Summary
In Motin v. Travelers Ins. Co., 2003 WL 22533673 (E.D.La. 2003) (Berrigan, J.), M M Towing Co., Inc. v. United Capitol Ins. Co,, 1998 WL 169694 (E.D.La. 1998) (McNamara, J), and Rich v. Bud's Boat Rentals, Inc., 1997 WL 785668 (E.D.La. 1997) (Vance, J.), the courts denied motions to remand on a finding that the adjuster had been fraudulently joined.
Summary of this case from Dillon v. Lincoln General Ins. Co.Opinion
CIVIL ACTION NO. 03-2487 SECTION "C" (1)
November 3, 2003
ORDER AND REASONS
Before the Court is Plaintiffs', Bonnie Motin, Henry Mansion, and Brenda Mansion, Motion to Remand to State Court pursuant to 28 U.S.C. § 1447. (Rec. Doc. 7). After having considered the law, the record, the motion, and the memoranda filed in support and opposition thereto, the Plaintiff's motion is DENIED.
I. PROCEDURAL HISTORY
On April 22, 2003, Plaintiffs, Bonnie Motin, Henry Mansion, and Brenda Mansion filed suit against Travelers Insurance Company and Richard J. Folse, Jr. in the Civil District Court for the Parish of Orleans, State of Louisiana, docket number 2003-6276. Plaintiffs are all domiciled within the State of Louisiana. While Defendant Travelers Insurance Company (hereinafter referred to as "Travelers") is a foreign insurance company, Defendant Richard J. Folse, Jr. (hereinafter referred to as "Folse") is a Louisiana domiciliary.
Defendants maintain that Plaintiffs have incorrectly referred to The Standard Fire Insurance Company as Travelers Insurance Company. However, neither party has filed a motion to correct the discrepancy, if indeed any exists. For the purposes of this Motion, the Court will refer to Plaintiffs' insurer as "Travelers".
On September 2, 2003, Defendants removed Plaintiffs' suit to the Eastern District of Louisiana pursuant to 28 U.S.C. § 1446 asserting that removal jurisdiction is proper because this Court could have exercised original jurisdiction pursuant to 28 U.S.C, § 1332. In the Notice of Removal, Defendants allege that, although Folse is a Louisiana domiciliary, his status should not be considered for the purpose of determining diversity jurisdiction because he was fraudulently joined to defeat diversity.
On September 26, 2003, Plaintiffs filed the instant Motion to Remand. Plaintiffs argue that Folse has not been fraudulently joined and, therefore, complete diversity does not exist.
II. THE STANDARD OF REVIEW
Generally, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States for the district and division embracing the place where such action is pending. 28 U.S.C.A. § 1441 (West 1994 Supp. 2003). The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interests and costs, and is between citizens of different States. 28 U.S.C.A. § 1332 (West 1993 Supp. 2003). In order to properly exercise of original jurisdiction when that original jurisdiction is based upon the matter in controversy being between citizens of different States, it is well settled that complete diversity — that is, the citizenship of every plaintiff is diverse from the citizenship of every defendant — must exist. Strawbridge v. Curtiss, 7 U.S. 267(1806).
The party seeking removal of a matter from state to federal court bears the burden of establishing the existence of federal jurisdiction. See Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir. 1992) (citing B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981). "Where charges of fraudulent joinder are used to establish this jurisdiction, the removing party has the burden of the proving the claimed joinder." Dodson, 951 F.2d at 42. A claim of fraudulent joinder shall be analyzed under the same standards used to assess a motion for summary judgment. See Badon v. R J R Nabisco, Inc., 224 F.3d 382, 393 (5th Cir.), op. after certified question declined, 236 F.3d 282 (5th Cir. 2000).
Consequently, a court must resolve any factual controversies in favor of the nonremoving party, "but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts. [The court shall] not, however, in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts." Id. (quoting Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc)).
The court must then "determine whether that party has any possibility of recovery against the party whose joinder is questioned." Dodson, 951 F.2d at 42 (citing Carriere v. Sears, Roebuck and Co., 893 F.2d 98, 100 (5th Cir.), cert. denied 498 U.S. 817 (1990)). The most crucial issue for the court to determine is whether any recovery is possible because "if that possibility exists, then 'a good faith assertion of such expectancy in a state court is not a sham . . . and is not fraudulent in fact or in law.'" Dodson, 951 F.2d at 43 (quoting B., Inc., 663 F.2d at 550). "There can be no fraudulent joinder unless it be clear that there can be no recovery under the law of the state on the cause alleged." Parks v. New York Times Co., 308 F.2d 474, 478 (5th Cir. 1962), cert. denied 376 U.S. 949 (1964).
Last and, perhaps, most important to the resolution of this issue, "[t]he district court must resolve any uncertainties as to the current state of the controlling law in favor of the plaintiff." B., Inc., 663 F.2d at 549. Fraudulent joinder is established only if "there is no possibility of a valid cause of action being set forth against the instate defendant." Id. "[I]f there is even the possibility that a state court would find a cause of action stated against . . . the named in-state defendant on the facts alleged by the plaintiff, then the federal court must find that the in-state defendant [has] been properly joined, that there is incomplete diversity, and that the case must be remanded to the state courts." Id. at 549-50.
Because neither party has presented any evidence, this court must determine if Plaintiff has successfully alleged a valid cause of action against Folse. If Plaintiffs have, the case must be remanded. If Plaintiffs have not, then Plaintiffs claim against Folse must be dismissed; and this Court will retain subject matter jurisdiction. Accordingly, the Court turns its attention now to Plaintiffs' petition. (Rec. Doc. 2).
III. THE ALLEGATIONS OF PLAINTIFFS' COMPLAINT
Bonnie Motion owned a house in New Orleans, Louisiana where her parents, Henry and Brenda Mansion, and she resided. On April 22, 2002, a fire completely destroyed the house along with various other items of Plaintiffs' personal property.
Travelers insured the house against fire loss. Folse is an insurance adjuster employed by Travelers and was assigned to handle Plaintiffs' claim.
On April 25, 2002, Folse and another man, Kevin Guge of Travelers Investigative Services, inspected the remnants of the home. Motin met the two men at the property during the inspection. Folse did not speak to Motin during the inspection. After the men finished the inspection, Guge conducted a recorded interview of Motin. Folse did not speak to Motin during the interview.
On April 26, 2002, Folse issued a letter, which Motin received a few days later. In that letter, Folse stated that Motin's claim might not be covered by her insurance policy with Travelers. Motin requested Folse provide her with a copy of her insurance policy. Folse did not provide her with a copy of her insurance policy.
On June 14, 2002, Folse issued another letter, in which he stated that Motin's claim might not be covered by her insurance policy and that the investigation was still ongoing. Folse did not provide any specifics as to why insurance coverage may be denied and as to why Travelers was still investigating.
As of sixty days from the proof of loss, Travelers had not paid Motin's claim, had not paid any undisputed amount, or even accepted or denied coverage. Also, Folse still had not provided Motin with a copy of her insurance policy. Folse did, however, after the sixtieth day following proof of loss, request that Motin allow an attorney to interview her. Folse also refused to provide Motin with the results of Travelers1 fire investigation reports or the statements of any witnesses. On November 13, 2002, Motin allowed a Travelers' attorney to question her.
As a result of the treatment Plaintiffs received at the hands of Defendants, Plaintiffs filed suit on April 23, 2003 alleging that "the defendants have intentionally breached the insurance contract and have engaged in intentional, bad faith claims adjusting in violation of the Louisiana Insurance Code, specifically La.R.S. 22:658 and 22:1220."
IV. LAW AND ANALYSIS
First, Defendants argue, and Plaintiffs do not contest, that Folse cannot be held liable to Plaintiffs under a contractual theory of liability because Folse never agreed to provide Plaintiffs with insurance coverage. The Court agrees.
In Louisiana, a contract is an agreement by two or more parties whereby obligations are created, modified, or extinguished. LA. CIVIL CODE ANN. art. 1906 (West 1987). The four elements of a valid contract are that (1) the parties must possess the capacity to contract, (2) the parties1 mutual consent must be freely given, (3) the contract must have a lawful cause, and (4) there must be a certain object for the contract. LA. CIVIL CODE ANN. art. 1918 (West 1987); LA. CIVIL CODE ANN. art. 1927 (West 1987); LA. CIVIL CODE ANN. art. 1966—67 (West 1987); LA. CIVIL CODE ANN. art. 1971 (West 1987). A mandatary who exceeds his authority is personally bound to the third person with whom he contracts, unless that person knew at the time the contract was made that the mandatary had exceeded his authority or unless the principal ratifies the contract. LA. CIVIL CODE ANN. art. 3016 (West Supp. 2003).
Because Folse never agreed to provide insurance to the Plaintiffs and never exceeded his authority to bind his principal, Travelers, he cannot be held liable for any breach of that insurance contract.
Secondly, Defendants argue, and again Plaintiffs do not contest, that Folse cannot be held liable under Title 22, section 658 of the Louisiana Revised Statutes or Title 22, section 1220 of the Louisiana Revised Statutes. LA.REV.STAT. ANN. § 22:658 (West 1995 Supp. 2003); LA.REV.STAT. ANN. § 22:658 (West 1995 Supp. 2003). Again, the Court agrees.
LA. REV, STAT. ANN. § 22:658 and LA.REV.STAT. ANN. § 22:1220, respectively, provide an insured remedies against an insurer (1) for arbitrarily failing to pay the claims of the insured thirty days after receipt of satisfactory proof of loss and (2) for failing to abide by its duty of good faith and fair dealing or its affirmative duty to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured. LA.REV.STAT. ANN. § 22:658; LA.REV.STAT. ANN. § 22:1220.
Neither of these statutes provide a remedy against an insurance adjustor. Nero v. La. Indep. Ins. Agencies, Inc., 2003 WL 203145, at *2 (E.D. La. Jan. 27, 2003); Yates v. Southwestern Life Ins. Co., 1998 WL 61033, at *4 (E.D. La. Feb. 12, 1998).
Third, Defendants argue that Plaintiff cannot establish a cause of action against Folse in tort. To this, Plaintiffs object relying upon Loehn v. Hardin. Loehn v. Hardin, 2002 WL 922380, at *2 (E.D. La. May 6, 2003).
In Loehn, the Louisiana plaintiffs brought suit in state court against a foreign insurer and one of the insurer's employees, an adjustor domiciled in Louisiana. Id. at *1. The defendants removed the case to the Eastern District of Louisiana arguing that the court had diversity jurisdiction because the adjuster had been fraudulently joined. Id. Relying on two earlier cases, Dufrene v. State Farm Fire and Cas. Co., 1993 WL 35128 (E.D. La. Feb. 5, 1993) and Smith v. Shenvin-Williams Co., 1992 WL 315090 (E.D. La. Oct. 19, 1992), the court found that the adjuster owed a duty to properly handle the claim which had been delegated to her by the insurer. Loehn, 2002 WL 922380, at *2.
The Court respectfully disagrees with the holding of the Loehn court. The duty to properly handle claims is a duty imposed by LA.REV.STAT. ANN. § 22:658 and LA.REV.STAT. ANN. § 22:1220, not by LA. CIV. CODE ANN. art. 2315 et seq. (West 1997 Supp. 2003). These statutes, penal in nature, must be strictly construed. Yates, 1998 WL 61033, at *4, citing Matter of Hanover Corp., 67 F.3d 70 (5th Cir. 1995). Nothing in the statutes suggests the Louisiana Legislature's intent to impose upon insurance adjusters the duties the statutes explicitly impose upon the insurer. Moreover, nothing in the statutes suggests that the Louisiana Legislature intended that the duties imposed upon the insurers be relegable to adjusters.
Having determined that the duties of insurance companies embodied in LA.REV.STAT. ANN. § 22:658 and LA.REV.STAT. ANN. § 22:1220 cannot be extended to insurance adjusters, the Court must now determine whether an independent tort duty may exist.
One Louisiana court has hinted that an adjuster may owe a tort duty to an insured. Alarcon v. Aetna Cas. Sur. Co., 538 So.2d 696 (La.App. 5th Cir. 1989). In Alarcon, the court stated in examining another case, Pellerin v. Cashway Pharmacy of Franklin, Inc., 396 So.2d 371, 373 (La.App. 1st Cir, 1981), to determine whether an adjuster owes a duty to an insured.
Some Louisiana cases have dealt with an issue similar to the issue presently before the Court, whether an adjuster owes a duty to an insured to warn him of the proper prescriptive period. As stated by the court in Rich v. Bud's Boat Rentals, Inc., 1997 WL 785668, at *3 (E.D. La. Dec. 18, 1997), Louisiana courts Have consistently held that, as a general rule, there is no duty on the part of an insurance adjuster to advise a claimant of the proper prescriptive period. Trainer v. Aycock Welding Co., 421 So.2d 416, 417 (La.App. 1st Cir. 1982) ("There is no duty on the part of an insurance adjuster to advise a claimant on the proper prescriptive period."); Pellerin v. Cashway Pharmacy of Franklin, Inc., 396 So.2d 371, 373 (La.App. 1st Cir. 1981) ("As a general rule, there is no relationship existing between a claimant and the insurance adjuster on which a duty to inform of prescription can be based."); Flowers v. United States Fidelity Guaranty Co., 367 So.2d 107, 110 (La.App. 4th Cir. 1979) (holding that "as adversaries, there is no relationship between the plaintiffs and the insurance adjuster on which a duty to inform of prescription can be based"); White v. Hartford Casualty Ins. Co., 297 So.2d 744, 746 (La.App. 1st Cir. 1974) ("We further advise that insurance adjusters have no duty to advise claimants on the Louisiana law of prescription.").
In Pellerin, the plaintiff's claim against the insurer had been dismissed on an exception of no cause of action and an exception of prescription. Pellerin, 396 So.2d at 372. She alleged that the adjuster had assured her that her claim would be settled as soon as she was released by the physician and told her not to contact him until then. Id. at 373. By the time she was discharged and reached the adjuster, her claim had prescribed; and the company refused to settle. Id. The Pellerin court, apparently believing the adjuster may have undertaken or assumed a duty to inform the insured of prescription, remanded with instructions to allow the plaintiff to amend her petition to allege such a breach of duty. Id.
In Alarcon, the court seized upon the Pellerin court's determination that, under some circumstances, an adjuster may owe an independent duty to an insured. Alarcon, 538 So.2d at 699, However, under the facts alleged in the plaintiff's petition, the court found that the adjuster did not owe a duty to the insured. Id.
In Alarcon, the plaintiff's house was destroyed in a fire. Id. at 697. The plaintiff's house was insured from fire loss by the defendant insurance company. Id. The insurance company sent its adjuster and a contractor to the scene of the accident to evaluate the damage. Id. After the evaluation, the two men arrived at amounts the plaintiff's believed to be a gross undervaluation. Alarcon, 538 So.2d at 697. The plaintiffs sued the insurance company and the adjuster. Id. The district court dismissed the plaintiffs' claims against the adjuster because the plaintiffs had not stated a cause of action against the adjuster. Id. The appellate court affirmed stating that allegations merely stating an adjuster committed negligent acts do not propose that the adjuster assumed a duty toward plaintiff. Id. The court concluded that, without the allegations plead in Pellerin or other like allegations proposing that an adjuster assumed a duty toward the plaintiffs, an adjuster does not owe a duty to an insured and an exception of no cause of action is properly sustainable. Id.,
Plaintiffs have not alleged any facts upon which it could be supposed that Folse assumed a duty to them. Plaintiff's allegations that "the defendants have intentionally breached the insurance contract and have engaged in intentional, bad faith claims adjusting in violation of the Louisiana Insurance Code, specifically La.R.S. 22:658 and 22:1220" do not establish, if true, that Folse assumed a duty to them. As such, Folse has been fraudulently joined.
Other Louisiana federal district court decisions also buttress this Court's decision. Nero, 2003 WL 203145; M M Towing Co., Inc. v. United Capitol Ins. Co., 1998 WL 169694 (E.D. La. April 9, 1998); Rich v. Bud's Boat Rentals, 1997 WL 785668 (E.D. La. Dec. 18, 1997); S. Hotels Ltd. P'ship v. Lloyd's Underwriters at London Cos., 1996 WL 448001 (E.D, La. Aug. 7, 1996); Riley v. Transamerica Ins. Group Premier Ins. Co., 923 F. Supp. 882, 888 (E.D. La. 1996); Pac. Employers Ins. Co. v. United Gen. Ins. Co., 664 F. Supp. 1022 (W.D. La. 1987).
IV. CONCLUSION
Therefore, Plaintiffs' Motion to Remand to State Court is DENIED. IT IS FURTHER ORDERED that Plaintiff's claims against Defendant, Richard J, Folse, Jr., be DISMISSED.