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O'Brien v. Government Employees Insurance Co.


filed: January 5, 1967.


Forman, Freedman and Seitz, Circuit Judges.

Author: Forman

FORMAN, Circuit Judge.

This is an appeal from a decision of the United States District Court for the Eastern District of Pennsylvania, granting judgment on the pleadings against the appellant, Robert P. O'Brien, in an action on an insurance contract issued by the appellee, Government Employees Insurance Company. Jurisdiction exists by reason of diversity of citizenship. As is conceded by the parties, the law of Virginia governs this case.

The allegations of the appellant's complaint, accepted as fact for purposes of this appeal, show that on June 19, 1964, while stationed with the United States Navy in San Juan, Puerto Rico, the appellant was struck by an uninsured automobile driven by one Thomas Colon-Fantuzzi, a resident of Puerto Rico, who is not a party to this litigation. As a result of the accident, the appellant suffered serious permanent bodily injury.

At the time of the accident the appellant was insured by the appellee under a family automobile policy issued to the appellant while he was in Virginia. This policy contained an endorsement, required by the Virginia Uninsured Motorist Act,*fn1 (hereinafter the Act) wherein the appellee agreed inter alia :

"To pay, in accordance with Section 38.1-381 of the Code of Virginia . . . all sums which the Insured . . . shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile . . . because of . . . bodily injury . . . sustained by the Insured . . . caused by accident and arising out of the ownership, maintenance, or use of such uninsured automobile up to $15,000."

After the appellee refused appellant's demand for payment under the endorsement, this action was instituted by the appellant, who had become a Pennsylvania resident subsequent to release from active naval duty. The appellee answered, denying liability on the ground that the appellant failed to establish his legal entitlement to damages from the uninsured motorist in that he had not instituted an action and secured judgment against the motorist, this being a condition precedent to recovery under the policy. On motion by the appellee, the District Court, accepting the argument that under Virginia law a judgment against the motorist was a prerequisite to recovery, granted judgment on the pleadings against the appellant pursuant to Rule 12(c) of the Federal Rules of Civil Procedure.*fn2

The appellee argues that the phrase "legally entitled" in both the endorsement and the statute*fn3 clearly denotes the establishment of a judgment in a separate action against the uninsured motorist. The appellant's construction is that this phrase requires merely that the burden of showing the liability of the uninsured motorist be met by appropriate proof in an action directly against the insurer. The phrase is insufficiently precise to compel either conclusion. Rather, we view the problem as one of deducing the purport of the language from the overall recovery mechanism prescribed by the Act. Consequently we can now dispose of two of the appellant's arguments. The first submission is that since the disputants are parties to a contract, it must be assumed that the appellant can sue his insurer directly unless the statute clearly bars such action. Assuming arguendo the correctness of this proposition,*fn4 it does not reach the problem of whether a necessary element of the insurance company's contractual liability, subsumed by the phrase "legally entitled," is a judgment against the uninsured motorist. The second argument is that since the statute specifies that nothing may be required of the insured except the establishment of legal liability,*fn5 it follows that there is no warrant to compel him to seek a separate judgment against the motorist when he can offer appropriate proof of legal liability in a direct action against the insurer. Again, however, the argument assumes the very question before us -- viz., what constitutes the establishment of legal liability.

The Virginia Uninsured Motorist Act, pertinent parts of which are set out in the margin,*fn6 does not in terms either require or make unnecessary a judgment against the uninsured motorist. Counsel have not cited, nor have we been able to find any Virginia decision dispositive of this point. However, the Act sets forth two separate procedures for bringing an action against an uninsured motorist depending upon whether his identity is known or unknown.

If the motorist is known, any insured intending to rely upon the endorsement must, "if any action is instituted against the owner or operator of an uninsured motor vehicle," serve process upon the insurer "as though such insurance company were a party defendant." The insurance company then has a right to defend the action in the name of the defendant or in its own name, but shall not interfere with the known defendant's right to employ counsel and take appropriate action in his own behalf.*fn7

If, however, the motorist is unknown, he is deemed uninsured,*fn8 and the insured may institute suit against him as "John Doe," serving process by delivering a copy of the motion for judgment or other pleadings to the clerk of the court in which the action is brought and by serving such papers on the insurer. The insurer has the right to file pleadings and defend the action in the name of John Doe.*fn9 Should the owner or operator of the vehicle causing the injury become known, he may be joined in the action against John Doe.*fn10

The existence of detailed provisions regulating suit by an insured against a known uninsured motorist indicates at the minimum that the Virginia legislature envisioned such a suit as part of the recovery mechanism. Moreover, had a direct action against the insurer been thought to be available, the most obvious situation for its application would have been the case where the motorist was unknown. Yet, for this occurrence the Virginia legislature created a John Doe procedure to simulate, as closely as circumstances will permit, a suit against a known motorist.*fn11 The failure of the legislature to employ the much simpler procedure of a direct suit against the insurer negatives its availability. While the appellant argues that the suit against the known motorist or "John Doe" is optional because of certain "if" and "may" language in the statute,*fn12 we think the District Court was clearly right in stating that such a reading would reduce the prescriptive provisions to mere surplusage:

"If the plaintiff already had the right to sue the insurance company directly, this court can think of no reason why the General Assembly of Virginia would have enacted the alternative procedure allowing the plaintiff to proceed against a fictional person. It would be especially absurd here where it is an avenue that is more cumbersome than making the insurance company the actual defendant."*fn13

The District Court also reasoned that the purpose of the John Doe procedure was to prevent the jury from being informed of the existence of insurance coverage so as to avoid prejudgment on the question of liability, and that the appellant's position would subvert this policy:

"There can be no other reason for the John Doe procedure than to preserve Virginia's policy against informing the jury of the existence of insurance in a case of this kind. See Simmons v. Boyd, 199 Va. 806, 102 S.E.2d 292 (1958); Rinehart & Dennis Co. v. Brown, 137 Va. 670, 120 S.E. 269 (1923); 47 Va. L. Rev. 145, 159-60 (1961). It is difficult to imagine therefore that the legislature intended to vitiate this longstanding policy by allowing a plaintiff to sue the insurance company directly if the alleged tortfeasor is known when at the same time it was enacting the John Doe scheme, the only purpose of which was to keep the fact of insurance from the minds of the jury."*fn14

In answer to this persuasive position the appellant argues that the District Court overlooked a vital distinction between the case where the motorist is known and that where he is unknown. In the latter the prejudice to the insurer is said to be vastly greater because of (1) increased sympathy for the plaintiff in a hit-and-run case*fn15 and (2) the absence of the most important witness for the insurance company, the defendant motorist. While the appellant's appreciation of the insurance company's increased disadvantage is for the most part correct, it is clear that the Virginia policy against notifying the jury of insurance coverage both antedates the unknown motorist problem and has been generally applied in cases where the alleged tortfeasor is known and is in fact the party defendant.*fn16 Moreover, strong evidence of this policy is found in Section 8-96 of the Virginia Code,*fn17 prohibiting the joinder of an insurance company as a party in a negligence action on account of its issuance of liability insurance to a party to that action. Simply put, there is every indication that the Virginia General Assembly did not intend to restrict the insurer's anonymity to the John Doe action.

Finally, the appellant advances two other points which we find without merit. First he argues that under ยง 38.1-381(g) of the Act the insurer shall not be restricted from "'instituting legal proceedings' . . . against the uninsured motorist." However, that section in fact states that the insured shall not be so restricted. Then the appellant argues that it cannot be presumed that the Act contemplates two suits for the vindication of the insured's rights. But the Virginia Supreme Court has made it clear that absent agreement, two suits may indeed be necessary.*fn18

We also note that Virginia's sister state, South Carolina, has enacted an Uninsured Motorists Act,*fn19 modeled after the Virginia Act, which contains provisions, including a John Doe procedure, identical to the Virginia Act in all respects material to the present case. Although the courts of that state have not passed upon the identical question involved here, there is no doubt that they view a judgment against the motorist as necessary to a suit against the insurer on the contract.*fn20 For example, in Laird v. Nationwide Ins. Co.,*fn21 the Supreme Court of South Carolina stated:

"Recovery under the uninsured endorsement is subject to the condition that the insured establish legal liability on the part of the uninsured motorist. Such an action is one ex delicto and the only issues to be determined therein are the liability and the amount of damage. After judgment is entered against the uninsured motorist, a direct action ex contractu can be brought to recover from the insurance company on its endorsement, and policy defenses may be raised by the insurance company. Doe v. Brown, 203 Va. 508, 125 S.E.2d 159; Rodgers v. Danko, 204 Va. 140, 129 S.E.2d 828."

And in Vernon v. Harleysville Mut. Cas. Co.,*fn22 the obligation of the insurance company under the statute was characterized as follows:

"The endorsement guarantees payment, within specified limits, of a judgment recovered against an uninsured motorist on his tort liability."*fn23

Language reflecting this same conception of the operation of the act can be found in many other opinions.*fn24

Absent any definitive pronouncement of the Virginia courts settling the issue posed herein,*fn25 we are constrained to think that they would hold that recovery under the Virginia Act and thus under the endorsement requires that the insured first obtain judgment against the uninsured motorist. Hence the judgment of the United States District Court for the Eastern District of Pennsylvania dismissing the appellant's action on the pleadings will be affirmed.

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