Insurance Company Accepting Responsibility For Adjuster

As most insurance lawyers know by now, an insurance company can accept responsibility for the conduct of it’s adjusters when the claim is caused mother-nature and by doing so will defeat diversity jurisdiction and allow a lawsuit to be litigated in a Federal Court rather than a State Court.  The law dealing with this issue is found in the Texas Insurance Code, Section 542A.006.

Another interpretation of this law was at issue in a May 2020, opinion from the Western District of Texas, El Paso Division.  The opinion is styled, Project Vida and P.V. Community Development Corporation v. Philadelphia Indemnity Insurance Company and Robert L. Betts.

Plaintiff sued Philadelphia and Betts in State Court after a dispute arose concerning the handling of Plaintiffs claim after a hail storm.  Plaintiffs allege that Philadelphia and the adjuster, Betts, mishandled the claim.  Philadelphia and Betts removed the case to Federal Court based on diversity jurisdiction and the assertion that Betts was improperly joined in the lawsuit in an effort to defeat diversity and in response Plaintiffs filed a Motion to Remand asserting that Betts was properly joined in the lawsuit..

Plaintiffs had properly sent a pre-suit demand letter to the Defendants.  In response P.V, pursuant to Section 542A.006, elected to accept responsibility for the actions of Betts.  Plaintiffs allege in their Motion to Remand that P.V. did not properly make their election to accept responsibility for Betts.  The exact reasons are in the opinion and need to be read, but essentially the allegation by Plaintiffs is that the election is too vague to be valid.  The Court agreed with Plaintiffs and remanded the case.

In discussing this case, the Court noted that neither Texas courts nor the Fifth Circuit have provided guidance as to what constitutes sufficient notice of election under Section 542A.006(a).  Section 542A.006(a) provides that the insurance company may accept its agent’s liability “for the agent’s acts or omissions related to the claim by providing written notice to the claimant.”  The plain language of Section 542A.006(a), therefore, suggests that an insurance company’s election of its agent’s liability is effective as to a specific claim.

Here, the vagueness of the election letter presents ambiguity as to which claim its election of liability is being made.  The Court resolves this ambiguity by granting the Remand.


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