United States: Not Just Yet, Again…Class Action Plaintiff Fails In Second Bid To Access A TCPA Defendant’s Insurance Coverage

Last Updated: October 17 2013
Article by Judy Selby

On October 7, 2013, a Missouri federal court judge held that a class action plaintiff that alleged violations of the Telephone Consumer Protection Act (TCPA) lacked standing to seek coverage under the defendant's insurance policies.  Nationwide Mutual Insurance Company v. Harris Medical Associates, LLC, No. 4:13-CV-7 CAS, United States District Court, Eastern District of Missouri (October 7, 2013) The class action plaintiff, St. Louis Heart Center, Inc. (St. Louis Heart) filed a class action against Harris Medical Associates, LLC (Harris), based on Harris's alleged transmission of unsolicited faxes to St. Louis Heart.  St. Louis Heart alleged TCPA violations and conversion under Missouri law.  Prior to the resolution of that case, Nationwide Mutual Insurance Company, Nationwide Mutual Fire Insurance Company and Nationwide Property and Casualty Insurance Company (collectively, Nationwide) filed a declaratory judgment action against Harris, alleging that it had no duty to defend or indemnify Harris for the claims asserted by St. Louis Heart.  St. Louis Heart was brought into that case as a necessary party.  Nationwide agreed to defend Harris in the TCPA case under a reservation of rights.  That case is still pending, although the parties are engaged in settlement negotiations.

St. Louis Heart filed a counterclaim against Nationwide in the coverage action, even though the underlying case has not been resolved.  Nationwide filed a motion to dismiss St. Louis Heart's claim for failure to state a claim, asserting that St. Louis Heart, a claimant in the coverage action, lacks standing to seek affirmative relief against Nationwide.  Nationwide argued that under the laws of both Georgia (which likely applies to the insurance coverage issues) and Missouri (the forum state),  "mere claimants who do not have a judgment against an insured have no rights to assert against the insurer."

St. Louis Heart  responded that because it was joined in the coverage case as a necessary party under FRCP 19(a), it must bring its own action for declaratory judgment as a compulsory counterclaim under FRCP 13(a).  It argued that it had standing to seek its own insurance coverage declaration and that if it did not assert its compulsory counterclaim, it would be barred.  St. Louis Heart further contended that, pursuant to the Supreme Court's decision in Maryland Casualty Co. v. Pacific Coal & Oil, 312 U.S.270 (1941), an insurance coverage declaratory judgment action presents a ripe controversy under Article III and that a tort claimant presents a proper action under Article III to seek a declaratory judgment that the tortfeasor's insurer owed the tortfeasor a duty to indemnify, even though the underlying suit had not yet been reduced to a judgment.  The court held that St. Louis Heart's characterization of Maryland Casualty was "inaccurate" and "incorrect."  It stated, "The Supreme Court did not hold that the tort claimant had standing to seek a declaration that the 'insurer owed the insured tortfeasor a duty to indemnify,' as St. Louis Heart asserts."

Nationwide asserted that the core question is whether a claimant can assert a substantive cause of action against the insurer of the party against whom liability is asserted.  Nationwide argued that because under the laws of both Missouri and Georgia, no action by a claimant can be brought against the insurer at least until there is a judgment to enforce.  "Without a cause of action, no claim can be asserted regardless of federal standing or jurisdictional concerns."  Nationwide also contended that FRCP 13 is merely procedural.

The Missouri federal court noted that in a diversity case, "a federal court may not address a party's claims unless the party establishes standing to sue under both Article III of the United States Constitution and the relevant state law."  Assuming without deciding that there was Article III standing, the court turned to an analysis of Missouri and Georgia law.

Under Missouri law, a party has standing to obtain a declaration under a contract if it is a party to the contact or a third party beneficiary.   Because St. Louis Heart was not a party to the Nationwide polices and had not established that it was a third party beneficiary, it lacked standing to pursue its counterclaim under Missouri law.

Under Georgia law, the general rule is that "a party who alleges he has been damaged is not entitled to bring a direct action against the liability insurer of the party who allegedly caused the damage," except where the damaged party has a judgment against the insured, liability has otherwise been fixed or a policy provision or statute permits such actions to be brought.  Because no exception applied in this case, St. Louis Heart lacked standing under Georgia law as well.

The court also rejected St. Louis Heart's assertion that FRCP 13(a) required it to assert a compulsory counterclaim.  The court held that "St. Louis Heart must first possess a viable claim, whether compulsory or permissive, before Rule 13(a) comes into play."  Nationwide's motion to dismiss, accordingly, was granted.

As we reported last July, St. Louis Heart fared no better in its prior attempt to assert a premature counterclaim against another of Harris's insurers in a separate insurance coverage suit.

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