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Fischer v. State Farm Mutual Automobile Insuance Co., Inc.

United States District Court, N.D. West Virginia

January 30, 2019

KEITH JAY FISCHER and DAWN MARIE FISCHER, Plaintiffs,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, INC. and WILLIAM GARVEY, JR. INSURANCE AGENCY, INC., Defendants.

          MEMORANDUM OPINION AND ORDER DENYING PLAINTIFFS' MOTION TO REMAND AND GRANTING DEFENDANTS' MOTION TO DISMISS

          FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE

         I. Background

         The plaintiffs, Keith Jay Fischer and Dawn Marie Fischer, initiated this lawsuit in the Circuit Court of Brooke County, West Virginia against defendants State Farm Mutual Automobile Insurance Company (“State Farm”) and William Garvey, Jr. Insurance Agency, Inc. (the “Garvey Agency”).

         Plaintiffs claim that at the time plaintiff, Keith Jay Fischer, contacted the Garvey Agency requesting coverage for a 2006 Mazda Miata owned by plaintiffs, no commercially meaningful and reasonable offer of underinsured motorist (“UIM”) coverage was made. Plaintiffs further assert that because of the “errors and omissions” of the Garvey Agency, plaintiff, Keith Jay Fischer, lacked UIM coverage on the 2006 Mazda Miata under the policy. The complaint goes on to allege that plaintiffs' claim for UIM benefits was denied by State Farm.

         Count I of the complaint seeks a declaratory judgment that the policy be reformed by operation of the law to include One Hundred Thousand Dollars ($100, 000.00) in UIM benefits. Count II of the complaint asserts a claim against State Farm for common law “bad faith”/breach of the implied covenant of good faith and fair dealing. Count III of the complaint asserts a claim against State Farm for alleged violations of the Unfair Trade Practices Act, W.Va. Code § 33-11-4(9). The only cause of action asserted against the Garvey Agency is found within Count IV of the complaint, which asserts a claim for “Negligence - Errors and Omissions.” In support of this cause of action, plaintiffs allege that the Garvey Agency “at all times material and relevant hereto, acted as an agent of State Farm.” Plaintiffs further contend that the Garvey Agency “breached its duty of care by failing to provide Plaintiffs with a meaningful and commercially reasonable offer of underinsured motorist bodily injury coverage benefits on the 2006 Mazda Miata under Insurance Policy No. 099 883 8-D2 l-48A and treating the Mazda Miata as a replacement vehicle.” Count V of the complaint asserts that State Farm is vicariously liable for the alleged acts of the Garvey Agency. The complaint seeks a declaration that the insurance policy under which plaintiffs seek recovery includes One Hundred Thousand Dollars ($100, 000.00) in underinsured motorist (“UIM”) coverage benefits. Plaintiffs further seek to recover unspecified damages for emotional distress, inconvenience, annoyance, humiliation, embarrassment, aggravation, anxiety, frustration, “other general damages, ” attorneys' fees, costs and expenses. Plaintiffs also seek to recover punitive damages. Plaintiffs demand a jury trial on all issues.

         Defendants removed the civil action to this Court pursuant to 28 U.S.C. § 1446. ECF No. 1. In the notice of removal, defendants assert that this Court has jurisdiction over the matter pursuant to 28 U.S.C. § 1332(a) (diversity jurisdiction) as this is a civil action wherein the matter in controversy exceeds the sum or value of Seventy-Five Thousand Dollars ($75, 000.00), exclusive of interests and costs, and it is between citizens of different states. Even though the Garvey Agency is a West Virginia corporation, the defendants argue that the Garvey Agency has been fraudulently joined and that the plaintiffs cannot “establish a cause of action against it.” Thus, because the Garvey Agency was fraudulently joined, defendants argue its citizenship must be disregarded and this Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a).

         Defendants then filed a motion to dismiss defendant William Garvey, Jr. Insurance Agency, Inc. (ECF No. 4) under Federal Rule of Civil Procedure 12(b)(6). Defendants contend that plaintiffs' complaint fails to state a claim against the Garvey Agency upon which relief may be granted. Defendants contend that plaintiffs' negligence claim against the Garvey Agency is premised upon the allegation that the Garvey Agency breached its duty of care by failing to provide plaintiffs with a meaningful and commercially reasonable offer of underinsured motorist bodily injury coverage benefits. Defendants argue that this claim fails as an insurance agent acting on behalf of a known principal cannot be sued in contract or tort. Additionally, defendants argue that the claim against the Garvey Agency fails as the obligation to make a commercially reasonable offer of UIM coverage extends only to the insurer and not to an insurance agent. Therefore, defendants argue that the Garvey Agency should be dismissed from this matter pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

         The plaintiffs then filed a motion to remand and memorandum in opposition to defendants' motion to dismiss (ECF No. 6). Plaintiffs move, pursuant to 28 U.S.C. § 1446, to remand this case to the Circuit Court of Brooke County, West Virginia and contend that the defendants have failed to satisfy their burden of proving that the defendant, William Garvey, Jr. Insurance Agency, Inc., was fraudulently joined as a party.

         Plaintiffs contend that the primary claim by the plaintiffs is that the defendant, State Farm, failed to make a proper offer of underinsured motorist coverage, meaning that coverage exists by operation of law. If, however, the Court concludes that there is no underinsured motorist coverage available to the plaintiffs, they have asserted an alternative claim against defendant the Garvey Agency. Specifically, plaintiffs allege that the Garvey Agency negligently and erroneously failed to procure the appropriate insurance coverage for the Mazda Miata requested by the plaintiffs.

         Plaintiffs contend that the claim against defendant the Garvey Agency is not a contract claim growing out of State Farm's policy, and no tort claim that can be asserted against State Farm. Instead, plaintiffs argue, it is a separate and independent claim of negligence assertable against the agent. Plaintiffs argue that because the defendants have failed to carry their heavy burden of demonstrating that there is not even a possibility of recovery against the Garvey Agency, remand is warranted and the Court, likewise, should deny the Garvey Agency's motion to dismiss for the same reasons.

         Defendants then filed a response in opposition to the plaintiffs' motion to remand and reply in support of the motion to dismiss. ECF No. 7. In response, defendants state, as recognized by plaintiffs, Benson held that “where the agent is the agent of the insurer, acts within the scope of his authority, and his principal is disclosed, he is not liable to the insured either in contract or in tort.” Benson v. Continental Ins. Co., 120 F.Supp.2d 593 (S.D. W.Va. 2000). However, plaintiffs argue that this rule applies only “where the agent's acts are those of the insurance company.” Defendants argue that the language quoted by plaintiffs actually does not appear anywhere in Benson. Defendants contend that Benson is applicable to the case herein as the complaint specifically alleges that the Garvey Agency acted as an agent of State Farm at all times and held its agents, representatives and employees out as agents of State Farm, and at no time was acting outside the scope of its authority. Plaintiffs next attempt to rely on Negri to avoid the dismissal of the Garvey Agency by asserting that an agent is subject to personal liability whenever he commits “an independent tort of negligence.” However, defendants assert that in this case, as in Negri, plaintiffs have not alleged an independent tort. Defendants contend that plaintiffs have specifically alleged that the Garvey Agency was acting as an agent of State Farm at all material times and that the Garvey Agency held its agents, representatives and employees out as agents of State Farm. Therefore, defendants assert that these alleged negligent acts are actions alleged by plaintiffs to be on behalf of State Farm and are, therefore, not independent torts. Consequently, pursuant to Benson and Negri, defendants argue that the Garvey Agency has been fraudulently joined and must be dismissed as an insured agent specifically alleged by plaintiffs to be acting on behalf of a known principal cannot be sued in contract or tort. Moreover, defendants contend that even if plaintiffs have sufficiently alleged an independent tort against the Garvey Agency (which defendants deny), the Garvey Agency has been fraudulently joined and should be dismissed as it owed no duty to make an offer of underinsured motorist coverage to plaintiffs as a matter of law. The plaintiffs filed a reply to defendants' response in opposition. ECF No. 8. In reply, the plaintiffs state that defendants are correct in saying the language “where the agent's acts are those of the company” does not appear in Benson.

         Plaintiffs clarify that, it appears, instead, in Negri v. Nationwide Mut. Ins. Co., No. 5:11cv3, 2011 WL 3648221 (N.D. W.Va. Aug. 18, 2011). Plaintiffs attempt to distinguish the case at hand from Benson by asserting that plaintiffs in this case have alleged have two independent and alternative theories of liability. First, plaintiffs allege that underinsured motorist coverage exists as a matter of law. Specifically, plaintiffs allege that a proper offer of underinsured motorist coverage was not provided and, therefore, the policy has been reformed by operation of law to include that coverage. If, however, the Court finds that there is no coverage (and, therefore, no claim against State Farm), the plaintiffs allege in the alternative that the Garvey Agency was guilty of negligence.

         The plaintiffs argue that they spell out two theories of negligence in their complaint: (1) negligence in failing to make a meaningful and commercially reasonable offer of underinsured motorist coverage as required by law and (2) negligence in “fail[ing] to procure the appropriate insurance coverage for the [Miata] requested by Plaintiffs.” The plaintiffs allege that the Garvey Agency failed to follow plaintiffs' instructions to issue a new policy for the Miata that provided the same coverages as plaintiffs' other, year-round vehicles (including underinsured motorist coverage). Instead, plaintiffs contend, the Garvey Agency treated the Miata as a replacement for a seasonal vehicle that did not have underinsured motorist coverage. Consequently, the Miata did not have underinsured motorist coverage at the time of the wreck. Plaintiffs argue that this is a classic failure-to-procure scenario that can be asserted against an agent under West Virginia law. Plaintiffs argue that because the plaintiffs have plead a viable claim against the defendant, the Garvey Agency, and because the Garvey Agency is a West Virginia corporation, full diversity of citizenship is lacking and, therefore, the Court should grant the plaintiffs' motion to remand.

         II. Applicable Law A. R ...


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