FSM SUPREME COURT
TRIAL DIVISION
Cite as Wilson v. Pohnpei Family Headstart Program, Inc.,
7 FSM Intrm. 411 (Pon. 1996)

[7 FSM Intrm. 411]

CONSTANTINO WILSON et al.
Plaintiffs,
 
vs.
 
POHNPEI FAMILY HEADSTART PROGRAM,
INC., POHNPEI STATE, WALES ELIAS and
NEW HAMPSHIRE INSURANCE COMPANY,
Defendants.
 
CIVIL ACTION NO. 1996-002

ORDER

Andon L. Amaraich
Chief Justice

Decided:  February 27, 1996

APPEARANCES:
For the Plaintiff:            Ron Moroni, Esq.
                                       P.O. Box 1618
                                       Kolonia, Pohnpei FM 96941

For the Defendants:     Fredrick L. Ramp, Esq.
                                       P.O. Box 1480
                                       Kolonia, Pohnpei FM 96941

*    *    *    *

HEADNOTES
Jurisdiction) Removal
     FSM Supreme Court General Court Order 1992-2 sets forth the governing procedures for the removal of state court actions to the FSM Supreme Court.  Removal is effected upon compliance with these procedures.  The state court takes no further action following removal unless and until a case is remanded.  Wilson v. Pohnpei Family Headstart Program, Inc., 7 FSM Intrm. 411, 412 (Pon. 1996).

Jurisdiction) Removal
     A petition for removal must be accompanied by a short and plain statement of the facts which entitle the party to removal together with a copy of all process, pleadings and orders served upon the parties in the action.  Wilson v. Pohnpei Family Headstart Program, Inc., 7 FSM Intrm. 411, 412 n.2 (Pon. 1996).

Jurisdiction) Removal
     When a case has been removed from state court after improperly pleading as a party a diverse citizen, it will be remanded as improvidently removed.  Wilson v. Pohnpei Family Headstart Program,

[7 FSM Intrm. 412]

Inc., 7 FSM Intrm. 411, 413-14 (Pon. 1996).

Insurance
     An insurance company that has no contractual obligation to persons other than its insured until a court determines the liability of its insured,  cannot be joined as a party to a lawsuit to determine that liability.  Wilson v. Pohnpei Family Headstart Program, Inc., 7 FSM Intrm. 411, 413 (Pon. 1996).

*    *    *    *

COURT'S OPINION
ANDON L. AMARAICH, Chief Justice:
 
Introduction
     On January 11, 1996, defendants in Pohnpei Supreme Court Civil Action No. 284-94 filed a petition in the FSM Supreme Court, requesting that this Court grant removal of that state court action based on the newly-created diversity of the parties.  The case arises out of an automotive accident in which a vehicle, operated by a driver for Pohnpei Family Headstart Program, Inc. ("Headstart"), struck a child.

     Defendants' Petition to Remove states that on December 28, 1995, the Pohnpei Supreme Court granted Plaintiffs' Motion to Amend Complaint and to Add Party.  With the addition of New Hampshire Insurance Company, a U.S. citizen, as a party defendant, defendants assert that there is now diversity of citizenship between the parties and this Court therefore has jurisdiction over the action pursuant to Article XI, Section 6(b) of the FSM Constitution.  On January 18, 1996, the parties filed a Stipulation Regarding Removal and Pending Motions, in which plaintiffs consented to defendants' petition to remove the Pohnpei Supreme Court proceeding to this Court.1

Discussion
     FSM Supreme Court General Court Order 1992-2 sets forth the governing procedures for the removal of state court actions to the FSM Supreme Court. Removal is effected upon compliance with these procedures.  The state court takes no further action following removal unless and until a case is remanded.

     The formal requirements for removal have been satisfied in this case, and therefore removal has been effected.  However, after reviewing the pleadings and filings in the case,2 the Court finds that this state court action has been improvidently removed to the FSM Supreme Court and must be remanded, because the New Hampshire Insurance Company has been improperly pled as a co-defendant in this

[7 FSM Intrm. 413]

action.  General Court Order 1992-2, part III(C) provides that
 
C.  If at any time before final judgment it appears that the case was removed improvidently and without jurisdiction, or that the removing party had previously waived its rights to remain as determined by the previous decisions of this Court, the trial division of the Supreme Court shall remand the case, and may order the payment of just costs.  A certified copy of the order of remand shall be mailed by its clerk to the clerk of the state court.  The state court may thereupon proceed with the case.

FSM GCO 1992-2, pt. III(C) (emphasis added).

     Plaintiffs' Motion to Amend Complaint and to Add Party, filed in Pohnpei Supreme Court, states that plaintiffs learned during discovery that Defendant Headstart was covered at the time of the accident by an insurance policy issued by a United States insurance company, and that the U.S. Federal Government required Headstart to carry insurance.  Based on these facts, plaintiffs sought leave to amend their original complaint to add the New Hampshire Insurance Company as a co-defendant.  Motion to Amend Complaint and to Add Party (Oct. 25, 1995) (Ct. Doc. 22).  Plaintiffs' Amended Complaint seeks payment from defendants under Coverage D of Headstart's insurance policy, which addresses bodily injury liability.  See Amended Complaint paras. 33-34 (Ct. Doc. 22).  Count IV of that Amended Complaint alleges that "[Headstart's] policy provided that the Defendant Insurance Company shall be liable to third parties sustaining injuries as a result of such negligence to the extent of $100,000 for any one person and $300,000 for any one accident."  Id. para. 33.

     The Court has reviewed the terms of the insurance policy at issue, and finds that plaintiffs' claim against the New Hampshire Insurance Company cannot stand as a matter of law until either a judgment is entered against the insured party, Headstart, or until this action is settled and the insured's obligations are thereby fixed.  The insurance policy agreement between the New Hampshire Insurance Company and Headstart explicitly states:

14.  Action Against the Company - Coverages D and E:  No action shall lie against the company unless, as a condition precedent thereto, the named insured shall have fully complied with all the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company.

Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy.  Nothing contained in this policy shall give any person or organization any right to join the company as a co-defendant in any action against the insured to determine the insured's liability.

Attach. A to Response to Pls.' Interrogatories and Request for Production Regarding Insurance Coverage (Ct. Doc. 19) (emphasis added).  Contrary to paragraphs 33 and 34 of plaintiffs' Amended Complaint, at this stage of the litigation New Hampshire Insurance Company has a contractual obligation only to its insured and has no legal obligation to the plaintiffs, who are not parties to that agreement.  If defendants are ultimately found liable in this case, and wish to bring a claim against their insurer for indemnification, or if the plaintiffs seek to recover under the policy, pursuant to Condition 14 of the insurance agreement, those claims may proceed separately against the insurer.

     The Court finds that plaintiffs' Amended Complaint improperly names New Hampshire Insurance Company as a party defendant, and that plaintiffs' claims against the New Hampshire Insurance

[7 FSM Intrm. 414]

Company cannot stand as a matter of law.  FSM Civil Rule 21 states that "[p]arties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just.  Any claim against a party may be severed and proceeded with separately."  Accordingly, the Court now drops New Hampshire Insurance Company from this case.  Without the U.S. insurance company as a co-defendant, the FSM Supreme Court no longer has diversity jurisdiction over this matter.  Finding that Pohnpei Supreme Court Civil Action No. 284-94 "was removed improvidently and without jurisdiction" within the meaning of General Court Order 1992-2, part III(C), the Court now remands this action to the Pohnpei Supreme Court for further proceedings.  The Pohnpei Supreme Court has been handling this case for over a year, since the filing of plaintiffs' complaint on November 30, 1994.  As a result, the state court has already done a great deal of work in this case and is familiar with the issues it raises.  This Court's decision to remand this matter to state court will therefore also best serve the interests of judicial economy, and allow for the smooth handling of the case.

     The Court is compelled to note for the record its concern over the possibility that the parties, though aware of the terms of Headstart's insurance policy, have nonetheless attempted to add the insurance company as a co-defendant for the sole purpose of creating diversity of citizenship in this action.  This Court will continue to guard against any such actions.
 
*    *    *    *
 
Footnotes:
 
1. The parties have filed a series of pleadings with this Court, including a Motion to Compel Discovery, an Answer to Plaintiffs' Amended Complaint, and various motions and notices concerning the deposition of Defendant Wales Elias.  On January 25, 1996, the FSM Supreme Court issued a protective order with respect to Defendant Wales Elias' deposition, effectively exercising jurisdiction over this matter, although no formal order granting defendants' earlier petition to remove had yet been entered.

2. A petition for removal is required to be accompanied by "a short and plain statement of the facts which entitle the party to removal together with a copy of all process, pleadings and orders served upon the parties" in the action.  FSM GCO 1992-2, pt. II(A).
                                                                                                                                                                                                                                                                                                           
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