ELECTING RESPONSIBILITY FOR ADJUSTERS UNDER 542A CONTINUES TO BE A MINEFIELD

June 25, 2020

Last week, a federal judge in Dallas remanded another insurer’s attempt to remove a case to federal court after electing responsibility for its adjuster under Texas Insurance Code § 542A.006.  In Stowell v. United Prop. & Cas. Ins. Co., 3:20-CV-0527-B, 2020 WL 3270709 (N.D. Tex. June 16, 2020), plaintiff made a residential hail claim and later sued the insurer and its adjuster.  The insurer made a 542A election of responsibility for its adjuster after being served with the suit, and removed the case to federal court, arguing the adjuster was improperly joined and should be dismissed.  The Dallas court sided with what it characterized as the majority view, holding that improper joinder is determined at the moment the suit is filed, and therefore post-suit elections are ineffective to defeat remand. 

It is not surprising that a Dallas court would follow a majority view led from the beginning by Northern District courts, but the court went further and openly disagreed with the minority view, arguing that examining the possibility of recovery against the non-diverse defendant is not the whole test, but merely a means to discerning whether the joinder was proper.

Editor’s note: Although the court did not discuss it, there appears to be some question whether the insurer or adjuster actually received the pre-suit notice the insured allegedly sent 60 days before filing suit.  In light of the growing majority view, receipt of the pre-suit notice has become a critical juncture because it will likely be the insurer’s only pre-suit opportunity to make a 542A election.  Future litigation on this issue may center on proof the insured sent the notice.