Netto et al v. Atlantic Specialty Insurance Company et al

Filing 19

ORDER denying 13 Motion to Remand to State Court Signed by Chief District Judge Louis Guirola, Jr on 12/14/2016 (Guirola, Louis)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
GARY W. NETTO AND
DEJUANA L. NETTO

PLAINTIFFS

v.

CAUSE NO. 1:16CV389-LG-RHW

ATLANTIC SPECIALTY INSURANCE CO.
AND GEICO INDEMNITY COMPANY

DEFENDANTS

ORDER DENYING MOTION TO REMAND
BEFORE THE COURT is the plaintiffs’ Motion [13] to Remand. Plaintiffs’
contend that the parties are not completely diverse, and therefore the Court does
not have subject matter jurisdiction under the diversity jurisdiction statute. The
defendants have responded, but there has been no reply. After due consideration of
the submissions and the relevant law, it is the Court’s opinion that it has subject
matter jurisdiction in this case. Accordingly, the Motion to Remand will be denied.
BACKGROUND
Plaintiffs Gary and Dejuana Netto are a married couple who filed this
lawsuit in Pearl River County, Mississippi, Circuit Court after Gary was involved in
a vehicle accident. Gary alleges he was a passenger in a vehicle owned by his
employer, Pearl River County, Mississippi, when it was rear-ended while the driver
attempted to make a left turn. Gary and Dejuana have sued Atlantic Specialty
Insurance Company and GEICO Indemnity Company for underinsured motorist
benefits.1 Dejuana brings a derivative loss of consortium claim. The defendants

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Atlantic Specialty issued a policy to Pearl River County, while GEICO issued a policy to the
plaintiffs.

removed the case to this Court on the basis of diversity jurisdiction, 28 U.S.C. §
1332. The plaintiffs timely moved for remand.
DISCUSSION
The plaintiffs argue that their lawsuit is a “direct action” against both
insurers under Mississippi law. Accordingly, applying 28 U.S.C. § 1332(c)(1), the
insurers step into the diversity jurisdiction of their insured. The statute provides in
part:
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 [ ] every State and foreign state of which
the insured is a citizen.
28 U.S.C.A. § 1332(c)(1). Thus, Plaintiffs argue that Atlantic Specialty should be
deemed a Mississippi resident like its primary insured, Pearl River County,
Mississippi, and GEICO should be deemed a Mississippi resident like its insureds,
Gary and Dejuana Netto. As all parties would have Mississippi citizenship in this
scenario, there would be no diversity.
The defendants respond that § 1332(c)(1) is not applicable for a number of
reasons. First, Mississippi is not a direct action state and does not allow Plaintiffs
to assert a liability claim directly against a liability carrier. Therefore § 1332(c)(1)
does not come into play. Second, Plaintiffs could not name Pearl River County as a
defendant simply because it was Atlantic Specialty’s insured, and it is “nonsensical”
to claim that they could have named themselves defendants as GEICO’s insured.
(Def. Resp. Mem. 4, ECF No. 18). Most importantly, Defendants cite case law
holding that the provision does not apply to suits by an insured against his own
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insurer. See, e.g., Adams v. State Farm Mut. Auto. Ins. Co., 313 F. Supp. 1349, 1352
(N.D. Miss. 1970).
The purpose of the “direct action” provision in § 1332(c)(1) was to
prevent an injured party from gaining diversity over a non-diverse
tortfeasor by directly suing the tortfeasor’s out-of-state insurance
company instead of the tortfeasor. The section was thus not intended
to thwart diversity in suits between an insured and the insured’s own
insurance company.
Guerrero v. State Farm Mut. Auto. Ins. Co., 181 F.3d 97, at *1 n.1 (5th Cir. 1999)
(citing Myers v. State Farm Ins. Co., 842 F.2d 705, 707 (3d Cir.1988); Andrew M.
Campbell, Construction and Application of 28 USCS § 1332(c)(1), Establishing
Citizenship of Insurer in Diversity Action Against Such Insurer Where Insured Is
Not Joined as Party Defendant, 119 A.L.R. Fed. 135, 171-77 (1994)).
Plaintiffs allege that Gary is an employee of Pearl River County and an
insured for “underinsured compensatory damages” under the Atlantic Specialty
policy issued to Pearl River County. (Compl. 5, 7 (¶¶ 10-11, 20), ECF No. 1-2). By
suing Atlantic Specialty for underinsured motorist benefits, Gary is suing his own
insurer, not the tortfeasor’s insurer.
The insured obviously is not joined as a party-defendant because the
insured is the plaintiff. Applying the direct action provision to a
dispute solely between an insured and her own insurance company
would result in an absurdity—federal courts would never hear common
insurance disputes because the insured and the insurer, the plaintiff
and the defendant would always be considered citizens of the same
state.
Estate of Monahan v. Am. States Ins. Co., 75 F. App’x 340, 343 (6th Cir. 2003).
Therefore, the direct action provision of the diversity jurisdiction statute does
not apply to this case. See id. (suit seeking UM/UIM coverage under an employer’s
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automobile insurance policy is not a direct action). As the parties are completely
diverse and there is no dispute that the amount in controversy is at least $75,000,
the Court has subject matter jurisdiction of this case. The Motion to Remand will
be denied.
IT IS THEREFORE ORDERED AND ADJUDGED that the plaintiffs’
Motion [13] to Remand is DENIED.
SO ORDERED AND ADJUDGED this the 14th day of December, 2016.

s/

Louis Guirola, Jr.

LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE

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