Allstate Insurance Companies v. Charles Herron
2011 U.S. App. LEXIS 4645
| 9th Cir. | 2011Background
- Allstate insured Herron under a car policy with $100,000 per-person bodily injury limits for Trailov.
- Trailov was severely injured in a September 14, 2002 accident; Allstate began investigation the same day.
- Power, Trailov’s counsel, demanded policy-limits settlement and set a deadline around mid-May 2003; Allstate responded incrementally and ultimately offered $100,000 plus $12,500 in fees on May 30, 2003.
- Herron consented to judgment against himself and assigned his rights to Trailov and Kenick; the assignment and judgment were contested as breaches of the cooperation clause.
- Allstate sought declaratory relief in federal court asserting Herron’s actions breached the policy and affected coverage; Herron sought dismissal or transfer to state court as a real-party-in-interest issue.
- The district court ruled, trial produced a jury verdict that Allstate acted reasonably by offering policy limits; the court amended the judgment in parts, later finding some amendments erroneous and reversing/remanding accordingly, with Herron appealing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court properly retained declaratory judgment jurisdiction. | Herron argues lack of proper jurisdiction/abuse of discretion. | Allstate contends declaratory relief appropriate for contract dispute with diversity jurisdiction. | Jurisdiction proper; no abuse of discretion. |
| Whether Allstate breached the duty to settle at policy limits by May 16, 2003. | Herron asserts Allstate failed to tender policy limits by the deadline. | Allstate argues it acted reasonably; deadline was not strict. | Rational jury could find Allstate acted reasonably; no directed verdict for Herron. |
| Whether evidence of other alleged breaches was properly excluded. | Herron contends numerous ancillary breaches should be admitted to show bad faith. | These breaches were not material and did not prejudice Allstate; evidence barred under Rules 401/403. | District court did not abuse discretion; evidence excluded as non-material/unduly prejudicial. |
| Whether the Rule 59(e) amendments to the judgment were proper. | Herron challenges amendments adding findings about prejudice and voiding coverage. | Allstate sought to reflect relief in its complaint; amendments appropriate under Rule 59(e). | Amendment to paragraph 4 erroneous; parts 2-3 affirmed; overall partial reversal/remand. |
Key Cases Cited
- Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281 (Alaska 1980) (insurer duties and breach analysis in settlement context)
- Grace v. Ins. Co. of N. Am., 944 P.2d 460 (Alaska 1997) (cooperation-clause prejudice requirement; nonliability if prejudice shown)
- Grace v. Ins. Co. of N. Am., 944 P.2d 460 (Alaska 1997) (cooperation clause prejudice requirement; nonliability if prejudice shown)
- Jackson v. Am. Equity Ins. Co., 90 P.3d 136 (Alaska 2004) (duty to tender policy limits when excess verdict likely; good faith and fair dealing standard)
- Estes v. Alaska Ins. Guar. Ass’n, 774 P.2d 1315 (Alaska 1989) (prejudice requirement to defeat coverage for insured breach of cooperation clause)
- Dizol v. Gov’t Employees Ins. Co., 133 F.3d 1220 (9th Cir. 1998 (en banc)) (Declaratory Judgment Act: factors for exercising jurisdiction)
- Great Divide Ins. Co. v. Carpenter ex rel. Reed, 79 P.3d 599 (Alaska 2003) (material breach and prejudice concepts in cooperation contexts)
- Weaver Bros., Inc. v. Chappel, 684 P.2d 123 (Alaska 1984) (prejudice and cooperation clause context in insurance contracts)