Downing v. Travelers Insurance

BAKES, Justice.

Plaintiff has appealed the district court’s grant of summary judgment to the defendant, the Travelers Insurance Company. The issues presented are: (1) whether plaintiff is a third party beneficiary of an insurance policy between plaintiff’s deceased husband’s employer and defendant, and (2) whether the district court had jurisdiction to hear the case as opposed to the exclusive jurisdiction given to the Railway Adjustment Board by the Federal Railway Labor Act.

Plaintiff’s husband, Michael A. Downing, was a train engineer employed by Camas Prairie Railroad, a subsidiary of Burlington Northern. He was previously employed by Burlington Northern before being transferred to Lewiston. Downing would drive the train from Orofino to Lewiston and back to *512Orofino, where he would leave it and then “deadhead” back to Lewiston in his own vehicle. “Deadhead” is a trade term describing a railroad employee’s travel, by “off-track” vehicles, to and from the starting point of the train. Under a collective bargaining agreement Downing was paid twelve cents per mile and one hour’s time for deadheading in “authorized vehicles” back to Lewiston. On the day in question, after the train “tied up” at Orofino at 4:55 p.m. on July 1, 1977, Downing left Orofino for Lewiston, riding a motorcycle which he had left in Orofino prior to his shift on the train. About ten miles out of Lewiston the motorcycle ran out of gas. Downing hitchhiked the rest of the way into Lewiston where he called his wife to come and get him and take gas out to the motorcycle. Apparently, Downing was at a bar or tavern near the service station from which he had called his wife. It is alleged that he had been drinking during this time. Downing admitted to his wife that he drank “two beers” while waiting at the tavern. She drove him with some gasoline back to where he had left his motorcycle and then followed him as he rode it back into Lewiston. As they were crossing the Memorial Bridge, Downing evidently got too close to (or struck) the divider, which caused him to lose control and be thrown into the oncoming traffic lane, where he was hit by another car and killed. The accident occurred four and one-half hours after Downing had left work at Orofino. The drive from Orofino to Lewiston is a distance of 45 miles.

The union to which Downing belonged (United Transportation Union) had entered into a collective bargaining agreement with many of the nation’s railroads, including Burlington Northern and Camas Prairie. The collective bargaining agreement contained a provision for accidental death benefits for employees who were killed while riding in authorized “off-track” vehicles while traveling to and from work. A payment of $90,000 ($100,000 minus $10,000 offset for automatic life insurance benefit already paid) was authorized under the collective bargaining agreement where the employee was within the covered conditions and was not within any of the named exclusions.

Appellant made a claim to Burlington Northern under Article IV of the “offtrack” agreement. Burlington denied the claim, stating that it did not come under the agreement’s conditions because he was traveling on a motorcycle, and his authorized off-track vehicle was an automobile; and second, he had already completed his travel to Lewiston and was returning to pick up his motorcycle. Finally, Burlington denied the claim because Downing may have come within the exclusion for driving while under the influence of alcohol. Burlington informed Mrs. Downing and her attorney that their remedy, if they wished to contest the denial, was under the Railway Labor Act since their claim involved construction of a collective bargaining agreement dealing with working conditions.

Appellant, through her attorney, chose instead to make a demand for payment directly against Travelers Insurance Company rather than prosecuting a claim with the Railroad Adjustment Board. Demand was made on Travelers because it had a policy with the Camas Prairie Railroad insuring Camas Prairie for any payouts it was obligated to make under Article IV of the collective bargaining agreement. When Travelers would not honor the demand appellant brought this action, naming as defendants Travelers, Burlington and Camas Prairie, and alleging entitlement to the benefits under the policy between Travelers and Camas Prairie (Count I) and also alleging a conspiracy on the part of all three defendants to defeat her claim under the policy (Count II).

One month after the complaint was filed, defendants Burlington Northern and Ca-mas Prairie removed the case to federal district court. All three defendants then moved for summary judgment, and plaintiff Downing moved for an order remanding the case to the state district court on the grounds that there was no jurisdiction in the federal district court. Without giving specific reasons, the United States Dis*513trict Court vacated the removal order and remanded the case to the state district court where it was originally filed to determine whether or not the issue was a “minor dispute” under the Railway Labor Act.

After remand to the state district court, the defendants moved for summary judgment.1 The district court granted summary judgment on the conspiracy claim (Count II), after the plaintiff acknowledged that she had no evidence of a conspiracy. Summary judgment was then granted to Travelers Insurance Company on Count I. Plaintiff Downing has appealed only the summary judgment in favor of Travelers on Count I.

I

Appellant’s right to death benefits stems from the collective bargaining agreement between the union and the railroad-employer, which provides:

“Where employees sustain personal injuries or death under the conditions set forth in paragraph (a) below, the carrier will provide and pay such employees, or their personal representative, the applicable amounts set forth in paragraph (b) below, subject to the provisions of other paragraphs in this Article.
“(a) Covered conditions:
“This Article is intended to cover accidents involving employees covered by this Agreement while such employees are riding in, boarding, or alighting from offtrack vehicles authorized by the carrier and are
“(1) deadheading under orders____”

The collective bargaining agreement specifically requires the employer to pay the benefits if certain conditions are met. Nothing in the agreement requires the employer to provide the death benefit through an insurance policy; the death benefit was strictly a potential liability of the employer. After this collective bargaining agreement was entered into, the employer, Camas Prairie, opted to insure against this potential liability under the collective bargaining agreement with a policy purchased from respondent Travelers. The policy in question was a group policy, but it was not the ordinary type of group policy in which the employees form the group. Rather, the group referred to in the policy was a group of employer-railroads who had entered into similar collective bargaining agreements. The group policy was to provide coverage for the liability imposed upon them by the various collective bargaining agreements with the union. The policy covers the employer’s liability under the collective bargaining agreement for bodily injury, including death, caused by an accident which is sustained by an employee of one of the participating employers while the employee is traveling in an off-track land conveyance or while deadheading under orders. All benefits are payable to the participating employer upon receipt of proof from the employer of the occurrence for which the claim is made. The policy makes no provision for payment to any employee. On the contrary, the policy specifically provides that “[a]ll benefits provided in this Article V shall be paid to the participating Employer.” (Emphasis added.) It also provides that benefits are to be paid to the employer “upon receipt of written proof on the Insurer’s forms,” and that the employer “shall provide such reasonable information as may be necessary to the investigation and settlement of claims.” The group policy does not allow for a claim to be presented by the employee or paid directly to such employee.2 As noted in the affidavit of E.J. Kinder, an employee of Travelers:

*514This policy was entered into directly with the railroads, as participating employers. All of the benefit payments made under the policy are made directly to the employers, not to any injured employee, or his heirs or personal representative. The policy is, in fact, a reimbursement of the respective participating employers’ liability under their collective bargaining agreements with the various railway labor unions, dated September 14, 1968, together with any subsequent modifications or amendments. Any potential claim for benefits by an employee, or his heirs or personal representative, is made directly to the railroad, not to the Travelers Insurance Company, and is, in fact, investigated by the railroad and the railroad determines whether there is liability under the collective bargaining agreement. Any participating railroad employer submits a claim under policy GA822432 only after it itself has made payment, or is about to make payment. Upon proof of claim submitted by any participating railroad employer, the Travelers then reviews the proof of claim and then makes payment direct to the railroad upon approval of the claim. To affiant’s knowledge with respect to all claims he is familiar with, that have been made under policy GA822432, there has never been a direct payment to any employee, or his heirs or personal representative. All payments have been made only to the participating railroad employer because that is the manner in which this reimbursement policy is set up.”

There is nothing in the policy in question to indicate that the deceased employee or his heirs were intended as beneficiaries of the policy. Their rights, if any, are determined by the provisions of the collective bargaining agreement. Had it not been for the fortuitous circumstance that the employee Downing had transferred from Burlington Northern, his original employer, to its subsidiary, the Camas Prairie Railroad, there would have been no insurance involved, since apparently Burlington Northern had not joined the group policy, opting rather to self-insure its obligations under the collective bargaining agreement. The policy in question was clearly intended to be an indemnification policy, or liability policy. It was intended to insure the Camas Prairie Railroad’s obligations under the collective bargaining agreement.

In this action appellant attempts to directly sue Travelers to recover benefits under the insurance policy negotiated between Travelers and the employer. This is a direct action against an insurer, by a party not a party to the insurance contract. The situation here is similar to a case where A injures B, B has a liability insurance policy with C, and A attempts to sue C directly to recover benefits under the policy. This type of direct action has never been recognized. Pocatello Industrial Park Co. v. Steel West, Inc., 101 Idaho 783, 621 P.2d 399 (1980). See Severson v. Estate of Severson, 627 P.2d 649 (Alaska 1981); Mel H. Binning, Inc. v. Safeco Ins. Co., 74 Cal.App.3d 615, 141 Cal.Rptr. 547 (1977); Rapacz v. Township High School Dist., 2 Ill.App.3d 1095, 278 N.E.2d 540 (1971); Miller v. Market Men’s Mutual Ins. Co., 262 Minn. 509, 115 N.W.2d 266 (1962); Manukas v. American Ins. Co., 98 NJ.Super. 522, 237 A.2d 898 (1968). See also Prosser, The Law of Torts, § 82, p. 544 (4th ed. 1971) (“Since, in its inception, liability insurance was intended solely for the benefit and protection of the insured, which is to say the tortfeasor, it followed that the injured plaintiff, who was not a party to the contract, had at common law no direct remedy against the insurance company.”). Here, by attempting to maintain the action against the insurance company, without first establishing entitlement to any death benefits under the collective bargaining agreement, appellant is attempting to circumvent the requirement that she establish a right under the death benefit provision of the collective bargaining agreement. Appellant’s claim is based upon the death benefit provision of the collective bargaining agreement. Appellant should not be allowed to sue the insurance company directly any more than a tort victim injured in an automobile accident *515should be able to directly sue the insurance carrier of the tortfeasor without having first proved a claim against the tortfeasor individually.

The reason why this direct action against the respondent’s insurance carrier should not be permitted is patently clear. Appellant’s claim is that the deceased employee was “riding in ... [an] off-track vehicle[s] authorized by the carrier and [was] (1) deadheading under orders____” The employer denied that claim, citing several defenses including the defense that the employee had arrived at his destination and was no longer “deadheading under orders.” If this action is reversed for a trial solely against the insurance carrier, which is now the only party remaining in the action since the appellant has not appealed from the dismissal of the employers, Burlington Northern and Camas Prairie Railroad, the employers, against whom any claim under the collective bargaining agreement should be asserted, will not even be parties to the action. The insurance carrier, Travelers, will be attempting to assert a defense based on a collective bargaining agreement to which it is not a party and may have little knowledge or expertise. If only the insurance carrier is a party on remand, the wrong party and the wrong issues will be before the court. The plaintiff cannot point to any language in the policy to indicate that an employee or his heirs have any rights under the policy. The policy expressly provides otherwise. All payments are expressly made payable to the employer. Accordingly, there is no third party beneficiary claim available to plaintiff under our cases.

II

Both the federal and state district courts noted the fact that if this claim constituted a “minor dispute” under the Railway Labor Act, 45 U.S.C. § 153, then exclusive jurisdiction of the claim would be in the Railroad Adjustment Board. Plaintiff argues that, since the United States District Court remanded this case back to the state court, the United States District Court impliedly ruled that this case does not involve a federal question, i.e., a “minor dispute” under the Railway Labor Act. We find no such ruling in the record from the United States District Court, but rather the record implies a contrary understanding. After hearing the matter, U.S. District Judge Ray McNichols stated:

“THE COURT: I must say that sometimes oral argument is not valuable and sometimes it is very valuable. At one time I am frank to say that I believed that this was a federal question. But I am persuaded now that this is not the situation. This Court does not have original jurisdiction. I assume that there is not the needed diversity.
“I therefore feel that I have no alternative but to remand the case to the State Court. You may prepare an order and send it around to counsel, and then I will enter it. Thank you, gentlemen.”

It appears from comments earlier in the proceedings that Judge McNichols based his ruling on this belief that the federal district court would not have jurisdiction even if there was a federal question involved:

“MR. DUNN (Counsel for plaintiff Downing): ... I think, in summary, Your Honor, on the remand, I would say that either way the court holds that it did not have original jurisdiction.
“THE COURT: In other words what you are saying is that the State Court should decide whether this is a minor dispute and that it would go back to the Board for determination under a labor dispute. “MR. DUNN: That’s what I am saying, Your Honor. The State Court is the proper Court to determine that question. “THE COURT: Well, the State Court would have to decide if this is a minor dispute.”

Thus, the federal district court seemed to have been convinced that if the matter at issue was a “minor dispute” under the Railway Labor Act, 45 U.S.C. § 153, then the Railroad Adjustment Board would have exclusive jurisdiction, not the federal or state district courts, and if it was not a “minor *516dispute,” there still would be no jurisdiction in the federal district court because there was no diversity, and only the state courts would have jurisdiction.

The seminal case on whether or not an issue presents a “minor dispute” is Andrews v. Louisville & Nashville RR. Co., 406 U.S. 320, 92 S.Ct. 1562, 32 L.Ed.2d 95 (1972). In that case a railroad employee had been injured, and when he became well enough to work again the railroad refused to rehire him. He filed an action in the state court for “wrongful discharge.” The United States Supreme Court held that petitioner’s rights, if any, arose as a result of the collective bargaining agreement, and the Supreme Court held that such a claim under a collective bargaining agreement was a “minor dispute” and the exclusive jurisdiction of the claim under § 301 of the Labor Management Relations Act was the Railway Adjustment Board. The court stated:

“But the very concept of ‘wrongful discharge’ implies some sort of statutory or contractual standard that modifies the traditional common-law rule that a contract of employment is terminable by either party at will. Here it is conceded by all that the only source of petitioner’s right not to be discharged, and therefore to treat an alleged discharge as a ‘wrongful’ one that entitles him to damages, is the collective-bargaining agreement between the employer and the union. Respondent in this case vigorously disputes any intent on its part to discharge petitioner, and the pleadings indicate that the disagreement turns on the extent of respondent’s obligation to restore petitioner to his regular duties following injury in an automobile accident. The existence and extent of such an obligation in a case such as this will depend on the interpretation of the collective-bargaining agreement. Thus petitioner’s claim, and respondents’ disallowance of it, stem from differing interpretations of the collective-bargaining agreement. The fact that petitioner intends to hereafter seek employment elsewhere does not make his present claim against his employer any the less a dispute as to the interpretation of a collective-bargaining agreement. His claim is therefore subject to the Act’s requirement that it be submitted to the Board for adjustment.” 406 U.S. at 324, 92 S.Ct. at 1565. (Emphasis supplied.)

A more recent case in point is the decision of the United States Court of Appeals for the Ninth Circuit in Magnuson v. Burlington Northern, Inc., 576 F.2d 1367 (9th Cir.1978), cert. den. 439 U.S. 930, 99 S.Ct. 318, 58 L.Ed.2d 323 (1978). In that case an employee of Burlington Northern, who was represented by the same counsel, Mr. John C. Hoyt, who is representing the claimant Downing in this case, was employed by Burlington Northern as a train dispatcher at a time when a head-on collision occurred between two freight trains. As a result of an investigation and a hearing, the railroad determined that Magnuson was responsible for the accident and discharged him. He brought an action in the state courts in Montana, not for wrongful discharge, but a tort action alleging conspiracy by the railroad to cover up its own negligence which caused the accident, and intentional infliction of emotional distress, for all of which he sought damages.3 The claimant Magnuson argued that since he was not suing for wrongful discharge under the collective bargaining agreement, but was suing in tort, the Andrews case was not applicable, and that the exclusive jurisdiction of the dispute was not in the Railroad Adjustment Board. However, the Ninth Circuit held:

“Artful pleading cannot conceal the reality that the gravamen of the complaint is wrongful discharge. If the pleading of emotional injury permitted aggrieved employees to avoid the impact of R.L.A., the congressional purpose of providing a comprehensive federal scheme for the settlement of employer-employee dis*517putes in the railroad industry, without resort to the courts, would be thwarted.” 576 F.2d at 1369.

The court went on to hold that the employee’s rights, if any, arose from the collective bargaining agreement, and as such was a “minor dispute” within the meaning of 45 U.S.C. § 153, and therefore affirmed the dismissal of the action.

In this case the employee’s rights, if any, arise from the collective bargaining agreement. As in the Magnuson case, the claimant should not, by “artful pleading,” be able to conceal this railroad labor dispute as a third party beneficiary insurance issue, choosing only to appeal the dismissal from the trial court’s summary judgment in favor of the defendant Travelers Insurance Company. The fact that the Camas Prairie Railroad, as distinguished from Burlington Northern, chose to insure its obligation under the collective bargaining agreement cannot change the fact that there is nothing in this record to suggest this insurance policy was a third party beneficiary contract, and the exclusive jurisdiction of this claim lies with the Railroad Adjustment Board.

Ill

Viewing the alleged facts and the existing record most favorably to the plaintiff, we nevertheless conclude that defendant is entitled to summary judgment on the following bases: (1) the plaintiff is not a third party beneficiary to the indemnity or liability policy between defendant Travelers and Camas Prairie; and (2) plaintiff’s alleged entitlement to the death benefits involves a “minor dispute” arising out of the interpretation of a collective bargaining agreement between the union and the railroad employer subject to the exclusive jurisdiction of the Railway Adjustment Board.

The judgment of the district court is affirmed. Costs to respondent.

DONALDSON, C.J., and SHEPARD, J., concur.

. Camas Prairie and Burlington Northern, defendants below, moved for summary judgment, claiming that the state court "lacks subject matter jurisdiction because plaintiff has failed to exhaust her mandated remedies as prescribed by Congress under the Railway Labor Act.” That summary judgment was granted by the trial court.

. This is in contrast to a different Group Policy, #GA-23000, also entered into between the employer and Travelers, which provided for accidental death benefits and life insurance to the employee’s survivors. Payment of $4,000 accidental death benefit and a $6,000 life insurance benefit were made directly to the widow of Michael Downing under # GA-23000.

. The parallel between that action and this action is striking in view of the claim of conspiracy which the appellant Downing asserted in this case. No appeal has been taken from the trial court’s dismissal of the conspiracy claim.