Grobe v. Vantage Credit Union

Decision Date20 January 2010
Docket NumberCase No. 4:09CV988 CDP.
Citation679 F. Supp.2d 1020
PartiesCossetta GROBE, Plaintiff, v. VANTAGE CREDIT UNION, et al., Defendants.
CourtU.S. District Court — Eastern District of Missouri

Jill S. Bollwerk, Bollwerk and Ryan, LLC, Phillip A. Tatlow, Hockensmith and Tatlow, St. Louis, MO, for Plaintiff.

Emily S. Hubbard, Brown and James, P.C., Jill R. Rembusch, Summers and Compton, Matthew S. Shorey, Armstrong Teasdale, LLP, Angela N. Loehr, Gallop Johnson, St. Louis, MO, for Defendants.

MEMORANDUM AND ORDER

CATHERINE D. PERRY, District Judge.

In this insurance coverage dispute, plaintiff Cossetta Grobe sued two insurance companies who have refused to pay benefits under accidental death and dismemberment policies held by her late-husband, Anthony. She has also sued two companies — her credit union and a retail store — that sent out solicitations offering the policies to their customers, including Grobe. Although complete diversity is lacking on the face of the complaint — because plaintiff is a Missouri citizen as is defendant Vantage Credit Union — defendants removed the case to federal court, claiming that Vantage was fraudulently joined to defeat diversity jurisdiction. I agree that there is no reasonable basis in fact and law to hold Vantage liable, and so I will deny the motions to remand, and dismiss all claims against Vantage.

Defendant Hartford Life and Accident Insurance Company has also moved to dismiss all counts against it, arguing that coverage under the policy is excluded under a "medical treatment" exclusion from the definition of "injury." I agree, and I will dismiss all counts against Hartford. Claims remain against defendants J.C. Penney Corporation, Inc. and Stonebridge Life Insurance Company.

Background

In 2005, Cossetta Grobe received a mailing from her bank, Vantage Credit Union. The mailing offered Grobe an opportunity to sign up for $1000 in accidental death and dismemberment (AD & D) insurance coverage from the Hartford Life and Accident Insurance Company, paid for by Vantage, free of charge. The policy was offered as a benefit to Vantage's customers, inviting them to join the group policy issued by Hartford to Vantage. The mailing also offered Grobe the opportunity to purchase additional coverage under the group policy, up to $250,000, at group rates, with the premium to be deducted from Grobe's account at the Credit Union. Grobe checked three boxes on the activation form: one for the free $1000 coverage, one for $100,000 of additional coverage, and one for family coverage, covering her husband, Anthony. She signed, dated, and mailed the form in a postage-paid envelope.

In its motion to remand, Vantage attached the solicitation packet that it sent to its customers, including the filled-out form signed by Grobe. The solicitation packet is four pages long, and includes a postage-paid envelope. The first page is a letter, signed by both Vantage's president and by Dave Ford, identified in the letter as an insurance agent for Hartford. The letter encourages Vantage customers to "accept the credit union-paid" AD & D coverage "made available through the Hartford." The letter also mentions the "opportunity to get up to $250,000 AD & D additional coverage, for as little as $1.00 a month per $10,000 of protection." The letter directs Vantage customers to "see the enclosed brochure for more information, including costs, exclusions, limitations, and terms of coverage."

The second page is the activation form, where the customer can select different types of coverage by checking various boxes. Directly above Grobe's signature on the activation form is the following language: "Charge Authorization. Yes, please sign me up for this insurance plan. I have received and read all insurance disclosures, and I authorize my credit union and its service provider to automatically charge my account. . . ." The third and fourth pages of the packet are insurance disclosures. On the last page of the packet, there is a section of print titled "Definitions/Exclusions." There, it states: "Loss resulting from sickness or disease, or medical treatment of sickness or disease, is not covered." After mailing in the solicitation form sometime in November 2005, the Grobes were issued an insurance certificate by defendant Hartford on December 7, 2005, indicating that the policy would be effective as of January 1, 2006.

On May 8, 2006, Grobe's husband died. Immediately before his death, Anthony Grobe took his prescription medication, methadone, as prescribed. He had been prescribed methadone by his physician for the treatment of a medical condition. Anthony Grobe had a preexisting medical history of insulin dependent diabetes and depression. The cause of death was determined to be accidental sustained acute methadone intoxication. Grobe filed for AD & D benefits under the policy. Defendant Hartford denied benefits, citing the "medical treatment of a sickness or disease" exception to coverage. After the denial, Grobe sued both Vantage and Hartford for negligent misrepresentation (Count I), breach of contract (Count III), and vexatious refusal to pay (Count V).1

I. Grobe's Motion to Remand

Federal courts are courts of limited jurisdiction. Myers v. Richland County, 429 F.3d 740, 745 (8th Cir.2005) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994)). As such, federal courts are authorized to hear cases only as provided by the Constitution and by statute. A party seeking to remove a case to federal court has the burden of establishing federal subject-matter jurisdiction. In re Bus. Men's Assur. Co. of Am., 992 F.2d 181, 183 (8th Cir.1993).

Under the doctrine of fraudulent joinder, a court may disregard the citizenship of a non-diverse defendant who was frivolously joined in an effort to defeat removal. Commercial Sav. Bank v. Commercial Fed. Bank, 939 F.Supp. 674, 680 (N.D.Iowa 1996). "Joinder is fraudulent and removal is proper when there exists no reasonable basis in fact and law supporting a claim against the resident defendants." Wiles v. Capitol Indem. Corp., 280 F.3d 868, 871 (8th Cir.2002) (citations omitted). Put another way, "if there is a `colorable' cause of action — that is, if the state law might impose liability on the resident defendant under the facts alleged — then there is no fraudulent joinder." Filla v. Norfolk S. Ry. Co., 336 F.3d 806, 810 (8th Cir.2003) (emphasis in original). A proper review focuses on the reasonableness of the factual basis underlying the claims. Menz v. New Holland N. Am., Inc., 440 F.3d 1002, 1004 (8th Cir.2006) (citing Filla, 336 F.3d at 810). Joinder is fraudulent if the facts with respect to Vantage are "shown to be so clearly false as to demonstrate that no factual basis exists for any honest belief on the part of the plaintiff" that a cause of action exists against it. Morris v. E.I. DuPont De Nemours, 68 F.2d 788, 792 (8th Cir.1934). However, if there is doubt as to the truth of the allegations, and if the question as to truth or falsity depends on witness credibility and the weight of the evidence, there is no fraudulent joinder. Id. If there is any question as to the sufficiency of the allegations against the non-diverse defendant, "the better practice is for the federal court not to decide the doubtful question in connection with the motion to remand but simply to remand the case and leave the question for the state courts to decide." Filla, 336 F.3d at 811 (quoting Iowa Pub. Serv. Co. v. Med. Bow Coal Co., 556 F.2d 400, 406 (8th Cir.1977)).

In ruling on these motions, it is proper for me to consider affidavits and other evidence submitted by the parties. Jones v. Chas. S. Lewis & Co., No. 4:08CV259 TCM, 2008 WL 2775705 (E.D.Mo. July 14, 2008); see also Parnas v. Gen. Motors Corp., 879 F.Supp. 91 (E.D.Mo.1995) (considering the parties' affidavits in addition to the parties' pleadings in determining the issue of fraudulent joinder); Reeb v. Wal-Mart Stores, 902 F.Supp. 185 (E.D.Mo.1995) (The "most prudent method" of determining if a defendant was fraudulently joined is to consider materials outside the pleadings to see if they establish facts supporting the plaintiff's claims.); Elliott v. Bridgestone/Firestone N. Am. Tire, No. 4:05CV1297 CDP, 2006 WL 6191453, 2006 U.S. Dist. LEXIS 8872 (E.D.Mo. Mar. 7, 2006) (considering affidavits and deposition testimony in ruling on a fraudulent joinder motion); Petersen v. Rusch, Inc., No. 4:05CV1328 ERW, 2006 WL 83492 (E.D.Mo. Jan. 12, 2006) (looking to affidavit of non-diverse defendant to deny remand because affidavit denied involvement and was uncontradicted by plaintiff). Both parties have attached affidavits and other supporting material. I will only use these materials to determine whether they establish facts supporting the claims, not whether they resolve the merits of the claims. Jones, 2008 WL 2775705, at *3.

Grobe has asserted three claims against the resident defendant Vantage: vexatious refusal to pay (Count V), negligent misrepresentation (Count I), and breach of contract (Count III). Grobe's claim against Vantage for vexatious refusal to pay fails because Vantage is not an insurance company. Under Missouri law, an action against an insurance company for vexatious refusal to pay benefits under an insurance policy exists "if it appears from the evidence that such company has refused to pay such loss without reasonable cause or excuse. . . ." Mo.Rev.Stat. § 375.420 (2008). To recover under this section, Grobe must show that the "insurer's refusal to pay was willful and without reasonable cause as it would appear to a reasonable and prudent person." Thornburgh Insulation, Inc. v. J.W. Terrill, Inc., 236 S.W.3d 651, 657 (Mo.Ct.App.2007) (quoting Smith ex rel. Stephan v. AF & L Ins. Co., 147 S.W.3d 767, 778 (Mo.Ct.App. 2004)). Where "the insurer has reasonable cause to believe and does believe there is no liability under its policy and it has a...

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