Elliott v. Am. States Ins. Co.

• Decision Date: 20 February 2018
• Docket Number: No. 17-1421,17-1421
• Citation: 883 F.3d 384
• Parties: Loretta T. ELLIOTT, Plaintiff–Appellant, v. AMERICAN STATES INSURANCE COMPANY, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

883 F.3d 384

Loretta T. ELLIOTT, Plaintiff–Appellant,

v.AMERICAN STATES INSURANCE COMPANY, Defendant–Appellee.

No. 17-1421

United States Court of Appeals, Fourth Circuit.

Argued: December 6, 2017

Decided: February 20, 2018

ARGUED: James Harold Hughes, HUGHES LAW, PLLC, Durham, North Carolina; James Bruce Hoof, BRUCE HOOF LAW, Durham, North Carolina, for Appellant. William Walton Silverman, WALL TEMPLETON & HALDRUP, PA, Raleigh, North Carolina, for Appellee. ON BRIEF: J. Mark Langdon, Robin A. Seelbach, WALL TEMPLETON & WALDRUP, PA, Raleigh, North Carolina, for Appellee.

Before MOTZ, AGEE, and FLOYD, Circuit Judges.

Affirmed by published opinion. Judge Floyd wrote the opinion in which Judge Motz and Judge Agee joined.

FLOYD, Circuit Judge:

Loretta Elliott filed this claim against her insurance company, American States Insurance Company ("ASIC"), alleging that its conduct in handling her insurance claim constitutes an unfair claims settlement practice in violation of N.C. Gen. Stat. § 58-63-15(11), and, as a matter of law, an unfair and deceptive trade practice in violation of N.C. Gen. Stat. § 75-1.1. On appeal, Elliott asserts that the district court erroneously denied her motion to remand based on ASIC's alleged untimely filing for notice of removal, arguing that the period for filing commences when a statutory agent is served. She also asserts that diversity jurisdiction does not exist because the case should be properly treated as a "direct action" within the meaning of 28 U.S.C. § 1332(c)(1). Last, Elliott argues that the district court erroneously granted ASIC's Rule 12(b)(6) motion to dismiss for failure to state a claim. For the following reasons, we affirm.

I.

On January 16, 2013, Elliott was in an automobile accident with Michael Jones. Elliott suffered serious, painful, and permanent bodily injuries as a result of the accident. At the time of the accident, Elliott's vehicle was insured by ASIC. Her policy included underinsured motorist ("UIM") coverage of $100,000, less any amount she recovered under another policy.¹ Jones had liability coverage up to $30,000 with State Farm Insurance Company ("State Farm"). Elliott submitted a settlement demand package to State Farm, alleging $234,847 in total damages and alleging that Jones's negligence caused the accident. State Farm paid her the policy limit of $30,000. Elliott submitted the same claim to ASIC with a settlement demand to recover the $70,000 limit in UIM benefits remaining under her policy. ASIC declined to make any offer to settle the claim. In response, Elliott advised ASIC that she was "compelled to institute litigation to recover amounts due" under her UIM policy. J.A. 71.

On October 8, 2014, Elliott initiated a lawsuit to recover damages against Jones ("Elliott v. Jones ") in Superior Court in Durham County, North Carolina, and ASIC exercised its statutory right as a UIM carrier to defend the Elliott v. Jones lawsuit as an unnamed party. The lawsuit was referred to arbitration, in accordance with Elliott's insurance policy,² and an arbitration hearing was held on February 2, 2016. Elliott alleges that ASIC made "token offers" to settle at some point between the filing of the lawsuit and the arbitration hearing, and that these offers were "substantially less than the amount of UIM coverage ultimately recovered ...." J.A. 19. Elliott rejected these offers. On February 9, 2016, an arbitration award was rendered in Elliott's favor in the amount of $90,000 plus prejudgment interests and costs. On March 1, 2016, in accordance with the arbitration award, the Superior Court entered a judgment in Elliott v. Jones for Elliott in the amount of $68,010.17, after deducting the $30,000 which State Farm had already paid. ASIC subsequently paid the full amount of this judgment.

Elliott then instituted this action against ASIC in Superior Court in Durham County, North Carolina, alleging that ASIC's handling of her UIM claim—specifically, forcing her to initiate arbitration in order for ASIC to settle the claim—constituted an unfair claims settlement practice in violation of N.C. Gen. Stat. § 58-63-15(11), and thus, as a matter of law, an unfair and deceptive trade practice in violation of N.C. Gen. Stat. § 75-1.1. She further asserts that she is entitled to recover damages from ASIC for this violation pursuant to N.C. Gen. Stat. § 75-16. Elliott served the summons and complaint on the Commissioner of Insurance of North Carolina (the "Commissioner"), ASIC's statutorily required agent for service of process; the Commissioner accepted service via certified mail on August 12, 2016. On August 24, 2016, ASIC received the summons and complaint from the Commissioner. On September 23, 2016, ASIC removed the action to the United States District Court for the Middle District of North Carolina on the basis of diversity jurisdiction. ASIC filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted, and Elliott filed a motion to remand on the basis of both untimely filing for removal and lack of diversity jurisdiction. The district court subsequently denied Elliott's motion to remand and granted ASIC's motion to dismiss. This appeal followed.

On appeal, Elliott raises three distinct arguments. First, she asserts that the district court erred in denying her motion to remand because she claims that ASIC's filing for removal was untimely. At issue is when the filing period commences if the defendant's statutory agent for service of process is served instead of the defendant. Second, Elliott asserts that the district court erred in determining that the parties were diverse and argues that federal jurisdiction does not exist. Here, she argues that this action by an insured against her insurance company is a "direct action" within the meaning of 28 U.S.C. § 1332(c)(1), and thus that ASIC should be deemed to be a resident of the state in which she is a resident, which would destroy complete diversity and eliminate the subject matter jurisdiction of a federal court. Finally, she asserts that the district court erred in granting ASIC's motion to dismiss for failure to state a claim upon which relief can be granted. We reject each of these claims in turn.

II.

We first address Elliott's assertion that the district court erroneously denied her motion to remand after incorrectly determining that ASIC timely filed notice of removal. Elliott argues that ASIC's period for filing for removal began when she served the Commissioner because the Commissioner was not simply ASIC's statutory agent and that, even if he were, the removal period begins when a statutory agent is served rather than when the defendant actually receives the complaint. Elliott's claims have no merit.

We review questions of subject matter jurisdiction de novo, including a district court's denial of a motion to remand. Mayes v. Rapoport , 198 F.3d 457, 460 (4th Cir. 1999). Doubts about the propriety of removal should be resolved in favor of remanding the case to state court and in doing so, removal statutes must be strictly construed. Barbour v. Int'l Union , 640 F.3d 599, 605 (4th Cir. 2011) (en banc).

A.

Before addressing the question of when the period for filing commences when a statutory agent is served, we must consider whether ASIC's agent for service of process was a statutory agent.

A "statutory agent" is "[a]n agent designated by law to receive litigation documents and other legal notices for a nonresident corporation." Black's Law Dictionary (10th ed. 2014). An "agency by operation of law" is "[a]n agency that arises under circumstances specified by law without mutual consent between the principal and the agent having been manifested." Id. Conversely, a "process agent" or "registered agent" is defined as "a person authorized to accept service of process on behalf of another."

In order to do business in North Carolina, North Carolina law requires that all foreign or alien insurance companies, including ASIC, file an instrument appointing the Commissioner of Insurance of North Carolina as the company's agent for service of process. N.C. Gen. Stat. § 58-16-5.³ In complying with this statutory requirement,⁴ ASIC's Board of Directors adopted a resolution nominating the Commissioner as its agent to accept service of process.⁵ Elliott contends that ASIC's resolution appointing the Commissioner as its agent for service of process demonstrates that ASIC authorized the Commissioner in this role such that the Commissioner is a registered agent rather than a statutory agent. This argument is unavailing, as the statute plainly requires this appointment. It is also irrelevant that ASIC's resolution states that it "expressly agree[s] that any and all lawful processes against it which may be served upon said Insurance Commissioner, or his successor, shall be deemed valid personal service upon said company and shall be the same force and validity as if served upon said company," J.A. 85, because the statute required the same, see N.C. Gen. Stat. § 58-16-5 ("service upon the Commissioner is sufficient service upon the company"). Thus, the record does not indicate that ASIC provided the Commissioner with any agency or authority to act on its behalf in any way other than what was required under North Carolina law.

Because North Carolina law requires ASIC to appoint and authorize the Commissioner as its agent for service of process as a condition of writing insurance in the state, and because this was the only authority ASIC provided the Commissioner, we conclude that the Commissioner was merely ASIC's statutory agent for service of process.

B.

Having concluded that the Commissioner is a statutory agent, we now consider whether the filing period commences when the statutory agent is served, as Elliott argues, or when the defendant receives the complaint, as ASIC argues.

The relevant removal statute provides that:

The notice of removal of a civil action or proceeding

...