Negri et al v. Nationwide Mutual Insurance Company et al
MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS 9 MOTION TO REMAND AND GRANTING THE DEFENDANTS 7 MOTION TO DISMISS ALL CLAIMS AGAINST DEFENDANT KOWALSKI AND TO DISMISS CIVIL CONSPIRACY CLAIM AGAINST DEFENDANT NATIONWIDE. Signed by Senior Judge Frederick P. Stamp, Jr. on 8/18/2011. (kac) (Copy to counsel)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
ALLEN R. NEGRI, by assignment
from Paul D. Dotson, Jr.,
LORRAINE NEGRI, by assignment
from Paul D. Dotson, Jr. and
PAUL D. DOTSON, Jr., individually,
Civil Action No. 5:11CV3
NATIONWIDE MUTUAL INSURANCE COMPANY,
and NANCY L. KOWALSKI INSURANCE
AND FINANCIAL SERVICES,
MEMORANDUM OPINION AND ORDER
DENYING THE PLAINTIFFS’ MOTION TO REMAND AND
GRANTING THE DEFENDANTS’ MOTION TO DISMISS
ALL CLAIMS AGAINST DEFENDANT KOWALSKI AND
TO DISMISS CIVIL CONSPIRACY CLAIM
AGAINST DEFENDANT NATIONWIDE
The plaintiffs filed this civil action in the Circuit Court of
Hancock County, West Virginia against the above-named defendants
alleging violations of the West Virginia Unfair Trade Practices Act
(“UTPA”), statutory and common law bad faith, breach of contract,
breach of fiduciary duty, tort of outrage, negligence, and civil
The defendants then filed a notice of removal in this
Court based upon diversity jurisdiction.
The defendants filed a
motion to dismiss all claims against defendant Nancy L. Kowalski
Insurance and Financial Services (“Kowalski”) and to dismiss the
Insurance Company (“Nationwide”).
The plaintiffs did not file a
response to the motion to dismiss.
However, the plaintiffs filed
plaintiffs then filed a reply.
Having reviewed the parties’ pleadings and the relevant law,
Accordingly, the plaintiffs’ motion for remand must be denied.
Furthermore, this Court grants the defendants’ motion to dismiss
On February 26, 2010, plaintiff Paul Dotson was driving a van
which struck a sport utility vehicle head-on.
Allen Negri was a
front seat passenger in the sport utility vehicle.
sustained a broken femur, concussion, low grade coma, broken nose,
broken ribs, bruised shoulder, injured hips, and multiple bruises,
cuts and scrapes.
The Negris made a claim for insurance benefits
Nationwide notified the Negris that no insurance coverage was
available because Dotson’s policy had been cancelled prior to the
Dotson states he was unaware his policy had been
cancelled and states that he was not notified by Nationwide of the
On June 25, 2010, the Negris filed suit against
Dotson in the Circuit Court of Brooke County.
Both Dotson and
Nationwide failed to answer the Negris’ complaint.
10, 2010, the Court granted the Negris’ Motion for Default and set
for hearing a Writ of Inquiry to determine their damages.
defendant appeared at the writ of inquiry.
The Court awarded
damages against Dotson in the amount of $6,389,320.69 plus interest
On September 27, 2010, the Court entered the final
After the final judgment order, Dotson assigned
his first party rights and a portion of his right to any first
party damages to Allen and Lorraine Negri.
A defendant may remove a case from state court to federal
court in instances where the federal court is able to exercise
original jurisdiction over the matter.
28 U.S.C. § 1441.
federal district court has original jurisdiction over cases between
citizens of different states where the amount in controversy
exceeds $75,000.00, exclusive of interests and costs.
The party seeking removal bears the burden of establishing
Mulcahey v. Columbia Organic Chems. Co.,
Inc., 29 F.3d 148, 151 (4th Cir. 1994).
Removal jurisdiction is
strictly construed, and if federal jurisdiction is doubtful, the
federal court must remand.
The doctrine of fraudulent joinder creates an exception to the
requirement of complete diversity. See Mayes v. Rapoport, 198 F.3d
permitted even if a non-diverse party has been named as a defendant
at the time the case is removed if the non-diverse defendant has
been fraudulently joined.
“This doctrine effectively permits
a district court to disregard, for jurisdictional purposes, the
citizenship of certain nondiverse defendants, assume jurisdiction
over a case, dismiss the nondiverse defendants, and thereby retain
jurisdiction.” Id. When fraudulent joinder is alleged, a court is
permitted to examine the entire record by any means available in
order to determine the propriety of such joinder.
Consolidation Coal Co., 660 F. Supp. 1140, 1141 (N.D. W. Va. 1987).
Motion to Dismiss
In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept all well-pled facts
contained in the complaint as true.
Nemet Chevrolet, Ltd v.
Consumeraffairs.com, Inc, 591 F.3d 250, 255 (4th Cir. 2009).
However, “legal conclusions, elements of a cause of action, and
bare assertions devoid of further factual enhancement fail to
constitute well-pled facts for Rule 12(b)(6) purposes.”
(citing Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)).
unreasonable conclusions, or arguments.”
Wahi v. Charleston Area
Med. Ctr., Inc., 562 F.3d 599, 615 n.26 (4th Cir. 2009).
It has often been said that the purpose of a motion under Rule
12(b)(6) is to test the formal sufficiency of the statement of the
claim for relief; it is not a procedure for resolving a contest
about the facts or the merits of the case.
5B Charles Alan Wright
& Arthur R. Miller, Federal Practice and Procedure § 1356 (3d ed.
The Rule 12(b)(6) motion also must be distinguished from a
motion for summary judgment under Federal Rule of Civil Procedure
56, which goes to the merits of the claim and is designed to test
whether there is a genuine issue of material fact.
purposes of the motion to dismiss, the complaint is construed in
allegations constitute a statement of a claim under Federal Rule of
Civil Procedure 8(a).
Id. § 1357.
A complaint should be dismissed “if it does not allege ‘enough
facts to state a claim to relief that is plausible on is face.’”
Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
plausibility is established once the factual content of a complaint
‘allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.’” Nemet Chevrolet,
591 F.3d at 256 (quoting Iqbal, 129 S. Ct. at 1949).
factual allegations are not required, but the facts alleged must be
sufficient “to raise a right to relief above the speculative
Twombly, 550 U.S. at 555.
In their pleadings in support of remand, the plaintiffs argue
that diversity jurisdiction is absent because the parties are not
The defendants, in their responses, contend
that the plaintiffs fraudulently joined non-diverse defendant
Kowalski to defeat diversity jurisdiction.
To establish fraudulent joinder, “the removing party must
demonstrate either ‘outright fraud in the plaintiff’s pleading of
plaintiff would be able to establish a cause of action against the
in-state defendant in state court.’” Hartley v. CSX Transp., Inc.,
187 F.3d 422, 424 (4th Cir. 1999) (quoting Marshall v. Manville
Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993)).
Marshall, 6 F.3d at 232.
A claim of
“[T]he defendant must show that the
plaintiff cannot establish a claim against the nondiverse defendant
even after resolving all issues of fact and law in the plaintiff’s
favor. A claim need not ultimately succeed to defeat removal; only
a possibility of a right to relief need be asserted.”
233 (citations omitted).
Id. at 232-
“Once the court identifies this glimmer
of hope for the plaintiff, the jurisdictional inquiry ends.”
Hartley, 187 F.3d at 426 (emphasis added).
Therefore, in order to
successfully prove fraudulent joinder, a defendant must demonstrate
by clear and convincing evidence that, after resolving all issues
of fact and law in the plaintiff’s favor, the plaintiff has not
alleged any possible claim against the co-defendant. Rinehart, 660
F. Supp. 2d at 1141.
A non-diverse party named in the state court
action may be disregarded for determining diversity of citizenship
when the party’s joinder is fraudulent.
Mayes, 198 F.3d at 461.
Here, the defendants do not allege outright fraud in the
plaintiffs’ pleadings. Therefore, to defeat the plaintiffs’ motion
to remand, the defendants must establish by clear and convincing
evidence that, even resolving all issues of fact and law in the
plaintiffs’ favor, the plaintiffs have not alleged any possible
claim against Kowalski.
The defendants have met this burden.
Because the plaintiffs’ grounds for relief are based upon West
Virginia law, the Court looks to the law of that state to determine
whether the Kowalski was fraudulently joined.
assert causes of action against Kowalski for breach of contract,
breach of fiduciary duty, tort of outrage, negligence, and civil
In addition, while not alleged in the complaint, the
plaintiffs state in their motion to remand that they intended to
bring a cause of action against Kowalski for violation of the UTPA.
Breach of Contract
In West Virginia, “[a]n insurance agent is not a party to an
Syl. pt. 2, Shrewsbery v. Nat. Grange Mut.
Ins. Co., 395 S.E.2d 745 (W. Va. 1990).
Rather, the insurance
agent is an “incidental beneficiary to the contract between insured
and insurance company.”
This rule originates from the agency
principle that where a principal is disclosed and the agent is
known to be acting on behalf of the principal, the agent “cannot be
made personally liable unless he agreed to be so.”
Wyman, 101 U.S. 392, 296 (1879).
Accordingly, the plaintiffs have
no possibility of recovery against Kowalski for breach of contract
and have therefore failed to state a claim for breach of contract
Breach of Fiduciary Duty
A fiduciary duty is “[a] duty to act for someone else’s
benefit, while subordinating one’s personal interest to that of the
It is the highest standard of duty implied by law.”
Elmore v. State Farm Mut. Auto Ins. Co., 504 S.E.2d 893, 898 (W.
Va. 1998) (citing Black’s Law Dictionary 625 (6th ed. 1990)).
Indeed, Justice Cardozo described this duty’s standard of behavior
as “[n]ot honesty alone, but the punctilio of an honor the most
Meinhard v. Salmon, 164 N.E. 545, 546 (N.Y. 1928).
In West Virginia, an insurance agent is the agent of the
insurance company, not the agent of the insured.
W. Va. Code
The plaintiffs fail to cite any case law or provide
any explanation of how Kowalski, an agent of Nationwide and not of
the plaintiffs, owes the plaintiffs the highest standard of duty
under the law.
Accordingly, this Court finds that there is no
possibility of recovery for a fiduciary duty claim against Kowalski
and that the plaintiffs have failed to state a claim against
Kowalski for breach of fiduciary duty.
Negligence and Tort of Outrage
The plaintiffs are correct that, generally, “agency law does
not insulate an agent from liability for his or her torts.”
Jur. 2d Agency § 298.
However, an agent of a disclosed principal
is not liable in contract or tort “where the agent’s acts are those
of the insurance company.”
3 Am. Jur. 2d Insurance § 161.
case, “the action must be brought against the company.”
Benson v. Cont’l. Ins. Co., 120 F. Supp. 2d 593, 595 (S.D. W. Va.
The plaintiffs rely on Jarvis v. Modern Woodmen of America,
406 S.E.2d 736 (W. Va. 1991). In Jarvis, the West Virginia Supreme
Court of Appeals held that an insurance agent could be held liable
encouraged the insured to falsify his insurance application by
denying that the insured smoked and leaving out other health
The insurance agent’s conduct in encouraging the insured
to make misrepresentations in procuring an insurance contract
constituted an independent tort of negligence, not a negligent act
on behalf of the insurance company.
This case can be easily distinguished from Jarvis.
case, the plaintiffs allege in paragraph 51 of their complaint that
included, among other things, billing, collecting monthly payments,
reporting claims, and/or communicating with Nationwide policy
In paragraph 53, the plaintiffs allege the breach of
contract by Kowalski resulted from a failure to perform “the
general powers conferred upon it by Nationwide.”
In paragraph 71,
the plaintiffs state that Kowalski owed a duty to Dotson “to
reasonably, fairly, in good faith, and/or in accordance with the
law [to] provide the plaintiff with insurance coverage.”
alleged negligent acts are actions on behalf of the insurance
company and are not independent torts.
See Vandiver Food Stores,
Inc. v. Ins. Co. of N. Am., 909 F. Supp. 618, 625-26 (E.D. Ark.
1995) (finding no allegation of a separate and independent tort by
insurance agency where allegations of complaint “relate solely to
an alleged breach of . . . insurance policy issued by [insurance
company] and the alleged bad faith refusal to pay benefits under
Importantly, there is no liability on the part of
an agent “for failing to notify the insured of the cancellation of
a policy, where the insured . . . should have known, from other
sources, that the policy was canceled.” 3 Am. Jur. Insurance § 168
The plaintiffs allege in their complaint that
Kowalski’s alleged actions or inactions were actions or inactions
for which Nationwide “conferred general powers” to Kowalski. There
are no allegations in the plaintiffs’ complaint of an independent
tort committed by Kowalski, unlike the insurance agent in Jarvis.
Accordingly, this Court finds that the plaintiffs have failed to
state a claim against Kowalski for negligence.
The plaintiffs also bring a cause of action for the tort of
Kowalski. No specific conduct is mentioned in the count. However,
the plaintiffs incorporate all previously mentioned paragraphs of
the complaint in that count.
This Court finds that the plaintiffs
have no possibility of recovery for the tort of outrage against
Kowalski for the same reasons they have no possibility of recovery
for negligence against Kowalski. Every allegedly outrageous act by
Kowalski was not “its tort,” but instead was the alleged tort of
Accordingly, this Court finds that the plaintiffs have no
possibility of recovery against Kowalski for negligence or the tort
of outrage and have therefore failed to state a claim against
Kowalski for negligence and for tort of outrage.
The plaintiffs have failed to state a valid claim for civil
conspiracy because a conspiracy requires at least two persons and
“a corporation can act only through its agents or employees.” Cook
v. Heck’s Inc., 342 S.E.2d 453, 460 (W. Va. 1986).
corporate principal or employer where they act in their official
capacities on behalf of the corporation and not as individuals for
their individual advantage.”
Id. (internal citation omitted).
Accordingly, the plaintiffs have no possibility of recovery against
Kowalski and Nationwide for civil conspiracy and have failed to
state a claim for civil conspiracy against all defendants in this
Violation of the UTPA
In the motion to remand, the plaintiffs admit that they did
not name Kowalski in Count II of their complaint for violation of
Count II does not allege any conduct by Kowalski which
allegedly violates the UTPA.
The plaintiffs argue that this Court
should interpret their pleadings liberally so as to do justice.
This Court is bound by law which requires a complaint to be wellpled and “‘allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.’”
Chevrolet, 591 F.3d at 256 (quoting Iqbal, 129 S. Ct. at 1949).
Here, the plaintiffs’ complaint is not only devoid of facts,
but also lacks even a bare allegation that Kowalski violated the
The federal removal statute, 28 U.S.C. § 1441(a), “requires
that a case ‘be fit for federal adjudication at the time the
removal petition is filed.’”
Moffitt v. Residential Funding Co.,
LLC, 604 F.3d 156, 159 (4th Cir. 2010) (citing Caterpillar Inc. v.
Lewis, 519 U.S. 61, 73 (1996)).
This jurisdictional defect is not
fatal where the plaintiff voluntarily amends his complaint to
allege a basis for federal jurisdiction.
In this case,
however, the plaintiffs have never filed a motion with this Court
to amend their complaint which complies with Local Rule of Civil
Procedure 15.01, which requires that “[a]ny party filing a motion
to amend a pleading that requires leave of court to file, shall
attach to that motion a signed copy of the proposed amended
pleading.” Because the plaintiffs have not filed a motion to amend
their complaint, and because this Court looks to the record at the
time of removal to determine whether subject matter jurisdiction
exists, this Court finds that the plaintiffs have no possibility
recovery against Kowalski for violations of the UTPA and that the
plaintiffs have failed to state a claim against Kowalski for
violations of the UTPA.
Because the plaintiffs have no possibility of recovery against
Kowalski, this Court finds that fraudulent joinder is present and
that the plaintiffs’ motion to remand must be denied.
Motion to Dismiss
For the reasons stated above, this Court has found that the
plaintiffs have no possibility of recovery against Kowalski. Thus,
the plaintiffs have failed to state a claim upon which relief may
be granted and this Court must dismiss Kowalski and must dismiss
the plaintiffs’ claim for civil conspiracy.
This Court will also address the plaintiffs’ argument that
Kowalski is an indispensable party to this litigation.
that Kowalski’s actions may make it liable to Nationwide and that
an issue likely to develop is who was assigned to notify Dotson
This question does not matter to the plaintiffs’ civil
Nationwide was to inform Dotson of the cancellation, complete
relief can still be afforded to the plaintiffs in this action and
Nationwide will not be subject to multiple obligations as they can
pursue an action against any agent or employee who possibly failed
to execute his or her duties to Nationwide in a separate action if
they so choose.
For the reasons stated above, the plaintiffs’ motion to remand
(Document No. 9) is DENIED and the defendants’ motion to dismiss
(Document No. 7) is GRANTED.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
August 18, 2011
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
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