Insured’s Process Victory

For insurance lawyers, a favorable way to increase the odds of a win or favorable settlement is to be able to litigate a case in State Court rather than Federal Court.  Here is a win for keeping a case in State Court.  This is a 2019, opinion from the Eastern District of Texas.  The opinion is styled, Michael Hebert v. United Property & Casualty Insurance Company.

This is a lawsuit filed against United and it’s adjusters, Castro and Pharr, resulting from the way Hebert’s claim was handled.  The case was filed in State Court.  The State Court dismissed the adjusters and United then removed the case to Federal Court based on diversity of citizenship and the amount in controversy pursuant to 28 U.S.C. Sections 1441 and 1446.

This Court states that the case was  not removable on its face because Pharr, Castro, and Hebert are Texas citizens and, therefore, there was not complete diversity.  Under what is called the voluntary-involuntary rule, a case generally can become removable only by an affirmative act by the plaintiff.  This is pursuant to 28 U.S.C., Section 1446(b)(3).  United’s election of post-suit liability was an involuntary act with regard to Hebert.  Thus, the case was not removable on its face or after United’s election of liability.

Although it is true that Texas Insurance Code, Section 542A.006 requires dismissal of an insured’s claims against the agent if the insurance company assumes liability, it does not follow that the initial claim against the agent was an improper joinder.  In order to establish improper joinder, the removing party must demonstrate either: 1) actual fraud in the pleading of jurisdictional facts, or 2) inability to establish a cause of action against the non-diverse party in state court.  The insurer’s post-suit election liability does not retroactively render adjusters improperly joined parties.  Hebert only needed to have stated valid claims against Pharr and Castro when suit was initially filed for the parties to be properly joined.  Here, Hebert alleges that Pharr and Castro conducted an inadequate inspection.  Without deciding the merits of this allegation, Hebert’s allegation are sufficient to establish that Pharr ans Castro were not improperly joined in the lawsuit against United.