Loretta Elliott v. American States Insurance Co.
883 F.3d 384
4th Cir.2018Background
- On Jan. 16, 2013 Loretta Elliott was injured in an automobile accident; her vehicle had $100,000 UIM coverage and the tortfeasor’s insurer paid its $30,000 limit.
- Elliott pursued the tortfeasor in state court; ASIC, her UIM carrier, defended under the policy and arbitration clause. An arbitration award and state-court judgment established liability and damages; ASIC paid the judgment.
- Elliott then sued ASIC in North Carolina state court alleging violations of N.C. Gen. Stat. § 58-63-15(11) (unfair claim settlement practices) and § 75-1.1 (UDTPA), alleging ASIC forced her into litigation and made token offers.
- Elliott served ASIC via the North Carolina Commissioner of Insurance (statutory agent); the Commissioner received service Aug. 12, 2016 and forwarded the complaint, which ASIC actually received Aug. 24, 2016. ASIC removed on Sept. 23, 2016.
- The district court denied Elliott’s motion to remand and granted ASIC’s Rule 12(b)(6) motion to dismiss for failure to state a claim. Elliott appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of removal under 28 U.S.C. § 1446(b) when a statutory agent is served | Removal period began when Commissioner (statutory agent) was served, so ASIC’s removal was untimely | Removal period begins when defendant actually receives the complaint (Murphy Bros. rule does not trigger on service of a statutory agent) | Service on a statutory agent does not trigger § 1446(b); removal was timely because ASIC removed within 30 days of receiving the complaint |
| Whether this is a “direct action” under 28 U.S.C. § 1332(c)(1) destroying diversity | This insured’s suit against its insurer is a direct action and insurer should be treated as citizen of plaintiff’s state, destroying diversity | Suits by an insured against its own insurer for breach/bad-faith are not "direct actions" under § 1332(c)(1) | Not a direct action; § 1332(c)(1) residency rule for direct actions does not apply; complete diversity exists |
| Sufficiency of pleading under § 58-63-15(11) (unfair claim settlement practices) | Alleged conduct (refusal to offer, token offers, forced arbitration) shows per se violations of § 58-63-15(11) | UIM coverage is derivative; insurer not required to settle before liability is established; offers before judgment do not violate the statute | Complaint fails to plausibly allege conduct covered by § 58-63-15(11) because liability and amount were not reasonably clear until judgment/arbitration; dismissal proper |
| UDTPA (§ 75-1.1) claim tied to § 58-63-15(11) violation | Violation of § 58-63-15(11) is per se violation of UDTPA; therefore UDTPA claim stands | If § 58-63-15(11) not violated, UDTPA claim fails; plaintiff did not plead independent UDTPA theory or proximate injury | Because § 58-63-15(11) claim fails, the § 75-1.1 claim fails as pleaded; dismissal proper |
Key Cases Cited
- Mayes v. Rapoport, 198 F.3d 457 (4th Cir.) (standard of review for jurisdictional and 12(b)(6) issues)
- Barbour v. Int’l Union, 640 F.3d 599 (4th Cir.) (strict construction of removal statutes)
- Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344 (U.S. 1999) (time to remove starts upon formal service on defendant)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility pleading standard)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility and Rule 12(b)(6) principles)
- Ljuljdjuraj v. State Farm Mut. Auto. Ins. Co., 774 F.3d 908 (6th Cir.) (insured’s suit against insurer is not a direct action under § 1332(c)(1))
- Rosa v. Allstate Ins. Co., 981 F.2d 669 (2d Cir.) (definition of "direct action" as actions where insurer stands in insured’s shoes)
- McGlinchey v. Hartford Accid. & Indem. Co., 866 F.2d 651 (3d Cir.) (insured’s suit against insurer not a direct action)
- Fortson v. St. Paul Fire & Marine Ins. Co., 751 F.2d 1157 (11th Cir.) (same)
- Beckham v. Safeco Ins. Co. of Am., 691 F.2d 898 (9th Cir.) (insured’s bad faith suit against insurer not a direct action)
- White v. U.S. Fid. & Guar. Co., 356 F.2d 746 (1st Cir.) (same)