FEDERAL JUDGE IN AUSTIN REMANDS SUIT TO STATE COURT WHEN ADJUSTER ELECTION WAS MADE AFTER SUIT WAS FILED.

A federal District Court judge in Austin recently remanded a hail lawsuit to state court after the insurer removed it.  In Jackson v. Meridian Sec. Ins. Co., No. A-22-CV-00357-RP, 2022 WL 2383937 (W.D. Tex. June 30, 2022), the policyholder sued the carrier and an individual adjuster without giving the 60-day pre-suit notice required by the Texas Insurance Code.  Texas Insurance Code § 542A.006 allows insurers to elect to assume responsibility for their adjusters and force dismissal of individual adjusters from lawsuits, and the carrier made an election to assume the adjuster’s liability in this case.  Because the lawsuit was the carrier’s first notice of the dispute, its election of responsibility for its adjuster was made after the lawsuit was filed.  The court cited what it called the “majority rule” set by the Northern District and remanded the case on the ground that there were legitimate claims against the non-diverse adjuster at the time the suit was filed, and therefore, no diversity jurisdiction.

Editor’s Note: While this case may not seem significant on its own, it marks a shift in the Western District of Texas.  We have been following the development of case law regarding removal and remand in Texas for the last several years in the wake of the promulgation of Texas Insurance Code § 542A.006.  At this time, a fairly strong split has developed between the judges in the Northern District of Texas, which consistently considers post-suit elections ineffective to support diversity jurisdiction, and the judges in the Southern District, who have supported, in some cases quite strongly, the position that a post-suit election is effective to create diversity jurisdiction as long as it pre-dates the removal.  The trend has been less clear in the Western and Eastern Districts, with some early Western District opinions accepting jurisdiction under these circumstances.  But this opinion suggests at least some of the Western District judges are now beginning to consider the Northern District’s position to be the “majority rule” in Texas and following it.  Thus, the split between the federal districts in Texas continues to harden and likely will remain in flux until the issue reaches the Fifth Circuit.