Northbrook National Insurance v. Brewer

Justice Marshall

delivered the opinion of the Court.

This case presents the question whether the “direct action” proviso of 28 U. S. C. § 1332(c) (1982 ed.) — which provides that in a direct action against a liability insurer, the insurer shall be deemed a citizen of the same State as the insured for purposes of diversity jurisdiction — applies to a workers’ compensation action brought in federal court by an insurer. The Fifth Circuit held that the proviso applied so as to bar a diversity action brought by an Illinois insurer of a Texas corporation against a Texas employee. 854 F. 2d 742 (1988). Accordingly, it affirmed the District Court’s dismissal for lack of subject-matter jurisdiction. Because the language of the proviso is unambiguously limited to actions brought against insurers, we reverse.

h-H

Respondent Larry Brewer is a Texas citizen and an employee of Whitmire Line Clearance, Inc., a Texas corporation. Petitioner Northbrook National Insurance Company, an Illinois corporation with its principal place of business in that State, was Whitmire’s workers’ compensation insurer. Under the Texas Workers’ Compensation Act, an employee *8 who suffers an injury in the course of employment “shall have no right of action against [the] employer . . . but . . . shall look for compensation solely to the [employer’s insurer].” Tex. Rev. Civ. Stat. Ann., Art. 8306, §3(a) (Vernon Supp. 1989). An employee must file his claim for compensation with the Texas Industrial Accident Board. Art. 8307, § 4a. Brewer filed a workers’ compensation claim against North-brook after he allegedly suffered an injury during the course of his employment. The board processed his claim and awarded him compensation.

Texas’ workers’ compensation law permits any party dissatisfied with a board ruling to bring a civil suit to set the decision aside. Art. 8307, § 5. The court determines the issues de novo, and the party seeking compensation bears the burden of proof, regardless of which party prevailed before the board. Ibid.

Northbrook filed suit against Brewer in Federal District Court, invoking the court’s diversity jurisdiction under 28 U. S. C. § 1332 (1982 ed.). The District Court dismissed for lack of subject-matter jurisdiction, holding that Fifth Circuit precedent, Campbell v. Insurance Co. of North America, 552 F. 2d 604 (1977) (per curiam), required it to apply the direct action proviso of the diversity statute. App. to Pet. for Cert. A-ll. That proviso states:

“[I]n 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, as well as of any State by which the insurer has been incorporated and of the State where it has its principal place of business.” 28 U. S. C. § 1332(c) (1982 ed.) (emphasis added).

The District Court therefore attributed Whitmire’s Texas citizenship to Northbrook, eliminating diversity between *9 Northbrook and Brewer. The Court of Appeals affirmed on the basis of Campbell. It noted, however, that Campbell stood on “weak jurisprudential legs.” 854 F. 2d, at 745.

HH

We hold that the direct action proviso is not applicable m this case because Northbrook’s suit was an action by, not against, an insurer.1 “[W]e must take the intent of Congress with regard to the filing of diversity cases in Federal District Courts to be that which its language clearly sets forth.” Horton v. Liberty Mutual Ins. Co., 367 U. S. 348, 352 (1961) (holding that Congress’ elimination of removal jurisdiction over workers’ compensation suits did not withdraw original diversity jurisdiction over such suits). The language of the proviso could not be more clear. It applies only to actions against insurers; it does not mention actions by insurers.

The proviso’s legislative history reinforces our reading of Congress’ pellucid language. Congress added the proviso to § 1332(c) in 1964 in response to a sharp increase in the caseload of Federal District Courts in Louisiana resulting largely from that State’s adoption of a direct action statute, La. Rev. *10 Stat. Ann. §22.655 (West 1959). See S. Rep. No. 1308, 88th Cong., 2d Sess., 4 (1964); H. R. Rep. No. 1229, 88th Cong., 2d Sess., 4 (1964). The Louisiana statute permitted an injured party to sue the tortfeasor’s insurer directly without joining the tortfeasor as a defendant. Its effect was to create diversity jurisdiction in cases in which both the tortfeasor and the injured party were residents of Louisiana, but the tortfeasor’s insurer was considered a resident of another State. Believing that such suits did “not come within the spirit or the intent of the basic purpose of the diversity jurisdiction of the Federal judicial system,” S. Rep. No. 1308, supra, at 7, Congress enacted the proviso “to eliminate under the diversity jurisdiction of the U. S. district courts, suits on certain tort claims in which both parties are local residents, but which, under a State ‘direct action’ statute, may be brought directly against a foreign insurance carrier without joining the local tort-feasor as a defendant,” id., at 1 (emphasis added). See also H. R. Rep. No. 1229, supra, at 1. Nowhere in the legislative history did Congress express any concern about diversity actions filed by insurance carriers.

The Fifth Circuit in Campbell reasoned that a suit such as Northbrook’s is, in context, actually an action against the insurer. The court noted that the entire process is initiated by the employee’s filing a claim with the board, and that the employee retains the burden of proof at trial. It also considered the insurer’s action in court merely an “appeal” of the board award. 552 F. 2d, at 605.

We reject this analysis. Although the employee in an action brought by the insurer retains some characteristics of a plaintiff at trial, such an action is still inescapably one by, not against, the insurer. The action is commenced when the insurer files a complaint in federal court, not when the employee files his claim before the board. See Fed. Rule Civ. Proc. 3 (“A civil action is commenced by filing a complaint with the court”). Moreover, once the court acquires juris *11 diction over the suit, the board’s award is vacated and no longer has any force or significance. Latham v. Security Ins. Co. of Hartford, 491 S. W. 2d 100, 104 (Tex.1972). See also Horton, supra, at 355, n. 15 (“This makes it all the more clear that the matter in controversy between the parties to the suit is not merely whether the award will be set aside since the suit automatically sets it aside for determination of liability de novo”). Thus, this Court concluded in Horton that such actions are not considered appeals under Texas law. 367 U. S., at 354 (citing Booth v. Texas Employers’ Ins. Assn., 132 Tex. 237, 246, 123 S. W. 2d 322, 328 (1938)).

The Campbell court also reasoned that the same policy considerations that apply to actions brought by resident employees apply to actions brought by out-of-state insurers; thus, the court stated that it would be unfair to provide those insurers access to federal courts while denying such access to employees. 552 F. 2d, at 605. Petitioner argues, however, that Campbell ignored a crucial difference between the two situations that justifies different treatment. Absent federal jurisdiction, a workers’ compensation action would be brought in a Texas state court, regardless of which party initiated it. Tex. Rev. Civ. Stat. Ann., Art. 8307a (Vernon Supp. 1989) (suit must be brought in county in which injury occurred or in which employee resided at the time of injury). Thus, the out-of-state insurer, unlike the resident employee, would, “at least in theory, be subject to a local prejudice in favor of the injured resident.” Aetna Casualty & Surety Ins. Co. v. Greene, 606 F. 2d 123, 127 (CA6 1979) (rejecting Campbell’s approach).

Petitioner’s position is not wholly convincing. Although it may explain why Congress would permit out-of-state insurers, but not injured state residents, to sue in federal court, it does not explain why Congress would deny those insurers access to a federal forum when injured residents initiate suit in state court. By eliminating diversity jurisdiction over *12 direct actions against out-of-state insurers, Congress also prevented those insurers from removing such actions to federal courts, because federal removal jurisdiction is limited to actions which could have been brought originally in federal courts. See 28 U. S. C. § 1441(a) (1982 ed.).2 Yet it is difficult to see how the nonresident insurer’s interest in a federal forum is any greater when it brings the action than when an injured resident does. It therefore seems somewhat anomalous for Congress to retain original diversity jurisdiction over actions by out-of-state insurers while withdrawing removal jurisdiction.

This seeming incongruity, however, is insufficient to persuade us to extend the scope of Congress’ precise wording in § 1332(c). In Horton, this Court confronted a similar question: whether Congress’ explicit withdrawal of removal jurisdiction over workers’ compensation cases, see n. 2, supra, precluded a diversity action brought in the first instance by an out-of-state insurer under the Texas workers’ compensation statute. The District Court had answered that question in the affirmative, reasoning that the concerns that persuaded Congress to eliminate removal jurisdiction — reducing congestion in federal courts and relieving injured employees of the burden of having to litigate in more distant federal courts — were also applicable when nonresident insurers initiated the actions. 367 U. S., at 351-352. Although this Court noted that these considerations were “appealing,” id., at 352, it refused to assume that Congress intended anything more than it had stated in unambiguous terms. Ibid. Similarly, we refuse to attribute to Congress an intent broader than that specifically expressed in the direct action proviso. Congress could easily have used language to bar suits by in *13 surers as well as those against insurers, and it can easily do so still. See ibid.

In sum, the direct action proviso is limited by its terms to actions against insurers. We cannot doubt that Congress meant what it said. We therefore reverse the decision of the Court of Appeals and remand for further proceedings consistent with this opinion.

It is so ordered.

Petitioner also argues that the proviso is inapplicable because this ease does not involve a “direct action” within the meaning of § 1332(c). A direct action, according to petitioner, is a suit in which a party claiming injury seeks relief from the liability insurer of the party legally responsible for the injury; in such an action, the injured party neither joins nor first obtains a judgment against the legally responsible party. Petitioner contends that a workers’ compensation suit against an employer’s insurer is not a direct action in Texas because employers are not legally responsible for workers’ compensation benefits under Texas law. Tex. Rev. Civ. Stat. Ann., Art. 8306, § 3(a) (Vernon Supp. 1989). Instead, the injured party must “look for compensation solely to the [insurer].” Ibid. Similarly, because Texas employers are not liable for workers’ compensation benefits, petitioner asserts, Whitmire’s policy with Northbrook did not provide “liability insurance” within the meaning of the proviso. We need not reach these arguments because we hold that the suit at issue here was not an action “against” an insurer.

In this ease, removal would also be precluded by 28 U. S. C. § 1445(c) (1982 ed.) which states: “A civil action in any State court arising under the workmen’s compensation laws of such State may not be removed to any district court of the United States.”