Allstate Insurance Company v. Scarbrough, 3:15-cv-00114

Background

On April 6, 2012 John Scarbrough drove a truck in Oxford, MS; passengers Rachel and Kimberly Holloway were injured. John was insured by GEICO; his parents Robert and Denise Scarbrough had an Allstate auto policy and an Allstate personal umbrella policy in effect at the time.
The Holloways sued John and others in state court for negligence and related claims; they later sought to add Allstate alleging coverage existed under the Scarbroughs’ policies and alleging concealment and bad faith.
Allstate filed a separate federal declaratory judgment action seeking a declaration that the Scarbroughs’ Allstate policies did not provide coverage; the Holloways were joined as necessary parties and filed counterclaims mirroring their state-court claims.
The Court previously granted partial summary judgment that the Scarbroughs’ automobile liability policy did not provide coverage for John. The present motion seeks partial summary judgment on the umbrella policy’s “required underlying insurance” provision.
The umbrella policy defines an “insured person” as a relative who is a resident of the Scarbroughs’ household but does not define “resident.” Allstate asserts the umbrella only becomes effective for a plaintiff once that plaintiff’s judgment exceeds the required underlying per-person limit of $250,000.
The court applied Georgia choice-of-law (policy clause) and, assuming for purposes of the motion that John is an insured person, held the umbrella does not provide coverage for a plaintiff unless that plaintiff’s verdict exceeds $250,000 per person (and $500,000 per accident).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Georgia law governs interpretation of the umbrella policy	Holloways: unspecified challenge; court notes reasonable basis for Georgia law	Allstate: policy chooses Georgia law; Scarbroughs are Georgia citizens	Georgia law applies under the policy's choice-of-law clause
Whether John is an "insured person" under the umbrella (i.e., a resident)	Holloways: John is related and claim he is a resident	Allstate: John was not a resident; umbrella not triggered	Court: residence is a fact question for a jury; assumed for this motion that John is an insured person
Whether the umbrella policy is triggered absent satisfaction of required underlying limits per plaintiff	Holloways/John: umbrella covers John as insured once a plaintiff obtains a judgment over $250,000 against him (per person)	Allstate: umbrella provides no coverage for any plaintiff until that plaintiff’s damages exceed the $250,000 per-person required underlying limit	Court: grant partial SJ — umbrella is not effective for a plaintiff unless that plaintiff’s verdict exceeds the $250,000 per-person (and $500,000 per-accident) underlying limits
Whether ambiguous policy language should be construed against Allstate to create broader coverage	Holloways: may argue ambiguity favors insureds	Allstate: policy language is unambiguous regarding required underlying limits	Court: language unambiguous; apply as written (no construction to create coverage)

Key Cases Cited

State Farm Mut. Auto. Ins. Co. v. Staton, 685 S.E.2d 263 (Ga. 2009) (ambiguities in insurance policies are construed against insurer but clear language must be applied as written)
Travelers Ins. Co. v. Mixon, 162 S.E.2d 830 (Ga. Ct. App. 1968) (a person may have more than one residence)
Baldwin v. State Farm Fire & Cas. Co., 590 S.E.2d 206 (Ga. Ct. App. 2003) (residence/domicile determinations are mixed questions of law and fact normally for a jury)
Daniel v. Allstate Ins. Co., 660 S.E.2d 765 (Ga. Ct. App. 2008) (same principle on residence and insured status)
Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standards and burdens of production)
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (standard for genuine dispute and reasonable jury verdict on summary judgment)