Vines v. United States Fidelity & Guaranty Company

• Decision Date: 03 May 1967
• Docket Number: Civ. A. No. 4945.
• Citation: 267 F. Supp. 436
• Parties: Jack B. VINES v. UNITED STATES FIDELITY & GUARANTY COMPANY.
• Court: U.S. District Court — Eastern District of Tennessee

267 F. Supp. 436

Jack B. VINES v. UNITED STATES FIDELITY & GUARANTY COMPANY.

Civ. A. No. 4945.

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

May 3, 1967.

Stone & Kirkland, Chattanooga, Tenn., for plaintiff.

Hall, Haynes, Lusk & Foster, Chattanooga, Tenn., for defendant.

MEMORANDUM

FRANK W. WILSON, District Judge.

This is an action by an employee against his employer's workmen's compensation insurance carrier for a determination of disability and benefits under the Tennessee Workmen's Compensation Act, T.C.A. § 50-901 et seq. The case is before the Court upon defendant's motion to dismiss for lack of jurisdiction of the subject matter.

The defendant relies upon the 1964 amendment to Section 1332(c) of Title 28, United States Code, which added the following provision:

"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."

It is undisputed in this action that the insured, Rapro, Inc., is a citizen of Tennessee, as is the plaintiff. Accordingly, if the code section cited is applicable, there is a lack of diversity of citizenship as between plaintiff and defendant. The issues presented are (1) whether defendant is an insurer of a policy or contract of "liability insurance" and (2) whether this is a "direct action" as those terms are used above.

The Tennessee Workmen's Compensation Act requires employers to either carry liability insurance or show proof of financial responsibility (T.C.A. § 50-1205):

"Every employer under and affected by the Workmen's Compensation Law (1) shall insure and keep insured his liability hereunder * * * or (2) shall furnish to the commissioner of insurance and banking satisfactory proof of his financial ability to pay all claims that may arise against him * * *."

The term "liability insurance" is applied to contracts which provide for indemnity against liability. Zieman v. United States Fidelity & Guaranty Company of Baltimore, Maryland, 214 Iowa 468, 238 N.W. 100. 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, Cushing v. Maryland Casualty Company, (C.A.5, 1952) 198 F.2d 536, or in a broader sense, against loss or liability on account of injuries to property. State ex rel. Traveler's Indemnity Company v. Knott, 114 Fla. 820, 153 So. 304, 155 So. 115. A policy of liability insurance is a policy that indemnifies against the condition of becoming liable. Graves v. National Mutual Casualty Company, 164 Kan. 267, 188 P.2d 945; Dunn v. Jones, 143 Kan. 218, 53 P.2d 918. In the recent case of Twin City Fire Insurance Company v. Wilkerson, (E.D.Tenn., 1965) 247 F.Supp. 766, the Honorable Robert L. Taylor, Chief Judge of this District, had occasion to construe the term "liability insurance" as used in 28 U.S.C. § 1332(c), and said this:

"Although the question is not wholly without doubt, these and other cases indicate to the Court that the term `liability insurance' has over the years to come to be accepted in the Courts as meaning an indemnity agreement which protects the insured against his liability to others, and the report of the Senate Committee on the subsection (c) amendment * * * discloses that it was this meaning that the Senate had in mind in considering the amendment * * *."

Defendant having insured plaintiff's employer against liability under the Tennessee Workmen's Compensation Law, the Court is of the opinion that the policy of insurance here sued upon is a policy of liability insurance within the meaning of the 1964 amendment to 28 U.S.C. § 1332(c).

The Court next turns to the question whether this is a "direct action" within the meaning of the code section. The instant action is authorized by Section 50-1209, Tennessee Code Annotated:

"No policy of insurance against liability arising under the Workmen's Compensation Law shall be issued unless it contain an express agreement of the insurer that it will promptly pay to the person entitled to same all benefits conferred by such law * * *. Such agreement shall be construed to be a direct promise by the insurer to the person entitled to compensation under the Workmen's Compensation Law, and may be enforced directly by such person in his name * * *."

This provision must be read into the contract of insurance. Douglas v. Sharp, (1952) 194 Tenn. 11, 249 S.W.2d 999; General Guaranty Insurance Co. v. Scudgington, (1964) 213 Tenn. 532, 376 S.W.2d 464. This Court was presented with the question of whether an action was a "direct action" within the meaning of 28 U.S.C. § 1332(c) in the case of Carvin v. Standard Accident Insurance Company, (E.D.Tenn., 1966) 253 F.Supp. 232. There one who claimed to be an insured under an automobile...