The federal district court granted the insured’s motion to amend its complaint to add non-diverse parties, forcing a remand of the case to state court. Central Cold Storage Corp., et al. v. Arch Specialty Ins Co., et al., 2026 U.S. Dist. LEXIS 207519 (N.D. Cal. Sept. 14, 2026).
Plaintiffs Central Cold Storage Corporation (CCS) and National Custom Packing, Inc. (NCP) sued insurers Arch Specialty Insurance Company and Axis Surplus Insurance Company in state court after benefits were denied for damage to the roof of a building in which CCS and NCP operated their businesses. The policies named plaintiffs’ parent company, VPS Companies, Inc., as the only insured. Plaintiffs alleged that they were intended to be additional insureds and were inadvertently omitted from the policies. The complaint asserted claims for reformation of contract, breach of contract and breach of the implied covenant of good faith and fair dealing.
The defendant insurers removed the action to federal district court on the basis of diversity jurisdiction. Plaintiff filed a motion for leave to amend the complaint to add two new defendants, insurance brokers Hefferman Group, Inc. and Amwins Insurance Brokerage, LLC, which were involved in obtaining the policies. Defendants opposed the motion, pointing out that joinder of Hefferman would destroy diversity jurisdiction.
VPS was the sole named insured in the policies. Hefferman, however, provided VPS with Evidence of Property Insurance forms listing VPS, CCS and NCP as named insureds under the policies. Therefore, plaintiffs understood that they were included as named insureds in the policies.
After plaintiffs reported the roof damage to the insurers, defendants continued to investigate for a year and a half without making a coverage determination or paying any benefits. VPS filed suit in state court and the insurers removed to federal district court. The federal court granted summary judgment to Arch and Axis based on the determination that VPS did not have any insurable interest in the property.
CCS and NCP then filed the present action against Arch an Axis in state court. Defendants again removed the action based on diversity jurisdiction. Plaintiffs moved for leave to amend in order to add the insurance brokers Hefferman and Amwins as defendants based on information obtained in discovery. Plaintiffs alleged claims against Hefferman and Amwins for professional negligence and negligent misrepresentation.
The court addressed six factors in determining whether plaintiffs should be allowed to amend their complaint. First, the court found that joinder of the brokers was necessary. The failure to join Hefferman and Amwins would lead to separate and redundant actions. Plaintiffs contended that the brokers were negligent in obtaining the policies without adding plaintiffs as insureds and/or in misrepresenting the scope of the policies. Litigation of plaintiffs’ current and proposed claims would require the same evidence about the same circumstances surrounding issuance of the same policies.
Next, the partes agreed that the statute of limitations would not bar plaintiffs from bringing a separate state court action against the brokers.
Third, there was no unexplained delay in seeking joinder. Through discovery, plaintiffs learned that Hefferman and Amwins were aware that Arch and Axis had omitted plaintiffs from the policies but never told plaintiffs or VPS about the omission. Fourth, there was nothing in the record to suggest that plaintiffs filed the motion solely to destroy diversity jurisdiction.
Fifth, plaintiff sought to add claims against Hefferman and Amwins based on their alleged failure to procure the coverage requested by VPS and alleged misrepresentations regarding the scope of coverage that was obtained. Sixth, if Hefferman and Amwins were not joined in this action, plaintiff would have to file a separate action against them in state court that wolld be based on the same nucleus of facts giving rise to the present action. Forcing a plaintiff to proceed with a second litigation in state court against a new defendant created avoidable prejudice.
Weighing these factors in favor of plaintiffs, the court granted the motion for leave to amend. The only factor weighing against plaintiffs was the statute of limitations under which plaintiffs could still file in state court. The remaining factors tipped the balance in favour of granting the motion. Upon the filing of the amended complaint, the case would be remanded to the state court.
Recent Comments