Silon v. American Home Assurance Company et al

Filing 27

ORDER: The 9 Motion to Dismiss Defendant Damali Brooks is Granted, rendering the 7 Motion to Remand as Moot. Signed by Judge Robert C. Jones on 04/20/09. (Copies have been distributed pursuant to the NEF - SRK)

1 2 3 4 5 JOHN SILON, 6 7 8 9 10 11 12 13 INTRODUCTION Before the Court is Plaintiff's Motion for Remand pursuant to 28 U.S.C. § 1441, (#7), and ) ) Plaintiff, ) ) vs. ) ) AMERICAN HOME ASSURANCE COMPANY, ) BROADSPIRE SERVICES, INC., DAMALI ) BROOKS, ) ) Defendants. ) ) 2:08-cv-1798-RCJ-LRL ORDER UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

14 Defendant's Motion to Dismiss Defendant Damali Brooks pursuant to Federal Rule of Civil 15 Procedure 12(b)(6), (#9). After considering the motions and pleadings on behalf of both parties, IT 16 IS HEREBY ORDERED that Defendant's Motion to Dismiss Damali Brooks is granted, (#9), 17 rendering Plaintiff's Motion for Remand moot as diversity would be complete. (#6). 18 19 FACTS Plaintiff John Silon brought this complaint in the District Court for Clark County on

20 November 17, 2008. He is an individual residing in Clark County, Nevada. Defendant American 21 Home Assurance Company is domiciled in New York State, and licensed to do business in Nevada. 22 Broadspire Services Inc. is domiciled in Florida State, and licensed to do business in Nevada. 23 Damali Brooks is an employee of Broadspire and resides in Clark County, Nevada. Plaintiff has 24 brought this suit against all three defendants in a dispute over his alleged entitlement to insurance 25 coverage.

1

Plaintiff was employed by Greater Nevada Auto Auction and had an accident while in the

2 course of his employment on February 3, 2006. He caused the accident while driving a company 3 truck. He was insured under the policy with American Home at the time. American Home had 4 contracted with Broadspire to administer claims under the Policy. The other parties to the accident 5 opened a claim against him and allegedly the claim adjuster working on the claim failed to respond 6 to the parties correspondence, did not indemnify him under the Policy, and failed to defend him in 7 the resultant lawsuit. 8 Plaintiff filed this suit against defendants. As to Defendant Brooks in particular, he alleged

9 that she had a duty to negotiated a settlement and assign him an attorney; breached this duty by 10 failure to accept reasonable offers, make counter offers, keep Plaintiff informed, and failed to 11 provide him with defense counsel; as a result of her negligence, he incurred economic damages and 12 severe emotional distress; and she negotiated the claim within the course and scope of her 13 employment for Broadspire. 14 15 I. 16 17 ANALYSIS Defendant's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) A. Legal Standard

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, dismissal is appropriate if

18 the plaintiff "fail[s] to state a claim upon which relief can be granted." Dismissal for failure to state 19 a claim under Rule 12(b)(6) is proper only if it is beyond doubt that the plaintiff can prove no set of 20 facts in support of the claim that would entitle the plaintiff to relief. Williamson v. Gen. Dynamics 21 Corp., 208 F.3d 1144, 1149 (9th Cir. 2000). The review is limited to the complaint, and all 22 allegations of material fact are taken as true and viewed in the light most favorable to the plaintiff. 23 In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1403 (9th Cir. 1996). Although courts assume the factual 24 allegations to be true, courts should not "assume the truth of legal conclusions merely because they 25 Page 2 of 7

1 are cast in the form of factual allegations." W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 2 1981). 3 On a motion to dismiss, the court "presumes that general allegations embrace those specific

4 facts that are necessary to support the claim." Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 889 5 (1990). The Ninth Circuit holds that a motion to dismiss for failure to state claims under Rule 6 12(b)(6) lies where the complaint reveals on its face that plaintiffs lack standing. Sacks v. Office of 7 Foreign Assets Control, 366 F.3d 764, 771 (9th Cir. 2006); DeSaracho v. Custom Food Machinery, 8 Inc., 206 F.3d 874, 878 (9th Cir. 2000). 9 10 B. Majority Rule on Negligence of Individual Insurance Claim Adjusters

The majority rule on negligence of individual claim adjusters is that they do not owe a

11 general duty of care to the insured, and therefore cannot be held liable to the insured for negligence 12 as a matter of law. E.g., Sanchez v. Lindsey Morden Claim Servs., 72 Cal. App. 4th 249, 253 (Cal. 13 App. 1999). Defendant correctly states this in its Motion and lists its lengthy research as to other 14 courts' following the majority rule. (#9 at 3). Defendant urges the Court to follow the majority rule 15 to find that no claim of relief is available against an individual claim adjuster. Id. at 4. It similarly 16 argues that negligence is not an available theory against the insurance company itself. Id. at 5. 17 Defendant alleges that Plaintiff has included the individual claim adjuster as a party to destroy 18 diversity jurisdiction. Id. at 6. 19 Plaintiff contends that he is not barred from pursuing a negligence claim against Damali

20 Brooks under Nevada law. (#15 at 5). He cites to several other states that allow negligence actions 21 against claim adjusters and urges the Court to adopt their stances. Id. at 5­6. Plaintiff looks to 22 distinguish majority law by differentiating between the cases with "first-party claims" and "third23 party claims." (#15 at 8­14). He avers that in a third-party claim, the adjuster has a duty to act for 24 the interest of the insured, and has a role "almost like that of an attorney." Id. at 14. 25 Page 3 of 7

1

It is advisable for the Court to follow the majority rule here for a number of reasons, and the

2 Court chooses to do so. First, the closest on-point case with Plaintiff's minority rule argument 3 provides no reasoning or guidance, and the other minority decisions cited to are factually 4 distinguishable from the present case. Second, a District of Nevada ruling on individual insurance 5 employee liability guides this court, although it did not address a negligence claim. See Vargas v. 6 Cali. State Auto. Assn. Inter-Ins. Bureau, 788 F. Supp. 462 (D. Nev. 1992). Lastly, a California 7 court of appeals ruling, to which Nevada often looks for guidance, adopts the majority position in 8 a factually similar case. 9 The case closest to on-point that Plaintiff relies upon is Continental Insurance Company v.

10 Bayless and Roberts, Incorporated, 608 P.2d 281 (Alaska 1980). In that case, the Alaska Supreme 11 Court held did find that an individual employee may be held liable for negligence arising out of a 12 breach of the general tort duty of ordinary care. Id. at 287. For its reasoning, the court cited to 13 another Alaska case in which an insurance agent could be held liable for negligent failure to insure 14 plaintiff's house properly. Id. at 288. However, the court in that instance offered no reasoning for 15 its departure from the majority rule, and merely relied on its cited to property case. The other cases 16 cited to by Plaintiff are factually distinguishable from the present as most of them involve whether 17 an independent firm may be held liable for negligence, not an independent claims adjuster. See 18 Brown v. State Farm Fire and Cas. Co., 58 P.3d 217 (Okla. App. 2002); Morvay v. Hanover Ins. 19 Cos., 506 A.2d 333 (N.H. 1986). 20 The Vargas case does address individual insurance employee liability issues, although it does

21 not directly speak to individual claim adjuster's negligence liability. 788 F. Supp. 462 (D. Nev. 22 1992). It that case, plaintiff sought to include an individual insurance company agent as a party to 23 an insurance bad faith action. The court held that "[n]o set of facts could entitled Plaintiff to "any 24 right to relief" from [agent] on the present complaint." Id. at 464. The complaint alleged breach of 25 insurance policy, insurance bad faith, and "malicious conduct." Id. The court went on to state that Page 4 of 7

1 as the agent's only actions related to his position with the insurance company, that if he had done 2 something within the scope of his agency that violated the terms of the contract, plaintiff could only 3 sue the insurance company and not him. Id. Plaintiff's argument that the agent was liable for 4 tortious conduct outside the scope of his employment, but as no allegation of actions outside the 5 scope of employment was made in the complaint, the court concluded that plaintiff could not state 6 a cause of action against the agent under the complaint. Id. 7 Similarly in this case, Plaintiff has not alleged Ms. Brooks has committed any negligence

8 outside of the scope of her employment, and subsequently cannot state a cause of action against her. 9 Every single one of the allegations against her involve her apparent dereliction and negligence in the 10 execution of her duties as a claims adjuster. See #15 at 3­4. 11 Lastly, the Sanchez case from the Court of Appeals of California adopts the majority rule of

12 no liability for an individual claims adjuster sued in his capacity as a claims adjuster. 72 Cal. App. 13 4th 249 (Cal. App. 1999). The court held that no duty of care existed on the part of the adjuster to 14 the insured under California law. Id. at 253. The court reasoned that the imposition of such a duty 15 would subject the adjuster to conflicting loyalties as often insurers and insureds disagree about 16 coverage or the amount of loss. Id. The court's conclusion was consistent with the general law of 17 agency, and the majority of other cases holding that an independent adjuster hired by an insurer owes 18 him no duty of care. Id. at 254 (citing to Velastequi v. Exch. Ins. Co., 505 N.Y.S. 2d 779, 782 (N.Y. 19 1986); Dear v. Scottsdale Ins. Co., 947 S.W.2d 908, 917 (Tex. 1997); Hill v. Giuffrida, 608 F. Supp. 20 648, 649 (S.D. Miss. 1985). Likewise in this case, Plaintiff's arguments about agency do not 21 persuade the Court. Nevada should not adopt the minority approach to liability of claims adjusters 22 in recognizing or creating an agency relationship between the adjuster and the insured. 23 24 25 Page 5 of 7 Accordingly, Defendant's Motion to Dismiss Damali Brooks is granted. (#9).

1 II. 2 3

Plaintiff's Motion for Remand to State Court Pursuant to 28 U.S.C. § 1441 A. Legal Standard for Motion to Remand

Any civil action may be removed to federal district court so long as original jurisdiction

4 would lie in the court to which the case is removed. 28 U.S.C. § 1441. Jurisdiction founded on 28 5 U.S.C. § 1332 requires that the parties be in complete diversity and the amount in controversy 6 exceed $75,000. The removal statute is to be strictly construed against removal jurisdiction. Gaus 7 v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Where doubt regarding the right to removal exists, 8 the federal court should remand the case to state court. Id. 9 Nevertheless, "fraudulently joined defendants will not defeat removal on diversity grounds."

10 Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). The joinder of non-diverse 11 defendants is fraudulent when "the plaintiff fails to state a cause of action against a resident 12 defendant, and the failure is obvious according to the settled rules of the state." McCabe v. General 13 Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). 14 Where fraudulent joinder is at issue, "[t]he defendant seeking removal to federal court is

15 entitled to present the facts showing the joinder to be fraudulent." Id. Thus, in deciding fraudulent 16 joinder claims, the Court may "pierce the pleadings" and consider "summary judgment-type evidence 17 such as affidavits and deposition testimony." Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1068 18 (9th Cir. 2001) (citing Cavallini v. State Farm Mut. Auto. Ins. Co., 44 F.3d 256, 263 (5th Cir. 1995)). 19 In other words, "a defendant must have the opportunity to show that the individuals joined in the 20 action cannot be liable on any theory." Ritchey, 139 F.3d at 1318. 21 22 B. Defendant Brooks Is Dismissed from the Case

Plaintiff argues that the joinder of Damali Brooks was proper, based on his argument that

23 Nevada should adopt the minority position on negligence liability of claims adjusters. (#7). 24 Defendant contends that the joinder was fraudulent because there is no reasonable basis to believe 25 a Nevada court would impose liability against an individual employee of an insurance company Page 6 of 7

1 acting within the scope of her employment. (#14). Defendant does not provide any affidavits or 2 deposition testimony as to this alleged fraudulent joinder. It does present a voluminous body of 3 caselaw representing the majority approach to negligence liability as per individual claims adjusters 4 (that it does not exist as there is no general duty of cared owed by the adjuster to the insured). 5 Based on this presentation of case law, as well as the holding above, dismissing the

6 Defendant Brooks from the case, this motion is moot as she was at the very least improperly if not 7 fraudulently joined, considering the caselaw on Defendant's side as to the matter. The remand to 8 state court is no longer necessary because she is no longer a party to the lawsuit and subsequently 9 complete diversity exists between the parties. Accordingly, Plaintiff's Motion to Remand is moot. 10 (#7). 11 12 CONCLUSION IT IS HEREBY ORDERED that Defendant's Motion to Dismiss Damali Brooks is granted

13 (#9), rendering Plaintiff's Motion to Remand as moot. (#7). 14 15 16 17 18 19 20 21 22 23 24 25 Page 7 of 7 _______________________________________ Robert C. Jones United States District Judge DATED: April 20, 2009