Volzhenina v. Safeco Insurance Company of America

Background

Viktoriya Volzhenina owns real property in San Pablo, California, insured by Safeco Insurance Company of America. She alleged that a July 2023 fire damaged the property and that Safeco and its adjuster, Mandy Esrock, undervalued her claim, refused to reimburse certain costs, supplied unrealistic repair estimates, and declined to provide requested information.

Volzhenina filed the operative complaint against Safeco and Esrock in Contra Costa County Superior Court in October 2024. The complaint included a negligent-misrepresentation claim against Esrock. Safeco removed the case to federal court in November 2024, asserting diversity jurisdiction under 28 U.S.C. § 1332. Volzhenina moved to remand, arguing that she and Esrock were both California citizens. Safeco and Esrock opposed the motion, arguing that Esrock had been fraudulently joined to defeat diversity jurisdiction.

Court’s analysis

Federal diversity jurisdiction generally requires that the amount in controversy exceed $75,000 and that every plaintiff be a citizen of a different state from every defendant. The court stated that a nondiverse defendant may be disregarded for this purpose only if the defendant was fraudulently joined. Fraudulent joinder requires a strong showing that the plaintiff cannot possibly state a claim against that defendant under settled state-law principles.

The court rejected the defendants’ argument that California law clearly barred Volzhenina’s negligent-misrepresentation claim against Esrock because Esrock was an insurance employee acting within the scope of her employment. The court explained that California appellate authority had held that a negligent-misrepresentation claim can be brought against an insurance adjuster even when the adjuster acts in the course of employment. Although federal courts had disagreed about the scope of that authority, the court concluded that it was not obvious that Volzhenina’s claim was legally barred.

The court also considered the defendants’ arguments that Volzhenina had not adequately pleaded reliance and damages. The court emphasized that the fraudulent-joinder inquiry does not decide whether Volzhenina will win or whether her complaint would survive a motion to dismiss. Instead, the question was whether there was any possibility that she could state a claim in state court. The court found that her allegations about the repair-cost authorization, Safeco’s estimate, her inability to find a contractor within that budget, and her alleged loss of full indemnification raised at least that possibility. The court further stated that any pleading deficiencies might be cured by amendment.

Ruling

The court held that the defendants had not met their heavy burden of proving fraudulent joinder. Because Volzhenina and Esrock were both California citizens, there was not complete diversity, and the federal court lacked subject-matter jurisdiction.

The court granted Volzhenina’s motion to remand and remanded the case to the Superior Court of Contra Costa County. It terminated as moot Esrock’s motion to dismiss. The clerk was directed to remand the case and close the federal file.