Fortson v. St. Paul Fire and Marine Ins. Co.

• Decision Date: 28 January 1985
• Docket Number: No. 84-3217,84-3217
• Citation: 751 F.2d 1157
• Parties: Jerome FORTSON, Plaintiff-Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1157

751 F.2d 1157

Jerome FORTSON, Plaintiff-Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellee.

No. 84-3217.

United States Court of Appeals, Eleventh Circuit.

Jan. 28, 1985.

Nathaniel W. Tindall, II, Ronald H. Trybus, Tampa, Fla., for plaintiff-appellant.

Thomas B. Matthews, Tampa, Fla., for defendant-appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before RONEY and CLARK, Circuit Judges, and SIMPSON, Senior Circuit Judge.

RONEY, Circuit Judge:

Jerome Fortson appeals from the district court's order dismissing his state law claim against St. Paul Fire & Marine Insurance Co. ("St. Paul") for lack of diversity of citizenship between the parties. Under federal law, in a direct action against an insurance company asserting a claim against the insured for which the company is liable, the citizenship of the insured is imputed to his insurer for diversity jurisdiction purposes. 28 U.S.C.A. Sec. 1332(c). Fortson claims this provision is not applicable to Fla.Stat.Ann. Sec. 624.155, which provides that a person may bring an action against an insurer for failure to settle in good faith a claim against the insured. Although we hold that the section 1332(c) proviso does not apply to an action under section 624.155, so that in this case the Florida citizenship of the insured would not be imputed to St. Paul, we affirm the dismissal of the action on the ground that plaintiff's suit was prematurely brought and thus failed to state a cause of action.

Plaintiff's wife died as a result of complications from the administration of anesthesia during a caesarean-section delivery performed on March 16, 1983 by Dr. Michael T. McNamara, a Florida citizen, for whom St. Paul carried malpractice insurance. Plaintiff informed St. Paul of his possible malpractice claim against Dr. McNamara. St. Paul responded by denying liability on behalf of its insured. On April 7, 1983, plaintiff, proceeding pursuant to section 624.155(2), notified St. Paul and the Florida Department of Insurance of his intention to bring an action against St. Paul for failure to resolve his claim against the insured in good faith. Plaintiff filed this action against St. Paul in federal district court on June 16, 1983.

Plaintiff's action is not a "direct action" within the meaning of 28 U.S.C.A. Sec. 1332(c), which provides in pertinent part that

in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, 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....

That section was enacted by Congress in order to eliminate the basis for diversity jurisdiction in states that allow an injured third-party claimant to sue an insurance company for payment of a claim without joining the company's insured as a party, where the insured would be a nondiverse party, even though the party insurance company would otherwise be diverse. See Hernandez v. Travelers Insurance Co., 489 F.2d 721, 723 (5th Cir.) (holding workers' compensation insurer deemed by section 1332(c) to be citizen of state of which insured is citizen in suit brought by insured's injured employee), cert. denied, 419 U.S. 844, 95 S.Ct. 78, 42 L.Ed.2d 73 (1974). But where the suit brought either by the insured or by an injured third party is based not on the primary liability covered by the liability insurance policy but on the insurer's failure to settle within policy limits or in good faith, the section 1332(c) direct action proviso does not preclude diversity jurisdiction. Beckham v. Safeco Insurance Co., 691 F.2d 898, 901-02 (9th Cir.1982); Velez v. Crown Life Insurance Co., 599 F.2d 471, 473 (1st Cir.1979). We hold that unless the cause of action against the insurance company is of such a nature that the liability sought to be imposed could be imposed against the insured, the action is not a direct action. Walker v. Firemans Fund Insurance Co., 260 F.Supp. 95, 96 (D.Mont.1966). See also Irvin v. Allstate Insurance Co., 436 F.Supp. 575, 577 (W.D.Okla.1977) (holding action by insured against his own insurer under uninsured motorist provisions of policy not a "direct action" within section 1332(c) proviso); Bourget v. Government Employees Insurance Co., 313 F.Supp. 367, 371 (D.Conn.1970) (holding action by judgment creditor of insured against insurer for bad faith failure to settle claim against insured not a "direct action" within section 1332(c) proviso), rev'd on other grounds, 456 F.2d 282 (2d Cir.1972).

In the current case, the district court reasoned that Fortson's cause of action for bad faith could "only be premised upon the relationship of Plaintiff and Defendant vis-a-vis Defendant's insured and as such, this action is a direct action within the meaning of 28 U.S.C.A. Sec. 1332(c)." Of course, Fortson never would have had any dealings with St. Paul were it not for the injury allegedly caused by Dr. McNamara and the contract of insurance between him and St. Paul. But it is the cause of action asserted against the defendant insurer, not the relationship of the insurer to the insured, that determines the applicability of the section 1332 "direct action" proviso. "[C]ourts have uniformly defined the term 'direct action' as used in this section as those cases in which a party suffering injuries or damage for which another is legally responsible is entitled to bring suit against the other's liability insurer without joining the insured or first obtaining a judgment against him." Beckham, 691 F.2d at 901-02. Plaintiff could not have sued Dr. McNamara for failure to settle in good faith. The cause of action is based on the insurer's individual legal statutory duty to settle claims in good faith. Thus, for purposes of determining diversity of citizenship in a section 624.155 action, a court is limited to examining the insurance company's state of incorporation and principal place of business. 28 U.S.C.A. Sec. 1332(c). The complaint alleges that Fortson is a Florida resident and St. Paul is "a foreign corporation licensed to do business in Florida." Since St. Paul did not show that either its state of incorporation or its principal place of business is in Florida, the parties are citizens of different states and the court had subject matter jurisdiction.

Even though the district court...