Last Wednesday, the United States District Court for the Western District of Texas reaffirmed its commitment to remain in the minority of Texas Courts to hold that the timing of when an insurance company elects to accept liability of an agent is not determinative for purposes of improper joinder. 

In Warner v. Trumbull Insurance Company, 2022 WL 3448748 (W.D. Tex., August 17, 2022), Cynthia Warner alleged that her home suffered severe roof damage in a May 2020 windstorm.  Ms. Warner notified Trumball, her insurance carrier, which assigned a claim representative that in turn retained Ladder Now to inspect Ms. Warner’s roof.  Ladder Now performed the inspection, and Trumball denied the claim based on the inspection result.  Ms. Warner filed suit against Trumball, Hartford, the claim representative, and Ladder Now for breach of contract, DTPA violations, fraud, Insurance Code violations, and civil conspiracy, alleging that Trumball should have sent its own inspector, not an independent one, and it should have performed an inspection for a water leak claim that it did not perform.

About six weeks after the suit was filed and almost 2 years after the windstorm, Trumbull served Ms. Warner with a written notice of its election to accept whatever liability Ladder Now incurred pursuant to Section 542.006 of the Texas Insurance Code, and it removed the lawsuit to federal court under diversity jurisdiction—having diversity of citizenship satisfied with Ladder Now then considered an improperly joined party.  Ms. Warner objected to the removal, arguing that Ladder Now was a proper party when the suit was filed since Trumball made the election after suit was filed. 

The Court disagreed, stating that the timing of the election made no difference because under Section 542.006, whether the election is before or after suit, the result is the same: the party is dismissed as an improper party.  Thus, Trumball successfully removed the case, regardless of having made its election—and creating diversity of citizenship—after the lawsuit was filed. 

Editor’s Note: Even though the insurance company won this case, this case emphasizes the importance that insurance companies and their counsel elect to accept liability of their agents as early as practical.  As this court stated, “[t]his Court has consistently endorsed the minority view” and insurance companies have no guarantee of being sued in a minority-view jurisdiction.

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