United States District Court, Eastern District of Michigan; Docket No. 8-72065; _________
Chief Judge Cornelia G. Kennedy
Official Michigan Reporter Citation: _______; Link to Opinion
Federal Jurisdiction and Removal of PIP Claims
In a written Opinion, Chief Judge Cornelia G. Kennedy ruled that the federal courts had no jurisdiction over a simple action to recover no-fault benefits where the plaintiff was a Michigan resident and injured in a Michigan accident and the defendant was a foreign insurance company doing business in Michigan. The plaintiff had filed her lawsuit in the Wayne County Circuit Court and the defendant/insurer sought its removal to the Federal District Court. The plaintiff was a passenger and was seeking no-fault benefits from the driver's insurer.
Judge Kennedy ruled that the case should be remanded back to the Wayne County Circuit Court on the grounds that under the "direct action proviso" of 28 USC § 1313(c) there is no federal jurisdiction, since absent the no-fault insurance act, plaintiff would have the right to sue the tort feasor directly for the same damages that she seeks in this action. The Court noted that the proviso in question operates to divest a court of federal diversity jurisdiction when there is (1) a policy or contract of liability insurance; (2) a direct action against an insurer, and (3) the insured is not a party defendant.
The Court noted that although the initial impetus for this proviso was the enactment of direct action statutes in Louisiana and Wisconsin which permitted the direct filing of a tort claim against the tort feasor's insurance company, the proviso is worded more broadly and reflects congressional intent that it be applied liberally in favor of withdrawing federal jurisdiction in certain defined cases more properly litigated in the state courts.
Judge Kennedy stated that there are "a number of reasons why although not specifically passed to eliminate diversity in no-fault cases the proviso should apply to diversity so created."
Judge Kennedy concluded therefore that the proviso taking away federal jurisdiction "should apply in no-fault suits, at least in those instances where the named insured is not the plaintiff."
[Author's Comment: It is important to keep in mind that the plaintiff in this case was a passenger at the time of her injury and was seeking no-fault benefits from the insurance company of the driver. Therefore, the named insured was not a party to this action. The situation might have been different had the plaintiff been suing under her own no-fault insurance contract]