Tyson v. Connecticut General Life Ins. Co.
Decision Date | 15 August 1980 |
Docket Number | Civ. A. No. 80-71663. |
Citation | 495 F. Supp. 240 |
Parties | Linda L. TYSON, Plaintiff, v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY, Defendant. |
Court | U.S. District Court — Western District of Michigan |
David B. Grant, Southfield, Mich., for plaintiff.
Kristine Galien Opperwall, Miller, Canfield, Paddock & Stone, Detroit, Mich., for defendant.
Plaintiff has filed a motion to remand this case to Wayne County Circuit Court, where it was originally filed and from which it was removed to this court by defendant.
Plaintiff, a Michigan citizen, is suing defendant insurance company, a Connecticut corporation, for its alleged wrongful failure to pay disability benefits under a group policy of insurance "applicable to plaintiff for sick and accident benefits, medical reimbursement and group disability income benefits." Complaint, ¶ 3. The policy sued on is not a workers' compensation policy. Plaintiff states that she was an insured under the group policy through her employment with American Motors Corporation.
Plaintiff's motion is based on 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.
Plaintiff argues that the "direct action" proviso to § 1332(c) applies in this case, and operates to make the citizenship of defendant-insurer the same as that of the American Motors Corporation, plaintiff's employer. Plaintiff alleges that AMC is a Michigan corporation, and that defendant assumes that citizenship pursuant to the proviso. Thus, plaintiff argues, there is no diversity of citizenship as required by 28 U.S.C. § 1332(a), and the court therefore lacks subject matter jurisdiction of this case.
Plaintiff's motion and supporting arguments require a careful study of the scope and purpose of the proviso to § 1332(c). The direct action limitation on diversity of citizenship was originally aimed at eliminating the increased caseload of the federal district courts of Wisconsin and Louisiana after those states adopted direct action statutes which permitted an injured party to sue a foreign insurer without joining the resident injured. Aetna Casualty & Surety Ins. Co. v. Greene, 606 F.2d 123, 125 (6th Cir. 1979).
The court has been urged to give this proviso a narrow construction and to interpret it in such a way so as to have it apply only in the particular cases involving suits against insurance companies who agree to protect against the tort liability of the person ultimately liable. There is law to support this narrow view of the statute. White v. U. S. Fidelity and Guaranty Co., 356 F.2d 746 (1st Cir. 1966); Henderson v. Selective Ins. Co., 369 F.2d 143 (6th Cir. 1966); Velez v. Crown Life Ins. Co., 599 F.2d 471 (1st Cir. 1979); Irvin v. Allstate Ins. Co., 436 F.Supp. 575 (W.D.Okl.1977). The better reasoned cases and those cases more recently decided in this circuit suggest that such a narrow mechanical construction is not appropriate. Aetna Casualty & Surety Ins. Co. v. Greene, supra; O. M. Greene Livestock Co. v. Azalea Meats, Inc., 516 F.2d 509 (5th Cir. 1975); Hernandez v. Travelers Ins. Co., 489 F.2d 721 (5th Cir. 1974); McMurry v. Prudential Property and Casualty Ins. Co., 458 F.Supp. 209 (E.D. Mich.1978).
Thus, the applicability of § 1332(c)'s proviso has been extended beyond the tort-type actions which were burdening the courts of Wisconsin and Louisiana. In McMurry v. Prudential Property and Casualty Ins. Co., supra, Judge Cornelia Kennedy applied the proviso to a case in which a passenger of an automobile sued the owner-driver's No-Fault insurer. In Greene, supra, the court held that the proviso would apply to a suit by a employee against the employer's workers' compensation insurer.
While the proviso, by its terms, is applicable to policies of "liability" insurance, Greene indicated the type of actions to which the proviso applies by defining the nature of a liability policy:
Thus, when an insurer protects a third person against that person's liability to another, the insurer assumes the third person's citizenship for purposes of diversity of citizenship federal subject matter jurisdiction. The liability of the third person can arise under common law or under statute. Thus, a tort liability insurer assumes the citizenship of the tortfeasor, a workers' compensation insurer assumes the citizenship of the employer, and a No-Fault insurer assumes the citizenship of its insured. Where the third person's liability arises by operation of contract law, should the rule be any different? This court thinks not. If, for example, an employer obligates itself, either by a collective bargaining agreement with its employees' union or by an individual contract of employment to provide disability insurance to its employees or to a particular employee, 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." Greene, supra. Thus, under the proviso in § 1332(c), the insurer "shall be deemed a citizen of the State of which the insured . . . is a citizen . . . ." In such a case, the insurer is required by law to assume, for the purpose of determining jurisdiction of the court, the same citizenship as that of the employer whose liability for disability insurance was protected by the issuance of the policy of insurance.
In this case, plaintiff was not promised disability protection pursuant to a collective bargaining agreement. Plaintiff was a nonunion, salaried employee. The record does not reflect whether the group insurance coverage provided to plaintiff was "bargained for" at the time she commenced her employment or whether it was simply a "fringe benefit." In either event, it was part of plaintiff's employment package, and thus constituted one aspect of AMC's obligation to plaintiff as its employee. See Toussaint v. Blue Cross and Blue Shield, 408 Mich. 579, 292 N.W.2d 880 (1980), noted in 48 U.S.L.W. 2826 (June 24, 1980). Contracts entered into between employers and an insurance company for the benefit of...
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