Jerome Fortson v. St. Paul Fire and Marine Insurance Company, 751 F.2d 1157, 11th Cir. (1985)

751 F.
2d 1157
Jerome FORTSON, Plaintiff-Appellant,

v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY,
Defendant-Appellee.
No. 84-3217.
United States Court of Appeals,

Eleventh Circuit.
Jan. 28, 1985.
Nathaniel W. Tindall, II, Ronald H. Trybus, Tampa, Fla., for plaintiffappellant.

Thomas B. Matthews, Tampa, Fla., for defendant-appellee.
Appeal from the United States District Court for the Middle District of
Florida.
Before RONEY and CLARK, Circuit Judges, and SIMPSON, Senior
Circuit Judge.
RONEY, Circuit Judge:
Jerome Fortson appeals from the district court's order dismissing his state law
claim against St. Paul Fire & Marine Insurance Co. ("St. Paul") for lack of
diversity of citizenship between the parties. Under federal law, in a direct action
against an insurance company asserting a claim against the insured for which
the company is liable, the citizenship of the insured is imputed to his insurer for
diversity jurisdiction purposes. 28 U.S.C.A. Sec. 1332(c). Fortson claims this
provision is not applicable to Fla.Stat.Ann. Sec. 624.155, which provides that a
person may bring an action against an insurer for failure to settle in good faith a
claim against the insured. Although we hold that the section 1332(c) proviso
does not apply to an action under section 624.155, so that in this case the
Florida citizenship of the insured would not be imputed to St. Paul, we affirm
the dismissal of the action on the ground that plaintiff's suit was prematurely
brought and thus failed to state a cause of action.
Plaintiff's wife died as a result of complications from the administration of

anesthesia during a caesarean-section delivery performed on March 16, 1983 by
Dr. Michael T. McNamara, a Florida citizen, for whom St. Paul carried
malpractice insurance. Plaintiff informed St. Paul of his possible malpractice
claim against Dr. McNamara. St. Paul responded by denying liability on behalf
of its insured. On April 7, 1983, plaintiff, proceeding pursuant to section
624.155(2), notified St. Paul and the Florida Department of Insurance of his
intention to bring an action against St. Paul for failure to resolve his claim
against the insured in good faith. Plaintiff filed this action against St. Paul in
federal district court on June 16, 1983.
Plaintiff's action is not a "direct action" within the meaning of 28 U.S.C.A. Sec.
1332(c), which provides in pertinent part that
4 any direct action against the insurer of a policy or contract of liability insurance,
in
whether incorporated or unincorporated, to which action the insured is not joined as
a party-defendant, such insurer shall be deemed a citizen of the State of which the
insured is a citizen....
5
That section was enacted by Congress in order to eliminate the basis for
diversity jurisdiction in states that allow an injured third-party claimant to sue
an insurance company for payment of a claim without joining the company's
insured as a party, where the insured would be a nondiverse party, even though
the party insurance company would otherwise be diverse. See Hernandez v.
Travelers Insurance Co., 489 F.2d 721, 723 (5th Cir.) (holding workers'
compensation insurer deemed by section 1332(c) to be citizen of state of which
insured is citizen in suit brought by insured's injured employee), cert. denied,
419 U.S. 844, 95 S.Ct. 78, 42 L.Ed.2d 73 (1974). But where the suit brought
either by the insured or by an injured third party is based not on the primary
liability covered by the liability insurance policy but on the insurer's failure to
settle within policy limits or in good faith, the section 1332(c) direct action
proviso does not preclude diversity jurisdiction. Beckham v. Safeco Insurance
Co., 691 F.2d 898, 901-02 (9th Cir.1982); Velez v. Crown Life Insurance Co.,
599 F.2d 471, 473 (1st Cir.1979). We hold that unless the cause of action
against the insurance company is of such a nature that the liability sought to be
imposed could be imposed against the insured, the action is not a direct action.
Walker v. Firemans Fund Insurance Co., 260 F.Supp. 95, 96 (D.Mont.1966).
See also Irvin v. Allstate Insurance Co., 436 F.Supp. 575, 577
(W.D.Okla.1977) (holding action by insured against his own insurer under
uninsured motorist provisions of policy not a "direct action" within section
1332(c) proviso); Bourget v. Government Employees Insurance Co., 313
F.Supp. 367, 371 (D.Conn.1970) (holding action by judgment creditor of
insured against insurer for bad faith failure to settle claim against insured not a
"direct action" within section 1332(c) proviso), rev'd on other grounds, 456
F.2d 282 (2d Cir.1972).
6
In the current case, the district court reasoned that Fortson's cause of action for
bad faith could "only be premised upon the relationship of Plaintiff and
Defendant vis-a-vis Defendant's insured and as such, this action is a direct
action within the meaning of 28 U.S.C.A. Sec. 1332(c)." Of course, Fortson
never would have had any dealings with St. Paul were it not for the injury
allegedly caused by Dr. McNamara and the contract of insurance between him
and St. Paul. But it is the cause of action asserted against the defendant insurer,
not the relationship of the insurer to the insured, that determines the
applicability of the section 1332 "direct action" proviso. "[C]ourts have
uniformly defined the term 'direct action' as used in this section as those cases
in which a party suffering injuries or damage for which another is legally
responsible is entitled to bring suit against the other's liability insurer without
joining the insured or first obtaining a judgment against him." Beckham, 691
F.2d at 901-02. Plaintiff could not have sued Dr. McNamara for failure to settle
in good faith. The cause of action is based on the insurer's individual legal
statutory duty to settle claims in good faith. Thus, for purposes of determining
diversity of citizenship in a section 624.155 action, a court is limited to
examining the insurance company's state of incorporation and principal place of
business. 28 U.S.C.A. Sec. 1332(c). The complaint alleges that Fortson is a
Florida resident and St. Paul is "a foreign corporation licensed to do business in
Florida." Since St. Paul did not show that either its state of incorporation or its
principal place of business is in Florida, the parties are citizens of different
states and the court had subject matter jurisdiction.
Even though the district court erred in determining it did not have subject
matter jurisdiction, we affirm its dismissal without prejudice on the defendant's
argument that plaintiff's cause is premature. Fla.Stat.Ann. Sec. 624.155 does
not indicate whether a claim for wrongful failure to settle in good faith may be
brought prior to obtaining a judgment establishing the underlying primary
liability, much less before even instituting a lawsuit.
(1) Any person may bring a civil action against an insurer when such person is
damaged:
9....
10
(b) By the commission of any of the following acts by the insurer:
11Not attempting in good faith to settle claims when, under all the circumstances, it
1.
could and should have done so, had it acted fairly and honestly toward its insured
and with due regard for his interests....
12
Fla.Stat.Ann. Sec. 624.155. To date no Florida court has interpreted that statute.
Plaintiff points out that the 1982 Florida Legislative Staff Report issued with
section 624.155 stated that "[t]his section could be activated after the filing of a
third-party suit by an amendment to the complaint." Plaintiff reasons that this
comment obviously indicates that he is not required to obtain a judgment
against the insured before commencing an action under section 624.155. We
think, however, that this comment recognizes that determining the merits of a
624.155 claim would be facilitated by resolution of the merits of the underlying
claim, and that joining the two claims might promote judicial efficiency and
provide a context for deciding whether the insurer in fact acted in bad faith. At
the very least, the comment contemplated the two claims being brought
together, not for the good faith claim being brought first.
13
That the Florida Legislature would not intend to permit an action of this kind to
be brought prior to resolution of the underlying claim is reflected in its reaction
to a judicial decision concerning direct action claims. In Shingleton v. Bussey,
223 So.2d 713 (Fla.1969), the Florida Supreme Court adopted a third-party
beneficiary concept to hold that a liability insurance company could be joined
as a defendant in a suit against its insured for a cause of action covered by the
policy. The Florida Legislature sought to modify that concept by passing
Fla.Stat.Ann. Sec. 627.7262(1), which provides:
14shall be a condition precedent to the accrual or maintenance of a cause of action

It
against a liability insurer by a person not an insured under the terms of the liability
insurance contract that such person shall first obtain a judgment against a person
who is an insured under the terms of such policy for a cause of action which is
covered by such policy.
15
In upholding this section against constitutional attack, the Supreme Court of

Florida noted that "[t]he statute is quite clear that no cause of action against an
insurance company shall accrue until a judgment against an insured is
obtained." VanBibber v. Hartford Accident & Indemnity Insurance Co., 439
So.2d 880, 882 (Fla.1983).
16
Whether or not section 627.7262(1) is directly applicable to a section 624.155

good faith action, the premature bringing of the good faith action prior to a
determination of the primary liability claim presents intractable proof problems
and permits anomalous results that would compel the decision here, absent
clear Florida statutory or case law to the contrary. The damages plaintiff seeks
can only be determined after the liability of St. Paul's insured has been
established. Florida law has always required the insured to be a party to that
determination even during the time after Shingleton when the insurance
company could be joined as a party. Allowing plaintiff to proceed first against
the insurer under a section 624.155 good faith failure to settle claim could lead
to the insurer being held liable for bad faith failure to settle even though its
insured might later be found not liable in the underlying tort action. Nothing in
the statutory language of section 624.155 suggests that the Florida legislature
intended such an anomalous possibility.
17
In view of the decision that plaintiff's suit is premature, we need not address St.
Paul's constitutional challenges to the statute.
18
The district court's dismissal of this action is affirmed on the sole ground that
plaintiff's claim was brought prematurely and therefore failed to state a cause of
action. The dismissal is, of course, without prejudice to the filing of the lawsuit
at a time when it is no longer premature.
19
AFFIRMED.

Jerome Fortson v. St. Paul Fire and Marine Insurance Company, 751 F.2d 1157, 11th Cir. (1985)

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751 F.

Jerome FORTSON, Plaintiff-Appellant,

United States Court of Appeals,

Nathaniel W. Tindall, II, Ronald H. Trybus, Tampa, Fla., for plaintiffappellant.

Plaintiff's wife died as a result of complications from the administration of

(b) By the commission of any of the following acts by the insurer:

14shall be a condition precedent to the accrual or maintenance of a cause of action

In upholding this section against constitutional attack, the Supreme Court of

Whether or not section 627.7262(1) is directly applicable to a section 624.155

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