Smith v. State Farm Fire and Casualty Insurance Company et al

Filing 16

OPINION AND ORDER Defendants motion to dismiss is GRANTED. Accordingly, Chris Nielson is dismissed from this case. Because Nielsons dismissal leaves complete diversity, the motion to remand is DENIED. Signed by Judge Rudy Lozano on 11/2/12. (kjp)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
SCOTT C. SMITH,

)
)
)
)
)
)
)
)
)
)

Plaintiff,
vs.
STATE FARM FIRE & CASUALTY
INSURANCE COMPANY, et al.,
Defendants.

NO. 2:12-CV-260

OPINION AND ORDER
This matter is before the Court on: (1) Defendants’ Motion to
Dismiss a Party Pursuant to Federal Rule of Civil Procedure 21,
filed on July 6, 2012; and (2) Motion for Remand, filed by
Plaintiff, Scott C. Smith, on August 30, 2012. For the reasons set
forth

below,

Defendants’

motion

to

dismiss

is

Accordingly, Chris Nielson is dismissed from this case.

GRANTED.
Because

Nielson’s dismissal leaves complete diversity, the motion to remand
is DENIED.

BACKGROUND
On June 6, 2012, Plaintiff, Scott C. Smith, brought suit
against his insurer, State Farm Fire and Casualty Company1 (“State
Farm”), and his State Farm insurance agent, Chris Nielson, in
1

Incorrectly named as State Farm Fire and Casualty Insurance Company.

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Indiana state court.

This suit centers around State Farm’s

handling of Smith’s fire loss claim and Agent Chris Nielson’s
alleged representations made to Smith regarding how State Farm
handles claims.
A month after suit was filed, Defendants filed a Notice of
Removal, removing this case from state court to federal court based
on diversity of citizenship jurisdiction.

The Notice identified

Smith

Farm

as

a

citizen

of

Indiana,

State

corporation and Nielson as an Indiana citizen.

as

an

Illinois

Despite Smith and

Nielson both having Indiana citizenship, State Farm maintained that
complete

diversity

is

not

destroyed

because

fraudulently joined as a defendant in this action.

Nielson

was

As such, State

Farm argued Nielson should be dismissed pursuant to Rule 21 of the
Federal Rules of Civil Procedure.
In line with its Notice, Defendants filed a motion to dismiss
Nielson pursuant to Rule 21. In response, Smith filed a motion for
remand, arguing that Nielson is a proper defendant and, therefore,
there is no diversity of citizenship jurisdiction.

As such, Smith

seeks to remand this case back to state court.
This Court, then, is to decide whether the complaint states a
claim against Nielson.

If it does, then a remand to state court

would be proper due to lack of diversity jurisdiction.

If the

complaint does not state a cognizable claim against Nielson, then
this Court will dismiss him and allow this litigation to continue

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here.

DISCUSSION
Fraudulent Joinder
State Farm argues that Nielson should be dismissed from this
case because he was fraudulently joined as a defendant.

Judge

Miller has recently opined on the fraudulent joinder doctrine and
succinctly stated that:
The fraudulent joinder doctrine allows a court
considering removal to disregard, for jurisdictional
purposes, the citizenship of certain non-diverse
defendants, assume jurisdiction over a case, dismiss the
non-diverse defendants, and thereby retain jurisdiction.
To establish fraudulent joinder, a defendant must
demonstrate that , after resolving all issues of fact and
law in favor of the plaintiff, the plaintiff cannot
establish a cause of action against the in-state
defendant. Framed a different way, the district court
must ask whether there is any reasonable possibility that
the plaintiff could prevail against the non-diverse
defendant. In conducting this analysis, a district court
must turn to state law to determine whether the plaintiff
has any reasonable possibility of success.
Haire v. State Farm Fire & Casualty Company, No. 1:11-CV-222, 2011
WL 473850 *1 (N.D. Ind. Oct. 5, 2011).

To determine if Nielson’s

dismissal is warranted under the fraudulent joinder doctrine, the
Court must evaluate the allegations against Nielson.

Allegations of the Complaint against Nielson
Count IV of the complaint relates to State Farm agent Nielson.
It provides:

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Count IV- Agent’s Negligence and Misrepresentation
21.

Chris Nielson misrepresented State Farm’s policy to the
Plaintiff, who had a long history with them and had other
insurance policies provided by them on earlier occasions.

22.

The Plaintiff justifiably relied on Chris Nielson’s
representations about the insurance policy, to his severe
detriment at the time.

23.

Upon information and belief, Chris Nielson made the
representations for the specific purpose of having Plaintiff
purchase the insurance through State Farm, when he knew or
should have known that the statements were completely false,
and that State Farm would act in violation of the policy after
a loss event.

24.

Plaintiff has been and continues to be damaged by the acts of
the defendant.

25.

Plaintiff has been further damaged in that he has not been
able to replace his home or possessions, is currently paying
rent, and remains effectively evicted from the home he was
accustomed to before the loss.

In addition to the pleadings, Smith has provided an affidavit
regarding his allegations against Nielson.

An evaluation of

fraudulent joinder is sometimes limited to the review of the
pleadings. However, the Seventh Circuit has held that a diversityrelated

and

uncontroverted

affidavit,

such

as

Smith’s,

is

admissible to consider in deciding whether fraudulent joinder has
been established.

Faucett v. Ingersoll-Rand Mining & Machinery

Co., 960 F.2d 653, 655 (7th Cir. 1992).

State Farm does not

contest the consideration of Smith’s affidavit.
Court

will

consider

Smith’s

affidavit,

relevantpart:

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Accordingly, this

which

provides,

in

3.

In 2007 or 2008, State Farm agent Chris Nielson made
representations to me that State Farm was a company that
honored claims in a prompt, fair and reasonable manner.

4.

At that time agent Chris Nielson instructed me that should I
make a claim, after providing information about the loss,
State Farm would timely honor the claim and made a prompt,
fair and reasonable settlement.

5.

I have had insurance for many years and specifically sought
this information before I bought the insurance.

6.

I relied on Chris Nielson, and kept up with him on the
insurance between the time I purchased it and the date of
loss, July 16, 2010.

7.

I dealt with Chris Nielson after the loss and considered him
the contact person from State Farm.

8.

I considered [Nielson] the contact person because he wrote the
checks, assisted with the inventory and proof of loss, and
insisted throughout that despite the complete loss of my home
and perusal property, State farm would take care of me and my
family.

9.

Even though the fire happened in July, 2010, and the policy
provides that appraisal is available to either party when they
cannot agree on the amount of the loss, Chris Nielson
discouraged me from going forward with the insurance
appraisal, even while representing that State Farm would be
fair, prompt and reasonable in paying the claim.
***

11.

Even after the 13 month delay and the determination by all of
the amount of the loss, State Farm did not pay the amount of
the loss, and instead designated their own less amounts to be
paid using its own determination of Actual cash Value that was
not part of any State Farm claim before then, was not part of
the disputed amount during the Appraisal, and was not part of
the appraisal in which their own Appraiser agreed about the
amount of loss.

12.

If I had known that State Farm would act as it has acted after
my fire loss, I would not have gotten State Farm Insurance for
coverage from my home or anything else.

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13.2 Chris Nielson acted as my special and personal advisor in the
insurance purchase and in the claim process.
(Aff. Chris Nielson).

The Fraudulent Misrepresentation Claim Against Agent
Nielson Does Not State a Claim for Which Relief Can be Granted
In Indiana, the elements of fraudulent misrepresentation are
that: (1) the defendant made false statements of past or existing
material fact; (2) the defendant made the statements knowing them
to be false or made them with recklessly without knowledge of their
truth or falsity; (3) the defendant made the statements to induce
the plaintiff to act upon them; (4) the plaintiff justifiably
relied and acted upon the statements; and (5) the plaintiff
sustained damages as a proximate result.

Haire, 2011 WL 4732850,

at *2 (citing Vanderwier v. Baker, 937 N.E.2d 396, 398 (Ind. Ct.
App. 2010).

“Under Indiana law, a claim for fraud cannot be based

on a misrepresentation of law or on a promise to be performed in
the future.

Additionally, ‘mere opinion or prophecy cannot be the

basis for an action of fraud.’” Id. (quoting American Family Mut.
Ins. v. Jeffrey, NO. IP 98-1085, 2000 WL 1206623, at *7 (S.D. Ind.
Aug. 11, 2000)(also quoting Medtech Corp. v. Indiana Ins. Co.,
N.E.2d 844, 848 (Ind. Ct. App. 1990)).
The factual allegations against Nielson in this case are
virtually identical to the allegations Kimberly Haire made against
2

Misnumbered as a successive number 12 in the affidavit.

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her State Farm agent, Paul Strepp, in Haire v. State Farm Fire &
Casualty Company, No. 1:11-CV-222, 2011 WL 4732850 (N.D. Ind. Oct.
5, 2011).

In Haire, the plaintiff alleged against agent Paul

Strepp:
15.

Prior to June 11, 2009, Plaintiff obtained and maintained her
insurance from Paul Strepp, CLU, an agent of State Farm Fire
& Casualty Company, who sold her the insurance policy in this
case.

16.

As agent for State Farm, Paul Strepp misrepresented State Farm
to Plaintiff as a company that acts promptly and fair after a
loss, but in fact did neither in this claim.

17.

In addition, as agent for State Farm, Paul Strepp
misrepresented State Farm at the time Plaintiff left her
former insurer, relying on the misrepresentations as the basis
for changing insurance.

18.

Plaintiff justifiably relied on Paul Strepp's representations
about State Farm.

19.

Upon information and belief, Paul Strepp's Agency made the
representations for the specific purpose of having Plaintiff
purchase the insurance through them, when it knew or should
have known that the statements were false, and that based on
State Farm's loss history it would act in violation of the
policy after a loss event.

20.

As a direct and proximate result of Paul Strepp's
misrepresentations, Plaintiff has suffered damages for the
value of her insured home, personal property, and for
additional living expenses.

21.

Plaintiff has been further damaged in that she has not been
able to rebuild her home, has not been able to remediate the
property that can be remediated, and remains effectively
evicted from the home that she was accustomed to before the
loss.

Haire, 2011WL 4732850 at * 2.
In Haire, Judge Miller found that a misrepresentation claim could
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not be maintained against agent Paul Strepp.

Judge Miller held

that “[a] statement that State Farm ‘acts promptly and fair[ly]
after a loss’ is an opinion about State Farm rather than a
statement of fact, and doesn’t relate to a past or existing fact,
but rather to some unforseen future event.”

Id. at *3.

Like the allegations against the agent in Haire, here Smith
complains that Nielson made misrepresentations that State Farm was
a company that honored claims in a prompt, fair and reasonable
manner.

Just as Judge Miller found in Haire, this Court, too,

finds such alleged statements are insufficient to give rise to a
misrepresentation claim. Indeed, any such statement is “an opinion
about State Farm rather than a statement of fact, and doesn’t
relate to a past or existing fact, but rather to some unforseen
future event.”

Id. at *3; see also Mudd v. Ford Motor Co., 178

Fed. Appx. 545, 547 (7th Cir. 2006).

This conclusion likely comes

as little surprise to the parties, as both should be rather
familiar with the decision in Haire.

Indeed, State Farm was a

party to that litigation and Plaintiff’s counsel here was also the
plaintiff’s counsel in Haire.

The Complaint Does Not Allege a Separate Negligence Claim
Smith

titles

Misrepresentation.”
Count

IV

contains

Count

IV

as

“Agent’s

At first glance,
separate

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two

Negligence

and

the title suggests that
claims;

a

claim

for

misrepresentation and a separate claim for negligence.

It is true

that negligence actions and actions of misrepresentation can be
maintained against insurance agents in certain situations. See
e.g.,

Wyrick

v.

Hartfield,

654

N.E.2d

913

(Ind.

Ct.

App.

1995)(noting that there exists a duty on the part of insurance
agents

to

procure

insurance).

However,

in

revisiting

the

allegations of the complaint, it is evident that Smith’s claim
centers solely around Nielson allegedly telling Smith that State
Farm

had

a

fair

and

reasonable

process

of

handling

claims.

Tellingly, in his brief, after reciting his allegations, Smith
argues that his complaint is sufficient to state a claim for
“actual misrepresentation and negligent misrepresentation.”
13, p.7).

(DE#

Thus, it is quite apparent that the “negligence”

referred to in the heading of Count IV relates to Nielson’s
alleged misrepresentations.

Again, no matter if made negligently

or intentionally, Nielson’s statements that State Farm would act in
a prompt, reasonable and fair manner are not actionable.
Moreover, this Court finds no stand alone claim of negligence
to be alleged against Nielson in the complaint.

This is not

surprising as Smith does not argue that one exists in his brief.
Smith’s mere mention of the word negligence, without any supporting
argument, case citation or development, is not enough to carry the
day.

This Court declines to speculate and construct Smith’s

potential arguments. It is not this Court’s job to sift the record

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and make the parties’ arguments for them.

See, e.g. United States

v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991)(“Judges are not like
pigs, hunting for truffles buried in” the record). Smith’s failure
to develop his arguments is fatal to any stand alone claim for
negligence.
State Farm and Nielson have shown that there is no reasonable
probability that Smith could prevail against Nielson.

Therefore,

agent Nielson is DISMISSED as a defendant, making his citizenship
irrelevant to federal diversity jurisdiction upon removal. Because
Nielson’s

dismissal

leaves

complete

diversity,

remand

is

inappropriate.

CONCLUSION
For the reasons set forth above, Defendants’ motion to dismiss
is GRANTED.
case.

Accordingly, Chris Nielson is dismissed from this

Because Nielson’s dismissal leaves complete diversity, the

motion to remand is DENIED.

DATED:

November 2, 2012

/s/RUDY LOZANO, Judge
United States District Court

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