Dallas Hail Claims – Making A Proper Pleading Against An Adjuster On Hail Claims

For insurance attorneys handling hail damage claims, the Northern District, Dallas Division, issued an opinion worth reading.  The opinion is styled, Ronald E. Cohen, et al v. Seneca Insurance Co., Inc., J.S. Held, Inc., Haag Engineering Co., and R. Kean Jenner.

This is a case of an insurance claim denial after a wind and hail storm in Dallas County.  The adjuster, Jenner, was the only non-diverse defendant.  The lawsuit for denial of policy benefits was filed in Dallas County Court and removed to Federal Court by the other defendants claiming that Jenner was improperly joined in an effort to defeat diversity jurisdiction.  Cohen filed a Motion to Remand based on his assertion that Jenner was not improperly joined.

The sole issue in this case is whether the joinder of Jenner was proper under Texas law.  If the court finds a reasonable basis to predict that Plaintiffs can potentially recover on one of the causes of action asserted against Jenner, the court must remand the entire case.

Texas Insurance Code, Chapter 541 was enacted “to regulate trade practices in the business of insurance” by prohibiting “unfair methods of competition or unfair or deceptive acts or practices.”  Pursuant to Section 541.003, a “person may not engage … in a trade practice that is defined in [Chapter 541] as or determined under [Chapter 541] to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.”  An “unfair or deceptive act or practice in the business of insurance” includes engaging in “unfair settlement practices with respect to a claim by an insured that include:

(1)  misrepresenting to a claimant a material fact or policy provision relating to coverage at issue;

(2)  failing to attempt in good faith to effectuate a prompt, fair and equitable settlement of:

  (A)  a claim with respect to which the insurer’s liability has become reasonably clear; or ….

(3)  failing to promptly provide a policyholder a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer’s denial of a claim or offer of a compromise settlement of a claim.

Pursuant to Section 541.002(2), a person is “an individual, corporation, association, partnership, … or other legal entity engaged in the business of insurance, including an agent, broker, adjuster, or life and health insurance counselor.”  Accordingly, Jenner is subject to suit.

Having concluded that Jenner can be sued under the insurance code, as she was here, the court looks to see whether the proper pleading standards were applied.  In making a determination regarding improper joinder, a court does not decide whether the plaintiff will actually or even probably prevail on the merits, but looks only for a reasonable possibility the plaintiff may do so.

Plaintiffs allege that the other defendants had Jenner measure, document, and adjust the claim.  Plaintiffs allege that Jenner traveled to the damaged properties but failed and refused to conduct a thorough investigation.  At one property Jenner found a “large number of small bare spots” on the roof, but attributed them to the “caustic effects of pigeon droppings.”  At the other property, Jenner found “a large number of circular chips” and attributed them to hail events that occurred “a long time ago.”  In making this determination, Jenner noted a “modest number of bruises” in the roof membrane.  Plaintiffs allege that Defendant Haag inspected the same roof in 2011 and found “no evidence of any hailfall, old or new, with hailstones sufficient to bruise” the roofing material.

The Court concluded that Jenner was properly joined as a defendant in this lawsuit and the case was remanded.