Pohto v. Allstate Insurance Company et al

Filing 17

ORDER granting 8 Motion to Remand to State Court. Clerk's Notice: Attorneys are responsible for supplementing the State Record with all documents filed in Federal Court. Signed by Honorable J Michelle Childs on 7/7/11.(awil)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
GREENVILLE DIVISION
Edward Scott Pohto,

)
)
Plaintiff,
)
)
v.
)
)
Allstate Insurance Company, Deborah Lynn )
Boggs, and the Stacie Orr Agency, Inc.,
)
)
Defendants.
)
)

C.A. No. 6:10-cv-02654-JMC

OPINION AND ORDER

This case concerns a dispute regarding a motorcycle insurance policy plaintiff Edward
Scott Pohto (“Pohto”) purchased from defendant Allstate Insurance Company (“Allstate”)
through its authorized agent, defendant Stacie Orr Agency (“Orr”). After Pohto suffered injuries
in an accident, defendant Deborah Lynn Boggs (“Boggs,” collectively with Allstate and Orr,
“Defendants”) adjusted Pohto’s claim for Allstate. Currently before the court is Pohto’s Motion
to Remand [Doc. 8] under 28 U.S.C. § 1447.
FACTUAL AND PROCEDURAL BACKGROUND
Pohto purchased a motorcycle insurance policy (the “Policy”) from Allstate through Orr
that was in effect on May 12, 2009, when he was involved in a serious accident. The driver of
the vehicle that caused the accident left the scene immediately. The Policy included uninsured
and underinsured motorist coverage which obligated Allstate to pay any claims resulting from an
accident with a hit-and-run driver or a driver with no automobile insurance or insufficient
insurance as long as Pohto was not at fault for the accident. As a result of the accident, Pohto
suffered severe injuries and submitted a claim to Allstate. Allstate assigned Boggs to adjust the
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claim. Pohto filed this action after Allstate declined to pay the full policy limit, presumably as a
result of Boggs’ findings. Pohto alleges, inter alia, that Allstate and Boggs acted in bad faith
and/or negligently in the handling of his claim, and Orr made material misrepresentations to him
in order to induce him to buy the policy.
Pohto moves to remand this case to South Carolina state court pursuant to 28 U.S.C. §
1447 on the grounds that this court lacks subject matter jurisdiction because plaintiff Pohto and
defendants Boggs and Orr are residents of South Carolina.
LEGAL STANDARD
Federal courts are courts of limited jurisdiction. The party invoking federal jurisdiction
has the burden of proving the jurisdictional requirements for diversity jurisdiction. See Strawn v.
AT&T Mobility LLC, 530 F.3d 293, 298 (4th Cir. 2008) (holding that in removing case based on
diversity jurisdiction, party invoking federal jurisdiction must allege same in notice of removal
and, when challenged, demonstrate basis for jurisdiction). Federal courts may exercise original
diversity jurisdiction only if no plaintiff and no defendant are citizens of the same state. See Wis.
Dep’t of Corr. v. Schacht, 524 U.S. 381, 388, 118 S. Ct. 2047, 2052 (1998). Because federal
courts are forums of limited jurisdiction, any doubt as to whether a case belongs in federal or
state court should be resolved in favor of state court. See Auto Ins. Agency, Inc. v. Interstate
Agency, Inc., 525 F. Supp. 1104, 1106 (D.S.C. 1981) (citing Penn Sec. Co. v. Home Indem. Co.,
418 F. Supp. 292, 294 (M.D. Pa. 1976); Anderson v. Union Pac. Coal Co., 332 F. Supp. 605, 608
(D. Wyo. 1971)).

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“Joinder designed solely to deprive federal courts of jurisdiction is fraudulent and will
not prevent removal.” Anderson v. Home Ins. Co., 724 F.2d 82, 84 (8th Cir. 1983) (citing Tedder
v. F.M.C. Corp., 590 F.2d 115, 117 (5th Cir. 1979)). The party seeking removal based on alleged
fraudulent joinder by the non-moving party must prove “that there is no possibility that the
plaintiff would be able to establish a cause of action against the in-state defendant in state court;
or [t]hat there has been outright fraud in the plaintiff’s pleading of jurisdictional facts.” Mayes v.
Rapoport, 198 F.3d 457, 464 (4th Cir. 1999) (quoting Marshall v. Manville Sales Corp., 6 F.3d
229, 232 (4th Cir. 1993)) (alterations in original).
DISCUSSION
Pohto requests the court to remand this case to state court because there is not complete
diversity among the parties and the court lacks subject matter jurisdiction. Defendants, however,
argue that Boggs and Orr were fraudulently joined simply to defeat federal jurisdiction. They
ask this court to deny Pohto’s motion because they contend he cannot possibly establish any
claim against either Boggs or Orr, and therefore the only legitimate defendant in the case is
Allstate, a foreign corporation. They do not argue that Pohto committed any outright fraud by
joining either Boggs or Orr.
Based on the record and the arguments of the parties, the court finds Pohto could possibly
establish a cause of action against Boggs for acting in bad faith and/or negligence. The court
also finds Pohto could possibly sustain a cause of action against Orr for making
misrepresentations to him about the policy.

Accordingly, this court lacks subject matter

jurisdiction over this case, and Pohto’s motion to remand is granted.
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Pohto correctly states that under South Carolina law, a plaintiff who shows an insurer
acted in bad faith in settling a claim may recover damages in tort. See Nichols v. State Farm
Mut. Auto. Ins. Co., 279 S.C. 336, 340, 306 S.E.2d 616, 619 (1983). He also asserts that a
company’s employees may be held individually liable for their torts even when those torts are
committed within the scope of their employment. Again, South Carolina law generally supports
Pohto’s proposition. See 23 S.C. JUR. Agency § 80 (2011) (“Where one acting as agent for
another, within the scope of his agency, commits a tort, both the principal and the agent are joint
tortfeasors in his action; and the injured party is not obliged to join both joint tortfeasors in his
action, but he may sue either singly.”)
While no South Carolina court has addressed whether an insurance adjuster may be held
personally liable for the bad faith or similar torts committed within the scope of the adjuster’s
employment, state courts have held employees in other kinds of businesses liable for torts
committed within the scope of employment. See Long v. Norris & Assocs., 342 S.C. 561, 538
S.E.2d 5 (Ct. App. 2000) (explaining an employee who wrongfully repossessed the plaintiff’s car
may be held personally liable because each person is responsible for his own tortious acts
regardless of whether he was acting in a representative capacity); Gilbert v. Mid-South Mach.
Co., 267 S.C. 211, 221, 227 S.E.2d 189, 193 (1976) (quoting Lawlor v. Scheper, 232 S.C. 94,
101 S.E.2d 269 (1957) in holding, “An agent’s liability for his own tortious acts is unaffected by
the fact that he acted in his representative capacity.”) Furthermore, other states have either
rejected fraudulent joinder challenges against plaintiffs who sue an adjuster personally in bad
faith actions or have held claims adjusters personally liable for acting in bad faith. See Wiseman
v. Universal Underwriters Ins. Co., 412 F. Supp. 2d 801 (S.D. Ohio 2005) (holding plaintiff had
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not fraudulently joined insurance adjuster in bad faith action because the adjuster could possibly
be held liable); Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 41 Tex.
Sup. Ct. J. 637 (1998) (explaining any insurance company employee whose job involves the
“sale or servicing” of policies may be personally liable for tortious conduct); O’Fallon v.
Farmers Ins. Exch., 859 P.2d 1008, 260 Mont. 233 (1993) (holding adjuster could be personally
liable for bad faith adjusting of plaintiffs’ claim).
Allstate argues that Boggs’ duty to Pohto arises solely from a contract to which Boggs is
not a party — the insurance agreement between Allstate and Pohto — and therefore Pohto
cannot maintain a cause of action against Boggs. The court is not persuaded that this forecloses
the possibility that Boggs could be held liable for adjusting Pohto’s claims in bad faith in light of
the aforementioned law from South Carolina and other states.
Allstate further argues that Boggs cannot possibly be personally liable because she was
clearly acting as Allstate’s agent at the time she adjusted Pohto’s claims, and respondeat
superior dictates that Allstate alone would be held liable for her tortious conduct. However,
Allstate cites no law to support this conclusion. Given the desire expressed by courts in South
Carolina and other states to hold employees individually liable for torts they commit within the
scope of their employment, the court believes Boggs could possibly be held liable if Pohto could
show she adjusted his claims in bad faith.
For the same reasons, the court finds Defendants have failed to show that Pohto could not
possibly state a cause of action against Orr. Defendants merely offer conclusory assertions that
because Orr procured the policy it promised Pohto, no misrepresentations were made, either
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knowingly or negligently.

Pohto claims, inter alia, that an Orr employee made

misrepresentations, either knowingly or negligently, about Allstate’s claims practices, not simply
the fact that Pohto’s policy contained Uninsured Motorist coverage. The court is not persuaded
that Pohto could not possibly maintain a cause of action against Orr, and accordingly, Pohto’s
motion to remand is granted.
CONCLUSION
For the foregoing reasons, the court GRANTS Plaintiff’s Motion to Remand [Doc. 8], and
this action is hereby REMANDED to the Court of Common Pleas in Greenville County, South
Carolina for further proceedings.
IT IS SO ORDERED .
s/ J. Michelle Childs
United States District Judge
July 7, 2011
Greenville, SC

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