DISTRICT COURT FOR SOUTHERN DISTRICT OF TEXAS, MCALLEN DIVISION, REMANDS TWO CASES TO STATE COURT BECAUSE INSURER FAILED TO ESTABLISH IMPROPER JOINDER

October 29, 2012

Last week, Judge Micaela Alvarez of the District Court for the Southern District of Texas,  McAllen Division, remanded two cases to State court on the basis that the insurer failed to meet its burden to show that non-diverse, independent adjusting companies was improperly joined by Plaintiffs in both actions in an attempt to defeat federal diversity jurisdiction.  Chavez v. Companion Commercial Ins. Co., 2012 WL5207522, No. M–12–276 (S.D.  Tex. – McAllen, Oct. 22, 2012); Goldstein v. Companion Commercial Ins. Co., 2012 WL 5250568, Civil Action No. M–12–288 S.D.  Tex. – McAllen, Oct. 22, 2012).  In two separate suits,  Plaintiffs  sued  Companion  Commercial  Insurance  Company  (“Companion”)  and  independent adjusting companies (4Cast Claims, LLC in Chavez and Wellington Claim Service Inc. in Goldstein) alleging delay and underpayment of insurance benefits related to a severe hailstorm on March 29, 2012.  In August 2012, Companion removed both cases to federal court on the basis of diversity of citizenship asserting that both conditions of 28 U.S.C. § 1332(a)(1) were satisfied because the non-diverse defendants in each case (4Cast Claims, LLC and Wellington Claim Service Inc.) were improperly joined.

Plaintiffs subsequently filed motions to remand arguing Defendants failed to show that the non-diverse defendants were improperly joined.  After reviewing Plaintiffs’ original state court petitions (and despite noting the petitions were “hardly a model of draftsmanship” and that Plaintiffs were “carelessness…in drafting the state court petition and the motion to remand”), the Court determined that Plaintiffs sufficiently alleged  that  both  independent  adjusting  companies  violated  provisions  of  Section  541  of  the  Texas Insurance Code and therefore were not improperly joined to the actions.  Therefore, the Court found that Companion had not met its burden of demonstrating that all non-diverse defendants were improperly joined in  either case.   The Court  held  that  it  lacked  jurisdiction  in  both  cases  because the parties  were not completely diverse and remanded the cases to the State court for further proceedings.