Paxson v. Palmateer et al

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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
DARLENE PAXSON,
Plaintiff/Judgment Creditor,
v.
LANE PALMATEER, SPECIAL
ADMINISTRATOR ESTATE OF
HUNTER LANE,
Defendant/Judgment Debtor,
and
PROGRESSIVE DIRECT INSURANCE
COMPANY,
Garnishee.
Case No. 24-1076-EFM-GEB
MEMORANDUM AND ORDER
This matter comes before the Court on Garnishee Progressive Direct Insurance
Company’s (“Progressive”) Motion to Stay and for Protective Order (“Motions”) (ECF
No. 33). Garnishee moves the Court to stay this matter until the appeal of Darlene Paxson,
Plaintiff/Judgment Creditor’s (“Paxson”) underlying case against Lane Palmateer, Special
Administrator of the Estate of Hunter Lane, (“Estate”) is decided and for a Protective Order
relieving it of its obligation to respond to Paxson’s written discovery requests until the
appeal of the underlying case is decided. For the reasons set forth below, the Court
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GRANTS Progressive’s Motion to Stay and FINDS AS MOOT Progressive’s Motion for
Protective Order.
I. Procedural Background1
On March 28, 2022 Hunter Lane was involved in a motor vehicle accident with
Paxson, where she was injured. Progressive insured Hunter Lane at the time of the
accident. The relevant policy carried bodily injury liability coverage in the amount of
$25,000 per person.2 On October 12, 2022 Paxson sued the Estate in the Eighteenth Judicial
District, Sedgwick County, Kansas (“State Court”).
On or about April 23, 2024, Paxson filed a Request for Garnishment in the amount
of $676,480.223 against Progressive. The court granted that request and entered an Order
of Garnishment. Two weeks after the court’s Order of Garnishment, Progressive served its
Answer in the State Court indicating it did not possess any “property, funds, credits or other
indebtedness belonging to the Judgment-Debtor…beyond the applicable insurance policy
limits of $25,000.” Progressive removed the garnishment action to this Court alleging
subject matter jurisdiction pursuant to 28 U.S.C. § 1332.
Shortly thereafter, on June 28, 2024, the Estate filed a Notice of Appeal with the
Kansas Court of Appeals seeking reversal of the State Court’s judgment in its entirety,
1 Unless otherwise indicated, the information in this section is taken from the Notice of Removal
(ECF No. 1), state court Petition (ECF No. 5), and Garnishee’s Motion (ECF No. 33). This
background information should not be construed as judicial findings or factual determination.
2 Motion to Pay Into the Registry of the Court, ECF No. 40.
3 110% of Judgment amount of $614,982.02, Order of Garnishment, ECF No. 4, pp. 1-9.
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arguing the trial court committed reversible error on critical rulings related to liability for
the underlying accident.
Meanwhile, in federal court, the parties engaged in a flurry of motion practice. First,
Progressive filed a motion requesting the Estate be regarded as a nominal party and to
realign the parties. The motion was granted. Paxson sought remand, which was denied, but
the court did grant Paxson’s request to file a reply to the Order of Garnishment out of time.
When Paxson filed her reply,4 it became clear this action is not simply a
garnishment. Rather, it is an action against Progressive for negligent or bad faith in settling
the underlying claim.
After the Scheduling Order was entered, Progressive filed the current Motions.
When briefing on the Motions was complete, Progressive filed an unopposed Motion to
Deposit Funds Into the Registry of the Court.5 The motion to deposit funds was granted6
and Progressive paid $123,000.00 into the Registry of the Court.7 The amount deposited
includes the $25,000 policy limit, along with accrued interest calculated as $93,343.46
through October 10, 2025.
II. Progressive’s Motion to Stay and for Protective Order
Progressive, as Garnishee argues Kansas law requires appeals to be exhausted
before a garnishment against an insurer may proceed. It argues that a stay of the
4 Reply, ECF No. 24.
5 Motion, ECF No. 40.
6 Order, ECF No. 42.
7 Receipt, ECF No. 43.
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proceedings in this case and a protective order is necessary where the Estate seeks a
reversal of the judgment in State Court on appeal. Reasoning, if discovery in this case
were to proceed, it would presumably be forced to divulge to Paxson documents relating
to its claim file and handling of the underlying claim while that claim is still pending. But,
Paxson disagrees, arguing Kansas law permits the enforcement of a judgment through
garnishment before decision on an appeal, absent the appropriate supersedeas bond being
posted.
“The Federal Rules of Civil Procedure do not, per se, provide for a stay of
proceedings.”8 However, a stay can be based upon the language in Rule 26(c) which
governs protective orders.9 A court may “issue an order to protect a party…from
annoyance, embarrassment, oppression, or undue burden or expense….”10 “The proponent
of a stay bears the burden of establishing its need.”11
Progressive argues it would be unduly burdened if both, this case and discovery
were to proceed while the underlying state case is on appeal. It should be noted that Paxson
has issued interrogatories and requests for production seeking information about the
handling of the underlying claim. Specifically, she seeks claims handling materials,
including the claims file which contains information protected by the attorney-client
privilege. Progressive further argues if the case is not stayed and discovery is permitted, it
8 Kemp v. Hudgins, No. 12-2739-JAR, 2013 WL 4857771, at *3 (D. Kan. Sept. 10, 2013).
9 Id.
10 Fed. R. Civ. P. 26(c); Kemp, 2013 WL 4857771, at *3; Kear v. Kohl’s Dept. Stores, Inc., No.
12-1235-JAR, 2013 WL 3581671, at *11 (D. Kan. July 12, 2013).
11 Kear, 2013 WL 3581681, at *11 (quoting Clinton v. Jones, 520 U.S. 681, 708 (1997)).
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would be forced to decide whether to participate in this garnishment action to the detriment
of the underlying case. Progressive additionally relies on Nungesser v. Bryant, 153 P.3d
1277 (Kan. 2007) to support its argument Paxson’s claim for negligent or bad faith in
settling the underlying claim is not ripe. It is this issue which drives Progressive’s dilemma.
Subject matter jurisdiction in this case is based upon the diversity of the parties.12
“[S]ince the decision in Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188
(1938), federal courts are bound in diversity cases to follow state rules of decision in
matters which are ‘substantive’ rather than ‘procedural,’ or where the matter is ‘outcome
determinative.’”13 The Kansas Supreme Court held as a matter of first impression, a suit
against an insurer could not be brought before the insured’s liability was established.14 In
a related case in this District, Judge Brown discussed the ruling by the Kansas Supreme
Court noting “although K.S.A. § 60–214(a) [similar to Federal Rule 14] provided a
procedural basis for asserting a third party petition against a person who might be liable to
the defendant for any part of the plaintiff’s claim, as a substantive matter Bryant could not
assert a bad faith claim until there had been a resolution of Nungesser’s underlying claim
12 Although Plaintiff/Judgment Creditor and Defendant/Judgement Debtor are both citizens of
Kansas, the District Judge found their interests are aligned on the same side for determining the
diversity of citizenship and Defendant/Judgement Debtor is a nominal party for the diversity
jurisdiction question. Memorandum and Order, ECF No. 14. Finding there is diversity of the
parties, where the parties agree the amount in controversy exceeds $75,000, the Court found it has
subject matter jurisdiction over this matter. Id.
13 Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404-05 (1967) (citing Guaranty
Trust Co. of New York v. York, 326 U.S. 99 (1945)).
14 Nungesser v. Bryant, 153 P.3d 1277, n 1 (2007).
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against Bryant.”15 The issue of whether a party can assert a bad faith claim against the
insurer prior to a determination of the underlying claim is a substantive matter, thus the
Court must follow Kansas law here.
“Kansas courts have ‘long recognized an insured’s action for negligence or bad faith
against his or her insured.’”16 “The key question…is not whether such an action can stand
but when – the critical factor is timing.”17 “A liability insurer is not properly a party in a
tort action arising from an auto accident, and no previous Kansas case has allowed an action
against an insurer based on negligence or bad faith to proceed before a judgment has been
reached in the underlying suit.”18
‘A claimant cannot bring an action against an insurer seeking
damages for the insurer’s allegedly wrongful refusal to
negotiate in good faith with the claimants where no excess
judgment has yet been rendered against the insured. Therefore,
a cause of action for the bad-faith [or negligent] failure to
settle a claim does not arise until there has been a final
determination of the insured’s liability and the claimant’s
damages, including resolution of any appeals.’19
Thus, this action for bad faith or negligent failure to settle the insurance claim is not ripe
until the appeal of the underlying matter is decided. The stay is necessary, first and
15 Nungesser v. Bryant, No. 07-1285-WEB, 2007 WL 4374022, at *3 (D. Kan. Dec. 7, 2007)
(emphasis added).
16 Kemp, 2013 WL 4857771, at *3 (citing Nungesser v. Bryant, 153 P.3d 1277, 1284 (Kan. 2007).
17 Id. (citing Nungesser, 153 P.3d at 1285).
18 Id.
19 Id. at *3-4 (emphasis in Nungesser, citing 44 Am.Jur.2d, Insurance § 1394, p. 622).
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foremost, to allow the claim on appeal to fully ripen, and also, to protect Progressive’s
attorney-client privilege during the pendency of the appeal.
For the reasons set forth above, IT IS THEREFORE ORDERED the Court
GRANTS Progressive’s Motion to Stay (ECF No. 33). The present action is stayed until
the appeal process is concluded in the underlying lawsuit and reached final judgment.
IT IS FURTHER ORDERED, the deadlines in the Court’s Scheduling Order (ECF
No. 21) which were first suspended by the Court’s March 20, 2025 Order (ECF No. 34),
remain suspended through the pendency of Paxson’s appeal of her underlying claims and
such claims have reached final judgment. Additionally, the Court suspends the deadline for
Progressive to respond to any written discovery served by Paxson in this case. Last, Paxson
shall notify the Court within 7 days of the entry of final judgment following decision on
the appeal. The Court will promptly thereafter set a Status Conference to discuss resetting
deadlines in this matter.
IT IS FURTHER ORDERED, where the case is stayed and the deadlines,
including the deadline for Progressive’s to respond to Paxson’s written discovery, are
suspended the Court FINDS AS MOOT Progressive’s Motion for Protective Order (ECF
No. 33).
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IT IS SO ORDERED.
Dated February 20, 2026, at Wichita, Kansas.
s/ Gwynne E. Birzer
GWYNNE E. BIRZER
U.S. Magistrate Judge
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