Fraud Allegations Against The Adjuster

Experienced Insurance Lawyers understand that insurance companies want to litigate cases in Federal Court and that the insurance companies will use any method they can to have the case in Federal Court.

A recent case from the Western District of Texas, Austin Division, which is styled, Davis v. Travelers Lloyds of Texas Ins. Co., issued an opinion denying Travelers efforts to litigate in Federal Court.

Davis filed suit in State Court alleging that he had a homeowners policy with Travelers insuring his residence and after sustaining water damage to his home, he filed a claim under the policy.  The adjuster assigned to the claim by Travelers was Rick Limer.

Davis alleges that Limer performed a substandard investigation and under-reported damage to the property.  As a result, Davis alleges that Limer’s actions caused the claim to be wrongly denied by Travelers.  Davis alleges against Travelers violations of the Texas Insurance Code, Chapters 541 and 542, and breach of contract.  Also, specific actions against Limer for violations of Chapter 541.

Travelers removed the case to Federal Court claiming that Davis only sued Limer in an effort to defeat diversity jurisdiction and thus, allow the case to be litigated in Federal Court.

There was interesting discussion by the Court in this case about exactly what causes of action can be asserted under Chapter can be asserted against an adjuster.  In Texas, some Courts do not allow all the causes of action found in Chapter 541 to be asserted against the adjuster.  In that regard, there is a conflict among the various Federal Courts.

However, Travelers also asserted that Davis failed to properly plead allegations against Limer.  These allegations being allegations subject to Rule 9(b) heightened pleading requirements when there are allegations of fraud or mistake.

To plead fraud in an acceptable manner, a plaintiff must specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.  In the lawsuit Davis alleges Limer specific misrepresentations, to include, but not limited to misrepresenting the scope of damages caused  by the covered peril, the true cost of repairing all of the damages caused by the peril, such as damages to the structure, and that Limer acted with actual awareness that he was misrepresenting the true scope and cost of repair in the estimate he prepared.  These specific misrepresentations are identified as being contained in the estimate Davis prepared.  The Court ruled that this is adequate to meet Rule 9(b) pleading requirements.

It will be interesting to see if this ruling is appealed.