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Bible Baptist Church by Baker v. Brotherhood Mutual Insurance Co.

United States District Court, S.D. West Virginia, Charleston

August 1, 2018

BIBLE BAPTIST CHURCH by DARRELL BAKER, HOWARD PREAST, and MICHAEL V. MINNICK, trustees, and JAMES WALDECK, Plaintiffs,
v.
BROTHERHOOD MUTUAL INSURANCE COMPANY, CHURCH INSURANCE CONSULTANTS, INC., and STEPHEN PETERS, Defendants.

          MEMORANDUM OPINION AND ORDER

          John T. Copenhaver, Jr. United States District Judge.

         Pending is the plaintiffs' motion to remand, filed on January 18, 2018. Inasmuch as Church Insurance Consultants, Inc. (“CIC”) is a West Virginia corporation and Stephen Peters is a West Virginia resident, the plaintiffs, who are also from West Virginia, contend that the court does not have diversity jurisdiction under 28 U.S.C. § 1332.

         This case was filed in the Circuit Court of Kanawha County, West Virginia, on September 23, 2017. Brotherhood Mutual Insurance Company (“Brotherhood”) removed this action to this court on December 22, 2017. Brotherhood objects to remand, asserting that the two West Virginia defendants were fraudulently joined to defeat diversity and arguing that there is no viable claim against CIC and Peters. As the Fourth Circuit has explained, “The burden on the defendant claiming fraudulent joinder is heavy: the defendant must show that the plaintiff cannot establish a claim against the nondiverse defendant even after resolving all issues of fact and law in the plaintiff's favor.” Marshall v. Manville Sales Corp., 6 F.3d 229, 232-33 (4th Cir. 1993). Thus, the court looks to see whether any viable claims have been asserted against the nondiverse defendants.

         I. Facts

         James Waldeck, a plaintiff, serves as pastor of Bible Baptist Church, located in Belva, Nicholas County, West Virginia. The church operates a boarding school in Clendenin, Kanawha County, known as Blue Creek Academy. Through the agency of CIC and its employee Peters, the church obtained a liability insurance policy from Brotherhood, first effective June 13, 2011.

         In May 2015, a lawsuit was brought in the Circuit Court of Kanawha County against Bible Baptist Church and others alleging that A.B., a student at Blue Creek Academy, was physically and sexually abused at the school. According to the allegations of the child's guardian, Waldeck negligently and carelessly failed to protect A.B. from such abuse, and the church negligently failed to supervise the staff at Blue Creek. Compl. at ¶ 12. Later, a second suit was filed on behalf of another student, K.R.L., which added a negligent hiring claim to the allegations made on behalf of A.B. Id. at ¶ 13.

         In January 2016, Brotherhood filed in this court Civil Action No. 2:16-cv-00341, a declaratory judgment action seeking to establish that its policy did not provide coverage for claims relating to A.B. and K.R.L. Id. at ¶ 15. In its complaint in that action, Brotherhood asserted that plaintiff Waldeck had falsely represented that the church “had no other facility than the church” and that, in particular, it did not operate a school. Id. at ¶ 17.

         Peters admitted in his deposition in that declaratory judgment action that Waldeck had never tried to conceal anything about the school from him, and Peters further acknowledged that he had received an email from Brotherhood specifically directing him to meet with Waldeck on March 10, 2011, at Blue Creek Academy.[1] Id. at ¶ 19. Peters also testified that he had visited the school and took photographs and measurements, which he submitted to Brotherhood. Id. at ¶ 20. He obtained information from Waldeck “to complete an application for both the Bible Baptist Church and the school and submitted that information to Brotherhood such that Brotherhood was clearly aware of the existence of Blue Creek Academy from the time of the Bible Baptist Church's initial application.” Id. at ¶ 21. Peters admitted that subsequent to the initial application which included a request for coverage for both the church and the school, he submitted a second application seeking coverage only for the church, which application falsely indicated that there was no school affiliated with the Bible Baptist Church. Id. at ¶ 22. Peters also admitted that Waldeck did not request the submission of the second application, which contained false information, and that the church and Waldeck never received any documentation to indicate that the coverage did not include the school. Id. at ¶ 23.

         Prior to Peters' deposition, Brotherhood's counsel asked him to sign an affidavit, which Brotherhood then attached with its motion for summary judgment in that case. Id. at ¶¶ 24-25. According to the plaintiffs, the affidavit falsely represented that Waldeck had declined the quote for coverage for the entire property on account of the amount of premium and instead opted for coverage for the church only. Id. at ¶ 24. During his deposition, Peters acknowledged that his affidavit had been composed by Brotherhood's counsel and that he had not reviewed the documents it referenced. Id. at ¶ 26. In his deposition, Peters testified under oath that “I no longer want to stand by my Affidavit any longer.” Id. at ¶ 27.

         By memorandum opinion and order entered by Judge Thomas E. Johnston in that case on December 7, 2017, judgment was entered for defendants, declaring Brotherhood's obligation under its insurance policy to cover the occurrences designated in the order, which resulted in $2 million in coverage for the claims of A.B. and K.R.L. Contrary to its complaint in that case, Brotherhood has acknowledged that its policy does provide liability coverage for the claims asserted against the Bible Baptist Church and plaintiff Waldeck for A.B. and K.R.L. Id. at ¶ 28. Fifteen days after the adverse judgment in its declaratory judgment action, Brotherhood removed this action on December 22, 2017.

         II. Claims against the Nondiverse Defendants in this Action

         Plaintiffs bring a claim of negligence in procuring coverage against CIC and Peters (Count I), breach of contract against CIC (Count II), breach of fiduciary duty against both (Count III), and fraud against both (Count VIII). Brotherhood is joined, inter alia, in the fraud count. Plaintiffs demand compensatory damages, damages “in connection with. . . embarrassment, humiliation, annoyance and inconvenience, ” net economic losses, punitive damages and attorney's fees. Id. at ¶ 87.

         The action must be remanded to state court if any of those grounds for relief against CIC or Peters is viable, in which event CIC and Peters could not be deemed to have ...


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