Arizona Allows Insured to Avoid Removal by Naming Adjuster as Defendant

The Holding

In Chukly v. American Family Mut. Ins. Co., 2017 WL 3262541 (D.Ariz. Aug. 1, 2017) (Order), a breach of contract and insurance bad faith case arising from a homeowners claim after a microburst and “massive rain,” the Arizona District Court ruled that aiding and abetting claims against a non-diverse claims manager and a non-diverse adjuster were not fraudulently joined and granted an insured’s motion to remand.

The Takeaways

•   An insured may likely avoid removal by asserting an aiding and abetting claim against a non-diverse adjuster or other insurer employee.
• The viability of, and requirements for, an aiding and abetting claim against an insurer employee are unsettled in Arizona.

The Rationale

Although the insured named the non-diverse claims manager and adjuster in its complaint, the insurer removed the case to District Court and argued these two defendants were “fraudulently joined” solely to defeat diversity jurisdiction.

A joinder is “fraudulent” if a complaint fails to state a claim against a non-diverse defendant, and the failure is obvious under a state’s settled law.  Any ambiguity, however, is resolved in favor of remand because the defendant bears the burden of proving removal is proper and there is a strong presumption against removal.

The District Court reasoned that ambiguity in Arizona’s state law is present because both the District Court and the Arizona Court of Appeals have reached divergent outcomes regarding the elements of aiding and abetting in the bad faith context.  As an example, some courts require an adjuster to engage in a separate tortious act and others do not.