Kimball Small Properties v. American Nat. Fire Ins. Co., No. C-90-20387 (SW).

• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
• Writing for the Court: SPENCER WILLIAMS
• Citation: 755 F. Supp. 1465
• Parties: KIMBALL SMALL PROPERTIES, et al., Plaintiffs, v. AMERICAN NATIONAL FIRE INSURANCE COMPANY, et al., Defendants.
• Decision Date: 13 February 1991
• Docket Number: No. C-90-20387 (SW).

755 F. Supp. 1465

KIMBALL SMALL PROPERTIES, et al., Plaintiffs,
v.
AMERICAN NATIONAL FIRE INSURANCE COMPANY, et al., Defendants.

No. C-90-20387 (SW).

United States District Court, N.D. California.

February 13, 1991.

755 F. Supp. 1466

Daniel Pyne and Alexander Stuart of Hoge, Fenton, Jones & Appel, Inc., San Jose, Cal., for plaintiffs.

Robert Helmenstine and Stephen Carlson of Lynch, Loofbourrow, Helmenstine, Giladi, & Grummer, San Francisco, Cal., for defendant American Nat. Fire Ins. Co.

ORDER DENYING PLAINTIFFS' MOTION TO REMAND

SPENCER WILLIAMS, District Judge.

This matter came before this Court on Plaintiff's Motion to Remand. The motion is DENIED.

BACKGROUND:

Plaintiffs Kimball Small Properties, Westall Corporation, Kimball Small Investments 103, Camsi III, and Oakmead Holdings, Inc., sued defendants for breach of insurance contract and bad faith. Plaintiffs in this suit are defendants in an underlying state civil suit which alleges that plaintiffs created property damage while leasing property. Plaintiffs turned to defendants here, plaintiff's insurers, for coverage, but defendants denied coverage. Plaintiffs then brought this suit against defendants, alleging breach of insurance contract and bad faith and seeking declaratory action.

Defendants are insurers of plaintiffs and citizens of states other than California.

DISCUSSION:

Defendants removed this suit from state court pursuant to 28 U.S.C. § 1441, claiming that this court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. Plaintiffs now move for remand pursuant to 28 U.S.C. § 1447, arguing that this court does not have diversity jurisdiction because the insurers should be treated as having the same citizenship as the insureds, pursuant to 28 U.S.C. § 1332(c)(1).

This court has diversity jurisdiction over cases in which the parties are citizens of different states and in which the amount in controversy exceeds $50,000.00. 28 U.S.C. § 1332(a). For purposes of 28 U.S.C. § 1332 and 28 U.S.C. § 1441 (removal), a corporation is a citizen of the state in which it resides, "except that in a 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 to be a citizen of the State in which the insured is a citizen...." 28 U.S.C. § 1332(c)(1) (emphasis added). Therefore, in adjudicating a "direct action" suit against an insurance company, the court should treat the insurance company as if it has the same citizenship of the insured.

In the case at bar, if § 1332(c)(1) applied, diversity jurisdiction would be destroyed because defendants would be considered to be citizens of the same state as plaintiffs.

Plaintiffs argue that § 1332(c)(1) applies to this suit because this suit is a "direct action" against the insurers. Plaintiffs base this novel interpretation of § 1332(c)(1) on Chavarria v. Allstate Ins. Co., 749 F.Supp. 220 (C.D.Cal.1990). Chavarria, in turn, allegedly based its holding on an interpretation of Northbrook Nat'l

755 F. Supp. 1467

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