The United States Court of Appeals for the Fourth Circuit held that an insured contractor was a nominal defendant in a battle among five insurers as to who owed what in the one million dollar settlement of faulty construction claims and therefore the contractor did not have to give permission for the suit to be moved to Federal Court. In Hartford Fire Insurance Company v. Harleysville Mutual Insurance Company, 736 F.3d 255 (4th Cir. 2013) A suit was brought against the contractor for alleged defects in its work. That lawsuit was settled with the insurance carriers contributing subject to each insurers right to subsequently resolve the proper allocation of the settlement through arbitration or litigation.
Hartford filed a suit for declaratory judgment in the State Court in South Carolina seeking a declaration of each insurer’s respective share of the settlement. In addition to the insurance carriers, the contractor, a South Carolina resident, was also named as a defendant. All of the insurance carriers joined in the removal of the suit to the United States District Court. The contractor neither consented nor objected to the removal, nor claimed an interest in the outcome of the proceeding at that time. Hartford moved to remand the case on the basis that the contractor had failed to join in or consent to the notice of removal.
The District Court found that the contractor was a nominal party for the purposes of the nominal party exception to the rule of unanimity governing removal. This was on the basis that no relief was sought from the contractor and that the plaintiff merely sought to determine the percentage that each insurer was required to pay on behalf of the contractor. After an in-depth review of the nominal party exception the Court of Appeals affirmed the judgment of the District Court and said:
“We emphasize that we make no categorical rules regarding insureds in this case. There may well be instances in which the interest of an insured would prevent removal by an insurer. What we adopt is a simple, straight forward inquiry for determining nominal party status which cuts across subject matter. The outcome of that inquiry depends upon the facts. Here, absence a demonstration of any palpable interest Hammons [the contractor] possesses in the outcome of the case, we find that Hammons is a nominal party and need not consent to the removal of this action to Federal Court.”