Insurance Lawsuits Under Texas Insurance Code, Section 542A.006

Here is another lawsuit litigated under Texas Insurance Code, Section 542A.006.  The opinion is from the Western District of Texas, San Antonio Division, and is styled, Farzin Tabib and Shahla Afshar v. Metropolitan Lloyds Insurance Company Of Texas and John Crouch.

The Court is asked to consider two motion.  A Motion to Dismiss with Prejudice Pursuant to Texas Insurance Code, Section 542A.006, filed by Lloyds and Plaintiffs Motion to Remand.  This Court denied the Motion to Remand and dismisses Crouch without prejudice, and finds the motion to dismiss moot.

As long as a nondiverse party, Crouch, remains joined, the only issue the court may consider is that of jurisdiction itself.  Federal courts always have jurisdiction to determine their own jurisdiction.  This limited authority permits the court to grant a motion to remand if a nondiverse party is properly joined, while also permitting the court to deny such a motion if a party is improperly joined and, in so doing, to dismiss the party that has been improperly joined.

Although the Court initially focuses on the motion to remand, both motions concern a postsuit election of liability by Lloyds pursuant to Texas Insurance Code, Section 542A.006. As shown by the Case History for the state action, Plaintiffs filed their state petition on January 4, 2021; Defendants filed their answers on January 26, 2021, and on that same day, Lloyds filed an election of liability and Defendants moved to dismiss Crouch based on that election.  Without awaiting a ruling on that motion to dismiss, Lloyds removed the case to federal court on February 5, 2021, filed the notice of election, and moved to dismiss Crouch.

This Court recognized a developed split of authority on how to apply Section 542A.006 when the insurer has made its election in the state court proceedings or at the time of removal.  Based on the analyses and discussions set out in this Court’s prior case law, the Court is naturally inclined to rule similarly, i.e., deny the motion to remand,and grant the motion to dismiss, except for the request for dismissal with prejudice.  As already noted, despite Section 542A.006 providing for dismissal with prejudice following an insurer’s election, the Fifth Circuit re-quires that  an improperly joined party  be dismissed without prejudice.

The Court has considered Plaintiffs’ various arguments for remanding this action.  But they present nothing that the Court has not already considered either expressly in its prior decisions addressing Section 542A.006 or through its recalled deliberations while determining similar motions in the earlier cases.  Plaintiffs present no new breakthrough, no persuasive decision,or any binding precedent requiring or persuading the Court to deviate from its prior path.  Because Lloyds’s election demonstrates that Plaintiff has no possibility of recovery against Crouch, the agent is considered improperly joined and his citizenship may be disregarded for purposes of diversity jurisdiction.  The Court thus denies the motion to remand and dismisses Crouch from this action without prejudice in accordance with precedent.


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