Last week, the U.S. District Court for the Western District of Texas concluded that the Insured’s insurance agent was improperly joined because the Insured failed to state claims against the agent. In Go Green Botanicals, Inc. v. Drexler Ins. Serv. LLC and Tri-State Ins. Co. of Minnesota, No. 5:22-CV-373-XR, 2022 WL 2286961 (W.D. Tex., June 23, 2022, mem. op.), Go Green alleged that it suffered covered losses under the Business Income Loss provisions of its insurance policy with Tri-State as a result of the COVID-19 shut-down orders, and that its claim for such losses was improperly denied. Go Green sued Tri-State and Go Green’s insurance agent, Drexler, in state court, asserting claims of breach of contract, conspiracy, bad faith, and violations of the Texas Insurance Code (i.e., failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of Go Green's claim; failing to promptly provide a reasonable explanation for the denial of Go Green's claim; failing to affirm or deny coverage in a reasonable time; and refusing to conduct a reasonable investigation). Go Green's only factual allegation specific to Drexler was that Drexler “told Go Green that there was no coverage for their loss and they need not bother filing a claim.”

Tri-State removed the lawsuit to federal court, contending that Drexler was improperly joined and, consequently, complete diversity existed between Tri-State and Go Green to establish federal jurisdiction.  In response, Go Green filed a motion to remand to state court, which the U.S. District Court denied.   

In denying remand, the Court concluded that Go Green failed to state any valid claims against Drexler.  To that end, the Court concluded that Drexler was not the insurer under the insurance policy and, thus, there was no valid contract that would allow Go Green to recover from Drexler on a breach-of-contract claim.  As to Go Green’s claims of conspiracy and bad faith, the Court concluded that “nowhere in the petition [did] Go Green plead any facts that would enable this Court to reasonably infer that Drexler denied Go Green's claim or that Drexler conspired with Tri-State to do so. Instead, Go Green merely allege[d] that Drexler advised Go Green that its claim would not succeed.”  Further, “there [was] no plausible reason to believe that Drexler had the authority to deny the claim on Tri-State's behalf.” As to Go Green's claims of violations of the Texas Insurance Code, the Court concluded that the Texas Prompt Payment Act only applies to insurers, not to insurance agents.  Further, Go Green did not allege “any facts indicating that Drexler had the authority to grant or deny coverage under the Policy or to investigate Go Green's claim.”

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