Opinion
CASE NO. 1:01CV1179
May 13, 2002
MEMORANDUM OF OPINION AND ORDER
On March 7, 1987, the plaintiff, Ronald Kohus, was severely injured while a passenger in a motor vehicle operated by an uninsured motorist. An uninsured motorist claim was pursued against his insurance carrier, Allstate Insurance Company, which paid him the policy limits but did not adequately compensate him for his injuries. At that time, plaintiff was employed by Plainville Ready Mix Concrete, Inc. who was insured under a commercial general liability insurance policy with defendant Hartford Insurance Company (Hartford). The plaintiff alleges in his complaint that this insurance policy included underinsured motorist coverage, or if not, said coverage arises by operation of law. Plaintiff seeks to recover under his former employer's insurance policy pursuant to the Ohio Supreme Court's decision in Scott-Pontzer v. Liberty Mut. Fire Ins. Co., 85 Ohio St.3d 660 (1999). The action, originally filed in the Common Pleas Court of Cuyahcga County, Ohio was removed by defendant in accordance with 28 U.S.C. § 1441(a) on the basis of diversity of citizenship, 28 U.S.C. § 1332(c). This matter is before the Court upon the plaintiff's motion to remand on the ground that complete diversity of citizenship does not exist as the plaintiff and defendant are both citizens of Ohio. (ECF 16). Along with the brief attached to this motion, the Court has reviewed the defendant's memorandum in opposition to the plaintiff's motion to remand to state court. (ECF 20). For the following reason, the plaintiff's motion to remand is granted.
A corporation is a citizen of any state where it has been incorporated and the state where it has its principal place of business. 28 U.S.C. § 1332(c). In the present case defendant Hartford is incorporated and has its principal place of business in Connecticut. In 1964, 28 U.S.C. § 1332(c) was amended as follows:
[I]n 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;
If this case is considered a direct action against Hartford it will be a citizen of both Connecticut and Ohio because Hartford's insured, Plainville Ready Mix Concrete, Inc., is an Ohio corporation with its principal place of business in Ohio. Thus, diversity will be lacking.
This provision was added because the States of Louisiana and Wisconsin enacted statutes allowing suits directly against insurance companies without joining the tortfeasors resulting in an increase in diversity cases. Henderson v. Selective Ins. Co., 369 F.2d 143, 149 (6th Cir. 1966). The Sixth Circuit defines "direct action" as "an action that under applicable state law may be brought directly against the insurer by the tort claimant prior to entry of judgment against the alleged tortfeasor." Stockton v. Generl Acc. Ins. Co., 897 F.2d 530, 1990 WL 20477 at *3 (6th Cir.). Stockton involved a garnishment lawsuit brought by judgment creditors against an insurer that the Sixth Circuit found was not a direct action under § 1332(c) because a valid judgment against the insured tortfeasor was a prerequisite to any action by the plaintiffs against the insurer. Id. at *3.
Recently, United States District Judge Dan Aaron Polster granted a motion to remand in Kormanik v. St Paul Insurance and Marine Co., Case No. 4:01CV2122 (N.D. Ohio 2001) (unreported), on the ground that the court lacked subject matter jurisdiction based on § 1332(c). Judge Polszer relied on the reasoning in Henderson v. Selective Ins. Co. wherein the Sixth Circuit recognized that § 1332(c) was adopted in order to address the increasing burden faced by federal courts as a result of new state laws which created diversity actions. Id., 369 F.2d at 149. The Sixth Circuit extended its reasoning in Henderson to actions directly against an insurer pursuant to Michigan's no-fault insurance law in Ford Motor Co. v. Insurance Company of North America, 669 F.2d 421 (6th Cir. 1982). The court opined that the provision of § 1332(c) should not be limited to the specific conditions that arose with the new Louisiana and Wisconsin laws. Id. at 425. Because of Congress's reaction to the earlier state legislation, no-fault insurance should not be held to expand the jurisdiction of federal courts. Id. at 426.
The Scott-Pontzer case has resulted in an escalation of cases filed in this Court that would otherwise not have been filed here, the same reaction that occurred in connection with the Louisiana and Wisconsin legislation. As Judge Polster recognized, Scott-Pontzer has caused unsettled questions of law to arise that require the district courts to attempt to guess how the Ohio Supreme Court would rule in certain situations. It would be better for the state courts to address these issues. The same reasons that motivated the enactment of 28 U.S.C. § 1332(c) also apply to Scott-Pontzer type actions.
For example, Ohio law is not settled as to whether limitations or conditions precedent in an insurance policy apply when insurance coverage is imposed by law. See Myers v. Safeco Ins. Co., 2000 WL 329800 (Ohio App., 5th Dist.), rev'd, 91 Ohio St.3d 333 (2001) (reversal based on Davidson v. Motorists Mut. Ins. Co, 91 Ohio St.3d 262, 264 (2001)); Luckenbill ex rel Luckenbill v. Midwestern Indemnity Co., 2001 WL 585730 (Ohio App., 2nd Dist.)
Further, this action satisfies the Sixth Circuit definition of direct action. It is a direct action against an insurer of a company that was not involved in plaintiff's accident. Scott-Pontzer type actions do not require a prior entry of judgment against a tortfeasor. See Kormanik v. St. Paul Fire and Marine Insurance Co., at P. 5. The Court concludes that this is a direct action depriving it of subject matter jurisdiction pursuant to 28 U.S.C. § 1332(c).
Accordingly, for the foregoing reason, the plaintiff's motion to remand (ECF 16) is granted.