Lawyers who sue insurance companies need to understand the various legal ways cases end up in State Court or Federal Court. As has been stated here many times, the insurance companies prefer Federal Court as a play ground for lawsuits. The reasons are many but what is important to lawyers who sue insurance companies is knowing ways to keep a case out of Federal Court if the case they are handling is one they would prefer to keep in State Court.
A 2022 opinion from the Northern District of Texas, Fort Worth Division, is a case worth reading. The opinion is styled, Casey and Jared Davis v. Allstate Vehicle And Property Insurance Company and Phillip Butler.
Plaintiffs were insured by Allstate and had a homeowners claim. The claim was properly submitted and the adjuster assigned to the claim is Butler. Plaintiffs sued Allstate and Butler alleging various violations of the Texas Insurance Code. Allstate removed the case to Federal Court asserting that they accepted responsibility for Butler under Texas Insurance Code 542A. The election of responsibility for Butler was filed in State Court but was removed prior to the State Court ruling on the filing.
Generally, an action nonremovable when commenced may become removable thereafter only by the voluntary act of the plaintiff. The improper-joinder doctrine provides a narrow exception to this general rule and allows a court to disregard the citizenship of an improperly
joined defendant. A defendant has been improperly joined if the plaintiff has failed to state a claim against that defendant on which relief may be granted. The federal pleading standard is applied to make this determination. Under the federal standard, pleadings must contain enough facts to state a claim to relief that is plausible on its face.
Allstate contends that removal is proper because (1) Butler is no longer a party to the case since it accepted liability for him, and (2) even if Butler is still a party to the case, he was improperly joined.
Allstate first argues that because it elected to accept liability for Butler under Chapter 542A of the Texas Insurance Code, Butler is no longer a party to the case. And thus, Allstate contends that Butler’s Texas citizenship is irrelevant to whether there is complete diversity. This argument is flawed for three reasons. First, Allstate cannot make an action removable by accepting liability for Butler because an action nonremovable when commenced may become
removable thereafter only by the voluntary act of the plaintiff. Second, the motion to dismiss Butler was not granted by the state court. Thus, under long-standing Texas law, Parks remains a party. Third, even if the motion to dismiss Butler was granted by the state court, such an order is only interlocutory under Texas law and thus does not terminate a defendant’s status as a party to the case. Therefore, Butler remains a party to the case, and Allstate’s acceptance
of Butler’s liability does not make the case removable.
The Court in this case, then addresses the pleading standards for the allegations against Butler and ruled against Allstate and removal. Thus, the case was sue sponte remanded back to the State Court. A win for the Plaintiffs.