Kosmyna v. Bankers Life and Cas. Co.

• Decision Date: 02 November 1982
• Docket Number: Civ. A. No. 82-73052.
• Citation: 550 F. Supp. 142
• Parties: George C. KOSMYNA, Plaintiff, v. BANKERS LIFE AND CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — Western District of Michigan

550 F. Supp. 142

George C. KOSMYNA, Plaintiff, v. BANKERS LIFE AND CASUALTY COMPANY, Defendant.

Civ. A. No. 82-73052.

United States District Court, E.D. Michigan, S.D.

November 2, 1982.

David B. Grant, Southfield, Mich., for plaintiff.

Arthur M. Hoffeins, Detroit, Mich., for defendant.

OPINION

FEIKENS, Chief Judge.

Plaintiff originally brought this action in Oakland County Circuit Court alleging defendant failed to pay benefits due under the terms of "an accident income policy" it issued through plaintiff's employer. Defendant timely petitioned this Court for removal. Plaintiff now moves to remand to Circuit Court. Defendant alleges jurisdiction is proper under 28 U.S.C. § 1332 because plaintiff is a citizen of Michigan and defendant is an Illinois corporation with its principal place of business in Illinois. Plaintiff contends that the language of the proviso to 28 U.S.C. § 1332(c), which states:

Provided further, 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, as well as of any State by which the insurer has been incorporated and of the State where it has its principal place of business,

requires that defendant be considered a citizen of Michigan. Thus, he argues, diversity is lacking.

The critical question is whether the policy is a "policy or contract of liability insurance" within the meaning of the statute.¹ The term "liability insurance" is applied to contracts which provide for indemnity against liability.... Liability insurance is that form of insurance by which the insured is indemnified against loss or liability on account of bodily injuries sustained by others, ... or in a broader sense, against loss or liability on account of injuries to property.... A policy of liability insurance is a policy that indemnifies against the condition of becoming liable.... In Twin City Fire Ins. Co. v. Wilkerson, 247 F.Supp. 766, 767 (E.D. Tenn.1965), the Court construed the term "liability insurance" as used in 28 U.S.C. § 1332(c), and said this:

Although the question is not wholly without doubt, ... the term "liability insurance" has over the years come to be accepted in the Courts as meaning an indemnity agreement which protects the insured against his liability to others, and ... it was this meaning that the Senate had in mind in considering the amendment.

Aetna Casualty & Surety Ins. Co. v. Greene, 606 F.2d 123, 126 (6th Cir.1979), quoting with approval, Vines v. United States Fidelity & Guaranty Co., 267 F.Supp. 436, 437 (E.D.Tenn.1967). In other words, liability insurance obligates the insurer to pay if the insured becomes liable to a third person.

States occasionally replace traditional tort law with other systems for providing compensation to accident victims. "Congress, when it used the terms `direct action' and `liability insurance' in the amendment to § 1332(c) did not intend the amendment to apply only to traditional tort claims." Aetna Casualty, 606 F.2d at 126. Thus, it is the law in this Circuit that claims under workers' disability compensation and no-fault automobile insurance statutes (which eliminate or reduce tort liability) fall within the meaning of the proviso to § 1332(c). Id.; Ford Motor Co. v. Insurance Co. of N. Am., 669 F.2d 421 (6th Cir.1982).

Arguing that the instant case falls within the proviso to § 1332(c), plaintiff relies on Tyson v. Connecticut General Life Ins. Co., 495 F.Supp. 240 (E.D.Mich.1980). Plaintiff's reliance on Tyson is proper; its factual situation is indistinguishable from the case at bar. However, as explained below, I decline to follow Tyson because I believe it was wrongly decided.

After discussing the law detailed above, Tyson argues that because Tyson's employer contractually agreed to provide her with disability insurance protection,

the employer has created a liability to act in accordance with that contract that is enforceable in law. Contract law creates an obligation to provide disability protection binding on the employer. The insurance agreement is, in turn, an "agreement which protects the insured against his liability to others."

Id. at 242, quoting Aetna Casualty, 606 F.2d at 126. However, this analysis misses the point.

Under the terms of a disability income policy, the insured is not the employer, but the employee. The insured, contrary to the assertion in Tyson, is not protected against incurring liability to others. The insured employee is merely protected against loss of income.

In addition, the employer discharges his obligation to the employee by arranging for an insurance company to provide coverage. If it fails to...