Brown v. State Farm Fire & Casualty Company et al
MEMORANDUM OPINION AND ORDER GRANTING 3 MOTION to Dismiss, and all claims against Mr. Donald Taylor are hereby DISMISSED WITHOUT PREJUDICE. Signed by Judge Virginia Emerson Hopkins on 2/7/2017. (JLC)
2017 Feb-07 PM 02:45
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
) Case No.: 1:16-CV-1390-VEH
STATE FARM FIRE & CASUALTY )
COMPANY and DONALD
TAYLOR, individually and as agent, )
servant, and/or employee of State
Farm Fire and Casualty a/k/a
DONALD TAYLOR AGENCY,
MEMORANDUM OPINION AND ORDER
Plaintiff John Brown (“Mr. Brown”) initiated this insurance action against
Defendants State Farm Fire & Casualty Company (“State Farm”) and Donald
Taylor, a/k/a Donald Taylor Agency (hereinafter, “Mr. Taylor”) (together,
“Defendants”) in the Circuit Court of Jefferson County on July 20, 2016. (Doc. 12).1 Mr. Brown’s Complaint asserts claims of Negligent Procurement of Insurance,
Breach of Contract, Bad Faith Refusal To Investigate and/or Pay a Valid Claim,
All page references to (Doc. __) correspond with the court’s CM/ECF numbering
Bad Faith Failure To Pay a Valid Claim, Breach of Contract To Procure Adequate
Insurance Coverage, and Negligent Hiring/Supervision. Id. On August 24, 2016,
State Farm and Mr. Taylor removed Mr. Brown’s lawsuit to federal court on the
basis of diversity jurisdiction, pursuant to 28 U.S.C. § 1332 and in conjunction
with the fraudulent joinder of Mr. Taylor. (Doc. 1 at 4, ¶ 8-10). Defendants argue
in their notice of removal that Mr. Taylor was fraudulently joined because none of
Mr. Brown’s claims against him are colorable under Alabama law.
Pending before the court is Mr. Taylor’s Motion To Dismiss, which was
filed on August 24, 2016. (Doc. 3). As Mr. Brown did not file either a Motion To
Remand or a response to Mr. Taylor’s Motion To Dismiss, the court ordered Mr.
Brown to respond to Mr. Taylor’s Motion and to address Defendants’ fraudulent
joinder arguments on October 24, 2016. (Doc. 12). Mr. Brown filed a Response on
November 4, 2016 (doc. 13), and Defendants filed a Reply on November 21, 2016
(doc. 14).2 The Motion To Dismiss and underlying fraudulent joinder arguments
are now ripe for disposition.
For the following reasons, the court finds that Mr. Brown is not able to
In their Reply, Defendants requested oral argument. (Doc. 14). However, the court has
determined that oral argument is not necessary in this case. Additionally, the court finds that
Defendants have had ample opportunity to brief their arguments through their Notice of Removal
(doc. 1), Motion To Dismiss (doc. 3), and Reply (doc. 14).
maintain a colorable cause of action against Mr. Taylor. Accordingly, as Mr.
Taylor has been fraudulently joined, there is complete diversity in this case. This
court retains jurisdiction to determine Mr. Taylor’s Motion To Dismiss, which is
due to be GRANTED.
Mr. Brown purchased an insurance policy known as a “Homeowners
Policy” from Defendant State Farm. (Doc. 1-2 at 9, ¶ 6). The policy was issued
effective from August 12, 2014, to August 12, 2015, and insured a single family
dwelling, providing coverage for the dwelling, other structures, personal property,
and loss of use. Id. at 9-10, ¶7. The policy was underwritten, marketed, sold, and
issued to Mr. Brown by State Farm, which acted through and/or in conjunction
with Mr. Taylor and his company, Don Taylor Agency. Id. ¶8.
Mr. Brown is a citizen of the state of Alabama. Id. ¶ 1. State Farm is an
Illinois corporation, with its principal place of business in the state of Illinois, that
is licensed to conduct business within the state of Alabama. Id. ¶2; (Doc. 1 at ¶9).
Mr. Taylor is also a citizen of Alabama. (Doc. 1-2 at ¶ 3); (Doc. 1 at ¶ 10).
On October 2, 2014, lightning struck a tree located adjacent to Mr. Brown’s
As is discussed later in this Opinion, the factual allegations must be viewed in the light
most favorable to the plaintiff, Mr. Brown, as stated in his Complaint. (Doc. 1-2).
home. Id. ¶11. The mechanism of the electrical strike and resultant concussion
caused damage to the foundation wall of the structure, which allowed water to
enter the dwelling and caused significant damage. Id. Almost immediately
thereafter, and in accordance with the subject policy provisions, Mr. Brown
notified State Farm of the damages to and losses sustained on the property. Id. at
11, ¶ 14. Mr. Brown was contacted by State Farm through its adjuster, but State
Farm did not make any effort to determine the amounts of loss or to make any
payment to Mr. Brown. Id. at ¶15.
On or about November 21, 2014, Mr. Brown was notified by letter from
Amy King, a Fire Claim Representative with State Farm, that the insurance policy
did not cover the loss because the lightning strike did not result in the damages to
the home. Id. at ¶16. State Farm denied Mr. Brown’s claim in its entirety. Id. Mr.
Brown claims that he has expended large sums for the work necessary to
determine the cause of the damage, he has undertaken temporary repairs in order
to mitigate the damage, and he has lost the use and value of his property. Id. at
“It is by now axiomatic that the inferior courts are courts of limited jurisdiction.
They are ‘empowered to hear only those cases within the judicial power of the United
States as defined by Article III of the Constitution,’ and which have been entrusted
to them by a jurisdictional grant authorized by Congress.” Univ. of S. Ala. v. Am.
Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999) (quoting Taylor v. Appleton, 30
F.3d 1365, 1367 (11th Cir. 1994)).
“A necessary corollary to the concept that a federal court is powerless to act
without jurisdiction is the equally unremarkable principle that a court should inquire
into whether it has subject matter jurisdiction at the earliest possible stage in the
proceedings.” Univ. of S. Ala., 168 F.3d at 410. “Indeed, it is well settled that a
federal court is obligated to inquire into subject matter jurisdiction sua sponte
whenever it may be lacking.” Id. (citing Fitzgerald v. Seaboard Sys. R.R., 760 F.2d
1249, 1251 (11th Cir. 1985) (per curiam)). Furthermore, “[b]ecause removal
jurisdiction raises significant federalism concerns, federal courts are directed to
construe removal statutes strictly.” Univ. of S. Ala., 168 F.3d at 411 (citing Shamrock
Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S. Ct. 868, 872, 85 L. Ed. 1214
State Farm and Mr. Taylor premise their removal upon this court’s diversity
jurisdiction. “Diversity jurisdiction exists where the suit is between citizens of
different states and the amount in controversy exceeds the statutorily prescribed
amount, in this case $75,000.” Williams v. Best Buy Co., 269 F.3d 1316, 1319 (11th
Cir. 2001) (citing 28 U.S.C. § 1332(a)). Therefore, removal jurisdiction based upon
diversity requires: (1) complete diversity of citizenship between the plaintiff(s) and
the defendant(s); and (2) satisfaction of the amount in controversy requirement.
Complete diversity requires that every “plaintiff must be diverse from every
defendant.” Palmer v. Hosp. Auth., 22 F.3d 1559,1564 (11th Cir. 1994). “Citizenship,
not residence, is the key fact that must be alleged in the complaint to establish
diversity for a natural person.” Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir.
Mr. Brown’s state court complaint makes an unspecified demand for damages,
so the removing Defendants bear the burden of demonstrating that the amount in
controversy requirement has been met. Roe v. Michelin N. Am., Inc., 613 F.3d 1058,
1060 (11th Cir. 2010). By alleging that they filed their notice of removal within thirty
days of service of the complaint by Mr. Brown, Defendants have invoked Section
1446(b)’s first and less demanding removal mechanism. See 28 U.S.C. § 1446(b)(1).4
A defendant’s notice of removal pursuant to Section 1446(b)(1) “need include only
28 U.S.C. § 1446(b)(1) states as follows: “The notice of removal of a civil action or
proceeding shall be filed within 30 days after the receipt by the defendant, through service or
otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such
action or proceeding is based, or within 30 days after the service of summons upon the defendant
if such initial pleading has then been filed in court and is not required to be served on the
defendant, whichever period is shorter.”
a plausible allegation that the amount in controversy exceeds the jurisdictional
threshold. Evidence establishing the amount is required by §1146(c)(2)(B) only when
the plaintiff contests, or the court questions, the defendant’s allegations.” Dart
Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547, 554, 190 L. Ed. 2d 495
As another district court in this Circuit has recently stated,
Where the plaintiff does not plead a specified amount of damages in the
complaint, a defendant's notice of removal need include only a
“plausible allegation” that the amount in controversy meets the
jurisdictional threshold. See Dart Cherokee Basin Operating Co. v.
Owens, 135 S. Ct. 547, 554 (2014) . . . [i]n assessing whether removal
is proper, the court must first look to the complaint. Pretka, 608 F.3d at
754. If a defendant alleges that federal jurisdiction is “facially apparent”
from the complaint, the court must evaluate whether the “complaint
itself satisfies the defendant's jurisdictional burden.” Roe, 613 F.3d at
1061. The law permits a district court to make “‘reasonable deductions,
reasonable inferences, and other reasonable extrapolations’” to
determine whether federal jurisdiction exits from the face of the
complaint. Id. at 1061-62 (quoting Pretka, 608 F.3d at 754). “A district
court need not ‘suspend reality or shelve common sense in determining
whether the face of the complaint . . . establishes the jurisdictional
amount.’. . . Instead, courts may use their judicial experience and
common sense in determining whether the case stated in a complaint
meets federal jurisdictional requirements.” Roe, 613 F.3d at 1062
Johnson v. Blackburn, No. 2:16-CV-989, 2016 WL 5816114, at *1 (N.D. Ala. Oct.
5, 2016) (Bowdre, J.) (analyzing the amount in controversy requirement in a notice
of removal made within the 30-day period in Section 1446(b)(1)).
In their Notice of Removal, Defendants point to the policy of insurance at the
basis of this suit, which has dwelling coverage limits of $270,300, coverage limits of
$27,030 for other structures, and personal property coverage limits of $202,725.
(Doc. 1 at 17-18, ¶ 24). Defendants also point to Mr. Brown’s allegations in the
complaint that he had to “expend large sums” to determine the cause of the damage
and repair the damage; that he has suffered, and continues to suffer, loss of value and
damages to his home and other property; and that the loss of the full use and
enjoyment of his home has resulted in “emotional and mental distress.” Id. (citing
(Doc. 1-2) at ¶¶ 18, 36, 43). Mr. Brown also seeks punitive damages in Counts I-VI
of the Complaint. Mr. Brown has not challenged the Defendants’ assessment of the
amount in controversy. The court finds that Defendants have satisfied their burden
of demonstrating that the amount in controversy meets the jurisdictional threshold.
Fraudulent Joinder Principles
The dispute over satisfaction of the citizenship requirement in this case has to
do with whether Mr. Brown has fraudulently joined Mr. Taylor as a defendant in the
case. “[W]hen there is no possibility that the plaintiff can prove a cause of action
against the resident (non-diverse) defendant[,]” fraudulent joinder is established.
Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998). Relatedly,
if fraudulent joinder is established, then the resident defendant is subject to dismissal
as a party and its citizenship is disregarded for diversity requirement purposes. See
The Eleventh Circuit extensively addressed the issue of removal based on
diversity jurisdiction when a non-diverse defendant has allegedly been fraudulently
joined in Crowe v. Coleman, 113 F.3d 1536 (11th Cir. 1997). There, the court stated:
In a removal case alleging fraudulent joinder, the removing party has the
burden of proving that either: (1) there is no possibility the plaintiff can
establish a cause of action against the resident defendant; or (2) the
plaintiff has fraudulently pled jurisdictional facts to bring the resident
defendant into state court. Cabalceta v. Standard Fruit Co., 883 F.2d
1553, 1561 (11th Cir. 1989). The burden of the removing party is a
“heavy one.” B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir.
Unit A 1981).
Crowe, 113 F.3d at 1538.5
The standard is onerous because, absent fraudulent joinder, a plaintiff has the
absolute right to choose his forum. That is, courts must keep in mind that the plaintiff
is the master of his complaint and has the right to determine how and where he will
fight his battle. As Crowe further recognized:
This consequence makes sense given the law that “absent fraudulent
joinder, plaintiff has the right to select the forum, to elect whether to sue
joint tortfeasors and to prosecute his own suit in his own way to a final
Under the second prong of the fraudulent joinder test, the court must determine whether
the plaintiff has fraudulently pled facts relating to a party’s citizenship in an effort to avoid
diversity jurisdiction. No issue related to the second prong exists in this case. Accordingly, the
court limits its analysis to the first inquiry.
determination.” Parks v. The New York Times Co., 308 F.2d 474, 478
(5th Cir. 1962). The strict construction of removal statutes also
prevents “exposing the plaintiff to the possibility that he will win a final
judgment in federal court, only to have it determined that the court
lacked jurisdiction on removal,” see Cowart Iron Works, Inc. v. Phillips
Constr. Co., Inc., 507 F. Supp. 740, 744 (S.D. Ga. 1981) (quoting 14A
C. Wright, A. Miller & E. Cooper, Federal Practice and Procedures §
3721), a result that is costly not only for the plaintiff, but for all the
parties and for society when the case must be re-litigated.
Crowe, 113 F.3d at 1538.
To establish fraudulent joinder of a resident defendant, the burden of proof on
the removing party is a “heavy one[,]” see Crowe, 113 F.3d at 1538 (internal
quotation marks omitted) (quoting B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549
(5th Cir. Unit A 1981)), requiring clear and convincing evidence and particularity in
pleading. Parks, 308 F.2d at 478 (citing Barron and Holtzoff, Federal Practice and
Procedure, § 103, p. 478). The court in Crowe explained the framework for analyzing
fraudulent joinder as follows:
While “the proceeding appropriate for resolving a claim of fraudulent
joinder is similar to that used for ruling on a motion for summary
judgment under Fed. R. Civ. P. 56(b),” [B., Inc., v. Miller Brewing Co.,
663 F.2d 545, 549 n.9 (5th Cir., Unit A 1981)], the jurisdictional inquiry
“must not subsume substantive determination.” Id. at 550. Over and
over again, we stress that “the trial court must be certain of its
jurisdiction before embarking upon a safari in search of a judgment on
In Bonner v. Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh
Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed down prior
to October 1, 1981.
the merits.” Id. at 548-49. When considering a motion for remand,
federal courts are not to weigh the merits of a plaintiff’s claim beyond
determining whether it is an arguable one under state law. See id. “If
there is even a possibility that a state court would find that the complaint
states a cause of action against any one of the resident defendants, the
federal court must find that joinder was proper and remand the case to
state court.” Coker v. Amoco Oil Co., 709 F.2d 1433, 1440-41 (11th Cir.
1983), superseded by statute on other grounds as stated in Georgetown
Manor, Inc. v. Ethan Allen, Inc., 991 F.2d 1533 (11th Cir. 1993).
Crowe, 113 F.3d at 1538 (emphasis added).
In a later fraudulent joinder decision, the Eleventh Circuit elaborated:
The fact that the plaintiffs may not ultimately prevail against the
individual defendants because of an insufficient causal link between the
defendants’ actions and the plaintiffs’ injuries does not mean that the
plaintiffs have not stated a cause of action for purposes of the fraudulent
joinder analysis. In a fraudulent joinder inquiry, “federal courts are not
to weigh the merits of a plaintiff's claim beyond determining whether it
is an arguable one under state law.” Crowe, 113 F.3d at 1538.
Pacheco de Perez v. AT & T Co., 139 F.3d 1368, 1380-81 (11th Cir. 1998); see also
Tillman v. R.J. Reynolds Tobacco, 340 F.3d 1277, 1279 (11th Cir. 2003) (“[I]f there
is a possibility that a state court would find that the complaint states a cause of action
against any of the resident defendants, the federal court must find that the joinder was
proper and remand the case to the state court.”). As long as a plaintiff’s claim against
a non-diverse defendant is “colorable,” fraudulent joinder does not apply and the
action is due to be remanded. Pacheco de Perez, 139 F.3d at 1380.
When considering a fraudulent joinder claim, federal courts use state rather
than federal pleading standards. Stillwell v. Allstate Ins. Co., 663 F.3d 1329, 1334
(11th Cir. 2011) (“We must necessarily look to the pleading standard applicable in
state court, not the plausibility standard prevailing in federal court.”); Henderson v.
Washington Nat. Ins. Co., 454 F.3d 1278, 1281 (11th Cir. 2006) (“[T]he decision as
to the sufficiency of the pleadings is for the state courts, and for a federal court to
interpose its judgment would fall short of the scrupulous respect for the institutional
equilibrium between the federal and state judiciaries that our federal system
While the federal plausibility standard asks for “more than a sheer possibility
that a defendant has acted unlawfully,” the standard for a fraudulent joinder claim
under Alabama law is a notice pleading standard. Stillwell, 663 F.3d at 1333; Thomas
v. Williams, 21 So. 3d 1234, 1236, 1236 n.1 (Ala. Civ. App. 2008) (declining to apply
the Twombly standard because “we have notice pleading under Alabama’s Rules of
Civil Procedure”); ALA. R. CIV. P. 8, Committee Comments (“the prime purpose of
pleadings is to give notice”).
The standard is met if the “claim for relief gives to the opponent fair notice of
the pleader’s claim and the grounds upon which it rests,” and the complaint cannot
be dismissed it if contains “even a generalized statement of facts which will support
a claim for relief.” McKelvin v. Smith, 85 So. 3d 386, 389 (Ala. Civ. App. 2010)
(internal citations omitted). When applying the standard, factual allegations must be
viewed in the light most favorable to the plaintiff, and any uncertainties about the
applicable law must be resolved in the plaintiff’s favor. Crowe, 113 F.3d at 1538.
Fraudulent joinder must fail if even one claim could possibly state a valid cause of
action against even one defendant. Stillwell, 663 F.3d at 1332-33.
Mr. Brown’s Complaint asserts claims against Mr. Taylor for Negligent
Procurement of Insurance (Count I) and Breach of Contract To Procure Insurance
Mr. Brown’s Negligent Procurement of Insurance Claim
In Count One, Mr. Brown has asserted a negligent procurement of insurance
claim against Mr. Taylor. (Doc. 1-2 at 12-15, ¶¶ 21-31). Under Alabama law, a “claim
in tort alleging negligent failure of an insurance agent to fulfill a voluntary
undertaking to procure insurance . . . requires demonstration of the classic elements
of negligence, i.e., ‘(1) duty, (2) breach of duty, (3) proximate cause, and (4) injury.’”
Kanellis v. Pac. Indem. Co., 917 So. 2d 149, 155 (Ala. Civ. App. 2005) (citing Albert
v. Hsu, 602 So. 2d 895, 897 (Ala. 1992)). Once an insurance agent “undertakes to
procure insurance for a client,” the agent owes a duty “to exercise reasonable skill,
care and diligence in effecting” the coverage. Highlands Underwriters Ins. Co. v.
Elegante Inns, Inc., 361 So. 2d 1060, 1065 (Ala. 1978) (applying the elements of a
negligent procurement of insurance claim).
However, contributory negligence is a complete defense to a negligence claim
under Alabama law. Alfa Life Ins. Corp. v. Colza, 159 So. 3d 1240, 1248 (Ala. 2014)
(citing Mitchell v. Torrence Cablevision USA, Inc., 806 So. 2d 1254, 1257 (Ala. Civ.
App. 2000)). Applying Alabama’s strict contributory negligence standard to
procurement claims, the Alabama Supreme Court held that “negligent-procurement
claim[s] [are] barred by the doctrine of contributory negligence” and judgment as a
matter of law in favor of an agent is required “when documents available to the
insured clearly indicate that the insurance in fact procured for the insured is not what
the insured subsequently claims he or she requested the agent to procure.” Alfa, 159
So. 3d at 1253, 1255; see id. at 1252 (“By not reading the documents, they took a risk
and put themselves in danger’s way. We do not think it unreasonable to conclude as
a matter of law that, in this day and age, any adult of sound mind capable of executing
a contract necessarily has a conscious appreciation of the risk associated with
ignoring documents containing essential terms and conditions related to the
transaction that is the subject of the contract.”).
While Mr. Brown’s response acknowledges that Defendants have raised a
contributory negligence defense, he has in no way attempted to distinguish Alfa from
its applicability in this case. Instead, Mr. Brown relies on Am. Furniture Galleries,
Inc. v. McWane, Inc., 477 So. 2d 369, 372-73 (Ala. 1985) to support the validity of
his negligent procurement claim. However, American Furniture did not concern an
insurance dispute and involved neither an insurance agent nor a negligent
procurement of insurance claim. As the Alabama Supreme Court directly addressed
negligent procurement of insurance claims brought against insurance agents in Alfa,
a case more recent than American Furniture and more directly on point, the court
finds that Alfa is binding on this action.
The Alabama Supreme Court’s holding in Alfa is limited to negligent
procurement of insurance claims and does not expressly extend to breach of contract
to procure insurance claims.7 Applying Alfa to the facts of this case, the court notes
that Mr. Brown admits the insurance policy was in full force and effect at all times
relevant to this action, so he had a duty to read the documents available to him. (Doc.
The court in Alfa did note, however, that “it would seem more unreasonable to allow
plaintiffs to prevail on negligent-procurement claims in spite of their failure to read documents
that put them on notice of the extent of their insurance coverage when that same failure to read
already bars a fraud or breach-of-contract claim based on the same essential facts.” Id. at 1252 n.
9. However, the breach of contract case cited by the court in Alfa concerned a breach of contract
claim against an insurer and did not address a breach of contract to procure insurance claim
brought against an agent. See Nance v. Sutherland, 79 So. 3d 612, 620 (Ala. Civ. App. 2010)
(finding that the insureds waived their argument that the insurance agent both owed and breached
a duty to advise them of the scope of coverage).
1-2 at 10, ¶7).8 Therefore, as a matter of law, Mr. Brown cannot recover against Mr.
Taylor as to this claim. Mr. Brown’s Negligent Procurement claim against Mr. Taylor
is due to be DISMISSED.
Mr. Brown’s Breach of Contract To Procure Insurance Claim
In Count Five, Mr. Brown has asserted a breach of contract to procure
insurance claim against Mr. Taylor. (Doc. 1-2 at 23-25, ¶¶ 49-53). Mr. Taylor urges
the court to dismiss this claim because (1) he alleges that Mr. Brown’s breach of
contract to procure insurance and negligent procurement of insurance claims are
mutually exclusive actions, and (2) he argues that Mr. Brown’s breach of contract to
procure insurance claim is defeated by his pending breach of contract and bad faith
claims against State Farm. (Doc. 3 at 9-11).
Mr. Brown failed to respond to Mr. Taylor’s Motion To Dismiss on his own
initiative, and only after the Court’s (doc. 12) Order did he file a Response. His
Response, however, only addresses the negligent procurement of insurance claim and
fails to present any argument whatsoever as to why he believes he has sufficiently
Mr. Brown also briefly alleges that Mr. Taylor had a “duty of continued monitoring” of
the insurance coverage to “ensure that Plaintiff’s insurance would adequately protect the subject
dwelling and related property relative to Plaintiff’s particular needs.” Id. at 13, ¶ 26. This is a
legal argument, and Mr. Brown provides no factual allegations, even cursorily, to support his
claim. He also cites to no Alabama case law recognizing that an agent has a duty of continued
monitoring. Regardless, this claim is also barred by Mr. Brown’s contributory negligence, which
is a complete defense to his negligence claim in this case.
established a breach of contract to procure insurance claim. However, due to the
impact that this claim has on the court’s fraudulent joinder analysis, the court will
analyze Mr. Brown’s Breach of Contract To Procure Insurance claim as if he had
argued in favor of its validity in his Response.
Once parties have come to an agreement on the procurement of insurance, an
agent must exercise “reasonable skill, care, and diligence in effecting coverage.”
Timmerman Ins. Agency v. Miller, 285 Ala. 82, 85 (1969). Under Alabama law,
“when an insurance agent or broker, with a view to compensation, undertakes to
procure insurance for a client, and unjustifiably or negligently fails to do so, he
becomes liable for any damage resulting therefrom.” Id. When the agent fails in the
fiduciary duties he assumes, he can be sued either for breach of contract or in tort.
Highlands Underwriters Ins. Co. v. Elegante Inns, Inc., 361 So. 2d 1060, 1065 (Ala.
Mr. Taylor first argues that negligent procurement claims brought under tort
and contract law are mutually exclusive. Mr. Taylor cites to First Ala. Bank of
Montgomery, N.A. v. First State Ins. Co., 899 F.2d 1045, 1068 (11th Cir. 1990)
(applying Alabama law)9 for his proposition that a party may only be liable in contract
Mr. Taylor also references Blumberg v. Touche Ross & Co., 514 So. 2d 922, 925 (Ala.
1987) to support his argument that these two types of claims are mutually exclusive. However,
this case found that accountant liability may arise in either contract or in tort and is not directly
if he or she breaches an express promise to use care. However, First Alabama merely
held that an agent or broker can assume additional contractual duties by express
agreement, not that a party may only sue under contract law when an express promise
has been made. Id. at 1068; see also id. at 1067 (“Alabama law holds that when one
contracts with another and expressly promises to use due care or to do an act, he is
liable in both tort and contract when his negligence injures the other party.”).
Therefore, Mr. Brown is not barred from bringing a breach of contract to
procure insurance claim merely because he has also brought a negligent procurement
of insurance claim against Mr. Taylor. Further, because Mr. Brown’s negligent
procurement of insurance tort claim fails as a matter of law, the court does not need
to determine whether these two specific claims are mutually exclusive.
Second, Mr. Taylor argues that Mr. Brown’s breach of contract to procure
adequate insurance claim is defeated by his pending breach of contract and bad faith
claims. The court agrees that, by alleging breach of contract and other contract-based
claims against State Farm, Mr. Brown concedes that insurance was in fact procured.
This is not a situation where Mr. Taylor altogether failed to procure any insurance for
Mr. Brown, nor is it the case that, upon failing to procure that insurance, Mr. Taylor
negligently neglected to notify Mr. Brown of his inability to procure coverage. Mr.
relevant in this insurance case.
Brown admits that there was a policy in full force and effect. (Doc. 1-2) at 10, ¶7.
Rather, Mr. Brown argues, like in his negligent procurement claim, that Mr. Taylor
breached an agreement between them by procuring insurance that was not adequate
because it did not cover all types of losses that he requested.
Under Alabama law, “[i]t is the rule that if the policy is accepted by the
insured, he is bound thereby even though the policy does not correspond to the
preliminary negotiations. The oral negotiations for the policy are merged into the
accepted policy.” Langley v. Mut. Fire, Marine & Inland Ins. Co., 512 So. 2d 752,
766 (Ala. 1987) (citing Smith v. Protective Life Ins. Co., Inc., 355 So. 2d 728, 730
(Ala. Civ. App. 1978)) (applying the merger doctrine to a breach of contract to
procure insurance claim), overruled on other grounds by Hickox v. Stover, 551 So.
2d 259 (Ala. 1989). The principle of the merger doctrine is “well embedded in our
law.” Langley, 512 So. 2d at 766. “It is familiar law that a contract of insurance is
essentially like all other contracts, and governed by general rules of contract . . . all
parol negotiations, understandings, and agreements are merged into the written
policy.” Farmers & Merchants Bank v. Home Ins. Co., 514 So. 2d 825, 831 (Ala.
1987) (citing Hartford Fire Ins. Co. v. Shapiro, 270 Ala. 149, 153-55 (Ala. 1960)).
The merger doctrine has been applied to breach of contract to procure
insurance claims by the Alabama Supreme Court. Langley, 512 So. 2d at 766. As a
district court within this Circuit has summarized,
[D]ecisions issued by the Alabama Supreme Court and by the Court of
Appeals for the Eleventh Circuit applying Alabama law have
consistently applied the merger doctrine. See, e.g., Sexton v. Liberty Nat.
Life Ins. Co., 405 So. 2d 18, 22 (Ala. 1981) (“It is the rule that if the
policy is accepted by the insured, he is bound thereby even though the
policy does not correspond to the preliminary negotiations. The oral
negotiations for the policy are merged in the accepted policy. . . . This
principle is well embodied in our law.”) (quoting Smith v. Protective
Life Ins. Co., 355 So. 2d 728, 730 (Ala. Civ. App. 1978)) (relying on
Hartford Fire) (other citations omitted); Farmers & Merchants Bank v.
Home Ins. Co., 514 So. 2d 825, 830–31 (Ala. 1987) (“Here, however,
the written policy of insurance was issued subsequent to the agent's
allegedly making oral representations that were contrary to the
provisions of the written insurance contract. The instant facts, therefore,
do invoke the application of the doctrine of merger, thereby precluding
any consideration of the alleged prior representations of [the insurance
agent] as to coverage.”) (relying on Hartford Fire); Langley v. Mut.
Fire, Marine, and Inland Ins. Co., 512 So. 2d 752, 766 (Ala.1987)
(same) (overruled on other grounds); First Ala. Bank of Montgomery
N.A., v. First State Ins. Co., 899 F.2d 1045, 1069–70 (11th Cir. 1990)
(applying Alabama law) (same).
Concrete Metal Forms, Inc. v. Cole-Farley & Associates, Inc., 2000 WL 1848162,
at *5 (S.D. Ala. Dec. 6, 2000).
However, an insurance broker or agent can assume additional duties by
express agreement. First Alabama, 899 F.2d at 1068-69. Whether an agent or broker
“assumes additional responsibilities depends on the relationship between the parties.”
Id. at 1068. In First Alabama, the broker assumed additional express duties after
giving an oral presentation and submitting a written proposal in order to become the
insured’s exclusive insurance broker. Id. The Eleventh Circuit held that the merger
doctrine did not bar the insured’s breach of contract claim against the broker because
“this was not merely a contract to procure insurance. [The broker] agreed to ‘provide
the expertise necessary to meet [the insured]’s needs’” by shopping the market and
making the insured aware of all alternatives. Id. at 1068-9 (emphasis added).
In his Complaint, Mr. Brown claims he intended that any loss caused by
lightning or other peril would be covered. (Doc.1-2 at 10, ¶ 10).10 He alleges that Mr.
Taylor agreed to “exercise reasonable skill, care, and diligence in effecting the
coverage needed by plaintiff” and “breached said contract to procure adequate
insurance coverage as was evidenced by Defendant State Farm’s failure to pay for any
damages caused by lightning.” Id. at 23, ¶ 50 and 24, ¶ 52. Mr. Brown has not
alleged, however, that Mr. Taylor assumed or undertook any additional duties beyond
obtaining the policy that was in fact procured. Unlike in First Alabama, where the
insurer held himself out to be the insured’s exclusive insurance broker, this case
merely involves a breach of contract to procure insurance claim, which is barred by
Mr. Brown’s Complaint seeks damages for the loss he suffered when lightning struck a
tree next to his home, causing damages to his foundation wall and allowing water to enter the
dwelling and cause further significant damage. (Doc. 1-2 at 10, ¶ 11). However, he alleges in
Count Five that, as a direct result of a material breach of duty by Mr. Taylor, he has “suffered
damages, including damage to his home and other property as a result of the burglary.” Id. at 24,
¶ 53 (emphasis added). Mr. Brown has not pled any factual allegations of burglary, and the
entirety of the complaint concerns whether loss resulting from a lightning strike should be
covered, so the court can only assume that this allegation was made in error.
Alabama’s merger doctrine.
Even under Alabama’s notice pleading standards, there is no possibility that
an Alabama state court could find, based on the Complaint, that Mr. Taylor has
sufficiently pled this claim. Accordingly, Mr. Brown’s Breach of Contract to Procure
Insurance Claim against Mr. Taylor (Count V) is due to be DISMISSED.
C. Mr. Brown’s Remaining Claims
Mr. Brown has also asserted claims against State Farm for Breach of Contract
(Count II); Bad Faith Refusal To Investigate And/Or Pay a Valid Claim (Counts III
and IV); and Negligent Hiring, Training, Monitoring, and Supervision of Licensed
Insurance Agents (Count VI).
The language of Counts II, III, IV, and VI is slightly ambiguous as to whether
Mr. Brown intended to assert these claims against State Farm, fictitious defendants,
and Mr. Taylor, or only against State Farm and fictitious defendants.11 Likely out of
an abundance of caution, Mr. Taylor’s Motion To Dismiss also argues that these three
claims can not be maintained against him, to the extent that Mr. Brown intended to
do so. Like the breach of contract to procure insurance claim, Mr. Brown did not
Cf. (Doc. 1-2) at ¶ 35 (“Defendant, State Farm and/or fictitious Defendants described
herein, breached the contract with the Plaintiff.”) with id. at ¶ 34 (alleging that all premium
payments were made other than those which were waived or otherwise discharged “as a result of
the Defendant State Farm, and/or fictitious defendants and/or Defendant Donald Taylor and/or
Don Taylor’s Agency’s and/or fictitious defendants material breach as alleged herein”).
address his claims in Counts II, III, IV, and VI in his Response and failed to clarify
whether he intended to pursue these four claims against Mr. Taylor as well as State
Regardless, Mr. Brown has not asserted a viable claim for Breach of Contract
or Bad Faith against Mr. Taylor. Under Alabama law, claims for breach of contract
and bad faith based on an insurance contract may only be brought against a party to
that contract. Ligon Furniture Co. v. O.M. Hughes Ins., Inc., 551 So. 2d 283, 285
(Ala. 1989). The complaint does not allege that Mr. Taylor was a party to the
insurance contract. In fact, as Mr. Taylor points out, Mr. Brown readily admits that
the insurance contract was issued by State Farm to Mr. Brown. (Doc. 1-2 at 26, ¶33)
(“A policy of insurance existed between the Plaintiff and the Defendant, State Farm
and/or fictitious defendants described therein . . . .”). Therefore, there is no possibility
that Mr. Brown can prove either of these claims against Mr. Taylor.
Additionally, to the extent that Count VI is alleged against Mr. Taylor, Mr.
Brown also cannot prevail on his negligent hiring and supervision claim as to Mr.
Taylor. A negligent hiring and supervision claim may only be maintained against an
employer, see Ledbetter v. United Am. Ins. Co., 624 So. 2d 1371, 1373 (Ala. 1993),
and the Complaint makes clear that Taylor acts as an agent or employee, rather than
an employer. See (Doc. 1-2 at 19, ¶ 55) (“It is alleged that Defendant State Farm
negligently hired, supervised, monitored, trained and retained its agents and/or
employees, including Defendant Donald Taylor.”). As the Complaint does not allege
that Mr. Taylor was an employer, Mr. Taylor is not a proper defendant for Mr.
Brown’s negligent hiring, training, monitoring, and supervision claim.
For all of the foregoing reasons, there is no possibility that Mr. Brown can state
a viable claim under Alabama law against Mr. Taylor. Therefore, Mr. Taylor was
fraudulently joined, and his citizenship is disregarded for purposes of evaluating
diversity jurisdiction. Because complete diversity exists between Mr. Brown and
State Farm, and as the amount in controversy requirement has been met, this court
retains jurisdiction over this action.
Mr. Taylor’s Motion To Dismiss (doc. 3) is hereby GRANTED, and all claims
against Mr. Taylor are hereby DISMISSED WITHOUT PREJUDICE. The Clerk
of Court is hereby DIRECTED to terminate Mr. Taylor as a party defendant.
DONE and ORDERED this the 7th day of February, 2017.
VIRGINIA EMERSON HOPKINS
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?