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Wagner v. Hannifan

United States District Court, W.D. Kentucky, Louisville Division

March 6, 2015



JOSEPH H. McKINLEY, Jr., Chief District Judge.

This matter is before the Court on Plaintiff's Motion to Remand [DN 6]. Fully briefed, this matter is ripe for decision. For the following reasons, the Motion to Remand is GRANTED.


This is one of several cases filed across Kentucky against Shelter Mutual Insurance Company ("Shelter") and its claims adjustors based on their allegedly unlawful procedures in settling claims with minors. Here, Plaintiff Amantha Wagner (citizen of Kentucky) sued Shelter (citizen of Missouri) and one of its insurance adjusters, Ellen Hannifan (citizen of Kentucky), in Jefferson Circuit Court.

On June 14, 2008, Jonathan Fletcher was driving his wife, Amy Fletcher, and stepdaughter, Amantha Wagner ("Wagner"), [1] in Jefferson County, Kentucky, when an uninsured driver rear-ended their vehicle. (Shelter Notes Report for Fletcher Claim [DN 6-3] 1-2.) When the accident occurred, they had been on the way to the hospital to have Wagner seen for a possible concussion that she may have received at softball practice. (Id. at 2.) They continued to the hospital following the accident. At the hospital, Wagner was treated for the concussion, as well as for neck and back pain from the accident. (Id. at 2-3.) Mr. Fletcher had uninsured motorist insurance coverage with Shelter, so he made a claim for his stepdaughter. (Id. at 1.)

Shelter assigned Casualty Adjuster Ellen Hannifan ("Hannifan") to handle the claim. (Id.) Hannifan determined that Wagner was properly entitled to uninsured motorist coverage under her stepfather's policy. (Id.) On September 8, 2008, Hannifan verbally offered Mrs. Fletcher $1500 to settle Wagner's claim. (Id. at 3.) Following that conversation, Hannifan sent Mrs. Fletcher a cover letter, which stated that enclosed was "[Shelter's] release for $1500 for Amantha's Uninsured Motorist claim. We can forward our draft upon return of the signed release." (Sept. 8, 2008 Letter [DN 6-6].) The enclosed "C-109.8-C" form was labeled "Indemnifying Release (Minors) Underinsured/Uninsured Motorist." (See Indemnifying Release (Minors) Underinsured/Uninsured Motorist [DN 6-5].) This form purported to "fully settle[] and discharge[] all claims against [Shelter]." (Id.) On September 10, 2008, Wagner's parents, Mike Wagner and Amy Fletcher, signed the indemnifying release. (See id.) Around September 23, 2008, Hannifan received the executed release, and thereafter sent Mrs. Fletcher the draft for $1500. (Shelter Notes Report for Fletcher Claim [DN 6-3] 3.) No court approval was sought or obtained for this settlement.

On September 8, 2014, Plaintiff filed this action in Jefferson Circuit Court against Defendants Hannifan and Shelter. This case has its origins in Adkins v. Shelter Mutual Insurance Company, No. 5:12-CV-173-KKC (E.D. Ky.). Adkins suffered injuries from a car accident. Adkins v. Shelter Mut. Ins. Co., No. CIV.A. 5:12-173-KKC, 2014 WL 4231230, at *1 (E.D. Ky. Aug. 26, 2014). Shelter issued a $500 settlement to then 17-year-old Adkins through her mother and without a court order. The settlement was accompanied by a substantially similar release containing the same misleading language, id. at *6, as Hannifan gave to Wagner.[2] Once Adkins turned 18, she contacted an attorney, filed suit against Shelter, and obtained a higher settlement, notwithstanding the release. Id. at *1. In Adkins, Shelter was ordered to produce approximately 100 claim files involving the claims of minors that were not court approved. Id. Plaintiff's claim file was one of the files Shelter produced pursuant to the court order.

In her complaint, Plaintiff asserts several causes of action related to the June 14, 2008 accident and the subsequent handling of her bodily injury claim. Of the ten claims Plaintiff filed against Shelter, [3] only five also named Hannifan as a defendant: negligence/gross negligence (Count VI), fraud in the inducement (Count VII), fraud by omission (Count VIII), intentional infliction of emotional distress (Count IX), and negligent misrepresentation (Count X). (See Compl. [DN 1-2] Counts VI-X.) In particular, Plaintiff claims that Hannifan and Shelter committed fraud and made false representations in the terms and description of the release form. (Id. ¶ 58.) Plaintiff also asserts that Hannifan and Shelter were negligent and committed fraud by omission by settling a claim of less than $10, 000 with a minor without a court order, in violation of KRS 387.280. (Id. ¶ 56.)

On October 10, 2014, Defendants removed this action from the Jefferson Circuit Court to this Court alleging federal diversity jurisdiction. (Defs.' Removal Notice [DN 1] ¶ 3.) They acknowledge that both Plaintiff Wagner and Defendant Hannifan are citizens of Kentucky. (Id.) They contend, however, that the Court should ignore Hannifan's citizenship for diversity purposes because Plaintiff fraudulently joined her to this suit. Defendants claim that Kentucky law only permits claims against insurance companies for bad faith; because Plaintiff asserted claims against Hannifan for torts other than bad faith, Defendants argue, those claims have no colorable basis. Further, Defendants argue that Kentucky law did not require them to obtain court approval of their settlements with the minor Plaintiff.

On November 6, 2014, Plaintiff filed this Motion to Remand [DN 6] the case to Jefferson Circuit Court, arguing that she has a colorable claim against the non-diverse defendant, the insurance adjuster. Plaintiff therefore contends that this Court lacks subject matter jurisdiction to hear her claims because complete diversity between the parties did not exist at the time of removal.


The question raised in this motion to remand is whether Ellen Hannifin was fraudulently joined in this action to prevent complete diversity. "Fraudulent joinder occurs when the non-removing party joins a party against whom there is no colorable cause of action." Saginaw, 576 F.3d at 624. "To prove fraudulent joinder, the removing party must present sufficient evidence that a plaintiff could not have established a cause of action against non-diverse defendants under state law." Coyne, 183 F.3d at 493 (citing Alexander v. Elec. Data Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994)). The plaintiff's motive for suing the non-diverse defendant is irrelevant to the fraudulent joinder analysis. Jerome-Duncan, 176 F.3d at 907. "Therefore the question is whether there is arguably a reasonable basis for predicting that the state law might impose liability on the facts involved." Probus v. Charter Commc'ns, LCC, 234 F.Appx. 404, 407 (6th Cir. 2007) (quoting Alexander, 13 F.3d at 949). Coyne provides the relevant standard:

[I]f there is a colorable basis for predicting that a plaintiff may recover against non-diverse defendants, this Court must remand the action to state court. The district court must resolve "all disputed questions of fact and ambiguities in the controlling state law in favor of the non removing party." [ Alexander, 13 F.3d at 949.] All doubts as to the propriety of removal are resolved in favor of remand.

Coyne, 183 F.3d at 493. Thus, the removing party bears a "particularly heavy burden" of proving fraudulent joinder-"[t]he combination of the colorable' standard with the requirement that all ambiguities of state law are to be resolved in favor of the non-removing party presents a significant hurdle." Kent State Univ. Bd. of Trs. v. Lexington Ins. Co., 512 F.Appx. 485, 489-90 (6th Cir. 2013). The fraudulent joinder standard is even more favorable to Plaintiffs than the ...

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