753 F.2d 1574 (11th Cir. 1985), 83-8787, Bowers v. Continental Ins. Co.

Docket Nº:83-8787, 84-8084.
Citation:753 F.2d 1574
Party Name:Joseph Alton BOWERS, Plaintiff-Appellant, v. CONTINENTAL INSURANCE COMPANY, Defendant-Appellee.
Case Date:February 27, 1985
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 1574

753 F.2d 1574 (11th Cir. 1985)

Joseph Alton BOWERS, Plaintiff-Appellant,

v.

CONTINENTAL INSURANCE COMPANY, Defendant-Appellee.

Nos. 83-8787, 84-8084.

United States Court of Appeals, Eleventh Circuit

February 27, 1985

Certiorari Denied July 1, 1985

See 105 S.Ct. 3531.

Page 1575

Ronald Arthur Lowry, Atlanta, Ga., for plaintiff-appellant.

William S. Sutton, Atlanta, Ga., for defendant-appellee.

Appeals from the United States District Court for the Northern District of Georgia.

Before HENDERSON and HATCHETT, Circuit Judges, and NICHOLS [*], Senior Circuit Judge.

Albert J. HENDERSON, Circuit Judge:

Joseph Alton Bowers sued the Continental Insurance Company (Continental) to recover certain optional personal injury protection (PIP) benefits allegedly due him under two no-fault policies issued by Continental. The United States District Court for the Northern District of Georgia granted Continental's motion for summary judgment and motion to strike Bowers' request for attorney's fees, statutory penalties and punitive damages. We affirm.

Bowers is covered by two Continental no-fault insurance policies, each providing $5,000.00 in basic and $45,000.00 in optional PIP coverage. On August 24, 1981, while riding in a truck insured by the Aetna Insurance Company (Aetna), he was involved in an accident as the result of which he incurred over $100,000.00 in medical expenses.

Aetna paid to Bowers $43,750.00 in PIP benefits. 1 During negotiations, Continental took the position that Bowers' total PIP recovery from Continental and Aetna could not exceed $50,000.00, the greatest amount of coverage available under any one of the policies. 2 Because Continental originally believed that Aetna paid the amount of $50,000.00, it claimed that it was not indebted to Bowers for an additional amount. 3

Bowers submitted copies of medical bills in excess of $92,000.00 along with a demand letter to Continental on April 26, 1982. On July 27, 1982, he filed a complaint in the State Court of DeKalb County, Georgia, against Continental seeking $42,419.10 in insurance benefits and, because of the lateness of the payment allegedly due from Continental, a statutory penalty of $10,604.79, reasonable attorney's fees and punitive damages. Continental removed the case to the United States District Court for the Northern District of Georgia on the grounds of diversity. The district court later denied Bowers' motion to remand the case back to the state court.

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On May 2, 1983, Continental learned that Aetna had paid only $43,750.00 in PIP benefits to Bowers. 4 Upon receipt of this information, Continental conceded that it owed Bowers the sum of $6,250.00, the difference between $50,000.00, the greatest amount of coverage available under any one of the policies, and Aetna's payment. 5 On May 31, 1983, Continental tendered a check for $6,250.00, but conditioned its acceptance on Bowers' release of all further claims against Continental. 6 Eventually, after Bowers refused to accept the payment, Continental forwarded another check for the same amount on October 20, 1983, without the release provision.

The district court granted Continental's motion for summary judgment, and awarded Bowers $6,250.00, the amount Continental conceded it owed. In a later order the court granted Continental's motion to strike Bowers' request for attorney's fees, statutory penalties and punitive damages. This appeal followed.

Bowers first urges that the district court erred in denying his motion to remand the case back to the state court. According to Bowers, the suit was not removable because it falls under the direct action provision of 28 U.S.C. Sec. 1332(c):

[I]n any direct action against the insurer of a policy or contract of liability insurance ... to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen, as well as of any State by which the insurer has been incorporated and of the State where it has its principal place of business.

28 U.S.C. Sec. 1332(c). Bowers argues that the district court lacked jurisdiction because, under the statute, his domicile must be imputed to Continental, thus destroying diversity.

At first glance, the literal language of the statute appears to support Bowers' contention. It is generally accepted that claims under no-fault insurance contracts may be considered "direct actions" within the meaning of section 1332(c). See, e.g. Ford Motor Co. v. Insurance Co. of North America, 669 F.2d 421, 425-26 (6th Cir.1982); McMurry v. Prudential Property and Casualty Insurance Co., 458 F.Supp. 209, 212-13 (E.D.Mich.1978). Moreover, it is undisputed that this suit is "against the insurer of a policy ... of liability insurance," and that Bowers, the insured, is "not joined as a party defendant."

Nonetheless, we do not believe that section 1332(c) applies to this action. The general rule...

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