eNotes: Liability – December 2023 – Virginia

SIGNIFICANT CASE SUMMARIES

Virginia Case Summary

110 S. Perry LLC v. Auto-Owners Ins. Co.
The United States District Court for the Eastern District of Virginia
No. 3:23-CV-175

Decided: September 28, 2023

Mutual insurance companies may be a “corporation” for diversity purposes according to the statute under which they are formed.

Background

Plaintiff, 110 South Perry, operates a residential building at 110 South Perry Street in Petersburg, Virginia. South Perry bought an insurance policy from Defendant Auto Owners Insurance Company. In August 2022, South Perry suffered substantial property damage after a storm. As a result of the storm, a large amount of rainwater collected, causing parts of the building to collapse. South Perry reported the damage and filed a claim with Auto-Owners, but Auto-Owners denied it. South Perry sued Auto-Owners in the Circuit Court for the City of Richmond for breach of contract and for an appraisal to determine the amount of damages.

Auto-Owners filed a Notice of Removal to federal court. Auto-Owners asserted that a federal court has subject matter jurisdiction, as there is complete diversity of citizenship between the Plaintiff and Defendant. Contemporaneously, Auto-Owners filed a Citizenship Disclosure Form identifying itself as a citizen of Michigan. However, Perry’s Complaint alleged that, because Auto Owners is a mutual company of which Perry is a member, Auto Owners has the citizenship of its members, including Perry. Perry alleged that Auto-Owners is also a citizen of Virginia, which would destroy diversity of citizenship.

Holding

The Court found that determining an entity’s corporate status is vital to determining diversity jurisdiction. The Fourth Circuit has found that determining whether an entity is a corporation involves looking at the statute which formed it. When the Court applied that reasoning here, it concluded that Auto-Owners is a corporation for diversity purposes. According to its articles of incorporation, Auto-Owners was organized under the Michigan Insurance Code, which provides that “companies formed under the insurance laws of this state shall be deemed bodies corporate and politic . . . and shall be subject to all of the provisions of law in relation to corporations as far as they are applicable.” For purposes of diversity jurisdiction, according to the statute which formed it, Auto-Owners is a corporation.

Questions about this case can be directed to Nicolette DeFrank at (571) 470-0395 or ndefrank@tthlaw.com.