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Society Insurance v. Nystrom

United States District Court, D. Arizona

September 8, 2016

Society Insurance, Plaintiff,
v.
Donna Nystrom; Christine St. John, individually and on behalf of her minor children, S.S. & S.S.; Brenda DeGross; Daniel DeGross; Darren DeGross; Dean DeGross; the Estate of David DeGross; Mountain Vista Medical Center; State Farm Mutual Automobile Insurance Company; Western General Insurance Company; John and Jane Does I - X, Defendants.

          ORDER

          Neil V. Wake Senior United States District Judge.

         On May 15, 2013, Society Insurance filed this action in interpleader under 28 U.S.C. § 1335. The action will be dismissed for two independent reasons: (1) the parties failed to make good faith efforts to comply with their stipulation to resolve this matter by agreement or state court adjudication, and (2) the action was filed prematurely.

         I. BACKGROUND

         On February 6, 2013, a motor vehicle collision occurred in Pinal County, Arizona, involving James Sparish, who was driving a truck insured by Society Insurance under a business auto insurance policy issued to “James Sparish, Brian Keeler, Kyle Kraine, Gregory Weaver dba J J S Auto Body Clinic.” Society Insurance also provided a garage business owners policy to “James Sparish, Brian Keeler, Kyle Kraine, Gregory Weaver dba J J S Auto Body Clinic.” Sparish is a Wisconsin resident.

         When Sparish was in Arizona, he ran a red light and collided with a vehicle driven by Christine St. John. She and her two passengers, Spencer St. John and S.S., are Arizona residents. All three received medical treatment after the accident at Mountain Vista Medical Center.

         Donna Nystrom and David DeGross were passengers in Sparish's truck and were injured and hospitalized. DeGross died in the hospital. Both were Wisconsin residents.

         On February 7, 2013, Society Insurance received notice of the collision and shortly thereafter received communications from attorneys representing some of those injured in the collision. Society Insurance believed the claims could exceed the $500, 000 bodily injury policy limit provided by a business automobile policy that protected the truck driven by Sparish. By letter to all of the claimants and potential claimants, former counsel for Society Insurance offered to “mediate the claim to divide up the $500, 000” from the business automobile policy bodily injury limits and stated that “if the parties did not agree to mediation, then Society Insurance would interplead the funds leaving the court to decide the division.” (Doc. 101 at 7.)

         On May 15, 2013, Society Insurance filed this action in interpleader, seeking to deposit the business automobile policy limits with the Court. Neither the initial Complaint in Interpleader nor the First Amended Complaint in Interpleader admitted that its insured is liable for the damages caused by the February 6, 2013 collision or that the business automobile policy provides coverage for the collision. The following people were named as Defendants: David DeGross's wife, Brenda DeGross, and his three sons, Daniel DeGross, Darren DeGross, and Dean DeGross; Donna Nystrom; Christine St. John, Spencer St. John, and S.S.; and Mountain Vista Medical Center. State Farm Mutual Automobile Insurance Company and Western General Insurance Company were initially named as Defendants, but were dismissed upon stipulation.

         On January 10, 2014, Society Insurance moved to vacate the Scheduling Conference set for January 31, 2014, because the parties had scheduled a global settlement conference before an independent mediator on January 27, 2014. The Court granted the motion and continued the Scheduling Conference to February 28, 2014. On February 7, 2014, Society Insurance filed a motion to stay proceedings because during the global settlement conference a conflict arose between Society Insurance and its insured, James Sparish, regarding coverage. Because then-counsel for Society Insurance represented Sparish for defense of claims made by the Defendants, it was necessary to substitute new counsel for Society Insurance. New counsel entered their appearance on February 21, 2014.

         The Scheduling Conference was held on March 13, 2014, during which Defendants agreed to decide the allocation of the business automobile policy limits by either agreement or state court adjudication. On April 11, 2014, the parties filed a stipulation to permit Society Insurance to interplead the aggregate policy limits for bodily injury under the business automobile policy (“Disputed Funds”) to the registry of the Court, enjoin Defendants from bringing suit against Society Insurance relating to the business automobile policy or Disputed Funds, and discharge Society Insurance from any further liability arising from the dispute among the various Defendants relating to the business automobile policy or Disputed Funds. (Doc. 66.) The parties also stipulated that:

The parties will abide either (a) the agreement of the parties of the allocation of the Disputed Funds or (b) the adjudication of the state court system's allocation of the Disputed Funds to the Defendants and agree that this Court will pay the Disputed Funds to the Defendants according to the agreement or allocation.

(Id.) There was no indication that the parties intended for this Court to decide how the Disputed Funds should be allocated.

         The stipulation also amended the First Amended Complaint in Interpleader to correct the business automobile policy number and to change the name of the insured under the policy from “James Sparish” to “James Sparish, Brian Keeler, Kyle Kraine, Gregory Weaver dba J J S Auto Body Clinic.” The parties further agreed that the stipulation did not bar or limit the Defendants from “pursuing James Sparish personally as a result of the automobile incident that occurred on or about February 6, 2013” and did not bar or limit Defendants' “rights or claims to pursue other insurance policies provided by Society Insurance for the automobile incident that occurred on or about February 6, 2013.” (Doc. 66.)

         On April 24, 2014, the Court granted the parties' stipulation. (Doc. 67.) On May 27, 2014, Plaintiff deposited the sum of $500, 000 with the Court. (Doc. 68.) On July 29, 2014, pursuant to a second stipulation, Plaintiff was dismissed from this action and discharged from any ...


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