Jurisdiction And Insurance Cases

This is a case from the Northern District, Dallas Division, dealing with which court is proper to litigate the case.  The case is styled, Hutchins Warehouse Limited Partners v. American Automobile Insurance Company et al.

A court may sua sponte raise the issue of its jurisdiction at any time during the course of litigation.

28 U.S.C. Section 1441(a) permits the removal of any civil action brought in a state court of which the Federal Courts have original jurisdiction.  However, the removal statue must be strictly construed because removal jurisdiction raises significant federalism concerns.  Therefore, any doubts concerning removal must be resolved against removal and in favor of remanding the case back to state court.

There are two principle bases upon which a district court may exercise removal jurisdiction: 1) the existence of a federal question, pursuant to 28 U.S.C. 1331, and 2) complete diversity of citizenship among the parties., pursuant to 28 U.S.C. 1332.  The court can properly exercise jurisdiction on the basis of diversity of citizenship after removal only if three requirements are met: 1) the parties are of completely diverse citizenship, 2) none of the properly joined defendants is a citizen of the state in which the case is brought, 3) the case involves an amount in controversy of more than $75,000.

The holistic approach to removal mandates that the existence of even a single valid cause of action against in-state defendants, despite the pleading of several unavailing claims, requires remand of the entire case to state court.

Here, Hutchins asserts claims against American’s adjuster, McMillan, under various sections of Chapter 541 of the Texas Insurance Code.  American is a resident of another state and only Hutchins is a resident of Texas.  Hutchins alleges that McMillan violated, section 541.060(a)(1) by misrepresenting material facts relating to the coverage at issue, and section 541.060(a)(7) by refusing to pay the claim without conducting a reasonable investigation.

Specifically, Hutchins alleges that McMillan performed an outcome oriented investigation, focusing on pre-existing damages that were not caused by the tornado.  Moreover, Hutchins alleges that despite McMillan’s knowledge of structural damages to the interior building system and the need for permanent repairs and or a complete rebuild, McMillan has refused to provide an estimate for those damages.  Hutchins avers that its insurer accepted McMillins incomplete estimate as the final determined value of the damaged property.  Applying the federal pleading standard in this case, the court concludes that, taking the well-pleaded facts as true, Hutchins pled factual content that allows the court to draw the reasonable inference that McMillan violated the statutes.

Because Hutchins has stated a potentially viable claim against McMillan, complete diversity as required is lacking , and this case must be remanded back to the court from which it came.