823 F. Supp. 2d 656
W.D. Ky.2011Background
- Daugherty filed suit in Hardin County, Kentucky, on December 27, 2007; Defendants removed to the WD KY, citing diversity and amount in controversy.
- Amended complaint followed on June 16, 2008; core claim is denial of a $1.5 million disability-insurance benefit, with additional statutory and common-law claims.
- Plaintiff moved to remand on September 2, 2011, arguing lack of complete diversity and lack of federal jurisdiction.
- Court analyzed whether §1332(c)(1) applies; focus on whether this is a direct action against an insurer cloaking the insurer with the insured's citizenship.
- Court concluded Daugherty is an insured suing his insurer for disability benefits, not a direct action for liability insurance, and denied remand.
- Court found no valid KRS 304.14-370 remand basis, and retained jurisdiction under 28 U.S.C. §1332.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §1332(c)(1) apply to this dispute? | Daugherty fits the Lee-Lipstreu 'certain situations' exception. | Daugherty is an insured suing an insurer for disability benefits, not a direct action for liability insurance. | No; §1332(c)(1) does not apply. |
| Is the case within the Lee-Lipstreu 'certain situations' exception? | Unique disability-and-coverage facts bring it under the exception. | No established guidance; disability insurance not covered by the exception. | Not within the exception. |
| Is disability insurance 'liability insurance' for §1332(c)(1) purposes? | Disability coverage is a broader form and may trigger liability-insurance treatment. | Disability insurance is not liability insurance; only third-party liability coverage triggers §1332(c)(1). | Disability insurance is not liability insurance; §1332(c)(1) does not apply. |
| Does KRS §304.14-370 mandate remand? | State insurance-law provision precludes federal jurisdiction in foreign-insurer disputes. | Supremacy of federal diversity jurisdiction overrides state statute; no remand required. | No remand required. |
| Should the court abstain or remand under abstention principles? | Policy arguments favor remand to state court. | Maintenance of federal jurisdiction is appropriate under §1332 and concurrent jurisdiction. | Abstention not warranted; jurisdiction retained. |
Key Cases Cited
- Lee-Lipstreu v. Chubb Group of Ins. Cos., 329 F.3d 898 (6th Cir. 2003) (recognizes 'certain situations' where direct-action §1332(c)(1) may not apply)
- Tyson v. Conn. Gen. Life Ins., 495 F. Supp. 240 (E.D. Mich. 1980) (disability insurance treated as liability insurance in some contexts)
- Kosmyna v. Bankers Life & Cas. Co., 550 F. Supp. 142 (E.D. Mich. 1982) (disability insurance not liability insurance; three-party relation lacking)
- Spooner v. Paul Revere Life Ins. Co., 578 F. Supp. 369 (E.D. Mich. 1984) (disability policy disputes distinguished from liability-insurance actions)
- Ford Motor Co. v. Insurance Co. of N. Am., 669 F.2d 421 (6th Cir. 1982) (treats Tyson in context of no-fault; not controlling for disability insurance)
- Sprowls v. Oakwood Mobile Homes, Inc., 119 F. Supp. 2d 694 (W.D. Ky. 2000) (citation used for jurisdictional principles; not central to holding here)