Kormanik v. St. Paul Fire and Marine Ins. Co., 5:01CV02122.

• Decision Date: 19 October 2001
• Docket Number: No. 5:01CV02122.,5:01CV02122.
• Citation: 208 F.Supp.2d 824
• Parties: Ella Louise KORMANIK, Admin., et al., Plaintiffs, v. ST. PAUL FIRE AND MARINE INS. CO., Defendant.
• Court: U.S. District Court — Northern District of Ohio

208 F.Supp.2d 824

Ella Louise KORMANIK, Admin., et al., Plaintiffs, v. ST. PAUL FIRE AND MARINE INS. CO., Defendant.

No. 5:01CV02122.

United States District Court, N.D. Ohio, Eastern Division.

October 19, 2001.

A. William Zavarello, Zavarello & Davis, Akron, OH, for defendants.

Paul D. Eklund, Davis & Young, Cleveland, OH, for defendant.

MEMORANDUM OF OPINION AND ORDER

POLSTER, District Judge.

Before the Court is Plaintiffs' Motion to Remand Case to Summit County Court of Common Pleas (ECF No. 11). For the reasons stated below, Plaintiffs' motion is GRANTED.

I. BACKGROUND

On August 3, 2001, Plaintiffs filed a wrongful death and survivorship action against Defendant St. Paul Fire and Marine Insurance Company in the Summit County Court of Common Pleas. (ECF No. 1, Ex. A). In the Complaint, Plaintiffs allege that on August 3, 1999, Amie Kormanik, who was the daughter of Ella Louise Kormanik, died as the result of an automobile accident. Because the tortfeasors involved in that action were underinsured, Plaintiffs now seek damages from Defendant, the insurer of Ella Louise Kormanik's former employer, pursuant to the Ohio Supreme Court's decision in Scott-Pontzer v. Liberty Mutual Fire and Ins. Co., 85 Ohio St.3d 660, 710 N.E.2d 1116 (1999).

On September 5, 2001, Defendant removed the action to this Court pursuant to 28 U.S.C. § 1441(a). (ECF No. 1). Defendant contends that this Court has diversity jurisdiction over the case because Plaintiffs are citizens of Ohio, Defendant is a citizen of Minnesota, and the amount in controversy exceeds $75,000. Id. at 2. On October 4, 2001, Plaintiffs filed a Motion to Remand (ECF No. 11), in which they argue that complete diversity does not exist because Defendant is a citizen of both Minnesota and Ohio.

II. LEGAL ANALYSIS

For purposes of diversity jurisdiction, a corporation is a citizen of both its state of incorporation and the state where it has its principal place of business. 28 U.S.C. § 1332(c)(1). When a corporation is an insurer, citizenship also may be predicated upon the citizenship of the insured. According to the express terms of 28 U.S.C. § 1332(c)(1) ("the diversity-limiting provision"):

[I]n 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, as well as of any State by which the insurer has been incorporated and of the State where it has its principle place of business.

In this case, the only named defendant is St. Paul Fire and Marine Insurance Company. Defendant's insured, W.G. Lockhart Construction Company, is an Ohio corporation with its principal place of business in Ohio. Thus, if the provision quoted above applies to this case, Defendant must be deemed a citizen of Ohio and diversity will be lacking.

Defendant argues that the provision does not apply because this case is not a "direct action" within the meaning of the statute. In support of its position, Defendant points to Henderson v. Selective Ins. Co., 369 F.2d 143 (6th Cir.1966) and Stockton v. General Accident Ins. Co., 897 F.2d 530, 1990 WL 20477 (6th Cir.1990), unpublished. In Henderson, the Sixth Circuit held that the diversity-limiting provision did not apply in a case brought by judgment creditors of a negligent driver against insurers for an automobile salesman and an automobile dealership that allowed the negligent driver to drive one of the dealership's vehicles. The court based its decision upon legislative history indicating that the provision had been enacted solely for the purpose of addressing "... a situation arising in the States of Wisconsin and Louisiana, as a result of the enactment of `direct action' statutes in those states permitting suits directly against the insurance companies without joining the insured." Id. at 149.

In Stockton v. General Accident Ins. Co., the Sixth Circuit held that a garnishment lawsuit brought by judgment creditors against an insurer was not a direct action for purposes of § 1332(c). 897 F.2d 530, 1990 WL 20477. The court found that a "direct action" for purposes of § 1332(c), is "an action that under applicable state law may be brought directly against the insurer by the tort claimant prior to entry of any judgment against the alleged tortfeasor." Id. at *3. Based upon this definition, the court concluded that the lawsuit before it was not a direct action because a valid judgment against the insured tortfeasors was a prerequisite to any garnishment action by the plaintiffs against the insurer. Id.

The Court finds that neither of the above cases requires a finding that the diversity-limiting provision does not apply in this case. In Henderson, the Sixth Circuit explicitly recognized that the provision was adopted in an effort to address the increasing case burden faced by federal courts as the result of state laws which created diversity where it would not have existed before. Henderson, 369 F.2d at 149. The Sixth Circuit's decision in Ford Motor Co. v. Insurance Co. of North America, 669 F.2d 421 (6th Cir.1982), further expanded upon this view. In that case, the Sixth Circuit held that the diversity-limiting provision of § 1332(c) stripped the district court of diversity jurisdiction over an action filed by a plaintiff directly against an insurer pursuant to Michigan's no-fault insurance statute. The court noted that although it had initially given a narrow reading to the diversity-limiting provision, its application should not be limited "to the specific conditions which gave it birth." Id. at 425. The court concluded that the no-fault suits against insurers pursuant to the Michigan statute constituted "direct actions" within the meaning of § 1332(c) because they resulted in the same type of "back-door diversity" that the provision was intended to prevent. Id. at 426.

Much like the "direct action" statutes enacted by...