MAY 2015 BAD FAITH CASES: COURT REMANDS CASE TO COURT OF COMMON PLEAS BASED ON LACK OF DIVERSITY OF CITIZENSHIP, REJECTING FRAUDULENT JOINDER ARGUMENT (Middle District)

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In Krol v. Allstate Insurance Company, the plaintiffs were injured when they were driving in a car that was struck by an uninsured driver. Plaintiffs were treated by a doctor whose principal place of business was in Pennsylvania. Plaintiffs’ insurers refused to pay their medical bills, and argued that Plaintiffs’ injuries were not causally related to the car accident.

The doctor who treated Plaintiffs for their injuries sued Plaintiffs regarding the unpaid medical bills in the Northampton County Court of Common Pleas. Plaintiffs filed an answer and new matter, contending that the doctor’s claims were precluded by section 1797(b)(7) of Pennsylvania’s Motor Vehicle Financial Responsibility Law.

Plaintiffs subsequently sued their insurer in the Pike County Court of Common Pleas, asserting breach of contract and bad faith. The insurer attempted to remove the case to federal court, and Plaintiffs argued that the insurer failed to establish sufficient diversity of citizenship between the parties, and filed a motion to remand the action to the Pike County Court of Common Pleas.

In remanding the action back to the Pike County Court of Common Pleas, the Court considered two arguments that the insurer made in requesting removal to federal court: (1) diversity of citizenship, and (2) fraudulent joinder. In its diversity of citizenship argument, the insurer averred that it was incorporated under the laws of the State of Illinois, and therefore diversity existed since the plaintiffs are citizens of Pennsylvania. However, Plaintiffs joined the doctor who treated them after the car accident, and since his business was incorporated in Pennsylvania, the Court found that the matter lacked complete diversity of citizenship.

The insurer acknowledged the lack of complete diversity of citizenship, and argued that Plaintiffs fraudulently joined their doctor as a defendant to preclude removal. The insurer alleged that “plaintiffs’ claim for declaratory relief in the Pike County action is the same cause of action stated in a counterclaim Plaintiffs filed in a prior pending action in Northampton County,” and consequently, should be precluded under the doctrine of lis pendens (the pendency of a prior action).

The Court reasoned that in order to successfully assert the defense of lis pendens, the asserting party must establish that the prior case, parties, and relief requested are all the same. Here, the Court specifically pointed to the fact that the relief requested was different, because Plaintiffs requested monetary relief in the Northampton County action and declaratory relief in the Pike County action. Therefore, because the doctor was a proper defendant in the Pike County action and had the same Pennsylvania citizenship as Plaintiffs, the Court remanded the matter back to the Pike County Court of Common Pleas.

Date of Decision: March 6, 2015

Krol v. Allstate Insurance Co., No. 3:14cv1949, 2015 U.S. Dist. LEXIS 27644 (M.D. Pa. March 6, 2015) (Munley, J.)

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