Martin v. State Farm Mut. Auto. Ins. Co., No. CIV. A. 3:10-0144, 2010 WL 3259418 (S.D. W. Va. Aug 18, 2010).

A District Court in West Virginia refused to remand the case to the state court finding that under CAFA’s local controversy exception, “significant relief” sought against the local defendant is viewed relative to the overall relief sought, and “significant basis” does not require that the local defendant’s conduct form a basis of each claim asserted.

The plaintiffs, the Executrix of the Estate of Arch Fleming, brought a class action in the state court against the defendant, State Farm Mutual Automobile Insurance Company and its two agents. The plaintiffs’ decedents were injured in car accidents, in 2005 and 2009, where the damages incurred by each plaintiff greatly exceeded the liability coverage of the party at fault. At the time of their accidents, both the plaintiffs were insured by State Farm, and each policy carried a liability and uninsured motorist coverage limits of $100,000 per person, and $300,000 per occurrence. Neither policy carried underinsured motorist coverage. As a result, State Farm did not provide underinsured motorist coverage to either of the plaintiffs. 

The plaintiffs filed the suit alleging that State Farm unlawfully denied them underinsured motorist coverage, because the company failed to meet its legal obligation to make a commercially reasonable offer of underinsured motorist coverage to each plaintiff at the time their policies were issued. 

The defendants removed the action pursuant to CAFA, 28 U.S.C. §1332(d), and the plaintiffs filed the motion to remand arguing that their claims fell under the local controversy and/or the home state exceptions of CAFA.

The named plaintiffs each sought $100,000 in underinsured motorist coverage benefits in connection with their respective car accidents. The plaintiffs proposed a class consisting of more than 100 individuals; therefore, the defendants claimed that the amount in controversy was $10 million–well over the threshold, and that the removal was proper. 

The plaintiffs opposed the removal by arguing that State Farm had not provided sufficient evidence to show that members of the Class were each entitled to $100,000, because a plaintiff’s damage award would be limited to the difference between $100,000 and any amount State Farm offered to pay that plaintiff for any underinsured claim. 

The Court noted that under CAFA, the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeded the sum or value of $5 million exclusive of interests and costs. Thus, the combined value of the over 100 class members gave rise to a claim that was over $5 million in controversy. Therefore, the Court ruled that the defendants had satisfied the requirement.

Next, the only aspect that the plaintiffs were required to prove to show that they came under the local controversy exemption was to establish that at least one defendant was a significant local defendant. The Court noted that the significant relief is viewed relative to the overall relief sought. The significant relief test requires a comparative analysis, which includes not only an assessment of how many members of the class were harmed by the defendant’s actions, but also a comparison of the relief sought between all defendants and each defendant’s ability to pay a potential judgment. 

The plaintiffs contended that as a claim adjuster employed by an insurance company may be held personally liable for Unfair Trade Practices Act (“UTPA”) violations in West Virginia, the two agents of State Farm, and the other members of the defendant class of West Virginia resident insurance adjusters were liable for the UTPA violations. 

The Court disagreed finding that the plaintiffs did not submit any assessment of their UTPA claims; the value of the declaratory relief sought; or the value of the breach of contract and bad faith claims raised against State Farm. Therefore, the Court remarked that it could not measure the relief sought against any West Virginia adjuster against the total relief sought and the significant relief could not be shown. 

Similarly, the Court found that the significant basis provision of the local controversy exception was not satisfied here. The Court noted that in Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 153-54 (3rd Cir. 2009), the court specified an analysis to determine the significant basis provision, which calls for comparing the local defendants alleged conduct to the alleged conduct of all the defendants. (Editors’ Note: See the CAFA Law Blog analysis of Kaufman posted on October 14, 2009).

In Kaufman, the question presented was whether that party’s activities formed a “significant basis” for the claims asserted.  Kaufman said, a finding of significance does not require that the local defendant’s conduct form a basis of each claim asserted, however, it does require that there be at least one local defendant whose alleged conduct forms a significant basis for all the claims asserted in the action. The Court found that in this case, the plaintiffs provided no information or evidence to conduct a comparative inquiry. Therefore, the Court concluded that the plaintiffs could not show that any West Virginia adjuster’s conduct formed a significant basis for all the claims asserted and the local controversy exception did not apply.

Finally, in determining the applicability of the home state exception, the Court relied on the definition of the term “primary defendants.” The Court found that primary defendants were not the ones with the deepest pockets or those with the greatest culpability, but the ones who had a direct liability to the plaintiffs, and the ones who are able to satisfy potential judgment, and are sued directly, as opposed to vicariously. Under these definitions, the Court found that State Farm constituted a primary defendant. Therefore, the Court ruled that the home state exception did not apply.