Hollinger v. Home State Mut. Ins. Co., No. 10–40820, 2011 WL 3890833 (5th Tex. Sept. 6, 2011).

In this case, the Fifth Circuit held that registering a motor vehicle and insuring it in Texas is some evidence of an intent to remain in Texas—at least for a while.

The plaintiffs, seeking to represent all persons who purchased an automobile insurance policy in Texas, filed a class action case against County Mutual Insurance Companies alleging insurance discrimination in the non-standard insurance market, which serves lower income individuals and those drivers with less than ideal driving records in violation of § 544.052 of the Texas Insurance Code.

The plaintiffs alleged that various County Mutuals and other Reinsurers charged certain consumers higher policy fees on their automobile insurance than they charged other consumers, when those consumers were of the same class and hazard. 

The plaintiffs asserted diversity jurisdiction pursuant to CAFA. 

The Insurance Companies moved to dismiss the complaint on the grounds that CAFA’s “local controversy” and “home state” exceptions required the district court to abstain from jurisdiction pursuant to 28 U.S.C. § 1332(d)(4), which the District Court granted. 

Upon appeal, the Fifth Circuit affirmed.

The only element at issue was whether “greater than two-thirds” or “two-thirds or more” of the members of all of the proposed Insured’s classes are citizens of Texas and the United States. 

The Fifth Circuit noted that in determining diversity jurisdiction, the state where someone establishes his domicile serves a dual function as his state of citizenship. Domicile requires the demonstration of two factors: residence and the intention to remain.  Evidence of a person’s place of residence, however, is prima facie proof of his domicile. 

First, regarding residence in Texas, the District Court took judicial notice of the United States census data that the relocation rate of American citizens of all ages and races out of Texas was about 5.2% between 2007 and 2009—the relevant time period. In addition, a smaller percentage of people move out of Texas than from any other state.

The Insurance Companies put forth further statistical support showing that more than 99% of the automobiles that the County Mutuals insured were located in Texas. Also, only about 11% of Texas residents were not United States citizens. 

The Fifth Circuit observed that although the Insurance Companies’ statistics about Texas residents were not specific to the insured, these statistics were nonetheless probative, in the absence of any contrary showing by the plaintiffs. Further, the County Mutuals only issue policies in Texas. Accordingly, the Fifth Circuit concluded that the evidence established that the plaintiffs’ proposed class was domiciled in Texas at the time the complaint was filed.

Second, regarding ‘intention to remain in Texas,’ the Fifth Circuit discussed a case similar to this case, Joseph v. Unitrin, Inc., 2008 WL 3822938, *1 (E.D. Tex. 2008).  (Editors’ Note: see CAFA law blog analysis of Unitrin posted on August 20, 2009. 

In Unitrin, the district court analyzed the evidence of citizenship and noted that the proposed class was made up of Texas residents who are policyholders whose policies were cancelled and there was no evidence of a “mass exodus of more than one-third” of the proposed class from Texas during the applicable time period.  The Unitrin court reasoned that “because the putative class members are alleged to be Texas residents, logic dictates that their homes, and by extension, their domicile, remain in Texas.” The court further noted that because the policies cover both the residence and the household affects, “it can be assumed that the members of the putative class own both real and personal property in Texas.” Ultimately, the Unitrin court held that “in light of these factors and the discrete nature of the proposed class, the plaintiffs need not produce additional evidence in order to demonstrate that more than two-thirds of the potential plaintiffs are Texas citizens.”

Like the class action plaintiffs in Unitrin, the Insurance Companies here produced evidence of (1) insurance of personal property (motor vehicles—likely garaged at the residence of the owner) located in Texas and (2) authority of County Mutual insurers under Texas law, Tex. Ins.Code § 912.151, to write auto insurance only for vehicles located in Texas.

Additionally, the Fifth Circuit observed that the courts have acknowledged that where a proposed class is discrete in nature, a common sense presumption should be utilized in determining whether citizenship requirements have been met. Because owning a home is an indicium of a person’s domicile, it creates a reliable presumption that the class is comprised of citizens of that particular state.

The Fifth Circuit stated that the plaintiffs, more likely than not (or by a preponderance of the evidence) garaged their cars in Texas. Registering a motor vehicle and insuring it in Texas is some evidence of an intent to remain in Texas—at least for a while. Unlike owning a second home, a vehicle owner is more likely than not inclined to wait until actual relocation to register and insure a vehicle. The plaintiffs produced no evidence that any potential class member intended to establish a domicile outside of Texas. 

Based on the statistical evidence produced by the Insurance Companies, the Fifth Circuit concluded that the District Court correctly concluded that two-thirds or more of the plaintiffs’ proposed class of insurance policy holders were citizens of Texas with both residency and the intention to remain in Texas, by a preponderance of the evidence, at the time the Insured filed their complaint.