State Farm Fire & Casualty Insurance Company v. Two Gun Construction, LLC et al

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
State Farm Fire & Casualty
Insurance Company as
Subrogee of Brian Travis
and Swaraj Farm, LLC
Case No. 22-cv-63-PB
v. 	Opinion No. 2022 DNH 093
Two Gun Construction, LLC, et al.
ORDER
The issue this case presents is whether the court has diversity
jurisdiction in a subrogation action when the insurance company plaintiff and
the defendants are diverse but the company’s insureds and the defendants
are all New Hampshire residents.
I. 	BACKGROUND
Brian Travis and Swaraj Farm, LLC (the insureds) owned a home in
Candia, New Hampshire that was damaged in a fire. Their insurer, State
Farm Fire & Casualty Insurance Company, agreed to reimburse the insureds
for their losses above the policy deductible. State Farm later brought this
subrogation action to recover the payments it made to the insureds from
several defendants who were involved in the construction of the home. State
Farm asserts claims for breach of contract, breach of warranty, and
negligence.
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Although State Farm is an Illinois company and has sued in its own
name, defendants argue in a motion to dismiss that the court lacks diversity
jurisdiction because the insureds and the defendants are all New Hampshire
residents.
II. 	ANALYSIS
A federal court must look to the citizenship of the real parties to the
controversy when determining whether it has diversity jurisdiction. Navarro
Savings Ass’n v. Lee, 446 U.S. 458, 461 (1980); see also Lewis v. Clarke, 137
S. Ct. 1286, 1294 (2017). Because this is a diversity case, I turn to state law
to determine the parties’ substantive rights and federal law to resolve any
procedural issues. Alejandro-Ortiz v. P.R. Elec. Power Auth., 756 F.3d 23, 26
(1st Cir. 2014); see also Melendez Colón v. Rosado Sanchez, 995 F.3d 262, 267
n.3 (1st Cir. 2021). While the question of in whose name an action must be
brought presents a procedural issue governed by Fed. R. Civ. P. 17, the issue
of who is the real party in interest is a separate substate issue governed by
state law. See 6A Fed. Prac. & Proc. Civ. § 1444 (3 ed.). Thus, I turn to New
Hampshire law to determine whether State Farm or its insureds are the real
parties in interest in this case.
Defendants rely primarily on the New Hampshire Supreme Court’s
decision in Sibson v. Robert’s Exp., Inc., 104 N.H. 192, 195 (1962), in arguing
that the insureds are the real parties in interest. In Sibson, however, the
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court merely held that an insurer who paid its insured’s property damage
claims could not bring a separate subrogation action to recover its payments
after the insured had litigated claims for personal injury stemming from the
same event. Id. In reaching its decision, the court explained that the insurer
could have intervened in its insured’s personal injury action to recover its
property damage payments. Id. at 194; see also King v. Nedovich, 118 N.H.
161, 162 (1978); (recognizing that insurer in Sibson could have intervened in
the personal injury action). What it could not do was split the personal injury
and property damage claims into separate actions. Sibson, 104 N.H. at 194.
The court’s subsequent decision in King, 118 N.H. at 161-62, leaves no doubt
that this limited reading of Sibson is correct because the court in King
permitted an insurer-subrogee to intervene in place of its insureds in an
action for damages arising out of a fire. Id.; see also Nat’l Marine
Underwriters, Inc. v. McCormack, 138 N.H. 6, 8 (1993). Thus, Sibson does not
in any way alter State Farm’s substantive right to pursue its subrogation
claims against the defendants.
As a general rule, an insurer-subrogee who pays its insured’s entire
loss is the only real party in interest in an action to recover those losses. See
United States v. Aetna Cas. & Sur. Co., 338 U.S. 366, 380-81 (1949).
Defendants have failed to cite to any New Hampshire Supreme Court case
that calls this rule into question. Nor have they pointed to any unusual facts
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that would warrant a different result in this particular case. Because State
Farm is the only real party in interest and complete diversity exists between
State Farm and the defendants, the court has subject matter jurisdiction to
resolve the matter.
Defendants’ motion to dismiss (Doc. No. 26) is denied.
SO ORDERED.
/s/ Paul J. Barbadoro
Paul J. Barbadoro
United States District Judge
August 9, 2022
cc: 	Counsel of Record
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