Erie Insurance Company v. Electrolux Home Products, Inc.

Filing 10

ORDER granting 7 Motion to Remand to State Court. Signed by Senior Judge Graham Mullen on 7/15/11. (gpb)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:10cv615

ERIE INSURANCE EXCHANGE,
Plaintiff,
v.
ELECTROLUX HOME PRODUCTS, INC.,
Defendant.

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ORDER

This matter is before the court upon Plaintiff’s Motion to Remand. Plaintiff Erie
Insurance Company (“Erie”) filed a Complaint in Mecklenburg County, Superior Court
Division, North Carolina General Court of Justice on October 25, 2010. Defendant Electrolux
Home Products, Inc. filed a Notice of Removal on December 1, 2010, on the basis of diversity
jurisdiction. Following Defendant’s removal notice, Plaintiff amended its Complaint to change
the named Plaintiff from Erie Insurance Company to Erie Insurance Exchange.
Plaintiff alleges in this subrogation action that Defendant’s negligent design and
manufacture of a clothes dryer caused a fire at the residence of one of its insureds. Plaintiff paid
the insurance claim arising from the fire and now seeks to recover those sums from the
Defendant.
In its Motion to Remand, Plaintiff alleges there is no diversity of citizenship between the
parties and therefore no federal subject matter jurisdiction under 28 U.S.C. §1332(a). Defendant
argues the parties are in fact diverse and urges this court to retain jurisdiction.

Under 28 U.S.C. §1332(a), federal subject matter jurisdiction exists when there is
diversity of citizenship between all of the parties. 28 U.S.C. §1332(a). “Diversity jurisdiction
does not exist unless each defendant is a citizen of a different State from each plaintiff.” Owen
Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978). Because jurisdiction is a “threshold
issue,” a case that lacks subject matter jurisdiction will be remanded. See Steel Co. v. Citizens
for a Better Env’t, 523 U.S. 83, 94-95, 102 (1998); see also Jones v. American Postal Workers
Union, 192 F.3d 417, 422 (4th Cir. 1999). The burden of proof for establishing federal
jurisdiction rests on the party seeking it, and any doubts about removal must be resolved in favor
of remand. See Lovern v. Edwards, 190 F.3d 648, 654 (4th Cir. 1999).
Defendant is domiciled in the State of Delaware. According to Plaintiff, Erie Insurance
Exchange is a reciprocal insurance exchange and therefore exists as an unincorporated
association for purposes of determining diversity jurisdiction. “A reciprocal insurance exchange
. . . is an unincorporated business organization of a special character in which the participants,
called subscribers (or underwriters) are both insurers and insureds.” Themis Lodging Corp. v.
Erie Ins. Exch., 2010 WL 2817251 *1 (N.D. Ohio 2010) (quoting Adolph Coors Co. v. Truck
Ins. Exch., 2005 WL 486580 *2, n.1 (D.D.C. 2005). An unincorporated association is
considered a citizen of each state in which its members reside. See Clephas v. Fagelson,
Shonberger, Payne & Arthur, 719 F.2d 92, 93-94 (4th Cir. 1983). “Courts have long recognized
that reciprocal exchange insurance associations, like Erie, do not receive fictional citizenship as
do corporations but, instead, bear the citizenship of each member.” Themis Lodging Corp., 2010
WL 2817251 at *1 (citations omitted). Thus, the citizenship of Plaintiff’s policyholders, as
members, should be considered when determining diversity. See Id.; see also Lavaland , LLC v.
Erie Insurance Exchange, 2009 WL 3055489 (S.D.Ill. 2009). Plaintiff has its principal place of
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business in Pennsylvania, but has members (policyholders) who are citizens of Delaware.
The Defendant cites Erie Ins. Exch. v. Davenport Insulation, Inc., 616 F. Supp. 2d 578
(D. Md. 2009) and Garcia v. Farmers Insurance Exchange, 121 F. Supp. 2d 667, 669 (N.D. Ill.
2000) in support of its argument that policyholders of a reciprocal insurance exchange should be
considered customers, not members. However, the court finds Davenport and Garcia to be
against the greater weight of authority.
IT IS THEREFORE ORDERED that Plaintiff’s Motion to Remand is hereby
GRANTED.
Signed: July 15, 2011

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