Lack of federal jurisdiction sends insurance indemnification lawsuit back to state court

By Nicholas Malfitano | Apr 13, 2016

U.S. District Court Judge Gerald J. Pappert  

PHILADELPHIA -- A federal judge has sent an insurance indemnification lawsuit back to state court.

Judge Gerald J. Pappert for the U.S. District Court for the Eastern District of Pennsylvania ruled Monday that Erie Insurance Exchange’s suit versus Greenwich Insurance Company would be remanded to state court due to a finding of lack of federal jurisdiction.

On Nov. 30, Erie filed a complaint in the Philadelphia County Court of Common Pleas, alleging both it and defendant Greenwich insured the same risk on which Erie paid defense and indemnification costs, but Greenwich did not. As a result, Erie seeks a finding that Greenwich had a duty to defend and indemnify for the risk, and that Erie is entitled to 50 percent of the funds it expended.

In total, Erie seeks declaratory judgment, breach of contract/equitable subrogation, and equitable contribution and indemnification.

On Jan. 4, Greenwich removed the complaint to the federal district court, while Erie filed a motion to remand, arguing that the court lacked diversity jurisdiction because Erie and Greenwich are both citizens of Connecticut. Greenwich countered that Erie did not sufficiently establish that it is a citizen of Connecticut.

It was the court’s purview to determine jurisdiction in this matter, Pappert said.

“A civil action brought in a state court may be removed to the district court in the district where the state action is pending if the district court had original jurisdiction over the case,” the judge wrote.

“District courts have original jurisdiction over all civil actions in which the parties are diverse in citizenship and the amount in controversy exceeds $75,000. Diversity statutes ‘must be narrowly construed,’ so that the congressional intent to restrict federal diversity jurisdiction is honored.”

Pappert pointed to rules of citizenship, which state a corporation is “a citizen both of the state where it is incorporated and of the state where it has its principal place of business,” whereas these rules do not apply to unincorporated associations, whose own citizenship depends on the citizenship of its members.

Per this rationale, Pappert decided the court lacked diversity jurisdiction over the matter since Greenwich is a citizen of both Delaware and Connecticut (due to the origin of its incorporation and principal place of business, respectively) and Erie is an unincorporated association.

In this case, Pappert pointed to sworn statements from Erie’s vice-president and claims manager Gregory Kuntz and counsel Allan Molotsky, who averred “though Erie doesn’t issue policies of insurance in Connecticut, Erie Insurance Exchange has subscribers, i.e., policyholders, who are citizens of Connecticut.”

Specifically, they pointed to policyholder Westberg Flooring Inc., which is incorporated in Connecticut.

Therefore, Pappert determined both Erie and Greenwich are citizens of Connecticut, and the district court did not have jurisdiction in the case.

“Erie argues that it should be awarded ‘its costs and actual expenses, including attorney fees, incurred as a result of Greenwich’s improper removal.’ The Court exercises its discretion to not award Erie its costs and fees, and finds that remanding the case is a sufficient remedy,” Pappert wrote.

The plaintiff is represented by Allan C. Molotsky, Dennis Chow and Matthew Vodzak of Fowler Hirtzel McNulty & Spaulding in Philadelphia.

The defendant is represented by Anne R. Myers, Eileen Monaghan Ficaro and Gregory F. Brown of Kaufman Dolowich & Voluck in Blue Bell.

U.S. District Court for the Eastern District of Pennsylvania case 2:16-cv-00015

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at

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