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Fraudulent Joinder of Defendant to Avoid Federal Court Fails
Post 5113
It Never Pays to Sue a Party Who Did Nothing Wrong
The Plaintiffs initiated this action in state court, asserting claims for breach of contract, bad faith, and constructive fraud/negligent misrepresentation against State Farm. They also brought claims for negligent procurement of insurance and constructive fraud/negligent misrepresentation against Tyler McCall and the Tyler McCall Insurance Agency, Inc .
In Justin Gamble and Brittany Gamble v. State Farm Fire And Casualty Company, et al., No. CIV-25-396-R, United States District Court, W.D. Oklahoma (July 2, 2025) State Farm removed the case to Federal Court and alleged that the McCall Agency was fraudulently joined to avoid removal.
KEY ISSUES
Fraudulent Joinder: State Farm removed the case, arguing that Mr. McCall and the McCall Agency were fraudulently joined to defeat diversity jurisdiction. The standard for establishing fraudulent joinder is stringent, requiring either actual fraud in the pleading of jurisdictional facts or the inability of the plaintiff to establish a cause of action against the non-diverse party in state court.
Negligent Procurement of Insurance: Plaintiffs allege that the McCall Agency negligently failed to procure the insurance coverage they requested. However, the court found that the plaintiffs received the policy they requested and had sufficient coverage to replace their roof. Therefore, they cannot show that insurance was not procured as promised.
Constructive Fraud/Negligent Misrepresentation: Plaintiffs also allege that the McCall Agency engaged in constructive fraud and negligent misrepresentation by failing to disclose information about State Farm’s bad faith claims handling tactics and the Hail Focus initiative. However, the court found no viable claim against the McCall Agency for these allegations .
State Farm removed the case, contending that Mr. McCall and the McCall Agency were fraudulently joined and their non-diverse citizenship may therefore be disregarded for purposes of establishing diversity jurisdiction.
DISCUSSION
The standard for establishing that a defendant has been fraudulently joined is a difficult one where the removing party must demonstrate either:
1. actual fraud in the pleading of jurisdictional facts, or
2. inability of the plaintiff to establish a cause of action against the non-diverse party in state court.
The standard to establish fraudulent joinder is more exacting than that for dismissing a claim and requires all factual disputes and all ambiguities in the controlling law to be resolved in the plaintiff’s favor. However, where a defendant’s non-liability is established as both a matter of fact and law, the defendant’s joinder is fraudulent and remand is appropriately refused.
The McCall Agency is the State Farm insurance agency that sold Plaintiffs the insurance policy. Oklahoma law recognizes that an insurance agent has a duty to act in good faith and use reasonable care, skill and diligence in the procurement of insurance.
An insurance agent can therefore be liable to the insured in negligence if, by the agent’s fault, insurance is not procured as promised and the insured suffers a loss. However, the scope of the agent’s duty to use reasonable care, skill, or diligence in the procurement of insurance is limited to needs disclosed by the insured. Agents do not have a duty to advise an insured with respect to his insurance needs and a general request for adequate protection and the like does not change this duty.
It is clear from Plaintiffs’ allegations and the record that Plaintiffs received the policy they requested and had sufficient coverage to replace their roof. No viable claim against McCall is available because Plaintiff’s claim against State Farm depends upon what damage her roof sustained, not the terms of her policy. As a result, Plaintiffs have no possibly viable claim against the McCall Agency for negligent procurement of insurance.
Any implied representations by the agent about the property’s condition or its eligibility for a replacement cost value policy were either true or not the cause of Plaintiffs’ losses.
Mr. McCall and the McCall Agency were fraudulently joined defendants, and their citizenship was therefore disregarded for purposes of determining subject matter jurisdiction.
The claims against Mr. McCall and the McCall Agency were dismissed without prejudice and the case will remain in the USDC.
ZALMA OPINION
Some litigants do not like litigating in federal court, especially when they are suing insurers and will sue the agent to create a failure of jurisdiction in federal court. The Plaintiffs tried and failed because the agent did exactly what he was required to do. The case will be tried against State Farm in federal court.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Fraud Perpetrators Will Have Judgment Entered in Favor of Insurer They Defrauded
Post 5155
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Allstate Effectively Proactive Against Insurance Fraud
Plaintiffs Allstate Insurance Company and other Allstate companies (collectively, “Plaintiffs”) sued seeking redress for losses incurred due to an alleged insurance fraud scheme. Plaintiffs alleged that Defendants Toshner, Lacey Davies, Michael Trinh, Roadside Response, LLC, and Responsible Billing, LLC’s (collectively, “Defendants”) submitted false reimbursement claims for hazardous material cleanups that were never actually performed, were unnecessary, or did not involve an Allstate insured.
In Allstate Insurance Company, et al. v. Daniel Toshner, et al., No. 1:24-CV-27-RP, United States District Court, W.D. Texas, Austin Division (July 9, 2025) Allstate moved for default to be entered against the defendants.
...
When Plaintiff Gives Up Court Must Grant Summary Judgment
Post 5154
It is Contumacious to Sue an Insurer if You are Not Insured
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Defendant American National filed a motion for summary judgment because Plaintiff is not a named or third-party beneficiary of the Policy. Defendant contends that because Plaintiff is not covered by the Policy, Plaintiff cannot prove that Defendant breached the Policy or demonstrated bad faith under La. R.S. 22:1973 and 22:1892. In support of this contention, Defendant argued that the Policy only covers the “Named Insured/Mortgagee” of the property, Magee Holdings, LLC, and that the Policy does not name Plaintiff as an insured or a third-party beneficiary.
In Hannah Guillotte v. American National Property And Casualty Company, Civil Action No. 23-00931-BAJ-RLB, United States District Court, M.D. Louisiana (July 16, 2025) Plaintiff, the ...
When Plaintiff Gives Up Court Must Grant Summary Judgment
Post 5154
It is Contumacious to Sue an Insurer if You are Not Insured
See the full video at https://lnkd.in/ggmMWkcN and at https://lnkd.in/gJXMDYxG, and at https://zalma.com/blog plus more than 5100 posts.
Defendant American National filed a motion for summary judgment because Plaintiff is not a named or third-party beneficiary of the Policy. Defendant contends that because Plaintiff is not covered by the Policy, Plaintiff cannot prove that Defendant breached the Policy or demonstrated bad faith under La. R.S. 22:1973 and 22:1892. In support of this contention, Defendant argued that the Policy only covers the “Named Insured/Mortgagee” of the property, Magee Holdings, LLC, and that the Policy does not name Plaintiff as an insured or a third-party beneficiary.
In Hannah Guillotte v. American National Property And Casualty Company, Civil Action No. 23-00931-BAJ-RLB, United States District Court, M.D. Louisiana (July 16, 2025) Plaintiff, the ...
Rulings on Motions Reduced the Issues to be Presented at Trial
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CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
