Alliance Ins. Co. of Philadelphia v. Jamerson

• Decision Date: 07 December 1935
• Docket Number: No. 806.,806.
• Citation: 12 F. Supp. 957
• Parties: ALLIANCE INS. CO. OF PHILADELPHIA et al. v. JAMERSON.
• Court: U.S. District Court — Eastern District of Illinois

12 F. Supp. 957

ALLIANCE INS. CO. OF PHILADELPHIA et al. v. JAMERSON.

No. 806.

District Court, E. D. Illinois.

December 7, 1935.

Baker & Lesemann, of East St. Louis, Ill., Taylor, Chasnoff & Willson, of St. Louis, Mo., and Martin F. Oehmke, of East St. Louis, Ill., for plaintiff.

Kramer, Campbell, Costello & Wiechert, of East St. Louis, Ill., for defendant.

LINDLEY, District Judge.

Ten fire insurance companies have filed their bill of complaint against defendant, alleging that they are the insurers in eleven different policies upon a stock of merchandise in East St. Louis, Ill., destroyed by fire; that defendant is the insured in each and all of the said policies; that one of the provisions of each of the allegedly standard insurance contracts is that the insurer shall not be liable for any more than its pro rata share of any total loss; that defendant has instituted in the state court ten different suits at law upon the policies; that, although certain of the latter purport to constitute prima facie and individual liability of more than $3,000, each of the suits was brought for $2,999; that none of the plaintiffs is liable because the defendant fraudulently conspired with others to procure by false statements the insurance, to bring about the fire and resulting destruction of the insured property, all with the purpose of defrauding plaintiffs; that defendant has been convicted on an indictment in the United States court charging him with using the mails to promote this fraudulent scheme; that equity has jurisdiction, first, because of the provisions of the policies aforesaid; and, second, because the trial of this suit will avoid multiplicity of suits.

Plaintiffs pray for a permanent injunction against the prosecution of the suits in the state court, for cancellation of the policies, or, in the absence of such relief, determination of the liability of each of the insurers in accordance with the provisions hereinbefore mentioned. Defendant resists the application for injunction, and has filed his motion to dismiss the bill for want of jurisdiction or equity.

The first question is as to whether a federal court has any jurisdiction. Diversity of citizenship exists; defendant is a resident of Illinois, and each of the plaintiffs is resident of a state other than Illinois. Plaintiffs claim the amount involved is the aggregate of the alleged liabilities. Defendant denies that plaintiffs have any right to unite in a joint bill of complaint and that there is, therefore, lack of jurisdictional amount.

In Troy Bank v. G. A. Whitehead & Co., 222 U.S. 39, 32 S.Ct. 9, 56 L.Ed. 81, the Supreme Court said: "When two or more plaintiffs, having separate and distinct demands, unite for convenience and economy in a single suit, it is essential that the demand of each be of the requisite jurisdictional amount; but when several plaintiffs unite to enforce a single title or right, in which they have a common and undivided interest."

The question of whether an insured may, in a similar situation, unite as defendants various companies in a suit in equity, is settled in this jurisdiction. In American Central Ins. Co. v. Harmon Knitting Mills, 39 F.(2d) 21, 23, the United States Circuit Court of Appeals for the Seventh Circuit had before it a bill in equity brought by the insured against seven companies, the separate policy of each of which provided that there should be no liability for any greater proportion of the loss than the amount the policy bore to the entire insurance. The court approved the jurisdiction, saying: "If equity has jurisdiction of this cause, it is because it will avoid numerous actions at law. But something more is required than the avoidance of a multiplicity of suits. There must be a common interest existing among the individual defendants and between them and the plaintiff in order that a court of equity may interfere. * * * This common interest exists in the present suit, if at all, because of the similar provisions in all of the insurance policies and particularly because of that provision heretofore quoted which makes each appellant liable for only its proportion of the total loss. Is this common interest of such a nature, extent, and object, as to justify the assumption of jurisdiction by a court of equity? We think it is. Milwaukee Mechanics' Ins. Co. v. Ciaccio (C.C.A.) 38 F. (2d) 153. All the defendants were interested in the loss, the determination of which constituted what might be called the gist of this suit. It is true, each cause of action is based upon a contract, but liability is measured by the insured's loss rather than by the amount of the policy. In fact, liability under the contract is dependent upon the amount of all the outstanding insurance as well as the amount of the loss. How is the amount of outstanding insurance to be determined? And how can one company's proportion be ascertained without first ascertaining the total amount of insurance."

To the same effect is Milwaukee Mechanics' Ins. Co. v. Ciaccio (C.C.A.) 38 F. (2d) 153.

With this doctrine the Supreme Court of Illinois agrees. Thus, in Weininger v. Metropolitan Fire Ins. Co., 359 Ill. 584, 195 N.E. 420, 422, 98 A.L.R. 169, where a similar suit in equity had been brought upon nineteen fire insurance policies to determine the pro rata liability of each of the companies, the court, after remarking that the question was one of first impression in the state court, approved the jurisdiction. Mr. Justice Herrick said: "In the case at bar we have the common right in the complainants against the defendants, the establishment of which would regularly require the bringing of at least sixteen separate law actions. No defendant here has a defense which is personal to it, alone, but the defenses are common to all the defendants. If liable, each is liable for the payment of loss under the same conditions as the others. The record contains over 5,200 pages. While the cost of litigation is not the only criterion, yet in determining whether the defendants are subjected to any hardship by having the issues here tried in equity, the question of expense to the litigants and the time of the court in settling the issues are factors that may properly be considered by the court. If the issues were submitted to sixteen different juries, it is possible that the findings would be varied and conflicting and for different amounts of liability. In fact, it would be possible that in some cases juries might return verdicts for the defendants and in others for the complainants. That there might be very honest differences as to the amount of recovery is demonstrated by the record itself. * * * Certainly the case would be very much complicated in arriving at the amount of loss which each company should bear by reason of the pro rata provision of the policies if the several juries deciding the cases should determine the loss at different amounts. The liabilities of the defendants here by reason of the controverted issues as to the amount of loss and the pro rata features of the policies are interrelated and interdependent. There is involved herein, therefore, not only the question of multiplicity of suits, but, if there is a recovery by the complainants, the further fact that when the loss is determined some sort of accounting is necessarily required to fix and prorate the amounts for which the defendants are severally liable. We conclude that the case here presented is a proper one for the assumption of jurisdiction by a court of equity, not only upon the ground of avoiding a multiplicity of suits but also because an accounting is likewise involved."

The logic of these opinions applies to the present case. Upon principle, it matters not whether the insurance companies are plaintiffs or defendants. In the cases cited in both the federal and state courts the insurers disputed equitable jurisdiction. The courts held against them. Bowing to the rule thus established, plaintiff companies now invoke the jurisdiction in equity upon policies similar to those before the courts in the cases mentioned. They have a common defense and the same right in equity discussed by both federal and state courts; namely, the right to have determined their pro rata shares of the total loss if any, in the nature of an accounting in equity. Ignoring the question of fraud, the gist of the action, as Judge Evans said (American Central Ins. Co. v. Harmon Knitting Mills, supra), is the determination of the amount of the loss and the pro rata share of each of plaintiffs therein. If, in addition and as a first alternative, plaintiffs insist that this gist of the action has been destroyed by the fraud of defendant, still the amount in controversy is measured by the same element, the total loss claimed by defendant. He is either entitled to recovery for the full amount, clearly in excess of $3,000, or nothing. Having a right to sue in equity to recover this amount, no reason appears why those who are said to be liable may not sue likewise in the same court of equity. In other words, a cause in equity existing, either party may invoke the court's jurisdiction.

Other courts have held that several actions commenced or threatened by the same plaintiff against different insurance companies which had issued policies on plaintiff's property and refused to pay losses thereunder constitute a multiplicity of suits, within the meaning of the law, authorizing the interference of equity, where the same defense is set up by each of the defendants; and that an injunction will be granted to restrain the prosecution and commencement of such actions, upon a bill in the nature of a bill of peace, filed by all the companies against plaintiff in such actions. Virginia-Carolina Chemical Co. v. Home Ins. Co., 113 F. 1, 51 C.C.A. 21; Fegelson v. Niagara F. Ins. Co., 94 Minn. 486, 103 N.W. 495; Tisdale v. Insurance Co. of North America, 84 Miss. 709, 36 So. 568; Dixie F. Ins. Co. v. American...