Kong v. Allied Professional Insurance Co.: Lawsuit Brought By Insured's Assignee Against Insurer is Not a Direct Action for Purposes of Diversity Jurisdiction Because the Assignee Obtained a Judgment Against the Insured Before Bringing Suit

Kong v. Allied Professional Insurance Co., No. 13-12305, from MDFla

Senior Circuit Judge Alarcon (9^th Cir.) with Circuit Judge Tjoflat and Senior Circuit Judge Cox.

Summary:  The plaintiff sued the defendant insurer to enforce a judgment that the plaintiff had obtained against the insurer’s insured.  The suit was originally filed in Florida state court and then removed based on diversity.  The district court denied the motion to remand and ordered the parties to arbitrate their dispute in California.  Subsequently, after arbitration, the district court denied another motion to remand and entered judgment for the insurer.

The panel first concluded that the denial of the motion to remand was proper.  This suit was not a direct action for purposes of 28 U.S.C. § 1332(c), which provides that in a direct action against an insurer in which the insured is not joined as a party defendant, the insurer is considered to be a resident of every state of which the insured is a citizen.  The term “direct action” applied to cases brought against the insurer without joining the insured or first obtaining a judgment against him.  Since the plaintiff in this case obtained a judgment against the insured prior to suing the insurer, this suit was not a direct action.

Since Florida law provided that a contract’s arbitration clause is binding on an assignee, the panel also concluded that the arbitration clause in the insurance contract bound the plaintiff, and that the district court’s arbitration order was proper.