Case Information
*0 FILED IN THE U.S. DISTRICT COURT EASTERN DISTRICT OF WASHINGTON SEAN F. M C Sep 02, 2025 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON FLORIDA I. SCHAAL, widow and No. 2:25-CV-00221-RLP
beneficiary, and as Personal
Representative of the Estate of Charles ORDER DENYING PLAINTIFF’S
D. Schaal, MOTION TO REMAND
Plaintiff,
v.
IAT INSURANCE GROUP, INC., an
unauthorized foreign insurer operating
in the state of Washington;
TRANSGUARD INSURANCE
COMPANY OF AMERICA, INC., a
foreign insurer relaying on an
unauthorized insured to investigate and
adjust claims in the state of Washington;
and JENNIFER M. SAIS, a nonresident
adjustor for an unauthorized foreign
insurer,
Defendants.
BEFORE THE COURT is Plaintiff Florda Schaal’s Motion to Remand, ECF No. 6. Plaintiff is represented by Michael J. Delay. Defendants are represented by
Katrina P. Mendoza and Keith M. Liguori. The Motion was considered without
oral argument. For the reasons discussed below, Ms. Schaal’s Motion to Remand is
denied.
BACKGROUND On May 29, 2025, Plaintiff Florida Schaal, on her own behalf and as personal representative for the estate of late husband, Charles Schaal, filed this suit
in Spokane County Superior Court. ECF No. 1-2. Ms. Schaal is a resident of
Washington. Id . Defendants are IAT Insurance Group, Inc. (IAT), a North Carolina
corporation, Transguard Insurance Company of America, Inc. (Transguard), an
Illinois corporation, and IAT insurance adjuster Jennifer Sais, an Illinois resident.
ECF Nos. 1 at 3-4; 1-2 at 8-9. Ms. Schaal alleges Transguard improperly denied an
accidental death claim stemming from the death of her husband. ECF No. 1-2 at
28. Ms. Schaal further alleges that Transguard improperly used IAT, which is not
licensed to do business in Washington, to investigate Mr. Schaal’s death. Id . at 26-
27.
Ms. Schaal’s Complaint asserts causes of action for breach of contract, “negligence/bad faith,” violation of the Washington Consumer Protection Act,
violation of the Washington Insurance Fair Conduct Act, Fraud and/or
Unconscionability, and estoppel and waiver. Id . at 39-58. She prays for at least
$1,300,000 in damages. Id . at 59-60. Defendants filed a Notice of Removal to this Court on June 23, 2025, on the basis of diversity jurisdiction under 28 U.S.C. § 1332(a)(1).
LEGAL STANDARD Under Article III, “[t]he judicial Power shall extend” to “[c]ontroversies ...
between citizens of different States.” U.S. Const. Art. III, § 2. Drawing from that
authorization and beginning with the Judiciary Act of 1789, Congress has
continuously permitted federal district courts “to exercise jurisdiction based on the
diverse citizenship of parties
.
”
Caterpillar Inc. v. Lewis
,
467 (1996). Under the current federal statute governing diversity jurisdiction,
“[t]he district courts shall have original jurisdiction of all civil actions where the
matter in controversy exceeds the sum or value of $75,000, exclusive of interests
and costs and is between . . . citizens of different States.” 28 U.S.C. § 1332(a)(1).
A defendant may remove a case originally filed in state court to federal district court, if the district court would have original jurisdiction. 28 U.S.C. §
1441(a). A plaintiff may seek remand of a removed action based on any defect in
the removal, including lack of subject matter jurisdiction. 28 U.S.C. § 1447(c).
“The removal statute is strictly construed, and any doubt about the right of removal
requires resolution in favor of remand.” Moore–Thomas v. Alaska Airlines, Inc. ,
Id . (internal quotation marks omitted).
Here, it is undisputed the parties are citizens of different states, and the amount in controversy exceeds $75,000. Thus, unless an exception applies,
Defendants have demonstrated this Court has subject matter jurisdiction over the
case.
DISCUSSION Despite the requirements of § 1332(a)(1) being met, Ms. Schaal contends the Court nevertheless lacks jurisdiction because of the operation of the McCarran-
Ferguson Act, 15 U.S.C. § 1011 et seq. Alternatively, she asks the Court to decline
to exercise jurisdiction over this case via the application of Burford abstention.
1. The McCarran-Ferguson Act
In 1945 Congress passed the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq., with the intention to “give support to the existing and future state systems for
regulating and taxing the business of insurance.” Prudential Ins. Co. v. Benjamin ,
expressly and affirmatively that continued state regulation and taxation of [the
business of insurance] is in the public interest and that the business and all who
engage in it ‘shall be subject to’ the laws of the several states in these respects.” Id .
at 430,
for the purpose of regulating the business of insurance . . . unless such Act
specifically relates to the business of insurance.” 15 U.S.C. § 1012(b). Conversely,
“[w]hen federal law does not directly conflict with state regulation, and when
application of the federal law would not frustrate any declared state policy or
interfere with a State’s administrative regime, the McCarran-Ferguson Act does
not preclude its application.”
Humana Inc. v. Forsyth
,
Ct. 710 (1999).
Ms. Schaal contends the federal diversity jurisdiction statute, § 1332(a)(1), conflicts with a Washington statute, RCW 48.05.215(1). Ms. Schaal argues RCW
48.05.215(1) confers exclusive jurisdiction over claims against a foreign or alien
insurer who is unlicensed in Washington to Washington state courts. Therefore, the
exercise of jurisdiction by this Court, as authorized by the federal diversity
jurisdiction statute, conflicts with RCW 48.05.215(1)’s grant of exclusive
jurisdiction and is precluded by the McCarran-Ferguson Act.
Since the passage of the McCarran-Ferguson Act in 1945, several circuit courts have had the opportunity to weigh in on its application to the federal
diversity jurisdiction statute. The Tenth Circuit has held “[t]he McCarran Act
serves to limit the authority of federal regulatory agencies as to practices in the insurance business in the face of state acts and in the absence of specific federal
law, but it does not follow that there is thereby a modification of diversity
jurisdiction of the federal courts,” Atl. & Pac. Ins. Co. v. Combined Ins. Co. of
Am.
,
Congress did not intend the Act to “to divest federal courts of the right to apply
state law regarding the regulation of insurers in appropriate diversity proceedings.”
Grimes v. Crown Life Ins. Co.
,
necessary question . . . is whether operation of the diversity jurisdiction statute
actually ‘invalidate[s], impair[s], or supersede[s]’” a state law regulating insurers,
as opposed to the district court simply applying state law. Hawthorne Sav. F.S.B. v.
Reliance Ins. Co. of Illinois
,
§ 1012(b)).
To “invalidate” a state law means “to render ineffective, generally without
providing a replacement rule or law.”
Humana
,
marks omitted). To “supersede” means “to displace (and thus render ineffective)
while providing a substitute rule.” Id . (internal quotation marks omitted). Finally,
to “impair” means to directly conflict with a state law, to frustrate a declared state
policy, or to interfere with a state’s administrative regime. Id . at 310.
RCW 48.05.215(1) provides:
Any foreign or alien insurer not authorized by the commissioner, whether it be a surplus lines insurer operating under chapter 48.15 RCW or not, who, by mail or otherwise, solicits insurance business in this state or transacts insurance business in this state as defined by RCW 48.01.060, thereby submits itself to the jurisdiction of the courts of this state in any action, suit, or proceeding instituted by or on behalf of an insured, beneficiary or the commissioner arising out of an unauthorized solicitation of insurance business.
Ms. Schaal argues this statute confers exclusive jurisdiction over cases regarding unauthorized foreign or alien insurers to Washington courts. This
interpretation is contrary to the statute’s plain meaning. RCW 48.05.215(1) states
that unauthorized foreign or alien insurers “thereby submit[]” themselves to the
jurisdiction of Washington courts in any cause of action. This language clearly
concerns the reach of Washington courts’ personal jurisdiction, not a grant of
exclusive original jurisdiction. This is demonstrated by how RCW 48.05.215(1)’s
language closely parallels the language of Washington’s general long-arm statute:
Any person, whether or not a citizen or resident of this state, who in person or through an agent does any of the acts in this section enumerated, thereby submits said person, and, if an individual, his or her personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of said acts . . .
RCW 4.28.185(1) (emphasis added).
Indeed, Washington courts have never interpreted RCW 48.05.215(1) to confer exclusive original jurisdiction, but only as a long-arm statute. See Pro.
Marine Co. v. Those Certain Underwriters at Lloyd’s
,
P.3d 658 (2003);
see also Workland & Witherspoon, PLLC v. Evanston Ins. Co.
,
48.05.215(1) as a long-arm statute, not a grant of exclusive jurisdiction).
For comparison, Washington statutes conferring exclusive original jurisdiction are generally explicit. See, e.g. , RCW 3.50.020 (“The municipal court
shall have exclusive original jurisdiction over traffic infractions arising under city
ordinances and exclusive original criminal jurisdiction of all violations of city
ordinances”); RCW 13.04.030(1) (“Except as provided in this section, the juvenile
courts in this state shall have exclusive original jurisdiction over all proceedings . .
.”).
Ms. Schaal cites to
Covington v. Sun Life of Canada (US) Holdings Inc.
,
proposition that state jurisdictional statutes can preempt the federal diversity
jurisdiction statute under the McCarran-Ferguson Act. However, the state statute at
issue in Covington , Ohio Rev.. Code § 3903.04(E), provides “All actions
authorized in sections 3903.01 to 3903.59 of the Revised Code shall be brought in
the court of common pleas of Franklin county.” Id . at *2. The Ohio statute’s
explicit grant of exclusive jurisdiction is very different from the simple
authorization of jurisdiction provided by RCW 48.05.215(1), a long-arm statute.
As RCW 48.05.215(1) is a long-arm statute which merely authorizes the exercise of jurisdiction over unauthorized foreign or alien insurers by Washington
courts, the federal diversity jurisdiction statute does not invalidate, impair, or
supersede (i.e., render ineffective, displace, or conflict with) the state statute. Nor
does the federal diversity jurisdiction statute frustrate a declared state policy or
interfere with Washington’s administrative regime. Therefore, the McCarran-
Ferguson Act does not divest the Court of subject matter jurisdiction.
2. Burford Abstention
Alternatively, Ms. Schall contends that this Court should abstain from exercising jurisdiction over this case, as it concerns the intricate workings of
Washington’s insurance code and Washington has designated its courts as the
proper forum to determine these issues.
“Abstention is well recognized as an extraordinary and narrow exception to the general rule that a federal court should adjudicate cases otherwise properly
before it.”
Blumenkron v. Multnomah County
,
2024) (internal quotation marks omitted). In Burford v. Sun Oil Co. , the Supreme
Court recognized it is sometimes appropriate for federal courts to abstain from
ruling on matters of local concern arising out of a complicated state regulatory
scheme.
concerned with protecting complex state administrative processes from undue
federal interference.”
Poulos v. Caesars World, Inc.
,
2 normally requires a court to dismiss an action. Id .
3 In the Ninth Circuit, application of Burford abstention requires: (1) that the
state has chosen to concentrate suits [involving the issue] in a particular 4 court; (2) that federal issues could not be separated easily from complicated
state law issues with respect to which the state courts might have special 5 competence; and (3) that federal review might disrupt state efforts to
establish a coherent policy.
6
Blumenkron
,
7
v. First Maryland Sav. & Loan, Inc.
,
(applying same three Burford abstention factors in insurance context). [1]
Here, the first and third elements to apply Burford abstention are not met. First, Washington has not chosen to concentrate suits involving the insurance code
to a particular court. Ms. Schaal’s argument to the contrary is based on her
previously rejected theory that RCW 48.05.215(1) confers exclusive jurisdiction
over cases regarding unauthorized foreign or alien insurers. Washington law does
not mandate cases involving unauthorized foreign or alien insurers, or cases
applying Washington insurance law generally, be litigated in Washington courts.
While the second factor is met, as there are no federal issues to separate in this matter, the third factor is not. Ms. Schaal claims this case involves unusual and
novel issues related to IAT’s unlicensed status in Washington, but a review of her
Complaint does not show any particularly complicated issues of Washington
insurance law which require this Court’s interpretation. Instead, this case only
presents relatively straightforward issues of applying Washington insurance law. It
is not clear how the Court’s retention of the case would disrupt Washington’s
efforts to establish a coherent insurance policy.
As the first and third elements to apply Burford abstention are not met, and the McCarran-Ferguson Act does divest the Court of subject matter jurisdiction,
the Court denies Ms. Schaal’s motion to remand. As Defendants had an objectively
reasonable basis to remove this case, i.e. diversity jurisdiction, Ms. Schaal’s
request for attorney fees and costs is likewise denied. See Martin v. Franklin
Capital Corp.
,
ACCORDINGLY, IT IS ORDERED:
1. Plaintiff’s Motion to Remand, ECF No. 6 , is DENIED .
// The District Court Executive is hereby directed to enter this Order and furnish copies to all counsel.
DATED September 2, 2025.
_______________________________ REBECCA L. PENNELL UNITED STATES DISTRICT JUDGE
Notes
[1] The parties cite to a four-part test developed in the Tenth Circuit which is
more specifically tailored to
Burford
abstention in the context of insurance cases.
See Melahn v. Pennock Ins., Inc.
, 965 F.2d 1497, 1504 (8th Cir. 1992) (quoting
Grimes
,