Jones v. National Union Fire Ins. Co.

• Decision Date: 06 July 1987
• Docket Number: No. S86-424.,S86-424.
• Parties: Annie B. JONES, individually and as Guardian of Robert H. Jones, Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Indiana

664 F. Supp. 440

Annie B. JONES, individually and as Guardian of Robert H. Jones, Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY, Defendant.

No. S86-424.

United States District Court, N.D. Indiana, South Bend Division.

July 6, 1987.

John D. Ulmer, Goshen, Ind., Frank E. Tolbert, Logansport, Ind., for plaintiff.

Edward N. Kalamaros, South Bend, Ind., for Nat. Union Fire Ins. Co.

Michael C. Cook, Dale W. Eikenberry, Indianapolis, Ind., for Schmock Bros. Co.

James D. Witchger, Indianapolis, Ind., for Union Oil Co.

MEMORANDUM AND ORDER

MILLER, District Judge.

Plaintiff Annie Jones filed this suit on July 24, 1986 in her own behalf and as guardian for her husband, Robert H. Jones, against National Union Fire Insurance Company ("National Union"). National Union was the workers' compensation insurer for Mr. Jones' employer, Joy Manufacturing Company. Oral argument was held on June 30, 1987 on National Union's motion to dismiss for want of subject matter jurisdiction, Fed.R.Civ.P. 12(b)(1), or, alternatively, for summary judgment. Fed.R.Civ.P. 56.

This case presents two questions for resolution under Indiana law:

1. Whether an employee's complaint against his employer's insurer for bad faith conduct with respect to its handling of an occupational diseases claim and the employee's third party action states a claim that does not fall within the exclusive jurisdiction of Indiana's Industrial Board; and

2. Whether an occupational diseases insurer can waive its statutory lien on monies received by its insured's employee from the employee's claim against third parties.

For the reasons set forth below, the court concludes that both questions must be answered negatively, and that the defendant is entitled to summary judgment.

I.

National Union contended that Mrs. Jones' claims are, pursuant to Indiana law, within the exclusive jurisdiction of the Indiana Industrial Board, and that this court thus lacks jurisdiction over the subject matter of her complaint. The court rejected that argument in a memorandum order entered on October 23, 1986.

A.

Mrs. Jones invokes federal jurisdiction based on diversity of citizenship. 28 U.S.C. § 1332 affords the courts of the United States subject matter jurisdiction over suits between citizens of different states in which the amount in controversy exceeds $10,000.00. State law cannot enlarge or contract that grant of jurisdiction. Beach v. Owens-Corning Fiberglas Corp., 728 F.2d 407 (7th Cir.1984); Begay v. Kerr-McGee Corp., 682 F.2d 1311 (9th Cir.1982). State law may provide that Mrs. Jones can state no claim for relief under Indiana law from any entity other than the Industrial Board; if Indiana law so provides, this court will be bound to so hold. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Such a determination would be based upon the strength of Mrs. Jones' state law claim, however, and not upon any want of federal jurisdiction. Jurisdiction under § 1332 is based upon the parties' citizenship, rather than upon the law of the forum state or even upon the jurisdictional limits governing the courts of the forum state.

B.

A court exercising diversity jurisdiction must, however, be able to find that the parties before it are of diverse citizenship. Goldstick v. ICM Realty, 788 F.2d 456 (7th Cir.1986). In the order of October 23, 1986, the court informed the parties that the record before it was insufficient to allow such a finding. The pleadings established that the plaintiff was a resident of the State of Indiana, and that New York was the principal place of business of National Union. The pleadings were silent, however, as to Mrs. Jones' citizenship and as to the place of National Union's incorporation; a corporation is a citizen of the state of its incorporation and of the state of its principal place of business. Accordingly, the court afforded the parties thirty days within which to submit proof of citizenship.

The plaintiff submitted an affidavit establishing that Mrs. Jones is a citizen of the State of Indiana. No proof of National Union's citizenship had been submitted by the time of the summary judgment hearing some eight months later, however. Dismissal of a claim for want of sufficient allegations of diversity is "overkill", Hemmings v. Barian, 822 F.2d 688, 697 (7th Cir., 1987), so the court raised the issue anew at the hearing. Counsel agreed that National Union was incorporated in the Commonwealth of Pennsylvania.

Based on that agreement and the materials before it, the court finds that it has jurisdiction over Mrs. Jones' claims.¹

II.

In a summary judgment motion, the movant must demonstrate, by way of pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, that (1) no genuine issue of material fact exists for trial, and (2) the movant is entitled to judgment as a matter of law. Munson v. Friske, 754 F.2d 683 (7th Cir. 1984). If the motion's opponent would bear the burden of proof at trial on the matter that forms the basis of the summary judgment motion, the burden of proof shifts to the motion's opponent if the movant makes its initial showing, and the motion's opponent must come forth and produce affidavits, depositions or other admissible documentation to show what facts are actually in dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment should be granted only if no reasonable jury could return a verdict for the motion's opponent. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

When the parties dispute the facts, the parties must produce proper documentary evidence to support their contentions. The parties cannot rest on mere allegations in the pleadings, Posey v. Skyline Corp., 702 F.2d 102 (7th Cir.), cert. denied 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983), or upon conclusory statements in affidavits. First Commodity Traders v. Heinold Commodities, 766 F.2d 1007 (7th Cir.1983). A party need not try its case by affidavit, but it must set forth some facts from which the court reasonably can infer that the party would be able to produce some evidence at trial to support its theory. Matter of Morris Paint and Varnish Co., 773 F.2d 130 (7th Cir.1985).

Any permissible reasonable inferences from the documentary evidence must be viewed in the light most favorable to the motion's opponent. Matsushita Electronics Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).

A.

The parties, while not disputing the basic facts giving rise to this litigation, disagree considerably over the inferences to be drawn from those basic facts. The basic facts, with reasonable inferences drawn in favor of Mrs. Jones, the nonmoving party, are as follows:

1.

Robert Jones was overcome by toxic fumes while working for Joy Manufacturing on September 21, 1981. Mrs. Jones, representing herself and her husband, filed a claim against Joy Manufacturing pursuant to Indiana's Workmen's Occupational Disease Act. IND.CODE 22-3-7. Memorial Hospital, where Mr. Jones had been hospitalized, refused to release Mr. Jones' medical records without authorization. That authorization was not given until March, 1982. Mr. Jones apparently was being treated for substance abuse problems during that period.

On March 19, 1982, National Union paid Mr. Jones $1,540.00, representing eleven weeks of temporary total disability payments.

Mr. Jones' hospital records reflected a diagnosis of "mixed organic mental disorder", a condition related to Mr. Jones' inhalation of toxic chemicals at Joy Manufacturing. The records further reported that Mr. Jones was "resisting treatment" and drinking alcoholic beverages that he concealed in his hospital bed. National Union demanded an independent medical evaluation.

National Union continued partial payment on several occasions, but no settlement was reached until October 24, 1984.

2.

Starting in December, 1981, the Joneses' attorney² began to investigate a products liability suit against Union Oil Company of California and Schmock Brothers Coal & Oil Co., the producers of the chemicals that Mr. Jones inhaled. The Joneses' attorney sought the assistance of Joy Manufacturing and National Union in this investigation, suggesting that they would benefit from a successful products liability suit, because they could recoup all benefits they paid to Mr. Jones. The attorney asked Joy Manufacturing and National Union to help by: (a) preserving all chemicals; (b) hiring a chemist to investigate the chemicals' toxicity; (c) allowing private conferences with Joy employees who might be witnesses; (d) allowing the Joneses' attorney to conduct a private inspection of the plant; (e) helping to locate experts; and (f) advancing litigation costs and fees, eventually with the proposition that all such advancements would be credited against National Union's payments to the Joneses.

National Union and Joy Manufacturing declined to provide the Joneses' attorney with such assistance. Indeed, they conducted themselves in such a manner as to make more difficult the preparation of the products liability suit. They objected to the Joneses' questions during depositions; they refused to allow private inspection of the plant; they refused to allow private interviews of Joy employees; they refused to advance litigation costs. The Joneses came to believe that National Union's conduct should preclude it from benefitting from any success they might have in their products liability suit.

Drawing all reasonable inferences in Mrs. Jones' favor, as the court must in deciding this summary judgment motion, the court must infer that by this conduct, National Union acted in bad faith. The materials before the court contain a suggestion that National Union acted as it did out of concern that its insured, Joy Manufacturing,...