State Farm Fire Casualty Company v. Tashire/Dissent Douglas

by William O. Douglas

United States Supreme Court

386 U.S. 523

State Farm Fire Casualty Company  v.  Tashire

 Argued: Feb. 14 and 15, 1967. --- Decided: April 10, 1967

Mr. Justice DOUGLAS, dissenting.

While I agree with the Court's view as to 'minimal diversity' and that the injunction, if granted, should run only against prosecution of suits against the insurer, I feel that the use which we today allow to be made of the federal interpleader statute, ^[1] 28 U.S.C. § 1335, is, with all deference, unwarranted. How these litigants are 'claimants' to this fund in the statutory sense is indeed a mystery. If they are not 'claimants' of the fund, ^[2] neither are they in the category of those who 'are claiming' or who 'may claim' to be entitled to it.

This insurance company's policy provides that it will 'pay on behalf of the insured all sums which the insured shall become legally obligated to pay.' To date the insured has not become 'legally obligated' to pay any sum to any litigant. Since nothing is owed under the policy, I fail to see how any litigant can be a 'claimant' as against the insurance company. If that is doubtful the doubt is resolved by two other conditions:

(1) The policy states '(n)o action shall lie against the company * * * until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company.'

(2) Under California law where the accident happened and under Oregon law where the insurance contract was made, a direct action against the insurer is not allowable until after a litigant receives a final judgment against the insured. ^[3]

Thus under this insurance policy as enforced in California and in Oregon a 'claimant' against the insured can become a 'claimant' against the insurer only after final judgment against the insured or after a consensual written agreement of the insurer, a litigant, and the insured. Neither of those two events has so far happened. ^[4]

This construction of the word 'claimant' against the fund is borne out, as the Court of Appeals noted, by Rule 22(1) of the Federal Rules of Civil Procedure. ^[5] That Rule, also based on diversity of citizenship, differs only in the district where the suit may be brought and in the reach of service of process, as the Court points out. ^[6] But it illuminates the nature of federal interpleader for it provides that only '(p)ersons having claims against the plaintiff (insurer) may be joined as defendants and required to interplead.'

'Persons having claims against the plaintiff may be joined as defendants and required to interplead when their claims are such that the plaintiff is or may be exposed to double or multiple liability.'

Can it be that we have two kinds of interpleader statutes as between which an insurance company can choose: one that permits 'claimants' against the insurer ('persons having claims against the plaintiff') to be joined and the other that permits 'claimants' against the insured to be joined for the benefit of the insurer even though they may never be 'claimants' against the insurer? I cannot believe that Congress launched such an irrational scheme.

The Court rests heavily on the fact that the 1948 Act contains the phrase 'may claim,' while the 1926 and 1936 interpleader statutes contained the phrase 'are claiming.' From this change in language the Court infers that Congress intended to allow an insurance company to interplead even though a judgment has not been entered against the insured and there is no direct-action statute. This inference is drawn despite the fact that the Reviser's Note contains no reference to the change in wording or its purpose; the omission is dismissed as 'inadvertent.' But it strains credulity to suggest that mention would not have been made of such a drastic change, if in fact Congress intended to make it. And, despite the change in wording, under the 1948 Act there must be 'adverse claimants * * * (who) are claiming or may claim to be entitled to such money * * *, or to any one or more of the benefits arising by virtue of any * * * policy * * *.' Absent a direct-action statute, the victims are not 'claimants' against the insurer until their claims against the insured have been reduced to judgment. Understandably, the insurance company wants the best of two worlds. It does not want an action against it until judgment against its insured. But, at the same time, it wants the benefits of an interpleader statute. Congress could of course confer such a benefit. But it is not for this Court to grant dispensations from the effects of the statutory scheme which Congress has erected.

I would construe its words in the normal sense and affirm the Court of Appeals.

Notes

1. '(a) The district courts shall have original jurisdiction of any civil action of interpleader or in the nature of interpleader filed by any person, firm, or corporation, association, or society having in his or its custody or possession money or property of the value of $500 or more, or having issued a note, bond, certificate, policy of insurance, or other instrument of value or amount of $500 or more * * * if
2. Under the policy issued by State Farm, it promises '(t)o pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of (A) bodily injury sustained by other persons * * * caused by accident arising out of the ownership, maintenance or use, including loading or unloading, of the owned automobile * * *.' The insured will 'become legally obligated to pay' only if he has been found to be at fault for the accident, or if the victim's claim has been settled in accord with the policy terms. The claim against the insurance company is thus contingent on a finding that the insured was at fault or a settlement. This is unlike the situation where the insurance company has issued a policy such as a workmen's compensation policy which insures the insured for liability imposed in the absence of fault.
3. See Calif.Ins.Code § 11580(b)(2); Ore.Rev.Stat. § 23.230.
4. In those States having a direct-action statute, allowing an action against the insurer prior to judgment against the insured, interpleader jurisdiction can be sustained absent a judgment against the insured. The direct-action statute gives the injured party the status of a 'claimant' against the insurer. See, e.g., Pan American Fire & Casualty Co. v. Revere, 188 F.Supp. 474, 482-483.
5. Rule 22(1) provides in part:
6. See n. 3 of the Court's opinion.