Ullman v. Safeway Ins. Co., 2013 WL 7141522 (D.N.M. Dec. 31, 2013).

In a personal injury action, the District Court ruled that diversity jurisdiction asserted by the insurance company could not be satisfied and remanded the case to the state court.

The plaintiff, an insured in an automobile accident, filed a putative class action in the state court alleging that the insurer did not adequately inform her of her options to purchase uninsured/underinsured motorist (UM/UIM) coverage or obtain waiver of UM/UIM coverage equal to limits of liability coverage or waiver of stacking UM/UIM coverage.  The plaintiff alleged that the defendants improperly denied benefits under the UM/UIM insurance coverage to her and others similarly situated.  The defendants removed the case to the federal court based on the diversity jurisdiction, because the plaintiff was New Mexico citizen and the defendants were incorporated in Illinois with their principal place of business in Illinois.

A vehicle driven by another driver, Richard Bailey, struck the passenger side of the plaintiff’s vehicle, injuring the plaintiff and totaling her vehicle.  The plaintiff made Bailey a defendant as well.  Bailey was a New Mexico citizen as well, and the defendant, Safeway Insurance, argued that the plaintiff fraudulently joined and procedurally misjoined Bailey to defeat diversity jurisdiction, and, thus, the Court should ignore Bailey’s citizenship.  The plaintiff filed a motion to remand.

The District Court noted that, in its notice of removal, Safeway Insurance asserted that the amount-in-controversy exceeded the jurisdictional minimum of $75,000.  Although Safeway Insurance did mention CAFA as an alternative basis for removal at the hearing, it stated that it was not pursuing removal under CAFA.  The plaintiff conceded that her damages likely would exceed the jurisdictional minimum, but citing Lovell v. State Farm Mutual Automobile Insurance Co., 466 F.3d  893 (10th Cir. 2006), argued that Safeway Insurance also must demonstrate that each putative class member’s damages exceeded $75,000. Lovell noted that, in multiple plaintiff cases, each plaintiff individually must satisfy the amount in controversy requirement.

The District Court noted that each putative class members’ claims arose from separate contracts, and so, as in Lovell, the claims may not be aggregated to meet the amount-in-controversy requirements.  The Court found that a significant difference between that case and the present matter, however, was that, in the instant matter, the parties agreed that the plaintiff’s claims exceeded $75,000.  The Court found that Safeway Insurance had not established that every putative class members’ claims exceed the jurisdictional minimum amount, but it need not do so, because the Court could exercise supplemental jurisdiction over the other claims.

Accordingly, the District Court concluded that Safeway Insurance had demonstrated, and the plaintiff agreed, that the plaintiff’s claims likely exceeded $75,000.  Thus, the Court would exercise supplemental jurisdiction over the other putative class members’ claims as long as the other requirements for diversity jurisdiction are met.

Safeway Insurance mainly argued that Bailey was joined fraudulently to defeat the diversity jurisdiction.  Safeway Insurance argued that the plaintiff was seeking damages from it rather than Bailey and that, by attempting to reform the insurance policy to include the UM/UIM coverage, the plaintiff had not asserted a basis to recover from Bailey.  The District Court disagreed and explained the principles of personal injury.  When driver A runs his car into driver B, there is a possibility that driver B can recover against driver A for negligence.  The plaintiff might not have much success getting any money from Bailey, but she did have a legal right to pursue her claim and get judgment.  Accordingly, the District Court ruled that Bailey was neither fraudulently joined nor was he misjoined. 

Because Bailey’s mere presence in the suit destroyed Safeway Insurance’s attempts to establish complete diversity, the District Court ruled that it did not have subject matter jurisdiction and remanded the case.