JANUARY 2007 BAD FAITH CASES BAD FAITH CLAIM REMOVABLE TO FEDERAL COURT AS INSURED’S BAD FAITH CLAIM AGAINST INSURER IS NOT A DIRECT ACTION (Western District)

In Thomas E. Campbell v. State Farm Automobile Insurance Company, Plaintiff, the insured’s passenger, sought to remand insurer’s removal of action for declaratory judgment and bad faith to federal court, claiming that the action is a direct action against an insurance company and thus non-removable under 28 U.S.C. § 1332(c)(1).  Plaintiff was injured in an automobile accident while a passenger in a truck driven by the insured.  Plaintiff brought suit against the insured for money damages and the court entered a default judgment against the insured.  At a non-jury trial on the issue of damages, Plaintiff was awarded $137,569.74.  Plaintiff then filed a complaint against the insurer claiming that by virtue of the insured’s policy of insurance, the insurer was liable for the judgment against the insured.  Plaintiff’s complaint sought a declaration that the automobile insurance policy was in effect at the time of the accident as well as money damages for bad faith.

The insurer removed the action to federal court based on diversity of citizenship and Plaintiff filed a motion to remand.  The Court held that under Pennsylvania law, plaintiff could not bring a direct action against the insurer and therefore 28 U.S.C. § 1332(c)(1), which prohibits the removal of any direct action against the insurer for a policy of liability insurance, is not applicable.  The court held that a “direct action” does not exist 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.  Because Pennsylvania law does not authorize injured parties to file direct actions against their tortfeasor’s insurance company, Plaintiff’s claims of bad faith and declaratory judgment could not be asserted directly against the insured.  Plaintiff therefore stepped into the place of the insured and brought the claims for him.  Thus, this is not a direct action against an insurer and Plaintiff’s motion to remand was denied.

Date of Decision: December 18, 2006

Thomas E. Campbell v. State Farm Mutual Automobile Insurance Company, United States District Court for the Western District of Pennsylvania, Civil Action No. 06-871, 2006 U.S. Dist. LEXIS 92336 (W.D. Pa. December18, 2006) (Lancaster, J.)