United States District Court, S.D. Mississippi, Southern Division
GARY W. NETTO AND DEJUANA L. NETTO PLAINTIFFS
ATLANTIC SPECIALTY INSURANCE CO. AND GEICO INDEMNITY COMPANY DEFENDANTS
ORDER DENYING MOTION TO REMAND
GUIROLA, JR. CHIEF U.S. DISTRICT JUDGE.
THE COURT is the plaintiffs' Motion  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.
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. Dejuana brings a
derivative loss of consortium claim. The defendants removed
the case to this Court on the basis of diversity
jurisdiction, 28 U.S.C. § 1332. The plaintiffs timely
moved for remand.
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
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
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 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,
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
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 ...