Denied Insurance Claims And Federal Court Standards

Insurance claims lawyers are well aware that insurance companies prefer to litigate in Federal Court.  Proper pleading can often times prevent a case from being litigated in Federal Court.  Usually suing the adjuster who handled the claim will prevent removal to Federal Court.  The key is properly pleading claims against an adjuster.

This is discussed in a 2022, opinion from the Northern District of Texas, Dallas Division.  The style of the case is, Jackie Preston v. Nationwide Property & Casualty Insurance Company; Stevie Bruesewitz; and Matthew Vaughters.

Preston sustained damage to her property in 2019.  Nationwide was her property insurer and thus, Preston made a timely claim to Nationwide.  Preston became frustrated with Nationwide’s handling of her claim and sued Nationwide and the two adjusters, Stevie and Matthew.

Nationwide removed the case to Federal Court claiming that the adjusters were improperly joined in an effort to defeat diversity jurisdiction.

The Court in this case, discussed the standards for suing an adjuster.

There are two ways to establish improper joinder: (1) show actual fraud in the
pleading of jurisdictional facts, or (2) show the inability of the plaintiff to establish a cause of action against the non-diverse party in state court.
To do this, the court can either conduct a Rule 12(b)(6) analysis or, in its discretion, pierce the pleadings and conduct a summary inquiry.  In this context, the federal pleading standard applies over state rules, and the focus is on the validity of joinder, not the merits of the plaintiff’s case. A suit lacking in merit is not the same as a suit involving improper joinder. Considering a motion to remand with regard to improper joinder, if the plaintiff has stated a claim to relief that is plausible on its face, more than a recitation of elements of an action, then remand of the action is proper.

Individual adjusters can be personally liable under some provisions of the Texas Insurance Code. So long as at least one claim against the adjusters is viable, the Court must remand this case to state court.  The Court first considers Preston’s claim under Texas Insurance Code Section 541.060(a)(2)(A).  Under this provision, a person may be held liable for unfair settlement practices for “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear.”  The fact that the statute uses the word ‘effectuate,’ rather than a word that conveys finality (e.g., finalize), suggests that its prohibition extends to all persons who play a role in bringing about a prompt, fair, and equitable settlement of a claim. As the
persons primarily responsible for investigating and evaluating insurance claims,”
adjusters play such a role.
  A delay in an adjuster’s investigation will undoubtedly
cause a delay in the payment of the claim, and an insufficient investigation may well lead to a less than fair settlement of a claim.  
Accordingly, adjusters may be held liable under Section 541.060(a)(2)(A).

Satisfied that adjusters may be liable under Section 541.060(a)(2)(A), the Court must consider whether Preston has stated a viable claim under this provision against the adjusters here.  Pertinent to her Section 541.060(a)(2)(A) claims, Preston alleges that the adjusters have drawn out the investigation and settlement process and have refused to reasonably investigate or fully pay Preston’s claims.  She contends that the adjusters’ investigation was a “threadbare pretext to deny the Claim.”  While Preston’s allegations lack specific factual details that may be important as this case progresses, she “does not need detailed factual allegations” at this stage. Preston’s allegations of delay and inadequate and pretextual investigation are sufficient to state a claim against the adjusters for “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement” of Preston’s claims under Section 541.060(a)(2)(A).

Because Preston has stated a viable claim against the adjusters under Section 541.060(a)(2)(A), the adjusters were not fraudulently joined.  The Court need not consider the adequacy of Preston’s other claims or Nationwide’s motion to preclude Preston’s claim for attorney’s fees.  Lacking jurisdiction over this case,
the Court must remand it to state court.  However, the Court does not find that
Nationwide removed this case without an objectively reasonable basis for doing so.
  Accordingly, the Court GRANTS Preston’s motion to remand but DENIES Preston’s request for attorney’s fees.


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