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First Colonial Insurance Co. v. Custom Flooring

June 4, 2007

FIRST COLONIAL INSURANCE COMPANY AND STONCOR GROUP, INC., PLAINTIFFS,
v.
CUSTOM FLOORING, INC. AND FARMERS INSURANCE EXCHANGE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Hillman, District Judge

OPINION

This matter originally came before the Court on Defendant Farmers Insurance Exchange Company's motion to dismiss Plaintiffs' Complaint for lack of personal jurisdiction, or in the alternative, for forum non conveniens. On April 17, 2007, because the issue of Defendant Farmers' citizenship was raised in the parties' briefing, the Court Ordered Farmers to provide a supplemental brief stating its citizenship. While waiting for Farmers to submit its supplemental brief, Defendant Custom Flooring filed a motion to join in Farmers' motion to dismiss for forum non conveniens. The Court resolves below the issue of Farmers' citizenship and Farmers' and Custom Flooring's motions to dismiss.

BACKGROUND*fn1

This insurance coverage dispute arises out of an allegedly faulty installation of a floor in a building in New Brighton, Minnesota. Plaintiff, StonCor Group, Inc., was hired by the building's owner and acted as the principal contractor on the floor installation project. StonCor then subcontracted the installation work to independent outside contractors, including Defendant Custom Flooring, Inc. According to StonCor's Complaint, as part of their subcontracting agreement, Custom Flooring agreed to hold StonCor harmless from any liability and to maintain full insurance coverage. Custom Flooring obtained an insurance policy from Defendant Farmers Insurance Exchange Company, and StonCor was named as an additional insured.

Due to defects in the floor installation, the facility owner sued StonCor in Minnesota. StonCor tendered its defense to its insurance company, Plaintiff First Colonial Insurance Company. First Colonial accepted the tender, provided a defense, and the case settled. According to StonCor's Complaint, pursuant to the indemnification provision in Custom Flooring's Farmers insurance policy, First Colonial requested reimbursement of the settlement amount and its attorneys fees and costs, but Farmers refused its request.

StonCor and First Colonial, through its subrogation rights, have filed the instant action seeking a declaratory judgment for the monies expended in the Minnesota action, as well as attorneys fees and costs associated with bringing this action. Farmers has moved to dismiss Plaintiffs' Complaint for lack of personal jurisdiction, or, in the alternative, forum non conveniens. Colonial has joined in on Farmers' motion to dismiss on forum non conveniens grounds.

DISCUSSION

StonCor is a corporation organized and existing under the laws and regulations of the State of Delaware and maintains its headquarters in Maple Shade, New Jersey. First Colonial is an insurance company organized and existing under the laws and regulations of the State of Vermont and maintains offices in Medina, Ohio and Burlington, Vermont. According to Plaintiffs' Complaint, Custom Flooring is a corporation organized and existing under the laws and regulations of the State of Missouri and maintains offices in Missouri and Illinois. Also according to Plaintiffs' Complaint, Farmers is a California corporation with its principal place of business in California, and it is licensed to do business in New Jersey. Based on this alleged diversity of citizenship of the parties, as well as the claim that the amount in controversy exceeds $75,000, Plaintiffs invoke the Court's jurisdiction pursuant to 28 U.S.C. § 1332.

In its brief in support of its motion to dismiss for lack of personal jurisdiction, Farmers states that it is not a resident of New Jersey, but rather a "reciprocal insurance exchange operated under California law with its headquarters in California." Additionally, Farmers states that it does not write or collect premium in the State of New Jersey, and it does not have any appointed agents authorized to sell Farmers insurance in the State of New Jersey. Farmers further states that the claim arises out of an underlying suit in Minnesota over defects in a Minnesota project, and that Farmers insurance policy arises under Illinois law. Based on these considerations, Farmers argues that the Court cannot exercise personal jurisdiction over it because it does not have the requisite minimum contacts with the State of New Jersey, and that the exercise of jurisdiction over Farmers would not comport with traditional notions of fair play and substantial justice. In the alternative, Farmers, and by joinder Custom Flooring, argues that the action should be dismissed for forum non conveniens because (1) there is an alternate forum in the Illinois state court where related claims are already pending, (2) the underlying subject matter and evidence are all outside of the State of New Jersey, and (3) resolving related matters in a single forum serves the public interest.

In their opposition, Plaintiffs argue that Farmers does have the requisite contacts with New Jersey. They contend that Farmers has: (1) been a licensed insurer in the State of New Jersey for fifty-three years, (2) collected premiums in the state over the course of several years, (3) paid claims losses to insureds as a result of conducting business in the state over several years, (4) designated the New Jersey Commissioner of Insurance as its agent for service of process regarding all insurance matters in the State of New Jersey, (5) affirmatively undertook to comply with the insurance laws and regulations of the State of New Jersey, (6) knowingly agreed to make a New Jersey corporation, StonCor, an additional insured on Custom Flooring's insurance policy, and (7) knew that it was insuring a New Jersey company, that the policy was not for a limited purpose, that the policy's territory included the State of New Jersey, and that Farmers' breach of its obligations under the policy caused a New Jersey insured to incur damages in New Jersey.

With regard to Farmers' and Custom's non forum conveniens argument, Plaintiffs contend that their motion must fail because (1) the present action involves different facts and allegations from the Illinois action, (2) they fail to prove that an adequate alternative forum exists, (3) under New Jersey law, courts give a plaintiff's choice of forum great deference, and (4) efficiency favors a New Jersey venue.

When the Court first addressed Farmers' motion, Farmers contended at this point in the briefing that Plaintiffs' opposition proved that Farmers is a citizen of New Jersey, and because StonCor is also a citizen of New Jersey, diversity was destroyed and the case must be dismissed for lack of subject matter jurisdiction. Because a court has a continuing obligation to ensure its jurisdiction to hear a case, and because the citizenship of an unincorporated association, such as a reciprocal insurance association, is the citizenship of each of its members, see, e.g., Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 461 (1980), the Court instructed Farmers to file a letter brief setting forth its citizenship in order to determine whether there was diversity of citizenship. Farmers responded by stating that after a review of its records and zip code search of its members' addresses, it found no New Jersey zip codes. Coupling that finding with its statement that it does not solicit or authorize sales of insurance in New Jersey, it submits that it has no New Jersey members, and is therefore not a citizen of New Jersey.

The Court is satisfied that Farmers is not a citizen of New Jersey, and diversity jurisdiction exists. Thus, with the diversity of the parties' citizenship firmly established, it must be determined whether this Court has personal jurisdiction over Farmers and/or whether this is the appropriate forum for Plaintiffs' case.

A court may consider whether to dismiss a case based on forum non conveniens grounds without having to address personal jurisdiction issues. Sinochem Int'l Co. Ltd. v. Malaysia Int'l Shipping Corp., 127 S.Ct. 1184, 1192 (2007) ("A district court . . . may dispose of an action by a forum non conveniens dismissal, bypassing questions of subject-matter and personal jurisdiction, when considerations of convenience, fairness, and judicial economy so warrant."). A court has discretion to dismiss a case on forum non conveniens grounds when an alternative forum has jurisdiction to hear the case, and trial in the chosen forum would establish oppressiveness and vexation to a defendant out of all proportion to plaintiff's convenience, or the chosen forum is inappropriate because of considerations affecting the court's own administrative and legal problems. Id. (citations omitted). "Dismissal for forum non conveniens reflects a court's assessment of a range of considerations, most notably the convenience to the parties and the practical difficulties that can attend the adjudication of a dispute in a certain locality." Id. (citation and quotations omitted). Forum non conveniens has been characterized as essentially "a supervening venue provision, ...


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