Articles Posted in Claims Denial

When a claim is denied and the insured has to file a lawsuit against the insurance company, most insurance lawyers prefer to litigate cases in the State or County courts while insurance companies prefer to litigate the cases in Federal Court.

When the insurance company is sued in State Court, the attorney for the insured will also sue the adjuster in an effort to beat the required “diversity jurisdiction” of the Federal Court which is found at 28 U.S.C., Section 1332(a).

This issue was the topic in the 2019, Western District of Texas, Austin Division, opinion styled, Susan Swire and Philip Swire v. Alyssa Kempf f/k/a Alyssa Hodge and Geico County Mutual Insurance Company.  The case was filed in State Court and then removed to Federal Court based on diversity jurisdiction.  The Swire’s argued that Kempf is in fact a Texas citizen and therefore, removal is improper.

Insurance companies prefer to litigate cases in Federal Court.  Insurance lawyers representing insureds prefer to litigate their cases in State Court.  In the appropriate situation, here is a way to stay in State Court.

This is from the Southern District of Texas, Houston Division, and the case is styled, WEN WIRELESS, INC. d/b/a Cell Spot, Kick Back Wireless v. Amguard Insurance Company.

Wen sued Amguard in County Court and Amguard timely removed the case to Federal Court based on diversity jurisdiction.  Wen filed a Motion for Remand under 28 U.S.C., Section 1441(a) asserting that the Court did not have federal jurisdiction.

The Southern District of Texas, Houston Division issued an opinion in an unusual case in February 2019.  The case is styled, Patricio Delgado v. Allstate Texas Lloyds.

The case had been removed to federal court based on diversity jurisdiction.  Four parties sued Allstate on four properties in four states.  Allstate asked that the improperly joined parties by dismissed and the case severed into four separate lawsuits.  The Judge has found that the four claims are “factually unrelated” and severed the claims.  The Judge ordered that each plaintiff file an amended compliant related solely to his or her claims.  The Judge also ordered that each of the cases be remanded.

Allstate argues that the remand is improper because of the amount in controversy exceeding $75,000, because the amount originally sought by Delgado and the others exceeded $200,000.

Most insurance attorneys try to stay out of federal court.  Here, a pro se plaintiff filed his case in federal court.  The case is from the Eastern District of Texas, Sherman Division.  It is styled, Marlon Green v. Covenant Transportation Group, Inc., et al.  The case was dismissed because Green failed to properly plead his case.

Green does not enumerate any specific cause of action or claims, but rather broadly states that “administrative abuses are covered by The Civil Rights Act, and American with Disability Act Rights.”  In the most recent amended complaint, Green alleges that the Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. Section 1332, but avers the claim is less than $75,000.  Green also states “federal law violations include.”  The Court finds, upon review, that Green’s claims should be dismissed for lack of subject matter jurisdiction, and for failing to provide addresses for the preparation of service of process on Defendants, as ordered by the Court.

Federal courts are courts of limited jurisdiction and must have statutory or constitutional power to adjudicate a claim.  Federal courts have subject matter jurisdiction and are authorized to entertain a cause of action only where a question of federal law is involved or where there is diversity of citizenship between the parties and the amount in controversy exceeds $75,000.

Here is a case to watch closely.  The case is from the Eastern District of Texas, Sherman Division, and is styled, Charlotte Stephens v. Safeco Insurance Company of Indiana and Damon Edward Baker.

Stephens sued Safeco and Safeco’s adjuster, Baker, after a hail storm claim which resulted in a lawsuit being filed in State Court.  Safeco removed the case to Federal Court and invoked Texas Insurance Code, Section 542A.006.

542A.006 authorizes an insurer to elect to accept full responsibility of an adjuster’s acts or omissions and mandates that the adjuster be thereafter dismissed from any action to which they are a party.  This amendment spawns a novel question regarding removal based on diversity of citizenship under 28 U.S.C., Sections 1332(a), 1441(a), and 1446.  Namely, whether an action instituted in state court against a diverse insurer and a non-diverse adjuster — nonremovable to federal court due to the lack of diversity of citizenship — becomes removable upon, and solely because of, the diverse insurer’s election to accept complete liability of the nondiverse adjuster.  This Court found it did Not and remanded the case to State Court.  In this case, the Court found that the original joinder of the adjuster was proper.  Had the original joinder been improper the result would have been different.

Insurance attorneys will find this Northern District, Dallas Division opinion helpful for seeing how the courts analyze situations where a complaint is trying to be amended in Federal court to add non-diverse defendants.  The case is styled, Charity Ogunro v. Allstate Vehicle And Property Insurance Company.

Ogunro filed this home insurance dispute in March 2018, naming Allstate and two adjusters.  Allstate elected legal responsibility for the adjusters and the adjusters were dismissed with prejudice, thus, giving diversity jurisdiction.

Ogunro then attempted to amend her complaint by alleging causes of action against the insurance agents who sold the policy.  By allowing the amendment, Ogunro would be able to defeat diversity jurisdiction because the agents are Texas residents and thus, this case would be remanded back to State Court.

As has been said many times and will be said many more times, the insurance companies prefer to have their cases in Federal Court.  The rules of procedure, in the opinion or most lawyers, are more favorable to insurance companies.

The pleading standards are illustrated yet again in a Western District, El Paso Division opinion styled, Shiana Corporation v. Depositors Insurance Company and David Morgan.

Shiana suffered a loss from a wind and hail storm.  The insurance company, Depositors, hired adjuster Morgan to adjust the loss.  Morgan came back with an estimate of $49,268.48.  Shiana hired a public adjuster who adjusted the loss at $519,459.86.   A lawsuit resulted and was filed in State Court where it was promptly removed to Federal Court by Depositors who alleges that Morgan was improperly joined in an effort to defeat diversity jurisdiction.

It is well known among insurance lawyers that an insurance company always wants to have its lawsuit contested in Federal Court.

The U.S. Southern District, Corpus Christi Division, issued an opinion in 2018, that deals with the subject of which court a case should be litigated.  The style is, La Mirage Homeowners Association, Inc. v. Colony Insurance Company, et al.

La Mirage sustained hurricane damage and eventually sued its insurance companies, Colony and AXIS Surplus Insurance Company in State Court.  The insurers removed the case to Federal Court and La Mirage promptly filed a motion to remand back to the State Court arguing that diversity of citizenship did not exist.

National Law Review published an article dated January 17,2019, titled “Some Thoughts On Proving An Insurance Contract In Court.”

The article tell us insurance companies often have their backs against the wall in any dispute.  Typically, in a coverage or premium action brought by the insurance company, it bears the burden of proving its insurance contract and any exclusionary endorsements.  In inter-company disputes that may be a bit easier and the rules may be a bit looser, but in court, the policy has to be proven by the best evidence available.

Even if the dispute is about just one aspect of the policy, most courts require that the entire policy be proven, including all endorsements and other addenda.  That can be problematic when the “original” policy was issued through a broker or agent and delivered to the insured.  Often times, the “home office” copy may not contain all the pieces of the actual policy issued to the insured.

Insurance lawsuits, as all lawsuits, require the parties involved to cooperate with each other in the discovery process and to abide by the Rules of Procedure.  The results of failure to do so are illustrated in the 2018, Dallas Court of Appeals opinion styled, Farbod Ayati-Ghaffari v. Farmers Insurance Exchange.

The issue in this appeal is whether the trial court abused its discretion in imposing death penalty sanctions against Ayati for his abuse of the discovery process.

This opinion makes a long list of the abuses of occurred over the course of this lawsuit including Orders made by the Court that were not followed and numerous chances given by the Court to correct wrongs being committed by Ayati.