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