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A federal district court in California has rejected two insurers' efforts to remove a coverage case from state court for a host of reasons.

The Case

Susan Buno sued Allstate Northbrook Indemnity Company and Allstate Insurance Company of California in a state court in Los Angeles.

The insurers filed a notice of removal, asserting that Ms. Buno was a citizen of California and that Allstate Insurance Company of California had been fraudulently joined as a defendant by Ms. Buno.

The District Court's Decision

The district court found that the insurers had not satisfied the requirements of diversity jurisdiction and, therefore, it remanded the case back to the Los Angeles court.

In its decision, the district court explained that, to invoke its diversity jurisdiction, the insurers had to prove that there was "complete diversity of citizenship" between the parties, as well as that the amount in controversy exceeded $75,000.

The district court noted that the insurers indicated that they were "informed and believe that [Ms. Buno] is and was at the commencement of the state court action, a citizen of the State of California." However, the district court continued, Ms. Buno's  complaint alleged only that she was "a resident of [the] State of California, County of Los Angeles." The district court pointed out that "residence" was "not necessarily the same as domicile."

The district court also ruled that a petition for removal alleging diversity of citizenship upon information and belief was "insufficient."

Accordingly, the district court held that the insurers' notice of removal had "not properly alleged" Ms. Buno's citizenship.

The district court added that even if the insurers had properly alleged Ms. Buno's citizenship in California, they still would not have made a sufficient showing that there was fraudulent joinder in this case because the evidence presented by the insurers did not directly contradict all of Ms. Buno's allegations against Allstate Insurance Company of California. The district court pointed out that, among other things, Ms. Buno alleged that the insurers made prior settlement offers to her.

Finally, the district court ruled that, although Ms. Buno's complaint might be "deficient," the insurers failed to demonstrate that she would not be afforded leave to amend.

The district court concluded that the insurers had not met their "heavy burden of persuasion" that there was no possibility that Ms. Buno could prevail on any of her claims against Allstate Insurance Company of California and, therefore, it rejected their fraudulent misjoinder argument.

The case is Buno v. Allstate Northbrook Indemnity Co., No. CV 19-08692 PA (MRWx) (C.D. Cal. Oct. 10, 2019).

Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Mr. Meyerowitz is the Director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. He may be contacted at smeyerowitz@meyerowitzcommunications.com.