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Pennsylvania Court Provides Gateway for Insureds to Keep Lawsuits in State Court (PA)

August 3, 2018

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The Eastern District of Pennsylvania recently issued a decision that may help insureds interested in having their cases heard in state court rather than allowing those cases to be removed to federal court. In <a href="">Dominque Ellis v. Liberty Mutual Insurance Company, et al.</a>, a plaintiff defeated diversity by naming both the insurer and the claims adjuster as defendants.
Initially, a lawsuit was brought by Dominique Ellis (“Ellis”) who was hit by a car while she was walking down the street. At the time, Ellis was insured by a Liberty Mutual auto insurance policy that listed her mother as the “named insured.” Since the motorist was underinsured, Ellis sought to recover medical expenses from Liberty Mutual. Liberty Mutual later denied her claim and Ellis sued both Liberty Mutual and the claims adjuster, Clare MacNabb (“MacNabb”).
MacNabb was added to the lawsuit because Ellis claimed that she dragged her feet during a six-month investigation into whether Ellis lived at the address listed within the policy. Once MacNabb concluded that Ellis was being truthful about her address, she denied her claim on the ground that her medical expenses were less than the limit of the policy owned by the underinsured driver. Ellis alleged that the investigation was fraudulent and meant to intimidate her from pursuing her claim.
Ellis’ lawsuit was brought in state court and consisted of three counts against Liberty Mutual: (1) an “underinsured motorist claim,” (2) a claim for bad faith insurance denial, and (3) a claim for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL). The UTPCPL claim was also brought against MacNabb. As both Ellis and MacNabb were residents of Pennsylvania, there was no diversity of citizenship grounds to remove that case to federal court. However, Liberty Mutual argued that MacNabb was fraudulently joined and removed the case to federal court. As a result, Ellis moved to remand the matter back to state court.
The District Court granted the motion to remand, rejecting all three reasons asserted by Liberty Mutual to support that MacNabb had been fraudulently joined. First, the Court explained that claims under the UTPCPL against claims adjusters were “colorable under Pennsylvania law.” Under the law, UTPCPL claims against individual insurance claims representatives were allowed.
Second, the Court determined that it was too early to tell whether Ellis’s claim was for mere nonfeasance. Ellis’ complaint alleged nonfeasance by MacNabb in MacNabb taking too long to investigate her claim and ultimately denying coverage. However, a UTPCPL claim requires malfeasance, rather than nonfeasance. The Court determined that Ellis’ complaint also supported “an inference of malfeasance” in that the adjuster’s investigation was intended to intimidate or harass Ellis. According to the Court, malfeasance may exist if an insurer conducted a post-loss investigation in an unfair or unreasonable manner. The Court noted that, at this stage, Ellis still had the opportunity to prove malfeasance by MacNabb and that to dive further into this issue would require an assessment of the merits of the claim itself.
Finally, the District Court rejected Liberty Mutual’s argument that Ellis cannot maintain a claim under the UTPCPL because she did not purchase the insurance policy herself. The UTPCPL grants a claim to any person who, among other requirements, purchases or leases goods or services. In the instant matter, Ellis’s mother was the purchaser and the named insured. However, the Court determined that, although support that Ellis herself purchased the policy was “admittedly slim,” it should remain mindful that “all doubts should be resolved in favor of remand” and that remand was required if there was even a possibility that a state court would find the complaint stated a claim against MacNabb. The District Court thus concluded that the “lenient standard” had been satisfied and that it remained unclear whether Ellis had been making payments under the insurance policy. As a result, Ellis’s motion to remand was granted.
Thank you to Zhanna Dubinsky for her contribution to this post. Please email <a href="">Vito A. Pinto</a> with any questions.

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