OZANNE v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al
Filing
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MEMORANDUM OPINION AND ORDER OF COURT: denying as moot 3 Motion to Dismiss filed by PERRY S. MORGAN and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY and granting 6 Motion to Remand filed by CONNIE S. OZANNE. Signed by Judge Terrence F. McVerry on 5/5/2011. (kly)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
CONNIE S. OZANNE,
Plaintiff,
vs.
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY, a corporation
and PERRY S. MORGAN, an individual,
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)
) 2:11-cv-00327-TFM
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)
)
)
)
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Defendants.
MEMORANDUM OPINION AND ORDER OF COURT
Presently pending before the court for disposition is the MOTION TO DISMISS (Doc.
No. 3) filed by Defendants State Farm Mutual Automobile Insurance Company (“State Farm”)
and Perry S. Morgan (“Morgan”) (collectively “Defendants”); and the MOTION TO REMAND
(Doc. No. 6) filed by Plaintiff Connie S. Ozanne (“Ozanne” or “Plaintiff”) with brief in support
(Doc. No. 7). Plaintiff filed a response in opposition to the Motion to Dismiss (Doc. No. 9) and
Defendants filed a reply brief (Doc. No. 10); Defendants filed a brief in opposition to the Motion
to Remand (Doc. No. 11) and Plaintiff filed a reply brief (Doc. No. 12). Accordingly, the
motions are now ripe for disposition.
BACKGROUND
The following facts are taken from the complaint. See Complaint, attached as exhibit A
to Notice of Removal, at Doc. No. 1. At all relevant times, Defendant State Farm provided
Plaintiff, a citizen of Pennsylvania, with automobile insurance that included underinsured
motorist coverage (“UIM”) up to $250,000. On June 1, 2007, a vehicle being operated by an
individual named Barbara Ann Barney collided with Plaintiff‟s vehicle, which was being driven
by Plaintiff at the time, resulting in a collision and serious and permanent injuries and damages
to Plaintiff. At the time of the collision, tortfeasor Barney was insured by Erie Insurance
Company with bodily injury liability protection limits in the amount of $15,000.00. Plaintiff
settled her third-party liability claims for $15,000, the limit of the Barney‟s coverage, an amount
not adequate to compensate Plaintiff for the injuries sustained in the collision. Plaintiff
submitted a claim to Defendant State Farm for underinsured motorist (“UIM”) benefits.
Defendant Perry Morgan, a claim representative or adjuster, handled the UIM claim of Plaintiff
and extended all offers to Plaintiff.
On August 25, 2009, Defendant Morgan, on behalf of State Farm, extended an offer of
$80,000.00 to settle Plaintiff‟s UIM claim, which she rejected. State Farm increased its offer to
$100,000.00 on October 1, 2009, as part of which Defendant Morgan advised Plaintiff that
should she reject that figure, State Farm would consider the negotiations at an impasse, and the
offer would return to $80,000.00, the value of initial offer. Plaintiff rejected the offer of
$100,000.00. State Farm subsequently paid $80,000 in UIM benefits to Plaintiff on October 13,
2009.
Pursuant to the provisions of her policy, Plaintiff filed a complaint against State Farm in
the Court of Common Pleas of Beaver County, Pennsylvania on October 9, 2009, wherein she
sought UIM benefits. Litigation proceeded, which included a defense medical examination of
Plaintiff for the purpose of gathering evidence for use at trial. On July 1, 2010, a pre-trial
conference was held before the Honorable Deborah A. Kunselman. During the course of that
conference, Defendant Morgan informed the court and counsel of record that State Farm desired
to try a UIM claim to a jury verdict, and according to Plaintiff, Defendant Morgan allegedly
referred to Plaintiff‟s claim as a “test case.” A jury trial commenced on November 15, 2010, and
the jury entered a verdict of $1,000,000.00 in Plaintiff‟s favor on November 18, 2010. That
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verdict was later molded to $250,000.00, the amount of the UIM coverage limits provided by
Plaintiff‟s policy with State Farm.
Thereafter, on March 14, 2011, Plaintiff filed a two-count Complaint in the Court of
Common Pleas of Beaver County, asserting one count against Defendant State Farm for violation
of the Pennsylvania Bad Faith statute, 42 Pa.C.S. §§ 8371 et seq, and one count against
Defendant Morgan, a Pennsylvania citizen, for violating the Pennsylvania Unfair Trade Practices
Act and Consumer Protection Law (“UTPCPL” or “Pennsylvania Consumer Protection Law”),
73 Pa.C.S. §§ 201 et seq. In particular, Plaintiff alleged that Defendant Morgan a) failed to
properly and fairly evaluate her claim for UIM benefits and made wholly inadequate offers of
settlement; b) forced Plaintiff to undergo litigation of her UIM claim when the insurer‟s liability
to pay UIM benefits under the policy had become reasonably clear; and c) improperly used her
UIM claim as a “test case” to have the UIM claim tried before a jury, placing the interests of
Defendant State Farm ahead of those of hers and depriving her of benefits to which she was
entitled. Id. at ¶ 43.
On March 14, 2011, Defendants timely removed this action to the United States District
Court for the Western District of Pennsylvania pursuant to 28 U.S.C. §§ 1332, 1441, 1446. Doc.
No. 1. Defendants contend that, like Plaintiff, Defendant Morgan is a citizen of Pennsylvania,
yet that Defendant Morgan was fraudulently joined to destroy diversity.1 Id. On March 15,
2011, Defendants filed a motion to dismiss Count II of the complaint, the UTPCL claim against
Defendant Morgan. Doc. No. 3. Defendants contend that (1) no UTPCPL claim can lie against
Defendant Morgan because he was not a party to the insurance contract between State Farm and
Plaintiff; (2) Plaintiff‟s UTPCPL action is based upon Morgan‟s handling of Plaintiff‟s UIM
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The Court notes that both parties agree that Defendant State Farm is a corporation organized under the laws
of Illinois with its principal place of business in Bloomington, Illinois.
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claim, and Pennsylvania law does not permit a plaintiff to maintain a UTPCPL claim based upon
claim handling because it does not involve a consumer transaction; (3) Plaintiff‟s UTPCPL claim
is based only upon nonfeasance, which is not actionable under Pennsylvania law; and (4)
Plaintiff fails to adequately plead a UTPCPL claim because she did not establish any
misrepresentation or any justifiable reliance, as required under Pennsylvania law. Id.
In response, Plaintiff disputes the fraudulent joinder claim of Defendants, and asserts that
the UTPCPL is properly pled. Doc. No. 9. In sum, Plaintiff alleges that Defendant Morgan‟s
use of her UIM claim as a “test case” before a jury constitutes actionable misfeasance in that
Defendant Morgan failed to properly evaluate her claim and forced her to litigate, in violation of
the UTPCPL. Id. Moreover, Plaintiff contends that (1) her UTPCPL claim against Defendant
Morgan “is viable even though he was not a party to the insurance contract because the Plaintiff
was specifically intended [sic] to rely upon his unfair business practices;” and (2) she has
sufficiently pled reliance insofar as she was forced to litigate the underlying UIM claim as a
result of Defendant Morgan‟s alleged misconduct. (Doc. No. 9 at 3). Thus, as Plaintiff reasons,
this Court lacks subject matter jurisdiction because complete diversity of citizenship does not
exist.
LEGAL ANALYSIS
As noted, Plaintiff has filed a motion to remand this matter to the Court of Common
Pleas of Beaver County on the grounds that Defendant Morgan, like Plaintiff, is a citizen of
Pennsylvania. Defendants oppose remand and have independently filed a motion to dismiss the
UTPCPL claim against Defendant Morgan on the grounds that he has been fraudulently joined
and that the state law claim, as pleaded, is not actionable under Pennsylvania law. Because the
Court does not have jurisdiction over Defendants‟ motion to dismiss if the matter is remanded,
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the Court must first address Plaintiff‟s motion to remand.
Pursuant to 28 U.S.C. § 1332(a), district courts “have original jurisdiction of all civil
actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of
interest, and is between . . . citizens of different States.” Id. Moreover, actions that originated in
state court “may be removed by the defendant or the defendants, to the district court of the
United States for the district and division embracing the place where such action is pending.” 28
U.S.C. § 1441(a). In the absence of a federal question, removal is limited to those cases in which
“none of the parties in interest properly joined and served as defendants is a citizen of the State
in which such action is brought.” 28 U.S.C. § 1441(b).
When a non-diverse party has been joined as a defendant, the removing defendant may
avoid remand only by demonstrating that the non-diverse party was fraudulently joined. Joinder
is fraudulent “„where there is no reasonable basis in fact or colorable ground supporting the
claim against the joined defendant, or no intention in good faith to prosecute the action against
the defendant or seek a joint judgment.‟” Boyer v. Snap-On Tools Corp., 913 F.2d 109, 111 (3d
Cir. 1990) (quoting Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985)).
Further, “if there is even a possibility that a state court would find that the complaint states a
cause of action against any one of the resident defendants, the federal court must find that joinder
was proper and remand the case to state court.” Boyer, 913 F.2d at 111 (citations omitted). The
removing party carries “a heavy burden of persuasion” in making this showing, Steel Valley
Auth. v. Union Switch & Signal Div., 809 F.2d 1006, 1012 n. 6 (3d Cir. 1987) (citations omitted),
and “removal statutes are to be construed against removal and all doubts should be resolved in
favor of remand,” Boyer, 913 F.2d at 111 (citations omitted).
In that vein, the Court considers the count alleged against Defendant Morgan. The
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UTPCPL prohibits “unfair or deceptive acts or practices in the conduct of any trade or
commerce.” 73 P.S. § 201-3. Further, the law provides a private right of action to “[a]ny person
who purchases or leases goods or services primarily for personal, family or household purposes
and thereby suffers any ascertainable loss of money or property, real or personal, as a result of
the use or employment by any person of a method, act or practice declared unlawful” by the
statute. Id. at § 201-9.2(a). The statute's underlying purpose is fraud prevention and
Pennsylvania courts have construed the UTPCPL liberally to effectuate this purpose. See
Commonwealth by Creamer v. Monumental Props., Inc., 459 Pa. 450, 329 A.2d 812, 816
(Pa.1974); Keller v. Volkswagen of Am., Inc., 733 A.2d 642, 646 (Pa.Super.Ct.1999). In fact,
the statute lists more than twenty-one deceptive acts and practices. 73 P.S. § 201-4. Plaintiff
contends that Defendant Morgan improperly used her UIM claim as a “test case” in order to have
it tried before a jury, and thereby violated three specific subparagraphs of the UTPCPL, in
particular:
(v)
Representing that goods or services have sponsorship, approval,
characteristics, ingredients, uses, benefits or qualities that they do not have or that
a person has a sponsorship, approval, status affiliation or connection that he does
not have;
(xiv) Failing to comply with the terms of any written guarantee or
warranty given to the buyer at, prior to, or after a contract for the purchase of
goods or services is made; and
(xxi) Engaging in any other fraudulent or deceptive conduct which
creates a likelihood of confusion or misunderstanding.
73 P.S. § 201-2(4). As such, Plaintiff claims that she should be permitted to proceed with the
count against Defendant Morgan, and that, as such, diversity does not exist. As noted above, it is
the position of the Defendants that Defendant Morgan was fraudulently joined in the complaint
for the purpose of defeating diversity. See Doc. No. 11.
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As Defendants noted in the notice of removal, Doc. No. 1 at ¶ 17, in the insurance
context, “only malfeasance, the improper performance of a contractual obligation, raises a cause
of action under the [UTPCPL], and an insurer's mere refusal to pay a claim which constitutes
nonfeasance, the failure to perform a contractual duty, is not actionable.” Horowitz v. Fed.
Kemper Life Assurance Co., 57 F.3d 300, 307 (3d Cir.1995) (internal citations omitted).
“Misfeasance requires affirmative conduct, such as an act of misrepresentation or deception, or a
reckless mistake made.” Baer v. Hartford Mut. Ins. Co., No. 05-1346, 2005 WL 3054354, at *7
(E.D.Pa. Nov.14, 2005). The failure of an insurer to pay the proceeds of an insurance policy is
nonfeasance and thus is not actionable. Millwood v. State Farm Mut. Auto. Ins. Co., 08-1698,
2009 WL 291168, at *3 (E.D.Pa. Feb.5, 2009).
Nevertheless, the Court notes that the UTPCPL count against Defendant Morgan alleges
more than an allegation of a failure to pay on the part of State Farm. Count II avers that
Defendant Morgan chose the treat Plaintiff‟s UIM claim as a “test case”, consideration of which
overcame the proper evaluation of the claim. Such improper conduct, according to Plaintiff,
amounts to affirmative improper conduct, sufficient for the claim. See Doc. No. 6. The Court‟s
review of decisions within this Circuit reveals other instances in which UTPCPL claims were
allowed to proceed. In Smith v. Nationwide Mut. Fire Ins. Co., 935 F.Supp. 616, 620-621
(W.D.Pa.1996), for example, the plaintiff alleged, among other things, that the defendant had
failed to perform “a reasonable and prompt investigation” and had falsely implied that the
plaintiffs committed arson. The court compared Smith's complaint to that in Parasco v. Pacific
Indem. Co., 870 F.Supp. 644, 648 (E.D.Pa.1994), in which the plaintiff was allowed to proceed
based on allegations that the post-loss investigation had been performed “in an unfair and
nonobjective manner.” Construing the complaint generously in favor of Smith, the district court
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concluded that because there were allegations which, if proven, would amount to misfeasance
rather than nonfeasance, the plaintiff's claim under the UTPCPL would not be dismissed. Id. at
621. See also Amitia v. Nationwide Mut. Ins. Co., CA No. 08-335, 2009 U.S. Dist. LEXIS 2840,
*6-*7, 2009 WL 111578 (M.D.Pa. Jan. 15, 2009) (plaintiffs who alleged defendant failed to
evaluate their claim “promptly, objectively, and fairly” and conducted an “unfair, unreasonable,
and dilatory investigation” had stated a claim under the UTPCPL); Alberty v. Nationwide Mut.
Ins. Co., CA No. 05-1319, 2006 U.S. Dist. LEXIS 68783, *10-*11, 2006 WL 2601324 (W.D.Pa.
July 7, 2006) (magistrate judge recommended that where plaintiff alleged “affirmative,
intentional efforts to delay, dissuade, obstruct or otherwise „improperly handle‟ ” the claim,
motion to dismiss should be denied); and Novick v. UnumProvident Corp., CA No. 01-258, 2001
U.S. Dist. LEXIS 9735, *7, 2001 WL 793277 (E.D.Pa. July 10, 2001) (allegations that the
defendants were “predisposed toward terminating plaintiff's benefits and were „extreme and
outrageous' in investigating his claim” stated a cause of action under the CPL.)
Accordingly, the Court cannot conclude that the UTPCPL claim against Defendant
Morgan is “wholly insubstantial and frivolous.” Batoff v. State Farm Ins. Co., 977 F.2d 848, 852
(3d Cir. 1992). It is possible that the Court of Common Pleas of Beaver County will find Count
II to state a viable cause of action, and thus remand is required. Contrary to Defendants‟
argument, Pennsylvania courts have recognized that a colorable UTPCPL claim may exist
against an insurance adjuster. See e.g. Grossi v. Travelers Ins. Co., C.A. No. 9-1427, 2010 WL
483797 (W.D. Pa. Feb. 5, 2011). Even if the Court were to accept Defendants‟ contention that
many of those cases “creat[e] a precarious legal position, comparable to circular reasoning,” and
that other Pennsylvania state courts have held that a UTPCPL claim is not actionable absent
privity, the Court must “resolve any uncertainties as to the current state of controlling substantive
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law in favor of the plaintiff.” Batoff, 977 F.2d at 851. To determine the merits of Defendants‟
underlying claim would exceed the scope of the Court‟s current task, i.e., to evaluate subject
matter jurisdiction, and such an analysis is improper at this stage of the proceeding.
Accordingly, Plaintiff‟s Motion will be granted, and this matter remanded to the Court of
Common Pleas of Beaver County.
CONCLUSION
For the reasons hereinabove stated, the Court finds that Defendants have not
demonstrated by any record evidence that Plaintiff fraudulently joined Defendant Morgan in an
effort to destroy diversity of citizenship among the parties. Therefore, the Plaintiff‟s Motion for
Remand will be granted, and Defendants‟ Motion to Dismiss will be denied. An appropriate
Order follows.
McVerry, J.
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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
CONNIE S. OZANNE,
Plaintiff,
vs.
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY, a corporation
and PERRY S. MORGAN, an individual,
)
)
) 2:11-cv-00327-TFM
)
)
)
)
)
)
Defendants.
ORDER OF COURT
AND NOW, this 5th day of May, 2011, for the reasons set forth in the foregoing
Memorandum Opinion, it is hereby ORDERED, ADJUDGED and DECREED as follows:
(1) the MOTION TO REMAND (Doc. No. 6) filed by Plaintiff Connie S. Ozanne is
GRANTED; and
(2). the MOTION TO DISMISS (Doc. No. 3) filed by Defendant State Farm Mutual
Automobile Insurance Company and Perry S. Morgan is DENIED AS MOOT.
It is further ORDERED that this action is remanded to the Court of Common Pleas of
Beaver County, Pennsylvania forthwith. The clerk shall docket this case closed.
BY THE COURT:
/s/ Terrence F. McVerry
United States District Court Judge
cc: All Counsel of Record
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