Suing The Adjuster

A 2017, opinion from the Northern District, Dallas Division, is an example of how not to sue an adjuster to keep a case out of Federal Court.  The opinion is styled, Hutchins Warehouse Limited Partners, v. American Automobile Insurance Company, et al.

Hutchins sued American and their adjuster in State Court after their claim for benefits was not properly paid.  The allegations against the adjuster, McMillan, were that he made numerous errors in his estimate, which resulted in American underpaying and partially denying Hutchins’s claims.

28 U.S.C., 1441(a) permits the removal of any civil action brought in a state court of which the district courts of the United States have original jurisdiction.  The statute allows a defendant to remove a state court action to federal court only if the action could have originally been filed in federal court.

There are two principal bases upon which a district court may exercise removal jurisdiction: the existence of a federal question, 28 U.S.C., 1331, and complete diversity of citizenship among the parties, 28 U.S.C., 1332.  Here, the allegation is that the real parties in interest are diverse because McMillan was joined in the lawsuit only for purposes of defeating diversity jurisdiction and there is not a proper claim that has been pleaded against him.

To determine whether Hutchins is unable to establish a cause of action against McMillan, the court conducts a Rule 12(b)(6) type of analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant, McMillan.

The defendants contend that Hutchins fails to state a claim against McMillan because Hutchins’s complaint contains merely a recitation of the elements alleging that McMillan violated Chapter 542 of the Texas Insurance Code.

In this case, Hutchins complaint does not allege sufficient facts describing the actionable conduct of the adjuster, including the following:

  1.  “[McMillan] … made numerous errors in estimating the value of Plaintiff’s claim”;
  2.   “McMillan did not conduct a thorough investigation of Plaintiff’s claim ….  [His] substandard inspection failed to include all of Plaintiff’s storm damages noted upon inspection”;
  3.   “The damages included in the estimate were grossly undervalued”;
  4.   “Defendant McMillan failed to thoroughly review and properly supervise the inspection of The Property”;
  5.   “Further, Defendant McMillan knowingly and intentionally overlooked damages at The Property and used their own inadequate and biased investigation as the basis for erroneously denying a portion of Plaintiff’s claim.”

These purported factual allegations are nothing more than legal conclusions couched as factual allegations, which the court need not consider in determining a motion to dismiss.  They do not provide the court with a reasonable basis to predict that Hutchins can recover against McMillan.

Hutchins’s allegations fall short of describing the cause of the loss, such as how McMillan specifically committed any of the above acts.

Moreover, Hutchins’s allegations against McMillan merely track the statutory language under which Hutchins purports to bring its claims against McMillan.  For example, Hutchins alleges that McMillan engaged in an unfair settlement practice by “misrepresenting to Plaintiff material facts relating to coverage at issue.”  However, Hutchins fails to identify a single statement or any specific misrepresentation made by McMillan that would support a cause of action under section 541.060.  Hutchins has only pled a theoretical possibility that McMillan could be liable under these sections.

This Court denied Hutchins’s motion to remand and thus, the case remained in Federal Court.