Opinion
No. CIV-S-02-1426 DFL JFM
September 9, 2002
MEMORANDUM OF OPINION AND ORDER
Plaintiff Enrique Moreno ("Moreno") alleges that defendants, Allstate Insurance Company ("Allstate") and John Munoz ("Munoz"), the Allstate claims adjustor responsible for handling Moreno's claim, failed to settle a personal injury suit against him within a reasonable time, thereby exposing him to a judgment that substantially exceeded policy limits. Moreno filed suit in San Joaquin County Superior Court, asserting claims for breach of fair dealing against Allstate and claims for fraud and negligent misrepresentation against both Allstate and Munoz. Defendants removed the action to this court on the basis of diversity jurisdiction, alleging that Munoz, a California resident, had been fraudulently joined and should be disregarded for the purposes of determining diversity. Moreno, also a California resident, now moves for remand, arguing that Munoz is not a sham defendant. Defendants have filed cross-motions for judgment on the pleadings under Rule 12(c) on Moreno's fraud and negligent misrepresentation claims.
The parties have submitted documentary evidence outside the pleadings, treating defendants' Rule 12(c) motion as a motion for partial summary judgment.
I.
On April 2, 2000, Moreno crashed his car in Los Banos, California, severely injuring his passenger Richard Sabala ("Sabala"). (Complaint at ¶ 9, Nichols Aff. Exh. C). The 1997 Chevrolet Malibu that Moreno was driving at the time of the accident was insured by Allstate under an automobile liability policy with liability limits of $15,000 per person and $30,000 per accident. (Complaint at ¶ 7). The policy appears to have been issued to Moreno's father, Jose Ramos ("Ramos"). (Nichols Aff. Exh. G).Allstate concluded its investigation into the accident on April 7, 2000 and found Moreno 100% at fault for the car wreck. (Id. Exh. A). On April 14, 2000, Sabala's lawyer wrote to
Allstate offering to settle Sabala's claims. The letter states: "It appears that your insured has inadequate insurance to cover the damage he has caused, nevertheless, please accept this letter as a formal request on behalf of Mr. Sabala that you tender your insurance policy limits, whatever they are, in settlement of all liabilities of your insured." (Id. Exh. C). Sabala subsequently filed a personal injury action against Moreno, Ramos, and DB Transportation, the registered owner of the Malibu, on May 20, 2000. (Complaint at ¶ 10, Nichols Aff. Exh. E)
On May 25, 2000, Sabala withdrew his offer to settle his claims against Moreno for the available policy limit, citing Allstate's delay in accepting his initial offer. (Nichols Aff. Exh. E) Munoz notified Moreno and Ramos of these developments on June 6, 2000. (Id. Exh. F). Munoz's letter states:
On behalf of Allstate Insurance Company, I wanted to update you with respect to a claim being made against you by Richard Sabala.
By letter dated April 14, 2000, Dean Cooper, on behalf of Mr. Sabala, sent a "demand" letter to Ranola Chitmon, the Allstate adjuster who previously handled this claim. Mr. Cooper's demand was not capable of acceptance for several reasons; the letter did not mention the resolution of any medical liens to which you could be exposed; the letter did not offer to release both of you; and at the time the demand was made, Allstate did not have the police report, nor did it have the medical records to verify the nature and extent of the injuries claimed. In addition, such demand did not take into account DB Transportation's potential claim of being an insured under your policy.
(Id.) Munoz also wrote to Sabala's lawyer on June 6, 2000, indicating the Sabala's initial offer was not capable of acceptance and offering to settle Sabala's claims for the $15,000 policy limit provided that Sabala agree to release Moreno, Ramos, and DB Transportation and satisfy all existing medical liens. (Id. Exh. G).
Sabala apparently rejected this offer. Allstate defended Moreno in the state tort action which eventually went to trial. (Complaint at ¶¶ 11-12). The jury ultimately awarded Sabala a judgment of over $400,000. (Complaint at ¶ 15). Allstate paid Sabala the $15,000 policy limit, leaving Moreno liable for the rest of the judgment. (Id. at ¶ 16).
Moreno filed suit against defendants in San Joaquin County Superior Court on May 9, 2002. He alleges that Allstate breached its contractual obligations by refusing to accept Sabala's initial policy-limits settlement offer although it was clear that Moreno was at fault for the April 2, 2000 accident and that Sabala's damages significantly exceeded the available policy limits. Moreno also contends that Munoz falsely stated in his June 6, 2000 letter that Allstate could not accept Sabala's initial policy-limits settlement offer. Moreno further alleges that Munoz's letter concealed the true facts regarding defendants' unjustified delay in responding to Sabala's initial offer. Defendants removed the case to this court on July 1, 2002 on the basis of diversity jurisdiction. Moreno now moves for remand. Defendants seek judgment on the pleadings on Moreno's fraud and negligent misrepresentation claims.
II.
"If a plaintiff fails to state a cause of action against a resident defendant and the failure is obvious according to well-settled rules of the state, the joinder is fraudulent and `the defendant's presence in the lawsuit is ignored for purposes of determining diversity.'" United Computer Sys. Inc. v. AT T Corp., 298 F.3d 756, 761 (9th Cir. 2002) (quoting Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001)). Under California law, it is well settled that "[a]n agent of an insurance company is generally immune from suits brought by claimants for actions taken while the agent was acting within the scope of its agency." See Icasiano v. Allstate Ins. Co., 103 F. Supp.2d 1187, 1189 (N.D. Cal. 2000). Therefore, an insurance adjustor, such as Munoz, may not be held individually liable for actions taken on behalf of the insurer. See id. at 1190 (N.D. Cal. 2000); Kamran v. Allstate Ins. Co., 2000 U.S. Dist. LEXIS 13437 (C.D. Cal. Sept. 6, 2000); Cobarrubias v. Allstate Ins. Co., 1998 WL 656571 at *1 (C.D. Cal. July 10, 1998);Sanchez v. Lindsey Morden Claims Services, Inc., 72 Cal.App.4th 249, 84 Cal.Rptr.2d 799 (1999).
"Fraudulent joinder is term of art. The use of the term is not intended to impugn the integrity of the plaintiff or counsel." Charlin v. Allstate Ins. Co., 19 F. Supp.2d 1137, 1139 n. 1 (C.D. Cal. 1998) (quotations and citations omitted).
Moreno argues that an insurer's employees can be held directly liable for fraud under Younan v. Equifax, Inc., 111 Cal.App.3d 398 (1980). The Younan court held that an independent company, acting as the insurer's agent, may be liable for conspiring with the insurance company to defraud the insured. Younan does not stand for the broader proposition that an insurer's own employees can be independently liable for misrepresentation allegedly made on behalf of the insurer. See Icasiano, 103 F. Supp.2d at 1190 ("[t]here is nothing in Younan to indicate that employees of insurers, engaged in the process of administering a claim can be held independently liable to an insured).
Moreno argues that the general rule against independent adjustor liability does not apply when an adjustor makes false statements in an attempt to cover up his individual wrongdoing. However, in assessing whether an employee's actions should be attributed to an employer, California courts do not recognize a strict motivation-based test that turns on whether the employee intended to further the employer's interests through the alleged misconduct. See, e.g., Rogers v. Kemper Construction Co., 50 Cal.App.3d 608, 621 (1975). Because Munoz's alleged misrepresentations were undisputedly made in the course of his duties as an Allstate claims adjustor, Moreno may not hold Munoz individually liable on fraud or negligent misrepresentation theories. (Complaint at ¶ 21). The court therefore finds that Munoz was fraudulently joined. Moreno's motion to remand is accordingly denied.
Moreno does not allege that Munoz assumed any special duties towards him beyond those that Munoz was required to undertake on behalf of Allstate.
III.
To state claims for fraud or negligent misrepresentation under California law, Moreno must establish that he justifiably relied on a false statement or material omission attributable to defendants. See Glenn K. Jackson, Inc. v. Roe, 273 F.3d 1192, 1201 n. 2 (9th Cir. 2001); Lazar v. Superior Court, 12 Cal.4th 631, 638 (1996). As a matter of law, Allstate could not accept Sabala's policy-limits settlement offer without obtaining a release for all insureds covered by its liability policy.See, e.g., Shade Foods, Inc. v. Innovative Prods. Sales Mktg., Inc., 88 Cal.App.4th 847, 887 (2000); Lehto v. Allstate Ins. Co., 31 Cal.App.4th 60, 75 (1995). In his initial April 14, 2000 offer letter, Sabala did not agree to release his claims against Ramos or DB Transportation. (Nichols Aff. Exh. C). Thus, it does not appear that Munoz materially misstated the facts when he advised Moreno that Allstate could not accept Sabala's initial settlement offer.
Moreover, it is undisputed that Sabala withdrew his policy-limits settlement offer before Munoz drafted the June 6, 2000 letter to Moreno. (Id. Exh. E). Consequently, Moreno could not have detrimentally relied on Munoz's June 6, 2000 letter. Moreno argues that had he been aware of defendants' unjustified delay in settling Sabala's claims, he would have sought independent legal representation. However, Moreno does not allege that Sabala ever renewed his initial settlement offer, nor does Moreno challenge the quality of legal representation provided by Allstate. Because Moreno fails to allege an actionable false statement or material omission and fails to demonstrate reasonable reliance, defendants' motion for judgment on the pleadings is granted. As Moreno has not indicated that he can state additional facts to cure these deficiencies, his request for leave to amend is denied.
IV.
For the forgoing reasons, plaintiff's motion to remand is DENIED. Defendants' Rule 12(c) motion is GRANTED. Plaintiffs' fraud and negligent misrepresentation claims are DISMISSED.