The opinion of the court was delivered by: JACKSON
THOMAS PENFIELD JACKSON U.S. District Judge.
On August 10, 1985, plaintiff Vernon Gray was seriously injured when he was struck by an automobile driven by one Wendell Speed in the District of Columbia. Speed's automobile liability coverage was written by defendant Grain Dealers Mutual Insurance Company ("Grain Dealers"), an Indiana insurer. Speed, since deceased, was, at the time the policy was issued, a resident of North Carolina. The applicable monetary liability limit on Speed's policy was $ 25,000.
Grain Dealers was timely notified of the accident and placed the claim with R.W. Parker Associates, Inc. ("Parker"), an adjuster located in the Virginia suburbs of Washington, D.C., for appropriate handling. On September 25, 1985, Gray sued Speed in the U.S. District Court for the District of Columbia.
Speed was served with process on October 3rd, so advised Parker, and, on or about October 22nd, Parker contacted Gray's attorney and obtained an informal, indefinite extension of time to answer the complaint while it conducted an investigation.
Having heard nothing definitive from Parker in the meantime, on January 7, 1986, Gray's attorney wrote Parker to advise, inter alia, that Gray would accept "policy limits" to settle the case (assuming Speed's coverage was less than $ 100,000), and that the extension of time to respond to the complaint would be withdrawn on January 27th.
Apparently through oversight alone Parker failed either to respond to the offer to settle or to cause answer to be made to the complaint. Accordingly, on January 30, 1986, Gray had default entered against Speed, and on February 26th, following an ex parte hearing on damages, the Court entered judgment for Gray against Speed in the amount of $ 334,000.
Gray's attorney's letter of January 7th was first forwarded to Grain Dealers by Parker sometime in April.
On June 13, 1986, Gray and Speed entered into a written agreement, entitled "Assignment of Chose in Action and Release From Judgment," whereby Speed assigned his rights against Parker and "Grain Buyers" [sic] to Gray, and Gray, in consideration, "released" Speed from the judgment. The document was then filed with the Court in Civil Action No. 85-3056.
On June 25th Gray filed this action against Grain Dealers and Parker alleging, as Speed's assignee, claims of breach of contract, negligence, and "bad faith" in failing to defend or settle.
On July 10th Grain Dealers answered the complaint, and it also filed a "motion for relief from judgment" in its own name in Civil Action No. 85-3056, which, of course, Gray promptly moved to strike on the ground that Grain Dealers was not a party to the case, and that Speed had already been "relieved" of the judgment by the release. (Grain Dealers, in effect, abandoned its own motion upon its realization that any "relief" it might obtain for itself would come at the expense of its insured.)
On August 30, 1986, Wendell Speed died (aged 30) in the District of Columbia.
On September 5, 1986, the Court granted Gray's motion in Civil Action No. 85-3056 to strike Grain Dealers' motion for relief from a judgment in a case to which it was not named, and had never been admitted as, a party.
The case is presently before the Court on cross-motions for summary judgment by Gray and Grain Dealers against one another. (Gray's claim against Parker, and Grain Dealers' claim-over against Parker, remain pending). The foregoing facts are stipulated to be the material facts. Both parties have waived the right to present additional evidence. Grain Dealers concedes that Parker was its agent and that its failure to act upon the January 7th letter was both a breach of its contractual duty to Speed under its policy and was negligent. For his part Gray concedes that the evidence does not show that the failure to act was malicious or willful, and that he cannot, therefore, recover punitive damages. Grain Dealers contends that, having "released" Speed from liability on the judgment, Gray has, in effect, released it from liability to Speed on its policy, but that, in any event, its liability cannot exceed its policy limit of $ 25,000. Gray contends that he is entitled to recover the entire amount of the judgment from Grain Dealers.
The case thus presents three discrete issues for resolution: (1) a choice of the state law to be applied to govern the latter two issues; (2) the effect to be given the instrument by which Speed purported to transfer his rights against Grain Dealers ...