• Fourth Circuit Holds that Insured Was Nominal Party that Need Not Consent to Removal
  • February 10, 2014 | Author: George B. Hall
  • Law Firm: Phelps Dunbar LLP - New Orleans Office
  • The U.S. Fourth Circuit Court of Appeals recently held that an insured that was a nominal party was not required to consent to a removal in a coverage action among its insurers seeking to allocate a previously agreed settlement between the insurers. Hartford Fire Ins. Co. v. Harleysville Mutual Ins. Co., 736 F.3d 255 (4th Cir. Nov. 5, 2013).

    After the insured contractor was sued for alleged construction defects on a condominium complex, its insurers settled the claims subject to an agreement among themselves that they resolve the allocation of the settlement through litigation. One of the insurers filed suit in South Carolina state court, naming the insured and the other insurers as defendants, seeking a declaration of each insurer's share of the settlement. One of the other insurers timely removed with the consent of the other insurers. The plaintiff insurer moved to remand based on the insured's failure to consent to removal. The district court denied the motion to remand, finding that the insured was a nominal party that need not consent to removal.

    Affirming, the Fourth Circuit agreed that nominal parties need not consent to removal, and stated that the determination of whether a party is nominal or not is a straightforward inquiry into whether the non-removing party has an interest in the outcome of the case. The Fourth Circuit agreed that the insured did not have a sufficient stake in the litigation to rise above the status of a nominal party because all claims against the insured in the underlying action were settled and no party was seeking any monetary judgment or injunctive relief against it.