Ambiguous Policy Provisions and the Duty-to-Read Doctrine: Protecting Insureds from Improper Removal

Introduction

Wilson v. Kemper Corporate Services, No. 24-60090 (5th Cir. Apr. 11, 2025), presents a dispute over an insurer’s denial of an insurance claim and the subsequent removal of a state-court lawsuit to federal court. Maria Wilson, a Mississippi resident, sued Union National Fire Insurance Company (“UNFIC”), its parent Kemper Corporate Services (“Kemper”), and two non- diverse Mississippi agents—Robin Wilson and Angela Washington—after her house burned and her insurer refused coverage. The district court (S.D. Miss.) denied remand, compelled arbitration under a disputed policy clause, confirmed an award against Wilson, and denied her motion to vacate. On appeal, the Fifth Circuit reversed, holding that (1) non-diverse agent‐defendants were properly joined, (2) diversity jurisdiction was therefore lacking, and (3) all subsequent federal actions—including arbitration—were void for lack of jurisdiction.

Summary of the Judgment

The Fifth Circuit reversed the district court’s order denying remand and vacated both the order compelling arbitration and the amended final judgment confirming the arbitration award. The court held that under Mississippi’s “duty-to-read” doctrine, an insurer may not escape liability for negligent misrepresentations when the policy’s coverage provisions are ambiguous. Because the policy did not “clearly and unmistakably” require the insured to reside in a particular structure, Robin Wilson’s alleged misrepresentation (that household contents in the house would be covered even if Wilson lived in a trailer on the same address) could not be cured simply by reading the policy. As a result, the plaintiff could state a plausible negligence claim against Robin Wilson, making her joinder proper and depriving the federal courts of diversity jurisdiction. All federal-court proceedings were therefore void, and the case must be remanded to Mississippi state court.

Analysis

Precedents Cited

• Borden v. Allstate Ins. Co., 589 F.3d 168 (5th Cir. 2009): Establishes that federal diversity jurisdiction requires complete diversity, and removal statutes must be strictly construed.
• Williams v. Homeland Ins. Co. of N.Y., 18 F.4th 806 (5th Cir. 2021): Clarifies “improper joinder” analysis and when a district court may look beyond the complaint to undisputed facts.
• Smallwood v. Illinois Cent. R. Co., 385 F.3d 568 (5th Cir. 2004) (en banc): Equates improper-joinder inquiry to a Rule 12(b)(6) test—if a plaintiff can plead a viable claim, joinder is proper.
• Estate of Greenwood v. Montpelier US Ins. Co., 326 So.3d 459 (Miss. 2021): Defines Mississippi’s duty-to-read doctrine, barring only those misrepresentations “that could have been cured by reading the policy.”
• Corban v. United Servs. Auto. Ass’n, 20 So.3d 601 (Miss. 2009): Holds that any ambiguity in policy exclusions must be construed in favor of the insured.
• Papalote Creek II, LLC v. Lower Colorado River Authority, 858 F.3d 916 (5th Cir. 2017): Reinforces that a district court must have subject‐matter jurisdiction to compel arbitration under the FAA.

Legal Reasoning

1. Improper Joinder & Duty-to-Read  The Fifth Circuit used a “summary‐inquiry” under Williams and Smallwood to assess whether Maria Wilson had any possibility of recovery against the non-diverse agent defendants. Under Mississippi law, insurance agents owe no affirmative duty to advise on coverage unless they choose to give advice; then they must exercise reasonable care. However, the duty to read doctrine imputes to insureds knowledge of policy terms “whether or not they have read the policy,” barring negligence claims only when a misrepresentation is “curable by reading the policy.”

2. Ambiguity in the Policy  The core dispute turned on whether the policy’s definition of “described location” unambiguously required Wilson to live in the single-family house. The policy defined “described location” disjunctively to include (a) the dwelling, (b) other structures, or (c) that part of a building where the insured lives. The Fifth Circuit held that the policy’s use of “or” and its broader definition of premises rendered any purported residency requirement ambiguous. Ambiguities in coverage exclusions must be construed in favor of the insured; thus Wilson could plausibly claim that Robin Wilson’s alleged promise was not corrected by the policy text. Her negligence claim against Robin Wilson survived, making joinder proper and destroying diversity jurisdiction.

3. Void Arbitration  Because there was no subject-matter jurisdiction, the district court lacked power under the FAA to compel arbitration or confirm the award. Papalote Creek II instructs that a void order compelling arbitration cannot be resurrected by a later judgment—any arbitration procured without jurisdiction must be vacated.

Impact

– Clarifies Mississippi’s duty-to-read doctrine: insurers cannot rely on that doctrine when the policy language is ambiguous or fails to “clearly and unmistakably” negate an insured’s reasonable expectations.
– Emphasizes insured protection: any exclusion or limitation must be expressed unambiguously or will be construed in favor of coverage.
– Reinforces strict construction of removal statutes: doubts about diversity removal resolve in favor of remand.
– Puts insurers on notice to draft crystal-clear policy terms (especially residency requirements) if they hope to bar negligence claims based on the duty to read.
– Underscores that arbitration clauses cannot override subject-matter jurisdiction requirements; a void removal infects all downstream federal proceedings, including arbitration.

Complex Concepts Simplified

• Duty-to-Read Doctrine: Under Mississippi law, insureds are deemed to know policy contents even if illiterate or untrained in insurance. However, insurers cannot invoke it to bar claims based on misrepresentations that a fair reading of the policy would not correct.
• Improper Joinder: To remove a case on diversity grounds, all non-diverse defendants must be “improperly joined.” If the plaintiff states any viable claim against a non-diverse defendant, that defendant must stay in the case, destroying diversity.
• Subject-Matter Jurisdiction & Arbitration: A federal court must have independent jurisdiction (e.g., diversity) before it can enforce an arbitration clause under the Federal Arbitration Act. Without jurisdiction, any compelled arbitration and confirmation of awards are void.

Conclusion

Wilson v. Kemper Corporate Services stands as a significant protection for insureds under Mississippi law. By clarifying that ambiguous policy terms cannot cure negligent misrepresentations and by reaffirming the limits of diversity removal and FAA arbitration, the Fifth Circuit has strengthened the safeguards around policy interpretation and jurisdictional procedure. Future insurers must draft precise, unmistakable contract language if they wish to rely on the duty-to-read doctrine or to shift disputes into federal arbitration. Insureds, in turn, gain assurance that they will not be denied a day in court or stripped of coverage by unclear fine print.