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Geico General Insurance Co. v. Hansen

United States District Court, D. Kansas

November 19, 2018

KARA HANSEN, Defendant.



         Plaintiff GEICO General Insurance Company (GEICO) brought a declaratory judgment action against Defendant Kara Hansen in this Court seeking a judicial determination that under the terms of GEICO's insurance policy with Corbin Hamilton, GEICO did not breach its obligations and is not liable for more than $25, 000 (policy limits). There is also a pending state court action in which GEICO and Hansen are both parties. In the state court suit, Hansen (as assignee of Corbin Hamilton) asserts bad faith and negligence claims against GEICO, Rhonda Mason, and the law offices of Rhonda Mason. In this Court, Hansen has now filed a Motion to Dismiss (Doc. 4) asserting that the Court should abstain from exercising its jurisdiction and dismiss or, in the alternative, stay the case pending the outcome of the state case. Because the Court finds that the applicable factors weigh in favor of declining jurisdiction and in favor of dismissing GEICO's case, the Court grants Hansen's motion.

         I. Factual and Procedural Background[1]

         GEICO seeks a declaratory judgment that it did not breach its obligations under an insurance contract and is not liable for more than $25, 000. On April 9, 2014, Corbin Hamilton was driving an automobile that struck the rear of another vehicle driven by sixteen-year old Kara Hansen. The impact pushed Hansen's car into oncoming traffic where it was struck by another vehicle. Hansen received significant and permanent injuries, including a spinal cord injury resulting in paralysis.

         Hamilton had just purchased the vehicle, approximately a half-hour earlier, and the car was insured under a policy of automobile liability insurance issued to Hamilton by GEICO. The policy had bodily injury limits of $25, 000 per person and $50, 000 for each occurrence. It had a property damage limit of $25, 000.

         GEICO conducted an investigation of the accident and offered its bodily injury policy limits of $25, 000 to Hansen to settle her claim on May 30, 2014. On June 19, 2014, Hansen, through counsel, offered to accept the $25, 000 policy limits in settlement of her bodily injury claims if GEICO agreed to pay $15, 000 to settle her property damage claim. In this settlement offer to GEICO, Hansen's attorney stated that GEICO should communicate the offer to its insured (Hamilton) and the right to private counsel to advise him. Hansen's counsel stated that suit would be filed if the offer was not accepted. GEICO rejected Hansen's demand and instead offered to settle the property damage claim for $13, 269.23.

         GEICO retained attorney Rhonda Mason to provide Hamilton advice and counsel regarding the personal injury and property damage claims. Mason allegedly failed to communicate and advise Hamilton that GEICO was rejecting Hansen's settlement demand over a difference of $1, 730.77. Had Mason communicated with Hamilton, Hamilton would have allegedly demanded that GEICO accept the demand and settle. Had GEICO refused, Hamilton would have paid the $1, 730.77 with his own personal funds.

         On June 26, 2014, Hansen, through her next friend and father, Lester Hansen, filed a lawsuit in the District Court of Cherokee County, Kansas, alleging negligence against Hamilton. The lawsuit proceeded to jury trial. On February 2, 2018, the jury returned a verdict finding Hamilton 100% at fault and awarded damages to Hansen in the amount of $38, 500, 000. The jury also awarded property damages in the amount of $17, 000. After the verdict, a newspaper reported that the attorney representing Hansen said that there was a possibility that Hansen may be able to assert a bad faith claim against GEICO if Hamilton assigned his rights.

         On February 16, 2018, judgment was entered against Hamilton in the amount of $20, 750, 000 plus interest and costs.[2] Following the entry of judgment, Hamilton and Hansen entered into a settlement agreement in which Hamilton assigned his rights to Hansen for a breach of contract claim against GEICO, including any purported bad faith claims. In return, Hansen agreed not to execute the judgment on Hamilton's personal assets.

         On March 28, 2018, GEICO filed its declaratory action in this Court against Hansen. As noted above, it seeks this Court's determination that it did not breach its contract with Hamilton and that its indemnification obligation is limited to the $25, 000 bodily injury limit. In its Complaint, it alleged that based on the assignment of Hamilton's rights to Hansen, Hansen intended to assert a claim against GEICO for breach of contract and hold GEICO liable for the entire $20, 750, 000 judgment.

         Indeed, on May 4, 2018, Hansen filed suit in the District Court of Cherokee County, Kansas, against GEICO, Mason, and the Law Office of Rhonda Mason. Hansen alleges that GEICO acted negligently and in bad faith in failing to consider and communicate the settlement demand and in failing to conduct a good faith investigation into the claim. She also alleges that Mason and her law firm breached their duties and were negligent in failing to communicate and advise Hamilton of the settlement offer. Hansen seeks to hold GEICO liable for the $20, 750, 000 judgment against Hamilton.

         Hansen has now filed a motion in this Court seeking dismissal, or in the alternative a stay, based on the declaratory judgment abstention doctrine.

         II. Legal Standard

         The Court can exercise its discretion in deciding a pre-answer motion based on an abstention doctrine.[3] In this case, Hansen relies upon Brillhart abstention. The Brillhart doctrine is often invoked “[w]hen the issue of contemporaneous state and federal ...

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