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Davis v. Onebeacon Insurance Group

June 28, 2010

FRANK DAVIS, SR. AND CAROLYN DAVIS, PLAINTIFFS,
v.
ONEBEACON INSURANCE GROUP, JOHN DOE(S) I-V, ABC PARTNERSHIP(S) I-V, AND XYZ CORPORATION(S) I-V, DEFENDANTS.



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

OPINION

Plaintiff, Frank Davis, Sr., suffered severe injuries, including to his left shoulder, while working for his employer.*fn1 Davis consulted with an orthopedic surgeon who recommended surgery to repair his shoulder. Although it selected and appointed the physician to treat Davis, defendant, OneBeacon Insurance Company ("OneBeacon" or "defendant") --- identified by plaintiff as the workers' compensation insurance carrier for Davis's employer -- refused to authorize the surgery. After pursuing his remedies through the New Jersey Division of Workers' Compensation, Davis filed suit in the Superior Court of New Jersey, seeking compensatory and punitive damages against OneBeacon for pain and suffering and other injuries caused by OneBeacon's denial of necessary medical treatment.

Subsequently, Pennsylvania General Insurance Company ("PA General" or "defendant") removed the suit to this Court, explaining that it --- and not the fictitious OneBeacon -- is the workers' compensation insurance carrier for Davis's employer and, thus, is the proper defendant in this case. PA General now moves to dismiss Davis's complaint. Davis opposes PA General's motion and cross-moves to remand his suit to the New Jersey Superior Court.

For the reasons stated below, PA General's Motion to Dismiss is denied, and Davis's Cross-motion to Remand to the State Court is denied.

I. JURISDICTION*fn2

This Court exercises subject matter jurisdiction over the underlying claim pursuant to 28 U.S.C. § 1332. There is complete diversity between plaintiffs and defendant in the underlying action. Plaintiffs, Frank Davis, Sr. and Carolyn Davis, reside in Vineland, New Jersey and are citizens of the State of New Jersey. Defendant, PA General, is incorporated in the Commonwealth of Pennsylvania with its principal place of business in Canton, Massachusetts. Plaintiffs allege that the amount in controversy exceeds $75,000.

II. BACKGROUND

On August 11, 2000, Frank Davis, Sr., suffered a serious injury to, among other things, his left shoulder while working for his employer, South Jersey Overhead Door Company ("Overhead Door"), in Vineland, New Jersey.*fn3 As a result of the accident, Davis filed a claim petition in the New Jersey Division of Workers' Compensation. OneBeacon, identified in Davis's complaint as the workers' compensation insurance carrier for Overhead Door, selected and appointed Dr. Robert Dalsey, an orthopedic surgeon, to serve as the authorized treating physician to care for and treat Davis.*fn4

On March 16, 2005, Dr. Dalsey evaluated Davis and recommended an MRI exam of his left shoulder. About a week later, avers Davis, "The Honorable Robert F. Butler, Judge of Compensation, entered an Order Approving Settlement of Plaintiff['s]... claim for permanent disability benefits arising out of the August 11, 2000 accident, awarding 40% permanent partial total disability including, inter alia, 2.5 % permanent partial total disability stemming from tendinopathy and impingement syndrome of the left shoulder."

On March 15, 2006, Dr. Dalsey recommended that Davis undergo surgery for his left shoulder as a result of the August 2000 accident. Despite being advised of Dr. Dalsey's recommendation and several requests made by Davis, OneBeacon refused to authorize the surgery. Consequently, on September 20, 2006, Davis filed a Motion for Temporary Disability and Medical Benefits with the Division of Workers' Compensation (or, "the Division"), seeking to compel the treatment recommended by Dr. Dalsey along with temporary benefits.

On April 18, 2007, Judge Butler rendered his decision, finding that OneBeacon was obligated to authorize the shoulder surgery as recommended by Dr. Dalsey, its authorized treating physician, and that OneBeacon's refusal to authorize the surgery violated Section 15 of the Workers' Compensation Act (or, "the Act"), N.J.S.A. 34:15-1 et seq., and was unconscionable. In reaching its conclusion that OneBeacon's violation of the Act was unconscionable, the Judge explained that OneBeacon's denial of surgery was not predicated on any sound medical basis, was made with disregard to the seriousness of Davis's injury and the possible consequences he could suffer due to a delay in treatment, and defied the recommendations of OneBeacon's own authorized physician.

Further, the Judge suggested that, apart from the Act, Davis could pursue a civil remedy for his pain and suffering in another court.

The additional and prolonged pain and obvious mental anguish of the Petitioner that has been caused by the appalling and unconscionable conduct of OneBeacon are neither cognizable nor compensable based upon the provisions of the Workers' Compensation Act. Only the nature and extent of the Petitioner's permanent disability following his recuperation from surgery is compensable in this court.

As regrettable as that may be, the Petitioner is not left without a possible source of redress against OneBeacon for his pain and suffering. The Court suggests that Petitioner's counsel direct his attention to the case of Rothfuss versus Bakers Mutual Insurance Company of New York, 107 N.J. Super. 189, 257 A.2d 733 (1969).

In apparent response to the Judge's opinion, Davis filed a two-count complaint in the Superior Court of New Jersey on April 13, 2009. In the first count, Davis alleges that OneBeacon's egregious refusal to authorize necessary medical treatment has caused him "injuries that are not compensable under the Workers' Compensation Act, including but not limited to, pain and suffering, deterioration, worsening, wasting, inability to return to work sooner, prolonged pain and mental anguish and severe emotional distress." Further, in the second count, Davis's wife, Carolyn, asserts a claim for loss of consortium. Together, Davis and his wife seek compensatory and punitive damages, among other expenses.

On August 17, 2009, defendant removed Davis's suit to this Court. In so doing, defendant explained that Davis incorrectly named OneBeacon as the defendant in this case when in fact the proper defendant is PA General, a Pennsylvania corporation with its principal place of business in Massachusetts. According to PA General, there is no legal entity known as "OneBeacon Insurance Group"; rather, PA General is the entity that issued the insurance policy to Overhead Door.

On August 28, 2009, PA General moved to dismiss Davis's complaint. Soon thereafter, Davis cross-moved to remand the case to the New Jersey Superior Court.

Presently before the Court are PA General's Motion to Dismiss and Davis's Cross-motion to Remand to State Court.

III. DISCUSSION

A. Plaintiff Davis's Cross-motion to Remand

The Court will first address Davis's Cross-motion to Remand to the State Court. As a preliminary matter, Davis argues that this case should be remanded to the New Jersey Superior Court because diversity jurisdiction does not exist here. In particular, Davis asserts that, like he and his wife, OneBeacon, the named defendant, is a citizen of the State of New Jersey, thereby stripping this Court of subject matter jurisdiction in this case. Bolstering his claim that OneBeacon is the workers' compensation insurance carrier for Davis's employer and, thus, the appropriate defendant, Davis points to the Answer to his claim petition in the Division of Workers' Compensation, the Division's Order Approving Settlement, and his service of process in this action --- all of which implicated OneBeacon and its New Jersey address, and not PA General. Davis notes that PA General has not identified itself as the workers' compensation insurance carrier for Davis's employer until filing the Notice of Removal and that both PA General and OneBeacon are licensed to conduct business in New Jersey.

Moreover, Davis contends that, in accordance with 28 U.S.C. § 1332(c)(1), the workers' compensation insurance carrier for Davis's employer must be deemed a citizen of the state of which the insured is a citizen --- in this case, New Jersey. Finally, Davis submits that the issues in this case, steeped in New Jersey law, are novel and should be addressed by the New Jersey state judiciary. Hence, in the event that this Court has jurisdiction over this matter, Davis asks the Court to decline exercising it.

PA General counters that OneBeacon is not a legal entity but a trade name for a group of affiliated companies, as it had attempted to explain to Davis in a pair of letters dated September 13, 2007 and October 4, 2007, respectively. Regardless of whether Davis may sue PA General under the guise of OneBeacon, PA General submits that it is the workers' compensation insurance carrier for Davis's employer, and for purposes of diversity jurisdiction, it is incorporated in the Commonwealth of Pennsylvania with its principal place of business in Massachusetts --- facts, says PA General, that are undisputed by Davis. Additionally, PA General challenges Davis's interpretation of 28 U.S.C. § 1332(c)(1). By PA General's assessment, the citizenship of its insured is not attributable to PA General in this case because Davis's claims are directed at alleged misconduct committed by PA General as opposed to any misconduct on behalf of the insured employer. Finally, PA General asserts that if this Court may properly exercise jurisdiction over this case, it may not evade its responsibility to do so simply because Davis believes the case implicates important state law.

A defendant may remove a suit in state court to a federal district court pursuant to 28 U.S.C. § 1441 and in accordance with the procedures set forth by 28 U.S.C. § 1446. However, "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded" to the state court. 28 U.S.C. § 1447(c). As the party removing the case, the defendant bears the burden to demonstrate that at all stages of litigation there is federal subject matter jurisdiction over the case. Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 396 (3d Cir. 2004). Further, "[t]he district court must resolve all contested issues of fact and uncertainties of law in favor of the plaintiff." Bank of N.Y. as Tr. for the Certificate Holders CWABS, Inc. v. Ukpe, 2009 U.S. Dist. LEXIS 115557, at *11 (D.N.J. Dec. 9, 2009) (citing Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990)). As such, "the court should strictly construe removal statutes and resolve all doubts in favor of remand." Id. (citing Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985)).

The Court turns its attention to this case. First of all, as stated in 28 U.S.C. ยง 1332(c)(1), "in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen." Based on this jurisdictional statute, Davis believes that defendant must be deemed a citizen of New Jersey because Overhead Door, for whom defendant is the workers' ...


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