Northbrook Nat’l Ins. Co. v. Brewer, 493 U.S. 6 (1989)

Northbrook National Insurance Co. v. Brewer

No. 88-995

Argued October 4, 1989
Decided November 7, 1989
493 U.S. 6

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

Syllabus

Texas law provides that any party dissatisfied with a State Industrial Accident Board workers’ compensation ruling may bring a civil suit to set the decision aside. The court determines such cases de novo, and the party seeking compensation bears the burden of proof regardless of which party prevailed before the board. Pursuant to Texas law, respondent Brewer, a Texas citizen employed by a Texas corporation, filed a workers’ compensation claim with the board against the employer’s insurer, petitioner here, an Illinois corporation with its principal place of business in that State. After the board awarded Brewer compensation, petitioner filed an action in Federal District Court, invoking the court’s diversity jurisdiction under 28 U.S.C. § 1332. The court dismissed for lack of subject matter jurisdiction. Holding that Fifth Circuit precedent, Campbell v. Insurance Co. of North America, 552 F.2d 604, required it to apply the direct action proviso of § 1332(c) -- which states that,

in any direct action against the insurer of a policy . . . of liability insurance . . such insurer shall be deemed a citizen of the State of which the insured is a citizen. . . .

-- the court attributed the employer’s Texas citizenship to petitioner, thus eliminating diversity between petitioner and Brewer. The Court of Appeals affirmed.

Held: The direct action proviso does not apply to actions brought in federal court by an insurer. The proviso’s language unambiguously applies only to actions against insurers and does not mention actions by insurers. This reading is reinforced by the proviso’s legislative history. Campbell’s analysis -- that an action such as petitioner’s is an action against an insurer, since the entire process is initiated by an employee’s claim to the board, since the employee has the burden of proof at the trial, and since the insurer’s action is merely an "appeal" of the board’s ruling -- is rejected. Although the employee retains some of the characteristics of a plaintiff at trial, the action is commenced when the insurer files the complaint in court, not when the employee files his claim with the board. Moreover, the board’s award is vacated once the court acquires jurisdiction over the suit. The seeming incongruity Congress created by retaining diversity jurisdiction over actions brought by out-of-state insurers while withdrawing removal jurisdiction when it eliminated diversity jurisdiction in actions brought against them is insufficient to persuade this Court to extend the scope of the proviso’s precise wording. Cf. Horton v. Liberty Mutual Ins. Co., 367 U.S. 348, 351-352. Pp. 9-13.

854 F.2d 742, reversed and remanded.

MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, BLACKMUN, O’CONNOR, SCALIA, and KENNEDY, JJ., joined. STEVENS, J., filed a dissenting opinion, post, p. 13.