Bad Faith - Federal Court Allows Removal of Bad Faith Claim in Litigation Pending for More Than One Year
The U.S. District Court for the Western District of Kentucky addressed an issue that can be particularly significant in jurisdictions that permit "bad faith" claims to be made directly by third-party claimants against insurers.
In Meador v. Indiana Insurance Co., No. Civ.A.1:05CV-206-R (W.D. Ky., Feb. 1, 2006), the district court ruled that a bad faith claim was properly removable even though it was asserted in litigation that had been pending
for longer than one year.
The plaintiffs in Meador filed a personal injury action in Kentucky state court in August 2004 against two defendants for negligence and loss of consortium. In February 2005, the plaintiffs amended their complaint to name
Indiana Insurance Company as a defendant and claim damages for bad faith and for violation of Kentucky’s Unfair Settlement Practices Act and Consumer Protection Act. The state court ultimately agreed to stay discovery on the
claims against the insurer and bifurcated those claims for trial. The plaintiffs settled their personal injury claims in November 2005 and the two original defendants were dismissed. The insurer in December 2005 filed a notice of
removal to federal court. Plaintiffs responded with a motion to remand, arguing that removal was barred under 28 U.S.C. §1446(b) because the insurer had not filed its notice within one year after commencement of the action in
August 2004. Plaintiff further argued that the insurer had not met the statute’s thirty-day requirement.
The district court denied the motion to remand. In so doing, it acknowledged the existence of case law holding that an action "commenced" for purposes of §1446(b) when originally filed by the plaintiff and refusing to
give later-joined defendants additional time to remove. However, the district court reasoned that those cases involved situations where the claims against all defendants arose from the same transaction or occurrence. In contrast,
the court ruled that the plaintiffs’ bad faith claims in Meador were entirely separate from the personal injury claims against the other defendants. It accordingly held that the one-year period governing the bad faith
claims did not commence until the filing of the amended complaint.
With respect to plaintiffs’ second argument, the district court held that the thirty-day period did not begin to run until the original defendants were dismissed because the case was not removable while they were parties. Because the insurer filed its notice within thirty days after the dismissal, the district court ruled that the removal was timely.