Brown et al v. Indemnity Insurance Company of North America et al
Filing
9
MEMORANDUM OPINION & ORDER: IT IS ORDERED that Plaintiff's 6 MOTION to Remand to State Court is DENIED. Signed by Judge Joseph M. Hood on 7/14/2017.(KM)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
BRUCE BROWN, et al.,
Plaintiffs,
v.
INDEMNITY INSURANCE COMPANY
OF NORTH AMERICA, et al.,
Defendants.
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Civil Case No.
17-cv-00193-JMH
MEMORANDUM OPINION & ORDER
***
This matter is before the Court upon Plaintiffs’ Motion to
Remand [DE 6].
Defendants have filed a Response [DE 7], and
Plaintiffs have filed a Reply in further support of their Motion
[DE 8].1
On or about August 9, 2015, Plaintiffs’ Woodford County
barn caught fire resulting in damage to the barn.
Plaintiffs
had a contract of insurance with Defendant Indemnity Insurance
Company of North America (“IICNA”). IICNA retained an insurance
adjuster, Defendant Adam Rowe, to adjust the loss. On or about
August
11,
2015,
Rowe
estimate to replace it.
1
inspected
the
barn
and
generated
an
He returned to reinspect the barn on a
In their Response [DE 7], Defendants have asked the Court to disregard
Plaintiffs’ Reply on the grounds that Plaintiffs’ Motion to Remand “fails” to
address any of the legal authority or argument set forth in Defendants’
Notice of Removal.
The Court declines to do so.
Defendants may have made
efforts to head Plaintiffs off at the pass, so to speak, but the Court will
not cut off the process available to Plaintiffs through motion practice in
this instance.
number of occasions.
Ultimately, IICNA issued payment for some
aspects of damage to the barn but refused to provide coverage
for reconditioning and repainting purlins in the roof of the
barn allegedly damaged by the fire.
Plaintiffs demanded that
IICNA cover their claim for damage to the purlins on January 19,
2016, and IICNA instructed Rowe to reinspect the purlins to
determine whether coverage should be provided.
Rowe hired a
third-party laboratory to reinspect the purlins and, with an
employee of the laboratory, reinspected the purlins on February
25, 2016.
In reliance on those inspections and reports, IICNA
continues to deny Plaintiffs’ claim concerning the purlins.
Plaintiffs
are
domiciled
citizens of Kentucky.
in
Woodford
County
and
are
IICNA is an insurance company formed
under the laws of Pennsylvania and is not a citizen of Kentucky.
Rowe
is
domiciled
in
Jefferson
County,
Kentucky,
and
is
a
citizen of Kentucky for the purposes of evaluating jurisdiction
before this Court.
Defendant IICNA removed this action from
Woodford Circuit Court to this Court on April 28, 2017, on the
grounds that Rowe was fraudulently joined in this action and,
thus, his citizenship is irrelevant in determining the Court’s
jurisdiction over the matter because he is a nominal party.
Ultimately, the Court concludes that Plaintiffs have not
asserted
colorable
any
bad
factual
faith
averments
claim
of
against
2
wrongdoing
the
to
non-diverse
support
a
defendant,
Rowe. He has been fraudulently joined. As a result, there is
complete diversity, and this Court has jurisdiction over this
matter for the reasons explained below.
The Motion to Remand
will be denied.
I.
A case filed in state court is removable only if it could
have originally been brought in federal court. See 28 U.S.C. §
1441(a) (“[A]ny civil action brought in a State court of which
the
district
courts
of
the
United
States
have
original
jurisdiction[ ] may be removed ... to the district court of the
United States for the district and division embracing the place
where such action is pending.”); Lincoln Prop. Co. v. Roche, 546
U.S. 81, 83, 126 S.Ct. 606, 163 L.Ed.2d 415 (2005) (“[Section]
1441 ... authorizes removal of civil actions from state court to
federal court when the action initiated in state court is one
that could have been brought, originally, in federal district
court.”). Pursuant to 28 U.S.C. § 1332, federal district courts
have original jurisdiction over civil actions between citizens
of
different
$75,000.00,
states
where
exclusive
of
the
amount-in-controversy
interest
and
costs.
28
exceeds
U.S.C.
§
1332(a). The “statute has been interpreted to demand complete
diversity, that is, that no party share citizenship with any
opposing party.” Caudill v. N. Am. Media Corp., 200 F.3d 914,
916
(6th
Cir.
2000).
The
burden
3
of
establishing
diversity
jurisdiction is on the removing party. Coyne ex rel. Ohio v. Am.
Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999).
An exception to the complete-diversity requirement arises
where a non-diverse defendant has been fraudulently joined. See
id. (“[The Sixth Circuit] has recognized that fraudulent joinder
of non-diverse defendants will not defeat removal on diversity
grounds.”).
A
case
need
not
be
remanded
as
the
result
of
fraudulent joinder if there is no “reasonable basis” to expect
that the plaintiff's claims against the non-diverse defendant
could succeed under state law. Id. (citing Alexander v. Elec.
Data Sys. Corp., 13 F.3d 940, 943 (6th Cir. 1994)). Although the
actual motive of the plaintiff is irrelevant to the fraudulent
joinder inquiry, Jerome–Duncan, Inc. v. Auto–By–Tel Mktg. Corp.,
176 F.3d 904, 907 (6th Cir. 1999), this test serves as “a proxy
for
establishing
plaintiff
has
no
the
hope
plaintiff's
of
fraudulent
recovering
against
intent.
the
If
the
non-diverse
defendant, the court infers that the only possible reason for
the plaintiff's claim against [that defendant] was to defeat
diversity
and
prevent
removal.”
Smith
v.
SmithKline
Beecham
Corp., No. 11–56–ART, 2011 WL 2731262, at *5 (E.D. Ky. July 13,
2011) (citation and internal quotation marks omitted).
In cases
of
disputed
fraudulent
joinder,
the
Court
“must
resolve
all
questions of fact and ambiguities in the controlling...state law
in favor of the nonremoving party,” and “[a]ll doubts as to the
4
propriety of removal are resolved in favor of remand.” Coyne,
183 F.3d at 493 (internal quotation marks omitted). The removing
party
bears
the
“heavy”
burden
of
establishing
fraudulent
joinder. Walker v. Phillip Morris USA, Inc., 443 F. App'x 946,
953 (6th. Cir. 2011); Alexander v. Elec. Data Sys. Corp., 13
F.3d
940,
949
(6th
Cir.
1994).
“The
burden
of
proving
fraudulent joinder is even more stringent than the motion to
dismiss standard under Fed. R. Civ. P. 12(b)(6).” Gibson v. Am.
Mining Ins. Co., No. 08-119-ART, 2008 WL 4602747, at *5 (E.D.
Ky. Oct. 17, 2008) (citing Batoff v. State Farm Ins. Co., 977
F.2d 848, 852 (3d Cir. 1992)).
II.
Plaintiffs have averred common law negligence and bad faith
claims under both the common law and KRS 304.12-230 and 304.12235, part of Kentucky’s Unfair Claims Settlement Practices Act
(“UCSPA”), against IICNA and Rowe.
The UCSPA requires, among
other things, reasonably prompt acknowledgment and action upon
communication with respect to claims arising under an insurance
policy and that “[a]ll claims arising under the terms of any
contract of insurance shall be paid to the named insured person
or health care provider not more than thirty (30) days from the
date upon which notice and proof of claim, in the substance and
form required by the terms of the policy, are furnished the
insurer.” KRS 304.12-235(1). KRS 304.12-235(2) further provides
5
that, “[i]f an insurer fails to make a good faith attempt to
settle a claim within the time prescribed in subsection (1) of
this
section,
the
value
of
the
final
settlement
shall
bear
interest at the rate of twelve percent (12%) per annum from and
after the expiration of the thirty (30) day period.”
Finally,
subsection
fees
in
courts
of
(3)
provides
for
recovery
of
attorneys
certain circumstances.
The
UCSPA
does
not
define
“person,”
and
the
Kentucky have yet to clearly determine whether claims under the
USCPA can be asserted against claims adjusters such as Rowe.
See Davidson v. Amer. Freightways, Inc., 25 S.W.3d 94 (Ky. 2000)
(holding
that
the
USPCA
has
no
application
to
an
uninsured
entity under no contractual obligation to pay the tort claim
and, thus, a claim under KRS 304.12-230(6) and the tort of “bad
faith”
apply
agents)
who
only
are
“to
those
‘engaged…in
persons
the
or
entities
business
of
(and
entering
their
into
contracts of insurance’”); Kentucky Nat. Ins. Co. v. Shaffer,
155 S.W.3d 738 (Ky. Ct. App. 2004) (holding that, for a bad
faith claim to lie, there must be a contractual obligation to
pay a tort claim but not addressing whether agent of insurer is
subject
to
the
USPCA
or
liable
under
common
law
bad
faith
claim). Until the courts of Kentucky do so, these matters will
likely continue to be resolved in favor of remand for the nonremoving party averring bad faith claims against an insurance
6
agency and its adjuster.
See North Amer. Specialty Ins. Co. v.
Pucek, Civil Action No. 5:09-cv-49-JMH, 2009 WL 4711261 (E.D.Ky.
Nov. 4, 2009); accord Collins v. Montpelier U.S. Ins. Co., Civil
No.
11-166-ART,
Mattingly
(WOB-CJS),
v.
2011
Chartis
2011
WL
WL
6150583
Claims,
4402428
(E.D.
Inc.,
Ky.
Civil
(E.D.Ky.
Sept.
Dec.
12,
Action
20,
2011);
No.
2011-48
2011)
(same);
Gibson v. Am. Mining Ins. Co., No. 7:08cv118, 2008 WL 4602747
(E.D. Ky. Oct. 16, 2008); Wright v. Allstate Ins. Co., No. 03501 (E.D. Ky. Mar. 5, 2004).
Defendant
argues
This is not such a case
that
the
case
before
the
Court
is
distinguishable from this line of case law because, while an
insurance adjuster might be liable for bad faith under Kentucky
law, Plaintiffs “do not allege any facts on which to base for
bad faith or any other claim against Rowe,” averring only that
he was involved in adjusting Plaintiffs’ loss which was denied
in bad faith by IICNA.
Defendant argues that “the issue is not
whether Plaintiffs may bring an action against Rowe [for bad
faith]; rather, the issue is that Plaintiffs have failed to
plead any action against Rowe.”
Court
agrees.
In
the
[DE 7 at 4, Page ID#: 61.]
Complaint,
Plaintiffs
aver
The
Rowe’s
residence and citizenship; that he was engaged to adjust the
insurance claim by IICNA and inspected the damaged barn; that he
gathered an estimate showing replacement cost value and actual
cash
value,
returning
to
reinspect
7
the
barn
on
multiple
occasions; that he arranged for the inspection of the purlins
and, together with test lab employees, inspected the purlins;
that he received the submission of the test results from the
test lab; and, in the alternative, that he either acted within
the scope of his authority on behalf of IICNA or did not in
adjusting the claim.
wrongful
or
Defendant argues that there is nothing
actionable
with
described in the Complaint.
respect
to
Rowe’s
actions
as
Certainly, Plaintiffs aver that he
inspected and reported on the damage to their barn, but there is
no factual allegation that either his inspection or his report
were
completed
in
error
or
otherwise
subject
to
criticism.
Plaintiffs aver that, “relying on the inspections performed by
Defendant Rowe and reports arranged by Defendant Rowe, IICNA
refused coverage for the fire-damaged purlins. . .” such that
the only averment of wrongdoing is against IICNA.
The Court agrees that Plaintiffs have “failed to allege a
factual basis for an element of the[ir]. . . claim against the
non-diverse defendant” Rowe.
Wells’ Dairy, 157 F. Supp.2d at
1037; Alexander, 13 F.3d at 949.
can
lie
against
IICNA
under
Even if a claim for bad faith
Kentucky
law
for
rendering
a
decision that relied on the materials that Rowe prepared or
collected, the Court is not persuaded that Kentucky law provides
for
recovery
against
Rowe
on
the
Complaint.
8
factual
averments
in
the
It is really quite simple.
There must be some factual
basis for the Complaint against a party.
Where Plaintiffs have
no hope of recovering against the non-diverse defendant, Rowe,
this
Court
plaintiff's
infers
claim
that
against
the
only
him
was
possible
to
reason
defeat
for
the
diversity
and
prevent removal. See Smith, 2011 WL 2731262 at *5. Resolving
“all
disputed
questions
of
fact
and
ambiguities
in
the
controlling...state law in favor of the nonremoving party,” the
Court concludes that removal was proper on these facts. Coyne,
183 F.3d at 493 (internal quotation marks omitted). Defendant
has borne the “heavy” burden of establishing fraudulent joinder
in this matter. See Walker, 443 F. App'x at 953; Alexander, 13
F.3d at 949.
A case filed in state court is removable only if it could
have originally been brought in federal court. See 28 U.S.C. §
1441(a) (“[A]ny civil action brought in a State court of which
the
district
courts
of
the
United
States
have
original
jurisdiction[ ] may be removed ... to the district court of the
United States for the district and division embracing the place
where such action is pending.”); Lincoln Prop. Co. v. Roche, 546
U.S. 81, 83, 126 S.Ct. 606, 163 L.Ed.2d 415 (2005) (“[Section]
1441 ... authorizes removal of civil actions from state court to
federal court when the action initiated in state court is one
that could have been brought, originally, in federal district
9
court.”). Pursuant to 28 U.S.C. § 1332, federal district courts
have original jurisdiction over civil actions between citizens
of
different
$75,000.00,
states
where
exclusive
of
the
amount-in-controversy
interest
and
costs.
28
exceeds
U.S.C.
§
1332(a). The “statute has been interpreted to demand complete
diversity, that is, that no party share citizenship with any
opposing party.” Caudill v. N. Am. Media Corp., 200 F.3d 914,
916
(6th
Cir.
2000).
The
burden
of
establishing
diversity
jurisdiction is on the removing party. Coyne ex rel. Ohio v. Am.
Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999).
Once
Rowe’s
Plaintiffs
states.
and
citizenship
Defendant
is
are
disregarded,
clearly
citizens
the
remaining
of
different
With an amount in controversy that exceeds $75,000, the
Court could have had original jurisdiction of this matter under
28 U.S.C. § 1332(a), and it was properly removed to this court
pursuant to 28 U.S.C. § 1441(a).
Accordingly,
IT
IS
ORDERED
That
Remand [DE 6] is DENIED.
This the 14th day of July, 2017.
10
Plaintiffs’
Motion
to
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