May 31, 2018 Articles

Federal Court Jurisdiction—Who Will Decide Your Coverage Case?

Oftentimes, insurers find it advantageous to file their coverage actions in federal as opposed to state court

by Brian H. Sande and Charles E. Spevacek[1]

The Constitution creates the federal judicial branch and delineates the extent of federal jurisdictional authority. Importantly, the founders of the Constitution believed that controversies between citizens of different states needed a unique forum to resolve their disputes away from state courts:

The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.

. . . .

The judicial Power shall extend to all Cases, in Law and Equity, arising . . . between Citizens of different States. . . .

U.S. Const. art. III, §§ 1, 2.

Thus, “diversity jurisdiction” has, at its core, constitutional protections. This provision authorizing diversity of citizenship jurisdiction was designed to protect out-of-state litigants from local state court bias, both real and perceived.

The Federalists supported the creation of a strong federal judiciary and specifically the notion of diversity jurisdiction. In advocating for a federal judiciary that would, among other things, hear controversies between citizens of different states, Alexander Hamilton believed that “the reasonableness of the agency of the national courts in cases in which the state tribunals cannot be supposed to be impartial, speaks for itself.”[2] Hamilton maintained that a federal court should hear such cases because it was most “likely to be impartial between the different states and their citizens, and which, owing its official existence to the union, will never be likely to feel any bias inauspicious to the principles on which it is founded.”[3] James Madison maintained that “a strong prejudice may arise, in some states, against the citizens of others, who may have claims against them.”[4] This fundamental tenet underlying diversity jurisdiction remains valid today.[5]

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