In Thomas v. State Farm Lloyds, 2015 WL 6751130 (N.D. Tex. November 4, 2015) (Judge Boyle), Thomas sued State Farm Lloyds and the insurance adjuster in state court for allegedly mishandling their insurance claim under a Texas Dwelling Insurance Policy.  The claim arose out of an incident with the Thomas’ plumbing system that damaged their property, including the foundation and interior and exterior structures.  The Plaintiffs alleged claims against the insurance adjuster of violations of chapter 541 of the Texas Insurance Code, fraud and conspiracy to commit fraud.  State Farm removed the case to federal district court on the basis of diversity of citizenship, asserting that the adjuster was fraudulently joined.  Plaintiffs moved to remand.  The Court denied Plaintiffs’ motion to remand for the following reasons:

The Court noted that in March 2013, the Texas Supreme Court adopted Tex.R.Civ.P 91a.  This rule allows for Rule 12(b)(6) type analyses for the dismissal of state court cases with no basis in law or fact.  The Court recognized it as changing the pleading standard from “fair notice” to “enough facts to state a claim for relief that is plausible on its face.” The Court then construed the Plaintiffs’ allegations against the adjuster under this new standard to determine if the adjuster had been fraudulently joined to defeat diversity jurisdiction.

The Court held there was no reasonable factual basis for holding that a claim had been alleged against the adjuster under Texas Insurance Code Section 541.060(a)(1).  This section prohibits “misrepresenting to a claimant a material fact or policy provision relating to coverage at issue.”  The Court held the following allegations do not constitute a misrepresentation of the policy itself, so they are not actionable under this Section:  failing to conduct a reasonable investigation, understating the amount of damage to Plaintiff’s property, using her own statements as a basis for denying or underpaying the claim, failing to provide an adequate explanation for the claim denial, and misrepresenting that the damage was not covered.

The Court held that Texas Insurance Code Section 541.060(a)(2)(A) did not apply to the claims against the adjuster because this section forbids, “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of … a claim with respect to which the insurer’s liability has become reasonably clear.” The Court recognized this Section only applies to conduct preceding the settlement of a claim.  However, in this case, the only allegations against the adjuster were for “not adequately explaining the reasons for denying or underpaying Plaintiffs’ claim” which is conduct after the claim decision. 

The Court held the adjuster could not be liable under Texas Insurance Code Section 541.060(a)(3) and 541.060(a)(4) because an insurance adjuster does not have the responsibility nor authority to comply with them.  Section 541.060(a)(3) punishes the failure to promptly provide a reasonable basis in the policy for denial of a claim.  Section 541.060(a)(4) prohibits failing to affirm or deny coverage of a claim within reasonable time, or submit a reservation of rights to the policyholder.

The Court held the adjuster could not be liable under Texas Insurance Code Section 541.060(a)(7) which prohibits refusing to “pay a claim” without conducting a reasonable investigation.  Plaintiffs alleged the adjuster performed an outcome-oriented investigation which resulted in a biased, unfair and inequitable evaluation of the loss.  Also, the adjuster allegedly “did not properly inspect the [p]roperty and failed to account for and/or undervalued many of Plaintiffs’ exterior and interior damages, although reported to [State Farm.]”  The Court reasoned that these allegations against the adjuster were actually for a failure to investigate, rather than for a failure to pay.

Finally, the Court rejected the allegations against the adjuster of fraud and conspiracy to commit fraud because Federal Rule of Civil Procedure 9(b) requires fraud to be “state[d] with particularity” and “the circumstances constituting fraud.” The Court noted the Plaintiffs’ allegations were conclusory, and they did not allege they relied on any misrepresentations of the adjuster.

Conversely, in Fernandez v. Allstate Fire and Cas. Ins. Co., 2015 WL 6736675 (N.D. Tex. November 4, 2015)(Judge Fitzwater), the Court examined a motion to remand a residential wind/hail case against Allstate wherein the remand focus was on claims against an insurance sales agent who was a Texas citizen. The Court recognized that improper joinder is shown by either actual fraud in pleading jurisdictional facts or plaintiff is unable to establish a cause of action against the non-diverse party.  The Court used a 12(b)(6) type analysis to reject the motion to remand.

The Court reasoned that even though both an out of state adjuster and an in state sales agent were joined in the allegations against the carrier, Allstate, the only allegations that can reasonably be inferred to apply to the sales agent were those of misrepresentations regarding the coverage the Policy provided. However, the Plaintiff lumped together all the Defendants in “undifferentiated averments.”  This “does not satisfy the requirement to state specific actionable conduct against the non-diverse defendant.”  The Court further noted the Plaintiff could not rely on the conclusory allegations that merely track the statutory language.

The Court also specifically addressed the Texas Insurance Code Section 541.060(a)(1) claims against the sales agent.  Plaintiff contended the sales agent represented “that the Policy included hail and windstorm coverage for damage to Plaintiff’s house.”  The Court noted that the representation was undoubtedly true since the Policy did cover physical loss caused by windstorm or hail. Thus, those specific factual allegations could not support a violation of that Section.

Thus, as a result of the Plaintiff’s failure to make “sufficient allegations for the court to reasonably predict that she might be able to recover against [the sales agent] on any of her claims…” the Court ruled the agent was improperly joined.  The motion to remand was denied.

[Editor’s Note: these two cases show that removal and remand issues in the federal courts of Texas differ drastically in their treatment from case to case and even from judge to judge.  The perceptions of the nature of the allegations in a plaintiff’s pleadings frequently differ drastically from judge to judge even in the same Division.] 

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