In a Hurricane Katrina-related case, the United States District Court for the Eastern District of Louisiana ruled that complete diversity between parties was destroyed and the court had no subject-matter jurisdiction in Schaefer v. State Farm Ins. Co., Civil Action No. 06-7295, 2006 WL 3388483 (E.D. La. Nov. 21, 2006).
After his home in Kenner, Louisiana was damaged by Hurricane Katrina, Edward Schaefer filed claims under his State Farm homeowners policy. State Farm denied the claims, and Schaefer sued State Farm, his insurance agent, Monk Guillot, and AAA Contractor Services. He asserted claims against State Farm for damages and loss of his property, as well as for bad faith claims adjusting; against Guillot for failing to inform him of potential coverage gaps and not procuring adequate insurance; and against AAA for excessive and unfair damage costs.
State Farm argued that the parties were diverse because AAA and Guillot were fraudulently joined and invoked the court's original diversity jurisdiction. It alternately asserted that “the lawsuit is properly removed because this Court has original federal subject matter or supplemental jurisdiction.”
Schaefer countered that State Farm did not meet its burden in proving that he had no possibility of recovery against Guillot, and moved to remand the case because complete diversity was destroyed.
The court stated, “Most lawsuits filed under Hurricane Katrina focus on issues of insurance law and have been removed by out-of-state defendant insurance companies.…This case is no different.” The court noted that Schaeffer did “not provide specifics regarding the type or amount of insurance he requested, but implies that his expectations that he conveyed to Guillot were not met.”
State Farm provided evidence of thirteen different lawsuits against it “all using exactly the same vague language regarding their State Farm agent's alleged negligence in procuring insurance.” But, the court said, State Farm did not produce evidence refuting Schaefer's negligence allegations against Guillot.
The court, therefore, found that State Farm did not meet is burden in proving Schaefer had no possibility of recovery against Guillot, that Guillot was a properly joined defendant, and that the court had no subject matter jurisdiction.