Maria Rivera Torres v. Hartford Insurance Company, 588 F.2d 848, 1st Cir. (1978)
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Scribd Government DocsMaria Rivera Torres v. Hartford Insurance Company, 588 F.2d 848, 1st Cir. (1978)
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Scribd Government Docs588 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., defendantappellee.
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:
2 For the purposes of this section and section 1441 of this title, a corporation shall
(c)
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 partydefendant, 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.
3
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
6 eliminate under the diversity jurisdiction of the U.S. district courts, suits on certain
to
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.
7
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.
9
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 the action was brought by plaintiffs against Hartford. It is true, as
appellants point out, that, if suit had been brought against Venable, there would
have been no jurisdictional obstacle. The short answer is that plaintiffs chose to
sue Hartford, not the driver of the car. Under Puerto Rican law, plaintiffs had
three target defendants: Hartford, under the direct action statute; Vicks; and/or
its employee, Venable. The advantages of having a large insurance carrier as a
named defendant are obvious, but once the choice is made, the consequences
cannot be avoided.
10
It is clear that section 1332(c) restricts jurisdiction. Its provision for multiple
citizenship of the insurer was designed to restrict diversity jurisdiction. See
Hercules Inc. v. Dynamic Export Corp., 71 F.R.D. 101, 106-07
(S.D.N.Y.1976). While the merits of diversity jurisdiction continue to be hotly
debated,1 the general trend by the courts has been restrictive rather than
expansive. See Owen Equipment and Erection Company v. Kroger, Admx., 437
U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978).
11
While our reading of section 1332(c) has not been as restrictive of jurisdiction
as that of the Fifth Circuit, Compare Hernandez v. Travelers Insurance
Company, 489 F.2d 721 (5th Cir. 1974), and White v. United States Fidelity
and Guaranty Company, 356 F.2d 746 (1st Cir. 1966), we feel that, in this
situation, the purpose of the section compels an interpretation that will restrict
diversity jurisdiction. We, therefore, hold, under these facts, that the insurer is
deemed to be a citizen of the same state as the plaintiff if either the Named
insured or the tortfeasor Omnibus insured is a citizen of that state.
12
Affirmed.
See generally P. Bator, P. Mishkin, D. Shapiro & H. Wechsler, Hart &
Wechsler's The Federal Courts and the Federal System (2d ed. 1973). See also
A.L.I. Study of the Division of Jurisdiction Between State and Federal Courts
(1969)
One of the most perceptive comments on "the mounting mischief inflicted on
the federal judicial system by the unjustifiable continuance of diversity
jurisdiction" is Justice Frankfurter's concurring opinion in Lumbermen's
Casualty Co. v. Elbert, 348 U.S. 48, 53-60, 75 S.Ct. 151, 99 L.Ed. 59 (1954).
For an opposing view, See Weckstein, The 1964 Diversity Amendment:
Congressional Indirect Action Against State "Direct Action" Laws, 1965
Wis.L.Rev. 268, 269-71.
At least one bill that would eliminate or severely limit diversity jurisdiction was
before the last Congress and similar legislation is expected to be reintroduced
in the next.
