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Wright v. State Farm Mutual Automobile Insurance Co.

United States District Court, W.D. Kentucky

September 23, 2019



          Thomas B. Russell, Senior Judge.

         This matter is before the Court upon a motion by Plaintiff, Lance Wright, to remand this action to Jefferson County Circuit Court, where Plaintiff filed it. (DN 10). Defendant, State Farm Mutual Automobile Insurance Company (“State Farm”), has responded to Plaintiff’s motion. (DN 13). Defendant, Bob Dotson Insurance Agency, Inc., responded to Plaintiff’s arguments in its response to Plaintiff’s motion to place Defendants’ motion to dismiss in abeyance. (DN 12). Plaintiff has filed his reply. (DN 16). Fully briefed, this matter is ripe for review and for the following reasons, Plaintiff’s motion to remand is GRANTED.


         The factual allegations as set forth in the Complaint, (DN 1-2 at 4), and taken as true are as follows.[1] On March 15, 2018, Plaintiff suffered a fractured pelvis and several other injuries in a serious vehicle accident. (Id. (Complaint) at ¶ 10). On March 20, 2018, Plaintiff sent a letter to State Farm advising the insurer to produce “all policy declarations for all policies which would potentially provide [Plaintiff] with coverage.” (Id. at ¶ 11). State Farm responded by calling Plaintiff to tell him that he did not have underinsured motorist coverage (“UIM”) but eventually identified a claims handler for the UIM claim and offered to settle the claim for the “policy limits” of $25, 000.[2] (Id. at ¶ 12-14). The vehicle identified on the policy was a 2007 Ford Edge. (Id. at ¶ 14).

         Plaintiff alleges that, after accepting the claim settlement, he discovered that State Farm had been systematically misrepresenting coverage available to its insureds and that the Dotson Agency (the “Agency”) alters their insureds’ policies. (Id. at ¶ 15). Plaintiff lives with several family members who acquired insurance from State Farm through the Agency. (Id. at ¶ 15-21). In fact, Plaintiff claims that there are more than a dozen vehicles which have been insured by State Farm and the Agency which grant coverage to Plaintiff. (Id.) These coverages were for family members living in a single connected residence with three different addresses. (Id.) Plaintiff alleges that State Farm and the Agency were aware when they issued the policies that these addresses were part of one connected residence. (Id. at ¶ 21). Although he informed Defendants about these additional policies, State Farm and the Agency refused to produce the household policy coverages to Plaintiff. (Id. at 22). Plaintiff alleges that “[t]he Dotson Agency and State Farm, in a blatant effort to disguise and misrepresent coverages, insured some vehicles of the household members under one street address while insuring other vehicles of the household members under [policies] with different street addresses listed.” (Id.). Plaintiff also alleges that “the Defendant Bob Dotson Agency has already confirmed that they have forged several of their customers’ policies in an effort to try and deny them coverage.” (Id.). And Plaintiff claims that “State Farm and the Dotson Agency blatantly misinform their agents and claims handlers that there is no mechanism for them to identify State Farm coverages by an address.” (Id. at ¶ 26).

         Furthermore, Plaintiff sent a list of the fifteen vehicles allegedly insured by State Farm and the Agency to State farm and requested coverage declarations for the policies. (Id. ¶ 27-29). State Farm responded with coverage declarations for only five of the vehicles and refused to produce any others. (Id. at ¶ 29). Plaintiff then “reiterated the request for the ten or more outstanding coverages.” (Id. at ¶ 31). State Farm denied these requests. (Id.). Plaintiff also requested these documents from the Agency, who denied his requests. (Id.).

         Plaintiff filed his Complaint against State Farm and the Agency in Jefferson Circuit Court, alleging violations of the Kentucky Consumer Protection Act, the Kentucky Unfair Claims and Settlement Practices Act, common law bad faith, breach of contract, fraudulent misrepresentation, and civil conspiracy. Plaintiff claims that “State Farm and the Bob Dotson Insurance Agency, and in furtherance of a civil conspiracy, withheld information from Mr. Wright and his counsel that he was actually insured under multiple insurance policies affording him tens, if not hundreds, of thousands of dollars in coverage.” (DN 10 at 2-3).

         On November 21, 2018, State Farm removed this action under diversity jurisdiction. Because the Plaintiff and the Agency are both citizens of Kentucky, there is no diversity on the face of the complaint. But State Farm argues that “the Kentucky citizenship of Agent Dotson should be ignored under fraudulent joinder because Wright failed to assert a colorable claim against Agent Dotson.” (DN 13 at 4). State Farm argues that the Agency is fraudulently joined because (1) Plaintiff’s bad faith claim against the Agency fails as a matter of law because the Agency was not a party to the contract of insurance between Plaintiff and State Farm; (2) Plaintiff’s claim of fraudulent misrepresentation fails because Plaintiff does not plead fraud with sufficient specificity and the allegations against the Agency do not support a claim of fraud; and (3) Plaintiff cannot assert a colorable claim against the Agency for civil conspiracy because he has no viable free-standing cause of action and because no civil conspiracy claim can be brought against an insurance agent and its insurer as a matter of law. (DN 13 at 20-21). Plaintiff’s motion to remand is now before the Court and for the following reasons, it is GRANTED.

         Legal Standard

         The burden to establish federal subject matter jurisdiction lies with the party seeking removal. Vill. Of Oakwood v. State Bank & Trust Co., 539 F.3d 373, 377 (6th Cir. 2008) (citing Ahearn v. Charter Township of Bloomfield, 100 F.3d 451, 453-54 (6th Cir. 1996)). Generally, a defendant may remove a civil case to federal court only if the action is one over which the federal court could have exercised original jurisdiction. See 28 U.S.C. § 1441, 1446. Because Plaintiff’s complaint does not raise a federal question, the exclusive basis for federal subject matter jurisdiction is 28 U.S.C. § 1332, which requires the citizenship of each plaintiff to be diverse from the citizenship of each defendant. See Caterpillar Inc. v. Lewis, 519 U.S. 61, 67-68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996) (explaining the principle of complete diversity). While Plaintiff, a citizen of the Commonwealth of Kentucky, is diverse from State Farm, a company that is incorporated and maintains its principal place of business in Illinois, he is not diverse from the Bob Dotson Insurance Agency, a Kentucky corporation. Therefore, complete diversity is lacking based on the face of Plaintiff’s complaint. (DN 1-2 at 4). However, the Defendants insist that Plaintiff fraudulently joined the Bob Dotson Insurance Agency in an effort to defeat diversity jurisdiction and confine the case to state court.

         Defendants bear the burden of proving fraudulent joinder. “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.” Chambers v. HSBC Bank USA, N.A., 796 F.3d 560, 564-65 (6th Cir. 2015) (quoting Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999)). “If there is a colorable basis for predicting that a plaintiff may recover against non-diverse defendants, [the district] Court must remand the action to state court.” Taco Bell Corp. v. Dairy Farmers of Am., Inc., 727 F.Supp.2d 604, 607 (W.D. Ky. 2010) (citing Coyne, 183 F.3d at 493). In other words, if Plaintiff’s claims have even “a ‘glimmer of hope, ’ there is no fraudulent joinder.” Murriel-Don Coal Co. v. Aspen Ins. UK Ltd., 790 F.Supp.2d 590, 597 (E.D. Ky. 2011) (quoting Hartley v. CSX Transp., Inc., 187 F.3d 422, 426 (4th Cir. 1999)). This is a “heavy burden, ” Mayes v. Rapoport, 198 F.3d 457, 463 (4th Cir. 1999), as Defendants must demonstrate that there is no genuine basis upon which Plaintiff may be able to recover against the Bob Dotson Insurance Agency. Coyne, 183 F.3d at 493.

         The standard for a defendant to successfully show fraudulent joinder is even higher than the standard a defendant must meet to succeed on a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Anderson v. Merck & Co. Inc., 417 F.Supp.2d 842, 845 (E.D. Ky. 2006) (citing Little v. Purdue Pharma, L.P., 227 F.Supp.2d 838, 845-46 (S.D. Ohio 2002)). “[T]he benefit of the doubt given a plaintiff as part of the fraudulent joinder inquiry should be more deferential than even that given under Rule 12(b)(6). . . . [A] decision overruling a motion for remand where the defendant is claiming fraudulent joinder connotes that a plaintiff’s claim, as to the non-diverse defendant, has no basis in law or reason.” Little, 227 F.Supp.2d at 846-47; see also Casias v. Wal-Mart Stores, Inc., 695 F.3d 428, 433 (6th Cir. 2012).

         As is always the case in matters concerning comity and federalism, any ambiguity must be resolved against removal. See Brirly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 534 (6th Cir. 1999) (explaining that “the statutes conferring removal jurisdiction are to be construed strictly because removal jurisdiction encroaches on a state court’s jurisdiction” and that ambiguities regarding the scope of removal “should be resolved in favor of remand to the state courts.”). Furthermore, any ambiguities in the relevant state law must be resolved in the light most favorable to the plaintiff. Walker v. Phillip Morris USA, Inc., 443 F. App’x 946, 951 (6th Cir. 2011) (citing Alexander v. Electronic Data Systems Corp., 13 F.3d 940, 949 (6th Cir. 1994)); See also Coyne, 183 F.3d at 493 (“All doubts as to the propriety of removal are resolved in favor of remand.”).


         According to Plaintiff’s Complaint, the Bob Dotson Insurance Agency is a citizen of Kentucky and therefore is not diverse from Plaintiff. The Court must determine whether Plaintiff has asserted any claim against the Agency that is colorable. As an initial matter, it is important to recognize the limited nature of the Court’s examination of the merits of Plaintiff’s claims. The question before the Court is not whether Plaintiff will ultimately succeed in his claims against the Defendants. Instead, the question before the Court is whether there is a “glimmer of hope” or a reasonably arguable basis upon which Plaintiff might recover under Kentucky law. If there is a chance Plaintiff could succeed under Kentucky law, then the Court must remand the case to state court.

         Plaintiff claims that State Farm and the Agency misrepresented and concealed coverage from him through a deliberate scheme of separating household coverages under different policy numbers and then concealing the existence of coverage to the insured. Then, Plaintiff claims, the Defendants refused to produce policy information to him. Furthermore, Plaintiff claims that the Agency forged documents limiting coverage to him. Plaintiff alleges that State Farm offered incentives to the Agency to take these actions and that the Agency took independent actions to further the wrongful denial of coverage to him.

         Plaintiff claims, inter alia, that State Farm and the Agency each, and acting in concert, violated the Unfair Claims Settlement Practices Act (“UCSPA”), Ky. Rev. Stat. § 304.12-230. The UCSPA prohibits any person[3] from committing or performing seventeen specific acts or omissions including:

(1) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue; (2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies; (3) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; (4) Refusing to pay claims without conducting a reasonable investigation based upon all available information; . . . (6) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably ...

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