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Rainwater v. American Fidelity Assurance Co.

United States District Court, W.D. Kentucky, Bowling Green Division

May 26, 2017

LORETTA RAINWATER; and ALAN W. REED PLAINTIFFS
v.
AMERICAN FIDELITY ASSURANCE COMPANY; and JEFF SNYDER DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          Greg N. Stivers, Judge

         This matter is before the Court on Defendant's Motion to Dismiss (DN 5), Plaintiffs' Motion to Remand (DN 7), and Defendant's Motion to Dismiss or Motion to Strike (DN 9). The motions are ripe for decision. For the reasons stated below, the Plaintiffs' Motion to Remand is GRANTED, and Defendant's Motion to Dismiss or Motion to Strike is DENIED AS MOOT.

         I. STATEMENT OF FACTS AND CLAIMS

         Plaintiffs Loretta Rainwater (“Rainwater”) and Alan W. Reed (“Reed”) were both employed by the Adair County Board of Education. (Compl. ¶ 1, DN 1-1). In October 2010, Plaintiff applied for long-term care insurance policies issued by Defendant American Fidelity Assurance Company (“American Fidelity”). (Compl. ¶¶ 4-5). As alleged by Plaintiffs, Defendant Jeff Snyder (“Snyder”) was an agent of American Fidelity and was involved in marketing that company's policies to employees of the Adair County Board of Education. (Am. Compl. ¶ 3). After Plaintiffs obtained those policies, American Fidelity allegedly raised the policy premiums even though Plaintiffs alleged that they were told that the premiums would not increase. (Comp. ¶¶ 6, 8).

         Plaintiffs filed this action in Adair Circuit Court against Defendants asserting various claims including breach of contract claims against American Fidelity and a fraud claim against Snyder. Subsequently, Defendants removed this action on the basis of diversity jurisdiction and alleged that Snyder was fraudulently joined to destroy complete diversity between the parties. (Notice Removal 2-4, DN 1). In the present motions, Plaintiffs have moved to remand the case to Adair Circuit Court, and American Fidelity has moved to dismiss claims asserted in both the Complaint and the Amended Complaint.

         II. DISCUSSION

         A. Plaintiff's Motion to Remand

         After a case has been filed in state court, a party may remove the case to federal district court if “none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought” and if the amount in controversy exceeds $75, 000. See 28 U.S.C. § 1441(b); 28 U.S.C. § 1332(a). The defendant seeking to remove the case must file and serve a notice of removal within thirty days of receiving the initial pleading upon which the claim is based. See 28 U.S.C. § 1446(b). If the case stated in the initial pleading is not removable, a party has thirty days from receiving information warranting removal to file a notice of removal, with the caveat that removal based on jurisdiction conferred by 28 U.S.C. § 1332 is barred more than one year after the commencement of the action.

         1. Claims Asserted Against Snyder

         In this case, Defendants removed the action based upon diversity of citizenship between Plaintiff and American Fidelity and contenting that Snyder was fraudulently joined as a party. (Notice Removal 1-2). Based on the Court's reading, however, the Complaint does assert a colorable claim of fraud against Snyder. Under Kentucky law, the elements of fraud are: “(a) a material representation, (b) which is false, (c) known to be false or made recklessly, (d) made with inducement to be acted upon, (e) acted in reliance thereon, and (f) causing injury.” St. Martin v. KFC Corp., 935 F.Supp. 898, 909 (W.D. Ky. 1996) (internal quotation marks omitted) (quoting Miller's Bottled Gas, Inc. v. Borg-Warner Corp., 955 F.2d 1043, 1051 (6th Cir. 1992)).

         With regard to the allegations against Snyder, the Complaint satisfies the fraud requirements. Plaintiffs initially asserted the following allegations involving Snyder:

6. Before applying and receiving the policy of insurance, the Plaintiffs were each advised of the terms and conditions of the policy by the Defendant, Jeff Snyder. Specifically, Jeff Snyder represented to the Plaintiffs and each of them that the policy had three significant features:
1. A defined amount that would be paid on a daily basis if nursing home care was required; ...

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