Holding The Insurance Agent/Adjuster Liable

Insurance agent liability is an issue for Insurance Law Attorneys to be know about when investigating a case.  A 2004, opinion from the United States 5th Circuit provides some input on how to look at cases that might involve wrongs by the insurance agent.  The opinion is styled, Hornbuckle v. State Farm Lloyds.

This is a claim on a homeowners policy wherein a claim was made for benefits and the adjuster assigned to the claim, Kirkpatrick, along with State Farm was sued for mishandling the claim.  The case was filed in State Court and removed to Federal Court by State Farm, after which Hornbuckle filed a Motion to Remand.  State Farm claimed Kirkpatrick was sued for the sole purpose of defeating diversity jurisdiction and asserted that no independent causes of action were viable against Kirkpatrick.  The facts are worth reading, however the focus here is how the Court viewed the case.

In the opinion the Court states that Hornbuckle fails to bring forward any substantial evidence to support a claim against Kirkpatrick.  Contrastingly, with their notice of removal and in their response to the motion to remand, the Hornbuckle’s attach, among other things, the entire Hornbuckle deposition and other summary judgment type evidence, and assert that removal was proper because Kirkpatrick was fraudulently joined in that there was no arguably reasonable basis for predicting Hornbuckle could recover against him, and that in any event, removal was objectively reasonable.

The Texas Supreme Court has held that an insurance company employee who in the course of his employment engages in the business of insurance is a “person” whose conduct is regulated by Section 541 of the Texas Insurance Code and who is subject to liability thereunder for his violations thereof. The Court concludes that there is no reasonable possibility that Texas would allow recovery under Section 541 (or the Texas Deceptive Trade Practices Act (DPTA)) against an insurance company employee, who in the course of his employment engages in business of insurance, in the absence of evidence sufficient to sustain a finding that that employee himself committed a violation of Section 541 and that such violation was a cause of damage or legally recognized harm to the plaintiff.

State Farm points out that this Removal, unlike the litany of cases cited by Hornbuckle in support of her Motion, is not based upon whether Hornbuckle has pleaded causes of action that meet the threshold of stating a claim upon which the Courts have determined relief may theoretically be granted against a non-diverse State Farm Claim Representative, but rather upon whether Hornbuckle has any evidence at all that would support any of her claims.

The record clearly contains no summary judgment type evidence sufficient to sustain a finding that Kirkpatrick violated Section 541 (or the DPTA) or other legal duty owed by him to Hornbuckle.  Hornbuckle at no time attempted to explain to the district court the absence of such evidence and did not point to any specific evidence which it could and would produce or assert any need for further discovery or the like.  At the time the motion to remand was filed nine months had elapsed since the institution of the suit.  That being the case, and given that Hornbuckle’s deposition was taken some three years after the alleged loss and after the suit had been on file for some seven months and strongly indicated the absence of any minimally sufficient evidence of wrongdoing on Kirkpatrick’s part, the Court held that State Farm had objectively reasonable grounds to believe the removal was legally proper.

For removal purposes, a local defendant is deemed fraudulently joined not only when there is no arguably reasonable basis for predicting that the local law would recognize the cause of action pled against that defendant, but also when, as shown by piercing the pleadings in a summary judgment type procedure, there is no arguably reasonable basis for predicting that the plaintiff would produce sufficient evidence to sustain a finding necessary to recover against that defendant.  Were this not the rule, the removal rights of out-of-state defendants would largely be theoretical and practically meaningless.

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