Torres v. Hartford Ins. Co., No. 78-1104

• Decision Date: 27 December 1978
• Docket Number: No. 78-1104
• Parties: Maria Rivera TORRES et al., Plaintiffs-Appellants, v. HARTFORD INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 848

588 F.2d 848

Maria Rivera TORRES et al., Plaintiffs-Appellants, v. HARTFORD INSURANCE COMPANY, Defendant-Appellee.

No. 78-1104.

United States Court of Appeals, First Circuit.

Submitted Sept. 7, 1978.

Decided Dec. 27, 1978.

David Rive Rivera and Calderon, Rosa-Silva & Vargas, Hato Rey, P. R., on brief for plaintiffs-appellants.

Ernesto F. Rodriguez Suris and Miranda Cardenas, Otero, De Corral & Rodriguez, Hato Rey, P. R., on brief for Hartford Ins. Co., defendant-appellee.

Before COFFIN, Chief Judge, CAMPBELL and BOWNES, Circuit Judges.

BOWNES, Circuit Judge.

The sole issue in this case, which appears to be of first impression, is one of diversity jurisdiction involving the scope and meaning to be given 28 U.S.C. § 1332(c) which provides:

(c) For the purposes of this section and section 1441 of this title, a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business: 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.

The case arises out of an automobile accident on the Island of Puerto Rico. Plaintiffs, all citizens and residents of the Commonwealth, were injured in a collision with another car owned by Vicks Corporation, a Delaware corporation with a principal place of business in Puerto Rico. The automobile was operated by one of Vicks' employees, W. L. Venable, citizen and resident of North Carolina. The named defendant is Hartford Insurance Company, whose state of incorporation and principal place of business is Connecticut. There was in effect at the time of the accident a liability policy covering Vicks as the Named insured and employees such as Venable under the Omnibus or Other insured clause.

Plaintiff brought suit against Hartford only under Puerto Rico's direct action statute, 26 L.P.R.A. § 2003, which permits suits directly against an insurance company without joining the named insured or the alleged tort-feasor. The district court dismissed, pursuant to 28 U.S.C. § 1332(c), for lack of jurisdiction, and this appeal followed.

The section 1332(c) amendment to the diversity jurisdiction statute was a direct response to the fact that "direct action" statutes in Louisiana and Wisconsin had inundated the federal district courts there with diversity cases arising out of automobile accidents involving citizens of the same state. Since the named defendant was an insurance company with its state of incorporation and principal place of business far removed from the state of the accident, diversity jurisdiction was created and the federal district courts in Louisiana and Wisconsin flooded with cases which normally would have been handled in the state courts. The purpose of the amendment was

to eliminate under the diversity jurisdiction of the U.S. district courts, suits on certain tort claims in which both parties are local residents, but which, under a State "direct action" statute, may be brought directly against a foreign insurance carrier without joining the local tort-feasor as a defendant.

S.Rep.No.1308, 88th Cong., 2d Sess., Reprinted in (1964) U.S.Code Cong. & Admin.News, pp. 2778, 2778-79. See 13 Wright, Miller & Cooper, Federal Practice & Procedure § 3629 at 830-31 (1975).

The question of whether the word "insured" in section 1332(c) includes a person covered under the Omnibus clause has been answered in the affirmative by the courts that have considered it. Williams v. Liberty Mutual Company,468 F.2d 1207 (5th Cir. 1972); Anderson v. Phoenix of Hartford Insurance Company, 320 F.Supp. 399 (W.D.La.1970), Affirmed, No. 71-1295 (5th Cir. July 8, 1971); Government Employees Insurance Co. v. Le Bleu, 272 F.Supp. 421 (E.D.La.1967). In the light of the reason for the statute and its explicit congressional history, the only logical conclusion is that the word "insured" includes any alleged tort-feasor covered by the policy under the Omnibus clause.

The question, therefore, is whether the citizenship of the named insured, Vicks, or the Omnibus insured, Venable, is attributed to the insurance carrier. Appellant argues that, since the tort-feasor was a citizen of North Carolina, not Puerto Rico, there is diversity jurisdiction. This approach blithely ignores the fact that...