Dabbs v. Shelter Mutual Insurance Company et al
Filing
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ORDER denying 14 Motion to Remand. Signed by Honorable Timothy D. DeGiusti on 9/30/2015. (mb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
JOHANNA DABBS,
)
)
Plaintiff,
)
)
v.
)
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SHELTER MUTUAL INSURANCE )
COMPANY a/k/a/ SHELTER
)
MUTUAL INSURANCE CO. and
)
WYMAN WEST,
)
)
Defendants.
)
Case No. CIV-15-148-D
ORDER
Before the Court is Plaintiff Johanna Dabbs’ (“Dabbs”) Motion to Remand
[Doc. No. 14]. Defendants Shelter Mutual Insurance Company (“Shelter”) and
Wyman West (“West”) have filed their respective responses in opposition [Doc. Nos.
20 and 21]. The matter has been fully briefed and is at issue.
FACTUAL AND PROCEDURAL BACKGROUND
Dabbs was insured under an automobile insurance policy (the Policy) issued by
Shelter. Subsequent to purchasing the Policy, she was involved in an automobile
accident in Harris County, Texas in which Vincent Calderon sustained serious bodily
injuries. Calderon submitted a demand to Shelter to settle his claims. The matter went
unresolved, however, resulting in Calderon filing a lawsuit against Dabbs. A jury
awarded Calderon damages in the amount of $622,135.60. With the addition of
interest, the judgment against Dabbs totaled $707,133.10.
The present action alleges Shelter, inter alia, acted in bad faith in addressing
Calderon’s demand. Dabbs contends that due to Shelter’s failure to adequately
investigate and settle the claim, she sustained heavy financial losses and suffered
mental and emotional distress. Dabbs also sued West, the Shelter agent who sold her
the Policy, on the grounds that West failed to procure appropriate and adequate
coverage. Dabbs seeks damages for the aforementioned judgment, mental and
emotional distress, as well as an award of punitive damages.
According to the Petition, Dabbs and West are Oklahoma residents and Shelter
is a Missouri corporation. However, Shelter removed to this Court, alleging Dabbs
fraudulently joined West in an attempt to defeat diversity. Shelter contends that, under
Oklahoma law, no viable cause of action exists against West for Dabbs’ allegations
and thus his inclusion in this suit must be ignored for purposes of diversity
jurisdiction. West joins Shelter’s Notice of Removal.
STANDARD OF DECISION
If a civil action filed in state court satisfies the requirements for original federal
jurisdiction, a defendant may remove the action to federal court. See 28 U.S.C. §
1441(a); Huffman v. Saul Holdings LP, 194 F.3d 1072, 1076 (10th Cir. 1999). Federal
district courts have original jurisdiction of civil actions where complete diversity of
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citizenship and an amount in controversy in excess of $75,000 (exclusive of interest
and costs) exist. See 28 U.S.C. § 1332; Carden v. Arkoma Associates, 494 U.S. 185,
187, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990). In addition to the requirements of
original jurisdiction, 28 U.S.C. § 1441(b)(2) sets forth the “forum-defendant rule,”
which provides a case may not be removed on the basis of diversity if any defendant
is a citizen of the state in which the state-court action was brought. See id.; Brazell v.
Waite, 525 F. App’x 878, 884 (10th Cir. 2013) (unpublished); Red Cloud Assets, LLC
v. Harris Aviation, LLC, No. CIV–11–282–D, 2011 WL 1871166, at *3 (W.D. Okla.
May 16, 2011).
However, a defendant may remove a case based upon diversity
jurisdiction–even in the absence of complete diversity–if a plaintiff joins a nondiverse
party fraudulently to defeat federal jurisdiction. Red Cloud Assets, 2011 WL 1871166,
at *3 (“Of course, the presence of a resident defendant prevents removal only if this
defendant is ‘properly joined,’ and it is well established that the fraudulent joinder of
a resident defendant does not prevent removal.”) (citing Updike v. West, 172 F.2d 663,
665 (10th Cir. 1949)). “ ‘[A] fraudulent joinder analysis [is] a jurisdictional inquiry.’
” Cannon v. Fortis Ins. Co., No. CIV-07-1145-F, 2007 WL 4246000, at *3 (W.D.
Okla. Nov. 29, 2007) (quoting Albert v. Smith’s Food & Drug Ctrs., Inc., 356 F.3d
1242, 1247 (10th Cir. 2004)). Thus, “upon specific allegations of fraudulent joinder
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the court may pierce the pleadings, consider the entire record, and determine the basis
of joinder by any means available.” Hernandez v. Liberty Ins. Corp., 73 F. Supp. 3d
1332, 1336 (W.D. Okla. 2014) (quoting Smoot v. Chicago, Rock Island & Pac. R.R.
Co., 378 F.2d 879, 882 (10th Cir. 1967)).
Despite its harsh moniker, “[f]raudulent joinder is a term of art, it does not
reflect on the integrity of plaintiff or counsel, but rather exists regardless of the
plaintiff’s motives when the circumstances do not offer any other justifiable reason
for joining the defendant.” Cooper v. Zimmer Holdings, Inc., 320 F. Supp. 2d 1154,
1157 (D. Kan. 2004) (citation omitted); see also Aguayo v. AMCO Ins. Co., 59 F.
Supp. 3d 1225, 1257 (D.N.M. 2014) (opting to use the term “procedural misjoinder,”
rather than “fraudulent misjoinder,” because of the confusion that the word
“fraudulent” has caused in the fraudulent joinder context).
“The defendant seeking removal bears a heavy burden of proving fraudulent
joinder, and all factual and legal issues must be resolved in favor of the plaintiff.”
Hernandez, 73 F. Supp. 3d at 1336 (quoting Dutcher v. Matheson, 733 F.3d 980, 988
(10th Cir. 2013)). The defendant must show there is no possibility that the plaintiff
would be able to establish a cause of action against the nondiverse party. See id.
(citing Montano v. Allstate Indem., No. 99–2225, 2000 WL 525592, *1–2 (10th Cir.
April 14, 2000) (unpublished)); Brazell, 525 F. App’x at 881 (“the removing party
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must show that the plaintiff has ‘no cause of action’ against the fraudulently joined
defendant.”) (citations omitted). Consequently, the fraudulent joinder standard is even
more favorable to the plaintiff than the standard for ruling on a motion to dismiss
under Fed. R. Civ. P. 12(b)(6). Montano, 2000 WL 525592, at *2; Johnson v.
American Towers, LLC, 781 F.3d 693, 704 (4th Cir. 2015). Remand is required if any
one of the claims against the non-diverse defendant is possibly viable. Montano, 2000
WL 525592, at *2.
The non-liability of the nondiverse party must be established with “complete
certainty.” Hernandez, 73 F. Supp. 3d at 1336 (quoting Smoot, 378 F.2d at 882);
Mitchell v. Ford Motor Co., No. CIV-05–379-F, 2005 WL 1657069, at * 3 (W.D.
Okla. July 5, 2005) (a removing defendant who pleads fraudulent joinder must support
his claim with clear and convincing evidence) (citing Hart v. Wendling, 505 F.Supp.
52, 53 (W.D. Okla. 1980)). Although the court may consider evidence outside the
pleadings, “it is not proper for the court to pre-try issues of liability on a motion to
remand.” Id.
DISCUSSION
A review of the Petition indicates that Dabbs asserts three causes of action
against West: (1) Negligence in the Procurement of Insurance (Third Cause of
Action), (2) Negligent Underwriting (Fourth Cause of Action), and (3) Breach of
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Fiduciary Duty (Fifth Cause of Action). In sum, the factual basis for these claims is
that West failed to exercise reasonable care, skill, and diligence in obtaining adequate
insurance coverage; West failed to establish an accurate and consistent methodology
for calculating the amount of liability coverage that was necessary and reasonable; and
a fiduciary relationship existed between West (as insurance agent) and Dabbs (the
insured), which required West to act reasonably given the specialized knowledge he
possessed regarding the terms and conditions of insurance policies.
Shelter’s Notice of Removal asserts Dabbs cannot possibly establish a cause of
action against West for three reasons: (1) insurance agents do not have a duty to
advise their insureds with respect to insurance needs and there is no duty for an
insurer to provide an “adequate amount” of coverage, (2) an insurance agent, as a
stranger to the insurance contract, cannot be held liable for breach of either the
implied covenant of good faith and fair dealing or the contract,1 and (3) an insurance
agent does not have a recognized fiduciary relationship with an insured. West concurs
with Shelter’s Notice and also claims he has been fraudulently joined because an agent
(West) is not liable for the actions of the disclosed principal (Shelter) and Dabbs’
claims are barred by the applicable statute of limitations.
1
The Court does not construe the Petition as asserting a bad faith claim against
West.
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I.
NEGLIGENCE IN THE PROCUREMENT OF INSURANCE AND NEGLIGENT
UNDERWRITING
Dabbs’ allegations against West for negligent procurement of insurance state:
Defendant West owed Plaintiff a duty to act in good faith and to exercise
reasonable care, skill and diligence in the procurement of insurance for
the Plaintiff. West had a duty to inform Plaintiff of all coverages,
benefits, limitations, and exclusions in the coverage procured. Defendant
West breached his duty owed to Plaintiff and is liable to Plaintiff because
through the fault of Defendant West, the insurance requested by Plaintiff
did not perform as promised, did not protect the Plaintiff, and Plaintiff
suffered a terrible loss as a result. Defendant West breached his duty
owed to Plaintiff by:
a.
Procuring an insurance policy which did not serve to
actually pay the applicable policy limits when placed on a
reasonable demand that they be paid out in order to protect
Plaintiff from financial catastrophe;
b.
Procuring a[] policy which did not serve to protect the
Plaintiff from bodily injury legal liability;
c.
Procuring a policy which was written by Shelter, a
company that breached the duty of good faith and fair
dealing in the manner set forth herein and more fully
described above; [and]
d.
Procuring a policy of insurance with woefully inadequate
policy limits[.]
Petition, ¶¶ 48-51. Dabbs’ negligent underwriting claim contends West (and Shelter)
failed to use reasonable care, skill, and expertise in conducting an underwriting
analysis to ensure the insurance policy provided appropriate and adequate liability
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coverage. Id. ¶ 51. She alleges West’s failure resulted in her being unnecessarily
subjected to excess liability exposure and financial ruin. Id. ¶ 59.
In Swickey v. Silvey Cos., 1999 OK CIV APP 48, ¶ 13, 979 P.2d 266, 269 the
Oklahoma Court of Civil Appeals held that “[a]n agent has the duty to act in good
faith and use reasonable care, skill and diligence in the procurement of insurance and
an agent is liable to the insured if, by the agent’s fault, insurance is not procured as
promised and the insured suffers a loss.” Id. However, the court “decline[d] to extend
Swickey and impose a duty upon an insurer to provide an ‘adequate amount’ of
coverage,” when the insurer and its agent “did not fail to procure insurance for
Plaintiffs.” Cosper v. Farmers Ins. Co., 2013 OK CIV APP 78, ¶ 9, 309 P.3d 147,
149 (emphasis added). In Cosper, the court noted that the plaintiffs there “did not
allege that they requested a specific coverage limit and Defendants disregarded the
request and issued a policy in some other amount.” Id. The court also determined that
“‘[i]nsurance companies and their agents do not have a duty to advise an insured with
respect to his insurance needs.’ ” Id. (citing Rotan v. Farmers Ins. Group of
Companies, 2004 OK CIV APP 11, ¶ 2, 83 P.3d 894, 895; Mueggenborg v. Ellis, 2002
OK CIV APP 88, ¶ 6, 55 P.3d 452, 453).
In light of these clear pronouncements of Oklahoma law, the Court finds the
allegations of the Petition fail to support either a negligent procurement or negligent
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underwriting claim against West. Dabbs’ Petition acknowledges that coverage was
procured; she does not allege that the amount of coverage was not what she had
requested. Thus, her attempt to hold West liable for his conduct in conjunction with
the procurement of the Policy fails as a matter of law. Smith v. Allstate Vehicle and
Property Ins. Co., No. CIV–14–0018–HE, 2014 WL 1382488, at *2 (W.D. Okla. Apr.
8, 2014). Dabbs embellishes the phrase “procured as promised” from Swickey as
supportive of her claim, but this is unavailing. Both Swickey, Cosper, and their
progeny clearly provide that an action for negligent procurement of insurance shall lie
where an agent fails to procure an insurance policy requested by an insured; to date,
the Oklahoma appellate courts have declined to attach liability to an allegation that the
agent failed to procure an “adequate” policy. Since Dabbs’ negligent underwriting
claim rests on essentially the same factual allegations, the Court finds this claim is
also without proper legal support.
Accordingly, Dabbs cannot assert a claim for negligence procurement or
underwriting against West under the theories asserted.
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II.
BREACH OF FIDUCIARY DUTY
Dabbs’ breach of fiduciary claim, as it relates to West, specifically asserts:
A fiduciary relationship existed between Plaintiff and Defendant West.
The overmastering influence of Defendant West over Plaintiff, and
Plaintiff’s dependency and trust in her insurance agent, Defendant West,
which was justifiable, and Defendant West’s assurance he could procure
the insurance policy Plaintiff requested, creates a fiduciary status with
respect to Defendant West as it relates to Plaintiff. Defendant West’s
duty to act reasonably given the specialized knowledge he possessed of
the terms and conditions of insurance policies created such a special
relationship as to make Defendant West a fiduciary.
Petition, ¶ 68. In Cosper, the Court of Civil Appeals recognized “ ‘[t]here are no
Oklahoma cases holding that an insurance agent owes a fiduciary duty to a prospective
insured, or to an established customer with respect to procurement of an additional
policy.’ ” Cosper, 309 P.3d at 150 (quoting Swickey, 979 P.2d at 269).
Courts in this district, as well as in the Northern and Eastern Districts, are in
accord. See Siddique v. Western Heritage Ins. Co., No. CIV–14–456–SPS, 2015 WL
2451734, at *2 (E.D. Okla. May 21, 2015); Western Medical Park Owners v. U.S.
Liability Ins. Group, No. CIV–14–1266–C, 2014 WL 6674305, at *1 (W.D. Okla.
Nov. 24, 2014); Sab One, Inc. v. Travelers Indem. Co. of Conn., No.
CIV–14–1094–C, 2014 WL 6603419, at *2 (W.D. Nov. 19, 2014); Smith v. Allstate
Vehicle and Property Ins. Co., No. CIV–14–0018–HE, 2014 WL 1382488, at *4
(W.D. Okla. Apr. 8, 2014) (“Plaintiffs’ breach of fiduciary duty claim also fails, as the
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Oklahoma courts have not imposed a fiduciary duty on an insurance agent ‘to a
prospective insured, or to an established customer with respect to procurement of an
additional policy’ ”) (citing Swickey, 979 P .2d at 269; Cosper, 309 P.3d at 150);
Slover v. Equitable Variable Life Ins. Co., 443 F. Supp. 2d 1272, 1280 (N.D. Okla.
2006).
Likewise, in light of these clear pronouncements of Oklahoma law, the Court
finds that, under the facts alleged in the Petition, Oklahoma would not recognize a
claim for breach of fiduciary duty against West.
CONCLUSION
Plaintiff’s Motion to Remand [Doc. No. 14] is DENIED. The Court finds that
Shelter’s allegation of fraudulent joinder has merit and West should be disregarded
as a defendant to this action. As a result, there is complete diversity of citizenship
between the parties and subject matter jurisdiction exists. Dabbs’ action against West
will be dismissed without prejudice.2
2
Based on the foregoing analysis, the Court declines to address the additional
grounds asserted by West in support of removal and in support of his Motion to
Dismiss under Rule 12(b)(6) [Doc. No. 9]. If a defendant is fraudulently joined and
is disregarded as a party, the Court has no jurisdiction to resolve the merits of claims
against him, and he must be dismissed without prejudice. See Albert v. Smith’s Food
& Drug Centers, Inc., 356 F.3d 1242, 1249 (10th Cir. 2004); see also Brereton v.
Bountiful City Corp., 434 F.3d 1213, 1217–18 (10th Cir. 2006) (if district court lacks
jurisdiction, it is incapable of reaching a disposition on the merits, and dismissal must
be without prejudice).
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IT IS SO ORDERED this 30th day of September, 2015.
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