Last week, in Jones v. Allstate Ins. Co., 3:13-cv-4027, 2014 WL 415951 (W.D. Tex. Feb. 4, 2014), a Federal District Court Judge dismissed the insurance adjuster after concluding that the insureds had improperly joined him in the lawsuit in an effort to defeat diversity jurisdiction.  The case arose from a fire at the insureds’ place of business on September 10, 2011, and the insureds filed a timely claim with Allstate for the resulting damages.  Allstate denied the insureds’ claims on the grounds that the damages were excluded from the insurance policy.

Originally, the insureds filed suit against only Allstate in Dallas County Court at Law No. 4 based on Allstate’s withholding of policy benefits following the fire.  Allstate, a resident of Illinois, removed the case to federal court on the basis of diversity of citizenship.  The insureds then voluntarily dismissed the initial suit. 

Approximately two months after filing their initial lawsuit, the insureds filed suit in the 14th Judicial District Court of Dallas County, Texas.  In addition to Allstate, the insureds named insurance adjuster, Byron Rachal (“Rachal”) as a defendant in the second lawsuit.  The insurer timely filed a Notice of Removal, asserting that removal was proper because Rachal “had been fraudulently and/or improperly joined in this action to defeat diversity jurisdiction.”  The insureds never filed a Motion to Remand; however, the Court ordered all parties to submit briefs explaining the basis for the Court’s subject matter jurisdiction given the apparent lack of complete diversity of citizenship between the parties.  The insureds filed a two-page brief asserting that Rachal was the claims adjuster who ultimately denied the policy benefits.  The insurer filed a reply brief arguing Plaintiffs completely failed to address fraudulent/improper joinder.

The Court noted that Allstate has the heavy burden of demonstrating either actual fraud in the pleading, or the inability of the insureds to establish a cause of action against Rachal in state court.  The Court stated that Allstate showed that the insureds failed to provide sufficient information from which one could reasonably infer a cause of action against Rachal under Texas law.  The Court further stated that the insureds made no factual allegations as to Rachal in their Petition, other than asserting that he was a resident of Dallas County.  The Court determined that there was no statement in the state court Petition upon which the Court could assume that Rachal could be liable, as the insureds allege no facts regarding the relationship between the parties or Rachal’s role in the claims process. 

Additionally, the Court refused to consider factual allegations made by the insureds in its federal court briefing to support their positions against improper joinder.  The Court stated that simply stating that “Defendants” made misrepresentations, failed to comply with the law, or refused to perform a duty under the law is not sufficient.  Therefore, the Court dismissed Rachal from the case finding that he was improperly joined.

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