Fraudulent Joinder of Lawyer Results In Denial of Remand Motion In Texas Bad Faith Case

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SAN ANTONIO, October 21  — A federal judge denied a motion to remand a breach of contract and bad faith lawsuit to state court, finding that the joinder of the attorney who represented the insureds in the underlying tort action  was not proper.

In Amanda Montoya, et al. v. State Farm Mutual Automobile Insurance Co., et al., No. 16-00005, W.D. Texas; 2016 U.S. Dist. LEXIS 141322), U.S. District Judge Royce C. Lamberth held that the joinder of  a lawyer retained by State Farm Insurance Company to represent their insured, Andrew Acosta,  did not defeat federal diversity jurisdiction.

Amanda and Deandra Montoya were injured in an automobile accident when their car was hit by Acosta.  Acosta and a passenger in his vehicle were killed.  State Farm Mutual Automobile Insurance Co. insured Acosta under a policy with limits of of $25,000 per person and $50,000 per accident.  State Farm retained a lawyer, Jeff B. Frey, to represent Acosta’s estate.

Acosta’s lawyer settled for the policy limits with injured passengers, leaving the Montoyas with no access to the policy limits.  The Montoyas sued the Acosta estate in Bexar County, Texas, and obtained a verdict and judgment of $542,933.67.  The Montoyas took an assignment from the Acosta estate, and then sued State Farm, and the lawyer they retained, Frey, in state court for breach of contract and bad faith, as well as alleged breaches of the Texas Insurance Code and the Texas Deceptive Trade Practices Act (DTPA). The Montoyas claimed Frey improperly settled the case with the passengers, and that he acted as a claims adjuster in doing so, naming him as a defendant in the bad faith and breach of contract case.

State Farm removed the case to the U.S. District Court for the Western District of Texas on the basis of diversity jurisdiction, and argued that Frey’s Texas’ citizenship did not defeat diversity because Frey was improperly joined.

The Montoyas filed a remand motion which was denied by Judge Lamberth, who held that Frey could not be a proper defendant as an “insurance adjuster”:

“the Montoyas articulated no facts in their original petition that Mr. Frey himself had the authority to finalize a settlement himself… Instead, they merely state that Mr. Frey was hired to ‘evaluate, negotiate, and/or finalize the multiple settlements arising out of the collision,’ and that ‘State Farm and their agent Jeff B. Frey proceeded with finalizing settlements without the knowledge of, and to the detriment of, Plaintiffs.’  Thus, the Montoyas failed to allege that Mr. Frey had the authority to settle these claims himself, and this Court need not decide whether an attorney appointed to represent an insured is analogous to an adjuster under the Texas Insurance Code.  Even if he is, there is no liability under Section 541.060(a)(2) absent the authority to settle.  Since Mr. Frey did not have authority to settle, there is no reasonable basis to predict the Montoyas might be able to recover against Mr. Frey for violations of Section 541.060(a)(2).”

The judge also ruled that there were no allegations made against Frey regarding misrepresentation of the policy:

“[t]here are no factual allegations against Mr. Frey for misrepresentations of the policy; the only allegations made against him concern his role in evaluating and settling claims. . . The Montoyas now suggest that the single reference to State Farm in the petition is sufficient to maintain a cause of action against Mr. Frey as State Farm’s agent.  But ‘threadbare recitals of the elements of a cause of action, supported by mere conclusory statements’ do not satisfy Rule 12(b)(6).  The conclusory statement that State Farm was liable under § 541.061 was unsupported by any factual allegations against Mr. Frey specifically.  Thus, the Montoyas have not even stated a claim against Mr. Frey under § 541.061.”

 Amanda Montoya, et al. v. State Farm Mutual Automobile Insurance Co., et al., No. 16-00005, W.D. Texas; 2016 U.S. Dist. LEXIS 141322

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Bad Faith Claim Satisfies Federal Amount In Controversy Requirement

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PHILADELPHIA, Sept. 28 – A federal judge has denied a remand request in a removed action against Omni Insurance company, holding that while the amount of the coverage claim was only $28,000.00, a bad faith claim also in the suit satisfied the $75,000.00 jurisdictional amount.

Plaintiff Richard Duncan originally sued a motorist insured by Omni Insurance arising out of an automobile accident.  Omni denied its insured defense and indemnity on grounds of an unlicensed driver exclusion in the applicable policy.

Duncan won $28,000.00 in an arbitration against Omni’s insured who, after the award, assigned all rights it had against Omni to Duncan.  Duncan then filed coverage and bad faith claims against Omni in Philadelphia County, seeking the amount of the arbitration award, along with bad faith damages.  Omni removed the case to the U.S. District Court for the Eastern District of Pa., and Duncan moved to remand the case.

Eastern District Judge Harvey Bartle, III denied the remand motion, citing the 3rd Circuit precedent requiring reasonable reading of pleadings to determine amount in controversy, and holding:

“Because of the bad faith claim, we deem the amount in controversy requirement to have been met.”

Judge Bartle also granted summary judgment to Omni on the merits in the case, finding that the unlicensed driver exclusion was not void as against public policy, and that it barred coverage for the underlying loss.

Duncan v. Omni Insurance Company, CIVIL ACTION NO. 16-1489, 2016 U.S. Dist. LEXIS 133134 (E. D. Pa., Sept. 28, 2016)

 

3rd Circuit Affirms Denial of Remand Motion, Upholds UM/UIM Waiver

In Lieb v. Allstate, the 3rd Circuit Court of Appeals affirmed district court rulings 1.) denying the insured’s remand motion after Allstate removed the case from state court; and 2.) affirming dismissal of breach of contract claims under an automobile insurance policy, finding the insured’s waiver of UM/UIM coverage to be valid under the Pa.M.V.F.R.L.

The district court properly looked to  assessing jurisdictional amount as of the time of the removal, the appeals court found.  At that time, the Plaintiff’s complaint contained a claim for insurance bad faith, thus taking the value of the case in excess of the $75,000 jurisdictional limit.

The appeals court also affirmed the dismissal of the insured’s suit for UM/UIM benefits, finding a signed waiver form in compliance with Pa. law.

Lieb v. Allstate (3rd Cir. 2016)