Opinion
4:99CV27-T
August 5, 1999
ORDER
THIS MATTER is before the court upon defendant's Motion to Join State Farm Fire and Casualty Company as Party Plaintiff. Respective counsel have presented the court with excellent briefs in support, response, and reply. The court agrees with defendant that Travelers Ins. Co. v. Riggs, 671 F.2d 810, 813 (4th Cir. 1982), provides the rule of law in the Fourth Circuit that a partially subrogated insurer may be joined involuntarily as a party plaintiff. The issue, however, is one for the court, which is required to balance the benefits of full disclosure with the hazards of undue prejudice. This is the second time this year that this court has addressed the issue.
Joinder is governed by Rule 19(a), Federal Rules of Civil Procedure, which provides, as follows:
A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if
(1) in the person's absence complete relief cannot be accorded among those already parties, or
(2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may
(3) as a practical matter impair or impede the person's ability to protect that interest or
(ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest.
If the person has not been so joined, the court shall order that the person be made a party. If the person should join as a plaintiff but refuses to do so, the person may be made a defendant, or, in a proper case, an involuntary plaintiff. If the joined party objects to venue and joinder of that party would render the venue of the action improper, that party shall be dismissed from the action.
In this case, the only interests of the proposed plaintiff — a fire insurance company — are under the doctrine of subrogation. It is not disputed that upon payment of fire insurance benefits, the insurance company became partially subrogated to any rights these plaintiffs may have against defendant. The court makes a specific finding that State Farm has no right against this defendant for the incident at issue other than through subrogation of any judgment the named plaintiffs may receive. There is, therefore, no compelling reason to bring the insurance company into this action, inasmuch as complete relief can be afforded as the action now stands, and the absence of the insurance company will not in any way subject this defendant to double, multiple, or inconsistent obligations.
Even though defendant has made a strong argument that the named plaintiffs are not the real parties in interest, Rule 17(a) provides relief only where the failure to join a "real party" will subject the defendant to further liability or litigation costs. In addition toTravelers, which holds that it is not error for a court to involuntarily join a partially subrogated insurance company, defendant has also quoted from a letter sent by State Farm to defendant in which State Farm boasts, to put it mildly, that its position will be much improved where the named plaintiffs are upstanding citizens of the community. From the outset, the practice of counsel filing and quoting from letters amounting to "settlement discussions" is not looked upon favorably by this court. There is a great deal of banter, positioning, and brinkmanship in discussing settlement. While the letter of State Farm's agent may well be one to which the admonition, "I don't think I would have said that, " would apply, it does not "concede prejudice, " as defendant asserts, in the context of the Federal Rules. Indeed, the alleged statement of State Farm regarding its advantage is antithetical to an almost identical case this court tried this year, where a jury returned a verdict in favor of the manufacturer and State Farm had a claim of subrogation. The letter does not "concede prejudice" to defendant in the sense of Rule 17's requirement of "further liability" or "litigation costs, " and is, as a matter of fact, contrary to results recently obtained by State Farm in this court. Without doubt, State Farm's only recourse is through subrogation of a judgment in this action; therefore, the only consequence of State farm's joinder, either intended or unintended, would be undue prejudice through naming an insurance company. The plaintiffs' rights and defendant's obligations are neither enlarged nor diminished by the simple fact that plaintiffs had insurance, the insurance company paid benefits, and the insurance company hopes to recoup its loss through subrogation.See Hancotte v. Sears, Roebuck Co., 93 F.R.D. 845 (E.D. Penn. 1982) (a partially subrogated insurer was not a necessary party required to be joined to insureds' action against seller of defective water softener which allegedly caused fire loss, where complete relief could be granted between current parties since insurer had executed ratification agreement in which it agreed to be bound by result in the action and forever waived any rights to pursue its subrogation rights outside that action); Kint v. Terrain King Corp., 79 F.R.D. 10 (M.D. Pa. 1977); and Sargent v. Axel H. Ohman, Inc., 343 F. Supp. 316 (D. Minn. 1972). The court would consider joinder of State Farm only if it refused to sign a ratification agreement.
Although joinder will be denied, the court agrees with defendant's underlying argument that evidence as to the activities of the insurance company, as well as standard practices in the insurance industry, comprise a substantial portion of defendant's case. Based upon the actual trial of the earlier case, the court finds that the inherent prejudice in joinder of an insurance company is avoidable through exercise of a great deal of latitude in allowing the introduction of evidence as to what the insurance company (here, State Farm) did to investigate the fire, what it did not do, and what is standard in the industry, with appropriate limiting instructions. The court is keenly aware that where there is a questionable claim, but a possible products-liability issue, some insurers are shying away from denying benefits to its insured in order to avoid claims of bad faith and, thereafter, subrogating the homeowner's product-liability claim. The jury in the earlier case clearly saw what had occurred and returned a verdict in favor of the product manufacturer. Having considered defendant's motion and reviewed the pleadings, the court enters the following Order.
ORDER
IT IS, THEREFORE, ORDERED that defendant's Motion to Join State Farm Fire and Casualty Company as Party Plaintiff is DENIED, with leave to renew such motion in the event State Farm fails to sign a ratification agreement within 30 days. The court reserves the right to review this decision, sua sponte, through the time of trial.
This Order is entered in response to defendant's Motion to Join State Farm Fire and Casualty Company as party Plaintiff (#11).