Stinson v. State Farm Mut. Auto. Ins. Co., CIVIL ACTION NO. 3:18-CV-759-TBR

CourtUnited States District Courts. 6th Circuit. United States District Court of Western District of Kentucky
Writing for the CourtThomas B. Russell, Senior Judge United States District Court
PartiesSARAH STINSON PLAINTIFF v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, AND STATE FARM FIRE AND CASUALTY COMPANY, AND CASEY SIMPSON AGENCY DEFENDANTS
Decision Date25 September 2019
Docket NumberCIVIL ACTION NO. 3:18-CV-759-TBR

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

CIVIL ACTION NO. 3:18-CV-759-TBR

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY AT LOUISVILLE

September 25, 2019


Memorandum Opinion & Order

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

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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 numbers 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

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separate policy numbers 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 number 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

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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 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 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

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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...

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