Estate of Zeiler v. Prudential Insurance Co. of America

MEMORANDUM OPINION AND ORDER SHADUR, District Judge. Prudential Insurance Company of America (“Prudential”) filed a timely removal petition in this diversity action originally brought by Illinois residents in the Circuit Court of DuPage County. 1 Plaintiffs now move under Section 1447 to remand the action to the Illinois court on the ground this is a “direct action against the insurer of a policy or contract of liability insurance ... to which action the insured is not *628 joined as a party defendant.... ”—calling into play a 1964 proviso to Section 1332(c) that makes the insurer a citizen of the same state as the insured. That motion cannot prevail. In its inception the 1964 amendment to Section 1332(c) was intended to deal with the tort-claim “direct action” statutes (initially in Louisiana and Wisconsin) that were viewed as putting an undue burden on the federal courts’ diversity jurisdiction, see White v. United States Fidelity & Guaranty Co., 356 F.2d 746, 747-48 (1st Cir.1966). In that sense “direct action” could be viewed essentially as a term of art, and White and numerous other cases have construed the statute narrowly for that reason. It is true other cases have recently taken a more expansive approach, see Aetna Casualty & Surety Insurance Co. v. Greene, 606 F.2d 123, 125-26 (6th Cir.1979); O.M. Greene Livestock Co. v. Azalea Meats, Inc., 516 F.2d 509 (5th Cir.1975). But such cases have dealt with true “liability insurance”— insurance offered to protect against liability running to a plaintiff from a third person (whether liability owed to an injured party by the owner of an automobile, or to an injured employee by the employer in a workmen’s compensation situation, or to an unpaid seller by a bonded purchaser who later proves to be insolvent). This Court has indeed found one case in which a party suing (like plaintiffs here) an insurance company for disability benefits under a group policy was held within the scope of the Section 1332(c) proviso, Tyson v. Connecticut General Life Insurance Co., 495 F.Supp. 240 (E.D.Mich.1980). That decision seems ill-advised to this Court, for such policies do not insure a party (the employer) against his or its own existing liability, as in all the situations previously described—instead (both in Tyson and here) the policies themselves create the alleged liability as a contractual matter. In fact the claim in such a case is really by the insured employee against the insurer, rather than by a third party against the insurer without joining the insured (as the Section 1332(c) proviso literally reads). Such a policy is not one of “liability insurance.” 2 Plaintiffs’ motion to remand is denied. Footnotes [1] Prudential’s state of incorporation and principal place of business, and hence its sole place of citizenship under 28 U.S.C. § 1332(c) (all citations to Title 28 hereafter will simply be to “Section—”), are in New Jersey. That satisfies the complete diversity requirement of Section 1332(a)(1). [2] This Court of course shares the concern expressed by Judge Joiner in Tyson about the burdens of diversity jurisdiction (495 F.Supp. at 243—14 n. *), but that concern is no basis for a judicial amendment to the statute.