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Stinson v. State Farm Mutual Automobile Insurance Co.

United States District Court, W.D. Kentucky

September 25, 2019

SARAH STINSON PLAINTIFF
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, AND STATE FARM FIRE AND CASUALTY COMPANY, AND Y SIMPSON AGENCY DEFENDANTS

          MEMORANDUM OPINION & ORDER

          Thomas B. Russell, Senior Judge

         This matter is before the Court upon a motion by Plaintiff, Sarah Stinson, to remand this action to Jefferson County Circuit Court, where Plaintiff filed it. (DN 9). Defendant, State Farm Mutual Automobile Insurance Company (“State Farm”) has responded to Plaintiff’s motion. (DN 13). Defendant, Casey Simpson Agency (the “Agency”), addressed Plaintiff’s arguments in its response to Plaintiff’s motion to place Defendants’ motion to dismiss in abeyance. (DN 12). Plaintiff has filed her reply. (DN 14). Fully briefed, this matter is ripe for review and for the following reasons, Plaintiff’s motion to remand is GRANTED.

         Background

         The factual allegations as set forth in the Complaint, (DN 1-2 at 4), and taken as true are as follows.[1] On December 5, 2015, Plaintiff was involved in a motor vehicle accident. (DN 1-2 at ¶ 1). Because Plaintiff’s injuries exceeded the available insurance limits of the tortfeasor, she opened an underinsured motorist (“UIM”) claim with her insurer-State Farm. (DN 9 at 1). Her UIM claim was denied. Id. After her UIM claims were denied, Plaintiff resolved her claims for the tortfeasor’s policy limits. (DN 1-2 at ¶ 13).

         After resolving her claims with the tortfeasor, Plaintiff alleges that she “discovered that State Farm had been systematically misrepresenting coverage available to its insureds by, amongst other tactics, failing to properly search for available coverage.” (DN 9 at 2). Plaintiff claims that she then discovered available UIM coverage arising from other policies in her household. (DN 1-2 at ¶ 14). On September 18, 2018, Plaintiff attempted to confirm that there were applicable policies but the Agency advised her that they could not access the 2015 policies. Id. Plaintiff alleges that the Agency advised her that no policies could be found, and that State Farm does not look for all coverages that may cover its insureds. Id; See also (DN 9 at 2).

         Plaintiff claims that “[f]or more than two years, State Farm and Casey Simpson deceived Ms. Stinson as she and her counsel were repeatedly told that she was not insured under any policies which would afford her UIM coverage.” (DN 9 at 3). Furthermore, Plaintiff claims “[t]he Agency and State Farm both, and in furtherance of a civil conspiracy, withheld information from Ms. Stinson and her counsel that she was actually an insured under two insurance policies affording $125, 000 in coverage.” Id. Plaintiff alleges that the Agency “conspired with State Farm to sell insurance policies with separate policy No. for each vehicle in the household to assist State Farm in the misrepresentation of available coverage in order to defraud consumers and claimants” and that “the Agency engaged in conduct designed to deny or modify insurance coverage, to withhold available insurance coverage, and to deceive customers and their families into believing that insurance was not available or applicable to a loss when coverage existed.” (DN 9 at 10-11). Plaintiff claims that the Agency participated in this scheme by, inter alia, “selling and assigning separate policy No. for each vehicle in the household.” (DN 9 at 14). According to Plaintiff, the Agency knowingly concealed and misrepresented the existence of available under insured motorist coverage to its client, deliberately obstructed efforts to obtain information about coverage, and participated in a plan to deny payments to the insured for its own profits.

         Furthermore, Plaintiff asserts that:

The Defendants misrepresented the available coverage to [Plaintiff], advising her and her counsel on multiple occasions that she was not covered by them for any underinsured motorist coverage (“UIM”). The Defendants never advised [Plaintiff] or her counsel that there was indeed UIM coverage to which she was entitled under household policies. This resulted in the claim being denied underpaid and the Defendants committing fraud, bad faith, unfair claims and settlement practices and breaching several duties to the insured. . . .
The Defendants are part of a scheme in which Scorecard Bonuses and other bonuses are paid if criteria are met. In order to meet these criteria, the Defendants have collaborated to deprive their insureds of coverage to which they are entitled and have misrepresented to their insureds what coverage they have either purchased or should be receiving in the case of a loss.
The Defendants have concocted a scheme in which they insure multiple vehicles of their insured, assign each vehicle a separate policy No. and then withhold the existence of the available coverages when handling claims. . . . The Plaintiff was entitled to coverage under multiple policies, but the Defendants willfully and knowingly failed to advise the Plaintiff and her counsel of this. Instead, they simply cited the policy of the car involved in the crash and falsely represented that there was no UIM coverage available to the Plaintiff, thus depriving the Plaintiff of tens of thousands of dollars in available coverage under other policies.

(DN 1-2 ¶ 1-4) (formatting altered).

         Plaintiff filed her complaint against Defendants in Jefferson County 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. (DN 9 at 2-3). State Farm removed this action under diversity jurisdiction. Because Plaintiff and the Agency are both citizens of Kentucky, there is no diversity on the face of the complaint. But State Farm and the Agency argue that the Agency’s citizenship should be ignored under the doctrine of fraudulent joinder because, they argue, Plaintiff does not state a colorable claim against the Agency. 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 for fraudulent misrepresentation fails because Plaintiff does not plead fraud with sufficient specificity and the allegations against the Agency do not support a claim for fraud; and (3) Plaintiff cannot assert a colorable claim against the Agency for civil conspiracy because he has no viable freestanding 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 18-19). 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.32d 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 Casey Simpson Agency, a Kentucky corporation. Therefore, complete diversity is lacking based on the face of Plaintiff’s complaint. However, the Defendants insist that Plaintiff fraudulently joined the Casey Simpson 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 Casey Simpson 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.”).

         Discussion

         According to Plaintiff’s complaint, the Casey Simpson Agency is a citizen of Kentucky and therefore is not diverse from Plaintiff. The Court must therefore 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 her 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 deceived her and repeatedly told her that she was not insured under any policies which would afford her UIM coverage. And Plaintiff claims that “[t]he Agency and State Farm both, and in furtherance of a civil conspiracy, withheld information from Ms. Stinson and her counsel that she was actually an insured under two insurance policies affording $125, 000 in coverage.” (DN 9 at 3). Plaintiff claims that State Farm and the Agency are each part of a scheme “in which they insure multiple vehicles with their insured, assign each vehicle a separate policy No. and then withhold the existence of available coverages when handling claims.” (DN 1-2 at ¶ ...


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