The insured's Standard Flood Insurance Policy (SFIP) was issued by Allstate, a Write-Your-Own carrier participating in the National Flood Insurance Program (NFIP). See Borden v. Allstate Ins. Co., No. 08-30515, 2009 U.S. App. LEXIS 25599 (5th Cir. Nov. 20, 2009). After suffering flood damage from Hurricane Katrina on August 20, 2005, the insured filed a claim. Allstate denied coverage, contending the policy expired on July 8, 2005, due to failure to pay the premium.
The insured, a Louisiana citizen, sued Allstate in state court, alleging that he never received the annual renewal notice. Allstate, an Illinois citizen, removed the case to federal court based on diversity jurisdiction. The insured subsequently joined Allstate's agent, Ruiz, also a Louisiana citizen, as a defendant. Allstate did not object, but later filed a motion for summary judgment and further moved for the court to clarify its subject matter jurisdiction. The district court granted Allstate's motion for summary judgment and dismissed claims against both defendants without addressing Allstate's motion on subject matter jurisdiction.
On appeal, the Fifth Circuit agreed diversity jurisdiction did not exist because both the insured and Ruiz were Louisiana citizens. The fraudulent joinder doctrine, which ensures that an improperly joined, non-diverse defendant does not defeat federal removal jurisdiction, did not apply to joinders occurring after removal to federal court.
The district court did, however, have federal question jurisdiction. Federal law applied to a dispute under a NFIP policy. An action for breach of an SFIP raised a substantial question of federal law, thereby meeting the federal jurisdictional hurdle.
The grant of summary judgment in favor of Allstate was vacated, however. The policy gave the insured one year to notify Allstate of non-receipt of a renewal notice. Although the insured's affidavit claimed that his non-receipt of a renewal notice was timely reported, the district court overlooked this point. Therefore, the district court was instructed on remand to adjudicate the insured's claim.
