Opinion ID: 676471
Heading Depth: 1
Heading Rank: 1

Heading: background and vestavia hills's arguments

Text: Vestavia Hills won a judgment in state court against Cameron Development Corporation (Cameron). Based on that judgment, Vestavia Hills is now entitled to collect $442,263 from Cameron. Cameron submitted a claim for coverage on the judgment to its insurer, Defendant/Appellee General Fidelity Insurance Company (General Fidelity). General Fidelity denied Cameron's claim whereupon Vestavia Hills filed a one-count complaint in state court, suing Cameron and General Fidelity pursuant to Alabama Code § 27-23-2. That code section states, in relevant part: Upon the recovery of a final judgment against any person . . . if the defendant in such action was insured against the loss or damage . . . the judgment creditor shall be entitled to have the insurance money provided . . . and if the judgment is not satisfied . . . the judgment creditor may proceed against the defendant and the insurer to reach and apply the insurance money to the satisfaction of the judgment. In other words, in Alabama, if a party wins a judgment, and the defendant's insurer refuses to pay the judgment, the judgment creditor can sue the insurer along with the defendant from the earlier suit to reach the insurance proceeds. Vestavia Hills filed this action in state court, and General Fidelity removed it to the Northern District of Alabama. As Vestavia Hills and Cameron are both Alabama citizens, diversity jurisdiction was questionable. In denying Vestavia Hills's motion to remand, however, the district court realigned Cameron as a plaintiff because Vestavia Hills's and Cameron's interests converged against General Fidelity in that both Vestavia Hills and Cameron want to force General Fidelity to provide coverage. Vestavia Hills sought an interlocutory appeal, and the district court certified the question to this Court of whether a district court may, in a case brought under Alabama Code § 27-23-2, which requires a plaintiff to initiate the action against both the insured and the insurer, exercise its discretion to realign the parties based upon their actual interests. Vestavia Hills concedes that the purpose of this action is solely to establish whether General Fidelity must provide insurance coverage and that no claim is raised against Cameron, but the city nonetheless argues that the district court erred in realigning the parties because Alabama Code § 27-23-2 expressly states that both the insured and the insurer are to be named as defendants, and points out that the Alabama Supreme Court has held that both parties must be named as defendants. Vestavia Hills further argues that, even if the parties are realigned, this matter must be remanded to state court because realignment would have the effect of turning the case into a direct action under 28 U.S.C. § 1332(c), which provides that, for purposes of diversity jurisdiction, an insurer is deemed a citizen of the insured's State of residence when the insurer is sued in an action to determine the insured's liability and the insured is not named in that suit.