Progressive Direct Insurance Company v. Hydrie

Background

Progressive Direct Insurance Company brought a declaratory judgment action under 28 U.S.C. § 2201, asking the court to determine its rights and obligations under a personal automobile insurance policy issued to Waris Hydrie. Progressive sought a declaration that the policy provided no liability coverage for a December 9, 2021 accident. It did not seek monetary relief.

The accident involved a 2016 Lexus RX owned by Hydrie and rented to Xuanyu Zhang from December 9 through December 12, 2021, under a Turo car-sharing agreement. Yueyuan Xiao was driving when the accident occurred. Yi Fang, a passenger, was injured, and Qike Xu, another passenger, was killed. Fang demanded liability coverage from Progressive under Hydrie’s policy.

The policy covered bodily injury and property damage for which Hydrie was legally responsible because of an accident. It also contained a provision excluding coverage for bodily injury or property damage arising from use of a covered vehicle while it was leased or rented to others, including use in connection with a personal vehicle-sharing program. The exclusion did not apply to operation by Hydrie, a relative, or a rated resident.

Default and jurisdiction

The clerk entered Hydrie’s default after he was personally served with the summons and complaint and did not respond or otherwise appear. The court explained that, after default, the complaint’s factual allegations—other than allegations about damages—are treated as true, but legal conclusions are not automatically admitted. The court found that Progressive’s allegations stated a valid cause of action under the Declaratory Judgments Act.

The court also stated that subject-matter jurisdiction was proper under 28 U.S.C. § 1332(a)(1), based on Progressive’s allegation that the amount in controversy exceeded $75,000 and the parties’ stated citizenship information.

Ruling

The court granted Progressive’s Motion for Default Judgment. It ruled that the policy’s Paragraph 13 Exclusion applied because the accident occurred while the Lexus was rented to another person for compensation. The exclusion therefore barred all liability coverage for the December 9, 2021 accident.

The court further ruled that Progressive had no obligation to defend or indemnify Hydrie in any action alleging bodily injury or property-damage liability resulting from that accident. The court ordered that judgment be entered accordingly.