Academic journal article Defense Counsel Journal

Where Do I Fit in? Citizenship Claims and the §1332 Diversity Statute in Underwriters at Lloyd's V. Osting-Schwinn

Academic journal article Defense Counsel Journal

Where Do I Fit in? Citizenship Claims and the §1332 Diversity Statute in Underwriters at Lloyd's V. Osting-Schwinn

Article excerpt

The first sign of insanity is committing the same acts repeatedly and expecting a different result. However, the Society of Lloyd's, London must not have paid attention to this widely known cliché. The decision of the United States Court of Appeals for the Eleventh Circuit in Underwriters at Lloyd's v. OstingSchwinn is a seemingly simple case following a pattern of over a hundred years of United States Supreme Court precedent. Although the dictum in the opinion extends more broadly, the Eleventh Circuit essentially held in Osting-Schwinn that the Society of Lloyd's, London must claim citizenship in every state in which any of its members is a citizen.1 Despite arguments that as a practical matter, it would be a burden on Lloyd's to plead citizenship in every state in which its 30,000 members were citizens, the Eleventh Circuit still subjected the unincorporated association to the formal definition of citizenship.2 This decision greatly reduced the likelihood that Lloyd's, or any other unincorporated association, will be able to maintain claims filed in, or removed to, the district courts for the Eleventh Circuit.

I. The Facts

On May 7, 2002, plaintiff Osting-Schwinn's minor son, CO., was injured when his dirt bike collided with Michael Rockhill's all-terrain vehicle. Mr. Rockhill possessed an insurance policy underwritten by a number of Lloyd's of London syndicates on the vehicle involved in the collision. Ms. OstingSchwinn filed an insurance claim on behalf of her son, and the underwriters at Lloyd's offered to settle for the full policy limits in exchange for a release of all claims arising from the collision. The syndicates, who were responsible for managing the underwriters for the policy, sent four checks in sum equal to the policy limit "and a copy of the Rockhills' policy intended to satisfy the disclosure requirements of the Florida statute."4 Despite the tentative agreement, Ms. Osting-Schwinn returned the checks, asserting that any syndicate of the syndicates violated Florida law by not disclosing information regarding other insurers and by not sending "an adequate copy" of Mr. Rockhill's insurance policy.5

After Ms. Osting-Schwinn refused the settlement checks, she filed a negligence claim in the Florida Circuit Court for the Thirteenth Judicial Circuit. In response, the underwriting syndicates filed a diversity suit in the United States District Court for the Middle District of Florida seeking a declaratory judgment under 28 U.S.C. § 220 1,6 arguing that the syndicates and Ms. Osting-Schwinn had reached a valid agreement to settle the claim. Ms. Osting-Schwinn moved to dismiss the suit based on lack of subject matter jurisdiction, contending that the complete diversity requirement was not met. The district court denied the motion to dismiss and granted Lloyd's motion for summary judgment, reasoning that "[Ms.] Osting-Schwinn had formed an enforceable out-of-court settlement," and Ms. Osting-Schwinn received $101,658 in exchange for releasing all claims against the plaintiff.8 The district court further concluded that Lloyd's met the complete diversity requirement, reasoning that Lloyd's did not have to count the citizenship of each of its members because of its enormous size, and the lead underwriter, as an agent, could represent the entire association.9 Specifically, the district court stated that Lloyd's consisted of "over 400 separate syndicates and over 30,000 members," and it would be unrealistic to require the pleading of the citizenship of each party.10

Ms. Osting-Schwinn filed an appeal in the United States Court of Appeals for the Eleventh Circuit.11 The Eleventh Circuit limited its review to whether the district court properly applied 28 U.S.C. § 133212 when the district court determined whether Lloyd's met the requirements of diversity jurisdiction.13 The Eleventh Circuit held that the citizenship of each member of Lloyd's must be determined, as Supreme Court precedent strongly suggested upon the determination of the citizenship of all forms of unincorporated entities. …

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