Federal Court And Insurance Lawsuits

Grand Prairie insurance attorneys usually want to stay out of Federal Court because it is usually better for their clients to remain in State Court. The United States District Court, Dallas Division issued an opinion in September 2013, that is worth reading. The style of the case is Ridgeview Presbyterian Church v. Philadelphia Indemnity Insurance Company. Here is some of the relevant information.
This concerns a Motion To Remand.
This case involves an insurance claim filed after a storm damaged Ridgeview’s building. Ridgeview alleges that its insurance carrier, Philadelphia Indemnity acted in concert with an independent adjusting company, Crawford and a licensed adjuster, Lumpkin, to breach the insurance agreement and commit bad faith.
Ridgeview alleges that on a storm struck caused harm to Ridgeview’s roof, exterior, interior, and other structures. Following this storm, they filed a claim with Philadelphia Indemnity against the insurance policy for damage, and requested Philadelphia Indemnity cover the cost of repairs. Philadelphia Indemnity, in turn, retained Defendants Crawford and Lumpkin as adjusters on the claim. The claim was subsequently denied and suit was filed.
Drawing no distinction between the actions of the three, Ridgeview alleged that Defendants: (1) knowingly violated various provisions of Texas Insurance Code §§ 541.060 and 541.061; (2) failed to timely commence an investigation of Ridgeview’s claim and subsequently delayed payment; (3) breached the contract with Ridgeview; (4) breached the duty of good faith and fair dealing; (5) are liable for punitive damages resulting from fraudulent and malicious actions surrounding the denial of Ridgeview’s claim; (6) violated the Texas Deceptive Trade Practices Act (“DTPA”) by violating the Texas Insurance Code; and (7) “acted fraudulently as to each representation made to Ridgeview.”
Lumpkin removed the case to federal court on the basis of diversity jurisdiction under 28 U.S.C. §§ 1332 and 1441. Ridgeview filed a Motion to Remand arguing that joinder of Lumpkin was proper and urging the Court to remand the case.
The law is that though diversity jurisdiction requires complete diversity of the parties, a case involving a non-diverse defendant may nevertheless be removed to federal court if it is established that the nondiverse defendant was improperly joined.
To establish improper joinder, the removing party must demonstrate “(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.”
Ridgeview moves for remand because it claims it has sufficiently pleaded causes of action against Lumpkin for violating various sections of the Texas Insurance Code and the DTPA and for committing fraud.
A threshold question before the Court is whether to apply the federal or Texas pleading standard in its determination whether Ridgeview has sufficiently pleaded its state claims against Lumpkin. Indeed the decision about which pleading requirements to apply is “critical to resolving the issue of the pleading’s adequacy.” The parties in this case disagree as to which standard is appropriate. Ridgeview urges the Court to follow the Texas “fair notice” requirements; Lumpkin asserts that the federal standard should be used.
In support of its Motion to Remand, Ridgeview submitted an appendix that includes correspondence between Philadelphia Indemnity and Ridgeview regarding Philadelphia Indemnity’s insurance policy. Critically, these exchanges include reference to Lumpkin’s investigation of the claim. According to a letter dated February 28, 2012 from Philadelphia Indemnity to Ridgeview:
Mr. Lumpkin has reported the interior damage was not the result of wind/hail to the exterior/roofing. The interior water damage was the result of wear, tear, and deterioration of the exterior roof flashing allowing rain water penetration. As such, the roof flashing and interior water damage is not covered under the policy….
Mr. Lumpkin did report that there was minimal roof damage from wind which was unrelated to the roof leak/ interior water damage. He reported the cost to repair this minimal damage would be $250, which is below the $5,000 wind/hail deductible.
Mr. Lumpkin further reported that he also found minimal hail damage from an unknown previous hail storm. He advised that due to the minimal damage and that damage would likely not exceed the $5,000 wind/hail deductible, that you were not pursuing a separate hail claim.

This letter provides information regarding Lumpkin’s specific conduct, namely the conclusions he drew from investigating the claim. Though minimal, these details provide a basis for determining what evidence Ridgeview has to support its claim against him. In particular, proof of Lumpkin’s determination of the origin and value of the damage reasonably supports Ridgeview’s contention that Defendants wrongfully denied its claim and/ or underestimated the value of Ridgeview’s property damage during the investigation. In addition, the appendix also includes a report prepared by an outside agency at the behest of Lumpkin. This report references Lumpkin’s “instructions” regarding the investigation and thus suggests further individual conduct that could give rise to Lumpkin’s liability with respect to the investigation.
The Motion To Remand was granted.

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