IN DETERMINING CITIZENSHIP FOR PURPOSES OF DIVERSITY JURISDICTION STATUTE, FIFTH CIRCUIT LOOKS TO CITIZENSHIP OF INDIVIDUAL UNDERWRITERS OF LLOYD’S PLAN, NOT CITIZENSHIP OF ATTORNEY-IN-FACT WHO SELLS INSURANCE

In addressing a recent trend of suing a diverse insurer’s attorney-in-fact who sells insurance in the state of Texas in order to defeat diversity jurisdiction, the Northern District of Texas reiterated the Fifth Circuit’s longstanding precedent that a “Lloyd’s plan” under Texas Law is an association of underwriters that sell insurance policies through an attorney-in-fact or other representative—for diversity purposes, only the citizenship of its underwriters are considered. The attorney-in-fact of a Lloyd’s organization is not considered a member of the organization.

In Bell v. State Farm Lloyds, 3:13-CV-1165-M, 2014 WL 3058299 (N.D. Tex. July 7, 2014)(J. Lynn), Plaintiff sued State Farm Lloyds for the alleged violation of the duty of good faith and fair dealing, as well as provision of the Texas Insurance Code. 

The court dismissed Plaintiff’s causes of action against State Farm’s adjusters, and granted State Farm’s motion for summary judgment in its entirety and entered final judgment in favor of State Farm.  Plaintiff challenged the court’s jurisdiction after the judgment, and plaintiff requested that the court vacate the judgment and remand the case due to its lack of subject matter jurisdiction.  Plaintiff alleged that State Farm Lloyds was a Texas resident because its attorney-in-fact, State Farm Lloyds, Inc., was incorporated in Texas.  The court determined that the citizenship of State Farm’s attorney-in-fact was irrelevant for purposes of determining diversity jurisdiction. 

Judge Lynn further noted that it did not substitute or authorize the substitution of any parties, including State Farm Lloyds, Inc.  State Farm Lloyds was the party plaintiff sued, and the party entitled to remove the case to federal court.  The court had jurisdiction to hear the case.  As such, the court denied Plaintiff’s motion to vacate and remand.

[Editor’s Note: State Farm was represented by Chris Martin and Ryan Geddie of our firm and we are grateful for the opportunity to defend State Farm in this case].