Erie Insurance Exchange v. Davenport Insulation, Inc. (Maryland U.S.D.C.)

Filed: December 9, 2009

Opinion by Judge Benson E. Legg

Held: The court denied the plaintiff insurance company's motion to reconsider denial of its motion to remand. This validated the court's prior determination that the "reciprocal exchange" insurance company's policyholders are its customers, not its members, for purposes of diversity jurisdiction.

Facts: An insurance company sued its subrogation target in the Circuit Court for Queen Anne's County. The defendant removed based on diversity jurisdiction. The insurance company moved to remand. The insurance company argued that, because it is a reciprocal insurance exchange, it constitutes an unincorporated association. Under Fourth Circuit law, an unincorporated association is a citizen of each state in which its members reside. The insurance company argued that, because some of its policyholders reside in the defendant's home state, there was no diversity.

The court rejected the insurance company's argument for remand. Relying on an analogous case from the Northern District of Illinois (Garcia v. Farmers Insurance Exchange, 121 F. Supp. 2d 667 (2000)), the court reasoned that the insurance company's policyholders are its customers, not its members. Thereafter, the court granted summary judgment in favor of the defendant. After summary judgment, the insurance company moved for reconsideration of its motion to remand.

Analysis: The insurance company relied on a new case from the Northern District of Illinois that directly conflicts with the decision that the court relied upon (Lavaland, LLC v. Erie Insurance Exchange, 2009 WL 3055489 (2009)). The new opinion held that the insurance company was a citizen of every state in which its policyholders reside. The new case also was consistent with an unpublished decision issued by Judge Andre M. Davis in the District of Maryland (Hiob v. Progressive American Insurance Co., 2008 WL 5076887 (2008)).

Nonetheless, the court noted that case law limits the reasons for which the court may grant relief under the given circumstances, after judgment has been entered. This includes where "such action is appropriate to accomplish justice." This exception is limited to "situations involving extraordinary circumstances."

The court held that the case did not present extraordinary circumstances. In making this determination, the court noted that the Lavaland case was decided before the court entered summary judgment, and the insurance company had not raised it with the court. Rather, the insurance company only brought the case to the court's attention after the court ruled against it. The court stated that the insurance company, "believing that it might obtain a favorable outcome in this Court, took a calculated risk. Accordingly, [the insurance company] is not entitled to relief."

In addition, the insurance company did not take an interlocutory appeal from the court's decision on the motion to remand. The failure to file an appeal is fatal to a claim of extraordinary circumstances.

The letter opinion is available in PDF.