Steven Reto was injured in a car accident in 2014. After the underlying liability claim settled with the driver who caused the accident, the Retos filed a claim for underinsured motorist benefits with their insurer, Liberty Mutual. Sometime thereafter, the Retos filed suit in state court against Liberty Mutual and the claims adjuster who handled their claim, asserting statutory bad faith and other causes of action. Liberty Mutual removed the case to federal court, contending that its claims adjuster was fraudulently joined to defeat diversity of citizenship. The Retos moved to remand, maintaining that their claims against the adjuster were proper.
The federal district court, in Reto v. Liberty Mutual Insurance, No. 18-2483 (E.D. Pa. Aug. 8, 2018), denied the Retos' motion to remand and dismissed the claims adjuster as a defendant in the lawsuit. The court found the claims against the adjuster were "wholly insubstantial and frivolous" and that there was "no basis for a bad faith claim" against the adjuster because the Pennsylvania bad faith statute "applies only to insurance companies." "To determine who is the insurer for purposes of [the statute], we examine the policy documents and the extent to which the company acted as an insurer." The court found the adjuster was “not an insurer because she is not a party to the insurance contract. Only Liberty Mutual is identified in the policy documents as the "insurer." In addition, the Retos had not alleged that the adjuster "acted as their insurer." Although the Retos argued that they named the adjuster due to the "complexity of the corporate structure" of Liberty Mutual and "to ensure that the proper entity … would be liable for the actions of [the adjuster] via vicarious liability," the court rejected this argument. "If they named [the adjuster] only to learn who her employer was, they could subpoena and depose her as a witness."
Having determined that the adjuster "is not an insurer within the meaning of the bad faith statute," and that "there is no colorable claim against" her, the court concluded that she was fraudulently joined in the action, dismissed her as a defendant, and denied the Retos' motion to remand.