out of a motor vehicle accident. (Doc. No. 1, p. 1.) On

September 11, 2018, Madison Hargett, while driving in York County, South Carolina, caused the

motor vehicle accident when she failed to yield to ongoing traffic while making a left turn.

Hargett’s vehicle struck a truck operated by Harrington, who was driving the truck for his

1 Because this matter is currently pending resolution of a motion for summary judgment, the background provided

herein views all facts, and reasonable inferences taken therefrom, in the light most favorable to Defendant as the

nonmoving party. Bhattacharya v. Murray, 93 F.4th 675, 686 (4th Cir. 2024) (citing Davison v. Rose, 19 F.4th 626,

633 (4th Cir. 2021), cert. denied, __ U.S.__, 143 S. Ct. 106, 214 L.Ed.2d 25 (2022)).

employer, Portable Storage Systems, Inc., (“PODS”). Harrington contends he sustained serious

and significant injuries because of the accident and could no longer work for PODS.

When the accident occurred, Hargett—the driver of the car—and her father held an

insurance policy issued by Progressive Direct, which provided bodily injury liability coverage with

policy limits of $100,000. At the same time, PODS held a commercial auto insurance policy issued

by Fireman’s, which covered the PODS truck driven by Harrington and provided, among other

things, certain underinsured motorist (“UIM”) coverage (“the UIM Policy”), with Policy limits of

$1,000,000 per accident. The UIM Policy explains that under North Carolina law, “Underinsured

Motorist Bodily Injury Coverage . . . protects you and your family against injuries and property

damages caused by the negligence of other drivers who may have limited or only minimum

coverage or even no liability insurance.” (Doc. No. 12-1, p. 49.)

In July 2021, Harrington sent a demand package to Fireman’s via Berkley Southeast

Insurance Company (“Berkley Insurance”), which Harrington contends Fireman’s hires to serve

as adjusters and handle claims under Fireman’s policies, including the UIM Policy at issue here.

The demand package set forth Harrington’s injuries, medical expenses, and other damages, which

exceeded $100,000. On August 2, 2021, Progressive—Hargett’s insurance provider—informed

Harrington that it would tender its $100,000 bodily injury policy limits in exchange for

Harrington’s execution of a “settlement,” (Doc. No. 12-2), entitled a “Covenant Not to Execute.”

(Doc. No. 12-3.) The next day, a Progressive agent and Joel Coe, who is an agent with Berkley

Insurance, had a telephone conversation, and the Progressive agent informed Coe that Progressive

had tendered its policy limits to Harrington. On that same day—August 3, 2021—Mr. Coe made

a written status update in the claim messaging portal indicating the “I contacted the Tort Feasor’s

carrier regarding this loss . . . [and] they received a time limit demand and ultimately tendered their

$100K limits, yesterday.” (Doc. No. 24-1, p. 3.) Over the next several weeks, Berkley Insurance

subsequently requested additional materials from Harrington to investigate and evaluate his claim

on the UIM Policy.

On September 7, 2021, Harrington filed suit against Hargett and her father in the Court of

Common Pleas in York County, South Carolina, for his injuries caused by the accident

(hereinafter, “South Carolina Case”). On September 27, 2021, Harrington executed the Covenant

Not to Execute with Progressive in exchange for Progressive’s payment of $100,000. (Doc. No.

12-3.) In the Covenant, the parties acknowledged the Covenant was executed “in the State of

South Carolina and the parties agree that it shall be construed and enforced pursuant to South

Carolina law.” (Id., p. 2.) On February 10, 2022, Fireman’s appeared in the South Carolina Case

and filed its “Answer of Unnamed Defendant.” (Doc. No. 18-10.) The parties engaged in some

litigation in the South Carolina Case. (See, e.g., Doc. No. 18-14.)

On January 16, 2023, nearly a year after filing its Answer in the South Carolina case,

Fireman’s filed this declaratory judgment action, seeking a declaration by this Court concerning

its rights and obligations under the UIM Policy. On February 21, 2023, the judge in the South

Carolina Case granted Fireman’s Motion to Stay Proceedings and ordered the South Carolina Case

be stayed pending a determination in this case. (Doc. No. 18-15.)

Fireman’s now moves for summary judgment and asks this Court to rule, as a matter of

law, that Harrington is not entitled to and is barred from recovering benefits under the UIM Policy

because he failed to comply with certain notice provisions under North Carolina law and the UIM

Policy. Harrington responds in opposition and argues that genuine issues of material fact bar entry

of judgment at this stage in the proceedings.

II. Standard of Review

Fireman’s seeks summary judgment in its favor pursuant to Rule 56 of the Federal Rules

of Civil Procedure. The parties’ pleadings and evidence in support of their respective positions on

the motion at bar, however, present a significant jurisdictional question that this Court must first

decide prior to resolving any issue on the merits. Specifically, the parties indicate the South

Carolina Case is stayed pending resolution of this case. (Doc. No. 18-15.) Neither a judge nor a

jury has determined liability or—more importantly—awarded damages in excess of the $100,000

Progressive policy limits. Thus, the issue of whether Hargett is an underinsured motorist remains

undetermined.

It is axiomatic that federal courts are “courts of limited jurisdiction,” and courts “possess

only that power authorized by Constitution and statute.” Exxon Mobil Corp. v. Allapattah Servs.,

Inc., 545 U.S. 546, 552 (2005) (quotation and citation omitted). Article III of the United States

Constitution limits federal courts to adjudication of “Cases” and “Controversies.” U.S. CONST.

art. III., § 2. The constitutional doctrines of standing and ripeness ensure that courts “do not exceed

the limits of Article III judicial power.” Trustgard Ins. Co. v. Collins, 942 F.3d 195, 200 (4th Cir.

2019) (citations and quotations omitted). “The ‘irreducible constitutional minimum of standing’

requires the petitioner to allege a concrete injury that is ‘actual or imminent, not conjectural or

hypothetical.’” Id. at 199 (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560, (1992). Ripeness

“determines when a case or controversy is fit for federal judicial review” and prevents “the courts,

through avoidance of premature adjudication, from entangling themselves in abstract

disagreements.” Trustgard, 942 F.3d at 199 (cleaned up).

Article III ripeness can be missing for cases seeking resolution of a dispute over a party’s

obligation to pay a judgment in a separate action where neither judgment nor settlement has

occurred. Courts cannot resolve cases and controversies that are “of a hypothetical and contingent

nature” based on a speculative injury that “may or may not occur” depending on the outcome of

that separate lawsuit. Id. at 200. “Although we recognize how valuable it might be for the parties

to know an insurer’s obligations before liability is resolved, practical value cannot overcome this

fundamental limitation on our jurisdiction.” Id. at 201. In other words, courts cannot prematurely

adjudicate responsibility for “possible liability” that “might arise from pending lawsuits” because

those cases are not ripe until liability is determined. Id. (citing A/S J. Ludwig Mowinckles Rederi

v. Tidewater Const. Co., 559 F.2d 928, 931 (4th Cir. 1977) (concluding claims for indemnification

for expenses and liability in a separate pending—but not yet decided—personal injury or wrongful

death action were not ripe for adjudication; noting “there has been neither a determination of

liability nor a settlement in any of the personal injury or wrongful death actions pending against

[the defendants]”)); see also Michael Pellis Architecture PLC v. M.L. Bell Constr. LLC, No.

3:22CV470 (DJN), 2023 WL 6222623, at *11 (E.D. Va. Sept. 22, 2023) (concluding the court

lacked subject matter jurisdiction over the indemnification claim; “Since any future uninsured

liability claims are wholly speculative at this point, Plaintiffs’ claim for indemnification is not ripe

for adjudication.”). Otherwise, a court risks issuing an advisory opinion.

Article III justiciability, including ripeness, is required for courts to resolve a declaratory

judgment action. The statutes comprising the Declaratory Judgment Act authorize a federal court

to “declare the rights and other legal relations of” interested parties “in a case of actual controversy

within its jurisdiction . . . .” 28 U.S.C. § 2201 (emphasis added); see also Aetna Life Ins. Co. v.

Haworth, 300 U.S. 227, 239–40 (1937) (“The Declaratory Judgment Act of 1934, in its limitation

to ‘cases of actual controversy’. . . is operative only in respect to controversies which are such in

the constitutional sense.”); Zurich Am. Ins. Co. v. Covil Corp., No. 1:18-CV-932, 2020 WL

4483236, at *3 (M.D.N.C. Aug. 4, 2020) (“the Declaratory Judgment Act does not expand the

jurisdiction of federal courts beyond that authorized by Article III; it provides federal courts with

subject matter jurisdiction only to the extent ‘it authorizes relief which is consonant with the

exercise of the judicial function in the determination of controversies to which under the

Constitution the judicial power extends.’” (quoting Haworth, 300 U.S. at 240)). A declaratory

judgment action satisfies the constitutional case-or-controversy requirement if the dispute is

“definite and concrete, touching the legal relations of parties having adverse legal interests;” and

is “real and substantial and admit of specific relief through a decree of a conclusive character, as

distinguished from an opinion advising what the law would be upon a hypothetical state of facts.”

MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (cleaned up).

Ultimately, however, federal courts are empowered to abstain from resolving a declaratory

judgment case on the merits notwithstanding the existence of a case or controversy under Article

III. The Declaratory Judgment Act “gives federal courts discretion to decide whether to declare

the rights of litigants. . . . Rather than grant litigants a right to judgment in their case, it merely

permits the courts to hear those cases.” Trustgard, 942 F.3d at 201 (emphasis added). Indeed, the

Fourth Circuit has long recognized that “a district court’s jurisdiction under the Declaratory

Judgment Act is unquestionably discretionary,” and the Declaratory Judgment Act “‘confer[s] on

federal courts unique and substantial discretion in deciding whether to declare the rights of

litigants.’” Riley v. Dozier Internet L., PC, 371 F. App’x 399, 404 (4th Cir. 2010) (emphasis

added; quoting MedImmune, 549 U.S. 118, 136).

Finally, courts cannot simply presume to have jurisdiction just because a case is filed under

the Declaratory Judgment Act. “[J]ust because a federal court could exercise jurisdiction under

the Declaratory Judgment Act does not mean that it should.” Trustgard, 942 F.3d at 204 (emphasis

in original). The Fourth Circuit has explained the applicable standard to determine whether to

exercise jurisdiction over a declaratory judgment action:

A declaratory judgment 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. At the same time, whenever a parallel proceeding is pending

in state court, district courts must also take into account considerations of

federalism, efficiency, and comity. To aid district courts in balancing the state and

federal interests when a parallel state action is pending, we have articulated four

factors for consideration: (1) whether the state has a strong interest in having the

issues decided in its courts; (2) whether the state courts could resolve the issues

more efficiently than the federal courts; (3) whether the presence of overlapping

issues of fact or law might create unnecessary entanglement between the state and

federal courts; and (4) whether the federal action is mere procedural fencing, in the

sense that the action is merely the product of forum-shopping.

United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 493–94 (4th Cir. 1998) (cleaned up); accord

Trustgard, 942 F.3d at 202; Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 377 (4th

Cir. 1994).

Bearing these principles in mind, this Court considers whether Article III jurisdiction

exists, and if so, whether to exercise jurisdiction under the Declaratory Judgment Act.

III. Analysis

Here, Fireman’s asks this Court to declare as a matter of law that there is no coverage under

the UIM Policy for Harrington’s claim for underinsured motorist benefits as it relates to the South

Carolina Case. In other words, Fireman’s asks this Court for a judgment determining that

Fireman’s does not have any obligation under the UIM Policy if the Hargetts are found liable to

Harrington and if any damages are awarded to Harrington beyond the $100,000 coverage provided

by the Hargetts’ policy with Progressive. Because the parties have now informed the Court the

South Carolina Case is stayed, the Court considers whether Article III is satisfied and whether

declaratory judgment jurisdiction is appropriate in this case.

Ripeness is a “justiciability doctrine [that] determines when a case or controversy is fit for

federal judicial review.” Trustgard, 942 F.3d at 199. A claim stands ripe for adjudication “when

the action in controversy is final and not dependent on future uncertainties.” In re Naranjo, 768

F.3d 332, 347 (4th Cir. 2014). Furthermore, an issue is not ripe for decision “[w]here an injury is

contingent upon a decision to be made by a third party that has not yet acted.” Doe v. Va. Dep’t

of State Police, 713 F.3d 745, 758 (4th Cir. 2013). In determining whether issues are ripe, courts

consider “‘(1) the fitness of the issues for judicial decision and (2) the hardship to the parties of

withholding court consideration.’” Cooksey v. Futrell, 721 F.3d 226, 240 (4th Cir. 2013) (quoting

Nat'l Park Hospitality Ass’n v. Dep't of Interior, 538 U.S. 803, 808 (2003)). A case is “fit for

judicial decision when the issues are purely legal and when the action in controversy is final and

not dependent on future uncertainties.” Miller v. Brown, 462 F.3d 312, 319 (4th Cir. 2006)

(citation omitted). The “hardship to the parties” may be “measured by the immediacy of the threat

and the burden imposed” on a plaintiff. Charter Fed. Sav. Bank v. Off. of Thrift Supervision, 976

F.2d 203, 208–09 (4th Cir. 1992).

Throughout Fireman’s Memorandum in Support of its Motion for Summary Judgment,

Fireman’s repeatedly references Harrington’s “allegedly sustained” injuries and damages resulting

from the Accident. (See, e.g., Doc. No. 10, pp. 1-2 (emphasis added).) And while the record

before this Court indicates Fireman’s and Harrington have exchanged documents concerning

potential injuries and damages arising out of the accident, Fireman’s does not concede

Harrington’s injuries and damages exceed the $100,000 threshold from the Hargetts’ policy to

make an underinsured motorist policy applicable. It is possible—based on speculation and

uncertainties, of course—that the South Carolina Case may resolve these issues in a way that

makes the UIM Policy inapplicable. Accordingly, Fireman’s appears to seek an advisory opinion

from this Court in order to know it’s obligations before liability is resolved, and—as the Fourth

Circuit has recognized—“[Fireman’s alleged injury—that it might have to guarantee a future

judgment against [Hargett]—is of a hypothetical and contingent nature: the injury may or may not

occur depending on the outcome of the state lawsuit.” Trustgard, 942 F.3d. at 200.

Even presuming Fireman’s claim is ripe for judicial determination, the Court must consider

whether applicable factors counsel in favor of or against exercising discretionary jurisdiction under

the Declaratory Judgment Act. See United Capitol Ins. Co, 155 F.3d at 493–94; Trustgard, 942

F.3d at 202; Nautilus, 15 F.3d at 377. Consideration of discretionary jurisdiction—

notwithstanding the ripeness issue—is appropriate because “the exact parameters of subject matter

jurisdiction in this context remain unsettled,” and “courts have exercised jurisdiction without a

finding of liability in many cases over the years.” Zurich, No. 1:18-CV-932, 2020 WL 4483236,

at *3 (M.D.N.C. Aug. 4, 2020) (collecting cases). Moreover, the Fourth Circuit decision in

Trustgard questioned—but did not resolve—the ripeness issue in that case, instead opting to render

its decision based on the appropriateness of exercising jurisdiction under the Declaratory Judgment

Act. 942 F.3d at 201 (“Though we must generally decide jurisdictional questions first, we may

address a discretionary jurisdictional question before a nondiscretionary jurisdictional question.”).

The Court ORDERS the parties to submit supplemental briefing on their respective

positions as to whether this Court should exercise its jurisdiction to resolve the policy coverage

dispute here or whether it should abstain until the South Carolina Case is resolved. Supplemental

briefs on this narrow issue shall be no longer than 3,000 words and must be filed no later than

April 30, 2024. The Court will issue a ruling resolving the jurisdictional issue, and—if

appropriate—Fireman’s Motion for Summary Judgment, prior to or at docket call, which is set for

May 6, 2024.

IT IS THEREFORE ORDERED that supplemental briefs on the issue of this Court’s

jurisdiction shall be filed no later than April 30, 2024, and shall be no longer than 3,000 words.

IT IS SO ORDERED.

Signed: April 22, 2024

Frank D. Whitney é

United States District Judge Begs

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