Supreme Court of Delaware.

Rolando Rafael CASTILLO, Plaintiff Below, Appellant,

v.

CLEARWATER INSURANCE COMPANY, a Delaware Corporation, Defendant Below, Appellee.

No. 136, 2010.

 

Submitted: Oct. 6, 2010.

Decided: Nov. 22, 2010.

 

Before HOLLAND, BERGER and JACOBS, Justices.

 

HOLLAND, Justice:

 

This is an action for underinsured benefits (“UIM”) brought by the plaintiff-appellant, Rolando Castillo (“Castillo”) against his insurance company, defendant-appellee, Clearwater Insurance Company (“Clearwater”). Castillo, a resident of the State of Delaware, purchased an insurance policy from Clearwater (the “Clearwater Policy”), a Delaware corporation authorized to sell insurance to residents of the State of Delaware.

 

In this appeal, Castillo argues that the Superior Court erroneously held that the Clearwater Policy validly excluded UIM coverage. We have concluded that Castillo is correct. Therefore, the judgment of the Superior Court must be reversed.

 

Statement of Facts

 

Castillo entered into an independent contractor agreement with International Motor Freight (“IMF”) in 2003. As part of the agreement, Castillo was required to purchase “non-trucking liability insurance (minimum $300,000.00)” and provide proof of insurance to IMF. Castillo purchased the required insurance from Clearwater.

 

Under the agreement, Castillo transported goods using his truck, which was leased to IMF, and a trailer, owned by IMF, from northern New Jersey to the IKEA distribution center in Perryville, Maryland. After delivering goods to IKEA, Castillo’s daily routine was to return to his home in Bear, Delaware, after parking the truck and trailer overnight at a location nearby. The following morning, Castillo would then drive the truck and empty trailer from Delaware to northern New Jersey. There, he would receive his daily loan and start the routine again.

 

On December 7, 2005, after unloading his cargo at the IKEA distribution center in Perryville, Maryland, and on his way home to Bear, Delaware, Castillo sustained multiple traumatic injuries in a motor vehicle accident on Route 40. Castillo also incurred a significant amount of medical bills and lost wages.

 

IMF’s insurance carrier, National Interstate, indicated IMF’s policy did not apply to the accident because IMF did not own the vehicle. The underlying tortfeasor tendered his insurance policy limits and executed an affidavit of no other insurance. Castillo filed a UIM claim with Clearwater that was denied.

 

Superior Court Proceeding

 

The Clearwater Policy provided coverage for a 2002 Volvo truck tractor, which was registered and insured pursuant to title 18, section 3902 of the Delaware Code. Endorsement Number Six, titled “Uninsured Motorist Insurance Endorsement,” provides that:

 

A. COVERAGE

 

We will pay compensatory damages which an “insured”, is legally entitled to recover from the owner or operator of an “Uninsured Motor Vehicle” because of “Bodily Injury”:

 

(1) Sustained by an “insured”; and

 

(2) Caused by an “accident”.

 

B. WHO IS INSURED

 

(1) “Named Insured”.

 

(2) Anyone else “occupying” a “covered auto”.

 

Castillo filed a Motion for Partial Summary Judgment, seeking a declaratory judgment from the Delaware Superior Court that Clearwater was obligated to provide UIM benefits under the Clearwater Policy. In its opposition to that motion, Clearwater argued the Clearwater Policy did not apply for several reasons. First, Clearwater relied upon an endorsement titled “Truckers-Insurance for Non-Trucking Use,” which provided as follows:

 

Liability Coverage for a covered “auto” described in the Schedule is changed as follows:

 

1. The following exclusions are added: This insurance does not apply to:

 

a. A covered “auto” while used to carry property in any business.

 

b. A covered “auto” while used in the business of anyone to whom the “auto” is rented.

 

Second, Clearwater relied upon Endorsement Number Four, which provided as follows:

PROPERTY

 

The transportation of property by “auto” for the generation of economic gain or commercial benefit is defined as “business property,” and such transportation is outside the scope of coverage afforded in this policy.

 

Third, Clearwater argued that the title of the certificate provided with the policy limited coverage. The certificate was titled “Certificate of Non-Trucking Automobile Liability Insurance.”

 

The Superior Court ruled that the Clearwater Policy was valid and characterized that Policy as “a contract whose scope was limited,” as distinguished from a UIM exclusion, which the Superior Court recognized would be invalid under title 18, section 3902. Because the Superior Court found there were material issues of fact in dispute, however, it initially declined to dismiss Castillo’s complaint.

 

The parties then filed a proposed Stipulation and Final Order (the “Stipulated Order”) with the Superior Court. The Stipulated Order provided that the parties agreed there were no issues of material fact; that Castillo was operating his vehicle pursuant to a lease agreement with International Motor Freight (“IMF”), was in the business of IMF and under IMF’s direction, control and dispatch at the time of the December 7, 2005 accident; and that the Superior Court decision was a final decision that resolved the entire case in favor of Clearwater and against Castillo. The Stipulated Order, was entered as a final judgment by the Superior Court.

 

Statute Mandates Coverage

 

Underinsured motor vehicle coverage is treated the same as uninsured coverage (“UM”) under title 18, section 3902  of the Delaware Code, which provides as follows:

 

No policy insuring against liability arising out of the ownership, maintenance or use of any motor vehicle shall be delivered or issued for delivery in this State with respect to any such vehicle registered or principally garaged in this State unless coverage is provided therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or hit-and-run vehicles for bodily injury, sickness, disease, including death, or personal property damage resulting from the ownership, maintenance or use of such uninsured or hit-and-run motor vehicle.

 

Unless rejected in writing by the insured, every liability policy sold pursuant to title 18, section 3902 must include UM/UIM coverage.

 

Prior Precedents

 

This Court first construed section 3902 in the context of a UM/UIM coverage exclusion over thirty years ago. In State Farm Mut. Auto. Ins. Co. v. Abramowicz, the issue was whether a policy provision requiring actual physical contact between the insured’s vehicle and an uninsured motor vehicle was a valid exclusion. We began our analysis by noting that “[p]rotection against injuries and damages caused by uninsured motorists is an area widely regulated by statute,” which “in one sense is so clear that construction is not required.”  We concluded that the physical contract requirement was invalid under section 3902, holding that “[i]nsurance policy provisions designed to reduce or limit [UM] coverage to less than that prescribed by statute are void.”

 

Ten years later in Frank v. Horizon Assurance Co., this Court had to determine whether an other motor vehicle (“OMV”) exclusion was valid.0 In that case, the insurance company denied UM coverage on the basis that the insured was injured in a vehicle owned by the insured, but not listed as a covered vehicle under the policy.1 The carrier argued that restrictions or conditions on UM coverage were valid because UM coverage is not required under Delaware law.2 The insured argued that an insurance carrier may not restrict UM coverage where the right to reject UM coverage is not exercised by the insured.3

 

In Frank, this Court held that the exclusion at issue was invalid because UM coverage is mandatory under title 18, section 3902, unless affirmatively waived in writing.4 We noted that any restrictions to UM coverage must be specifically authorized by statute.5 We also held that UM coverage is personal to the insured (as opposed to being dependent on the vehicle the insured was in at the time of injury), noting that the public policy of this state prohibits UM coverage restrictions based on the manner in which the insured is injured.6

 

The holdings in Abramowicz and Frank were reaffirmed and applied by this Court in State Farm Mut. Auto. Ins. Co. v. Washington 7 and Hurst v. Nationwide Mut. Ins. Co.8 Fifteen years ago, in Hurst, a UIM case, this Court held that “insurance policy provisions designed to reduce or limit the coverage to less than that prescribed by the Delaware statute, 18 Del. C. § 3902, are void. Consequently, any restriction in the scope of coverage section 3902 requires must be specifically authorized by statute.” 9 In support of that proposition, we cited the relevant language contained in title 18, section 3902(b) of the Delaware Code, which is the portion of section 3902 regulating UIM coverage. In Hurst, we once again stated that “uninsured motorist coverage is personal to the insured and not vehicle specific” and that it is “inimicable to the purpose of Section 3902 to make recovery of supplemental uninsured coverage contingent upon the manner in which the claimant is injured.” 0

 

Castillo argues that, taken together, section 3902 and the holdings in our prior cases stand for the following:

 

(1) UM/UIM is mandatory for all vehicle registered in Delaware, unless rejected in writing;

 

(2) Policy provisions that reduce or eliminate UM/UIM coverage are void, unless the exclusion is specifically authorized by 18 Del. C. § 3902; and

 

(3) UM/UIM is personal to the insured and not dependent on the vehicle the insured was occupying when he or she was insured.

 

We agree that each of these propositions asserted by Castillo are correct statements of Delaware law.

 

Clearwater Exclusion Invalid

 

Clearwater successfully argued in the Superior Court that the issue was not whether the exclusion was valid, but whether the Clearwater Policy, which it characterized as a “commercial policy” with a “limited” scope, was “triggered.” That characterization is inconsistent with our prior cases that have construed the statutory mandate in section 3902. That section does distinguish between “commercial policies” and “car insurance,” but it does not authorize the issuance of a “limited” policy without UM/UIM coverage. Section 3902 requires that every policy have UM/UIM coverage, unless it is rejected in writing.

 

Our prior cases hold that section 3902 makes UM/UIM coverage mandatory for all vehicles registered in Delaware, unless that coverage is rejected in writing. Castillo did not reject UM/UIM in writing. Where, as here, the insured did not reject UM/UIM, thus making it mandatory, the question becomes whether the General Assembly specifically authorized the exclusion contained in the Clearwater Policy. The policy language at issue in this case is contained in Endorsement Number Four, and reads as follows:

 

The transportation of property by “auto” for the generation of economic gain or commercial benefit is defined as “business property,” and such transportation is outside the scope of coverage afforded in this policy.

 

The effect of that language is not materially different from the “carrying passengers for a fee” exclusion held invalid because the General Assembly did not authorize such an exclusion.1 In Jeanes v. Nationwide Ins. Co., 2 the Court of Chancery held that an insurance policy excluding coverage when the insured was “carrying passengers for a fee” (the insured was injured while driving a DART bus) was invalid because UM coverage is designed to be personal to the insured and not restricted to a certain vehicle. 3

 

In this case, the General Assembly has not specifically authorized an exclusion for transporting business property. Accordingly we hold that, the exclusion of UM/UIM insurance coverage from the Clearwater Policy is invalid.

 

Conclusion

 

The judgment of the Superior Court is reversed.

 

Del.Code Ann. tit. 18, § 3902.

 

State Farm Mut. Auto. Ins. Co. v. Washington, 641 A.2d 449, 450-51 (Del.1994).

 

Del.Code Ann, tit. 18, § 3902.

 

State Farm Mut. Auto. Ins. Co. v. Washington, 641 A.2d at 450.

 

State Farm Mut. Auto. Ins. Co. v. Abramowicz, 386 A.2d 670 (Del.1978).

 

Id. at 671.

 

Id. at 671-73.

 

Id. at 672-73.

 

Frank v. Horizon Assurance Co., 553 A.2d 1199 (Del.1989).

 

0. Id. at 1200.

 

1. Id. at 1201.

 

2. Id. at 1202.

 

3. Id.

 

4. Id.

 

5. Id. at 1205.

 

6. Id. at 1204-05.

 

7. State Farm Mut. Auto. Ins. Co. v. Washington, 641 A.2d 449 (Del.1994).

 

8. Hurst v. Nationwide Mut. Ins. Co., 652 A.2d 10 (Del.1995).

 

9. Id. at 12.

 

0. Id. at 14.

 

1. See Jeanes v. Nationwide Ins. Co., 532 A.2d 595, 598-599 (Del.Ch.1987).

 

2. Jeanes v. Nationwide Ins. Co., 532 A.2d 595 (Del.Ch.1987).

 

3. Id. at 598. See also Cropper v. State Farm Mut. Auto. Ins. Co., 671 A.2d 423, 426-27 (Del.Super.Ct.1995), aff’d 676 A.2d 907 (Del.1995), where the Superior Court held that an insurance policy clause excluding government-owned vehicles from the definition of an uninsured motor vehicle was invalid under Delaware law because it “limits the scope of uninsured motorist protection to less than that prescribed by statute.”

United States District Court, W.D. North Carolina,

Asheville Division.

GREAT WEST CASUALTY COMPANY, on behalf of its Insureds, Globe Carrier Company and Roumen T. Velkov, Plaintiff,

v.

Laci FREDRICS, Jason Peter Clark, Catherine Clark, Christopher Reed, Charles Conard, Danny Mathis, William Cory Bushman, Harold Bruce Stevens, Estate of Amber Reed, Estate of Alvin Kimble, Estate of Gail Kimble, Van Smith, B & S Trucking, Inc. and North Carolina Department of Transportation, Defendants/Claimants.

Civil No. 1:10-cv-267.

 

Nov. 22, 2010.

 

ORDER FOR DEPOSIT, RESTRAINING ORDER, and ORDER for SERVICE of PROCESS

 

MARTIN REIDINGER, District Judge.

 

THIS MATTER is before the Court on the Plaintiff’s Motion for Order Directing Payment of Policy Proceeds for Deposit in Court Registry [Doc. 3] and Motion for Restraining Order and Service of Process Authorized by 28 U.S.C. § 2361 [Doc. 5].

 

PROCEDURAL HISTORY

 

On November 11, 2010, the Plaintiff Great West Casualty Company (Great West) initiated this statutory interpleader action on behalf of its insureds, Globe Carrier Company (Globe) and Roumen T. Velkov (Velkov), pursuant to 28 U.S.C. § 1335. [Doc. 1]. In the Complaint, it is alleged that Great West insured Globe, a commercial trucking company which employed Velkov, on October 24, 2010 when an accident occurred in Henderson County, North Carolina. [Id., at 4]. The accident involved a vehicle owned by Globe and driven by Velkov which collided with and caused collisions with numerous vehicles on Interstate 26 in Henderson County. [Id.]. Five people died as a result of their injuries from the accident and others suffered personal injuries. [Id.]. Each of the potential claimants has been named in the action except for the estates of two potential claimants, Charles Novak and Theresa Seaver, for whom probate estates have not yet been established. [Id.].

 

Great West issued one liability insurance policy to Globe in the amount of one million dollars. [Id., at 5]. No other policies are known to it and it is of the belief that no other policies were issued by any other company. [Id.]. Great West also claims that neither Globe nor Velkov, who has been discharged in bankruptcy, have assets available to satisfy any potential judgments which result from the accident. [Id.].

 

Seven of the fourteen named claimants are or were North Carolina residents. [Id., at 1-3]. The two remaining potential claimants were North Carolina residents. [Id., at 5]. The accident occurred in North Carolina. Great West is confronted with the possibility of claims exceeding the policy limits of one million dollars due to the deaths and extensive injuries resulting from the collision. [Id., at 6]. It is also confronted with rival claims since the claims for death may exceed those for personal injuries, or vice versa, and, as a result, Great West is in the position of being unable to ascertain an equitable allocation of proceeds. [Id.]. Great West seeks leave to pay into court the full amount of its insurance policy pursuant to statutory interpleader.

 

Great West also moved for an order restraining the potential claimants from initiating or pursuing state or federal actions which would impact the available liability insurance. [Doc. 5]. It seeks national service of process pursuant to 28 U.S.C. § 2361. [Id.].

 

DISCUSSION

 

Federal district courts have original jurisdiction over a civil action for interpleader filed by any person or entity having in its possession five hundred dollars or more if (1) two or more adverse claimants of diverse citizenship may claim to be entitled to the money and (2) the money has been paid into court. 28 U.S.C. § 1335(a). An action for statutory interpleader is “an equitable remedy designed to protect the stakeholder from multiple, inconsistent judgments and to relieve it of the obligation of determining which claimant is entitled to the fund.” Security Ins. Co. of Hartford v. Arcade Textiles, Inc., 40 Fed.Appx. 767 *(4th Cir.2002), certiorari denied 537 U.S. 1109, 123 S.Ct. 852, 154 L.Ed.2d 780 (2003).

 

Here, Great West stands ready to deposit one million dollars into the court registry. It has thus satisfied the threshold dollar amount. State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 532, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967) (insurance company need not “wait until persons asserting claims against its insured have reduced those claims to judgment before seeking to invoke the benefits of federal interpleader.”).

 

In a statutory interpleader action, only the claimants need be diverse, not the parties, and only two claimants must have diverse citizenship. 4 Moore’s Federal Practice, § 22.04[b] (Matthew Bender 3d ed.). Since the claimants in this action are residents, variously, of South Carolina, Florida, North Carolina, Virginia, Kentucky and Tennessee, diversity of two or more of the claimants has been shown. Id.

 

Great West has shown that it possesses a single stake which is subject to multiple potential claims. Moore’s, supra., at § 22.03[c]. Those claims could expose it to multiple actions resulting in multiple liability, Id., and the various claims could clearly exceed one million dollars rendering them adverse. Id., at § 22.03[d]; Tashire, 386 U.S. at 533 n. 15 (claims are adverse because they are “competing for a fund which is not large enough to satisfy them all.”); Texas v. Florida, 306 U.S. 398, 406, 59 S.Ct. 563, 83 L.Ed.817 (1939) (plaintiff need not wait until actions are instituted).

 

Although this Court must have in personam jurisdiction over the claimants, section 2361 “allows nationwide service of process, and thus permits the exercise of personal jurisdiction over any claimant who has established contacts anywhere in the United States, even if that claimant does not have minimum contacts with the forum state in which the federal interpleader court sits.” Moore’s, supra., at § 22.03[f].

 

“Interpleader is a remedial joinder device that is efficient and avoids multiple liability and inconsistent obligations.” Id., at § 22.03[h]. Courts are therefore compelled to construe interpleader provisions liberally. Id. Great West has established that interpleader is appropriate in this case. Since one or more of the claimants resides in the Western District of North Carolina, venue in this Court is proper. 28 U.S.C. § 1397. The Court finds that the purpose behind the interpleader statute would be rendered futile if several courts could litigate the right to the stake at issue, the one million dollar insurance policy. Moore’s, at § 22.04[a]. “Absent self-restraint of the parties, the only way to ensure that there will not be overlapping litigation is to have the interpleader court issue an injunction against other proceedings.” Id. Congress authorized restraining orders in interpleader actions pursuant to 28 U.S.C. § 2361 and Federal Rule of Civil Procedure 65(e)(2) excepts that statute from its procedures. Id. The Court finds, in its discretion, that a restraining order shall issue at such time as Great West deposits the stake with the court registry. Id. The restraint will be limited to actions against the stake; that is, the sum of one million dollars. Id.

 

ORDER

 

IT IS, THEREFORE, ORDERED that the Plaintiff’s Motion for Order Directing Payment of Policy Proceeds for Deposit in Court Registry [Doc. 3] is hereby GRANTED. On or before ten (10) days from entry of this Order, the Plaintiff shall deliver to the Clerk of Court for the Western District of North Carolina payment of one million dollars ($1,000,000.00) representing the total amount of coverage available pursuant to the Plaintiff’s Policy GWP39171E issued on behalf of its insureds, Globe Carrier Company and Roumen T. Velkov. The Clerk of Court is authorized to accept this sum from the Plaintiff and to deposit these funds into the registry of the Court where they shall remain pending further Court Order.

 

IT IS FURTHER ORDERED that the Plaintiff’s Motion for Service of Process Authorized by 28 U.S.C. § 2361 [Doc. 5] is hereby GRANTED and service of process of the Summons and Complaint as well as this Order shall be accomplished pursuant to 28 U.S.C. § 2361 by personal service by the United State Marshals for the respective districts where the claimants reside. Return and proof of service of process shall be made by each United States Marshal by affidavit in the manner required by Federal Rule of Civil Procedure 4(l)(1).

 

IT IS FURTHER ORDERED that at such time as the Plaintiff makes deposit of the stake into the registry of this Court, the Plaintiff’s Motion for Restraining Order [Doc. 5] shall be GRANTED and the claimants shall be restrained from initiating, instituting or prosecuting any proceeding in any State or United States Court against the one million dollars ($1,000,000.00) in liability coverage insurance proceeds pursuant to the Plaintiff’s Policy GWP39171 E.

 

IT IS FURTHER ORDERED that this Order shall apply prospectively to any individuals, estates or entities who are appropriately added to this action as claimants.