Negligent Misrepresentation

Here is a case where the insured’s are claiming the agent misrepresented a policy.  The style of the case is Frederic Muratore and Lillian Muratore v. Texas Farmers Insurance Company, and McKenzie Shoaf.  The case is from the Southern District of Texas, Houston Division.

The Muratore had purchased flood insurance from Farmers as was required by their mortgage lender.  When the mortgage was paid off they asked their agent, Shoaf, to get them a less expensive flood insurance policy and coverage with at least $265,000.  The agent represented he did as requested.

The Muratore’s home was damaged in Hurricane Harvey and a claim was made to Farmers.  At this time, the Muratore’s learned the flood policy they got from Shoaf only provided up to $400 of coverage.

Farmers paid the $400 and the Muratores sued Farmers and Shoaf in State Court.  Farmers removed the case to Federal Court alleging that federal law preempts state law claims arising out of the National Flood Insurance Program (42 U.S.C., section 4001)  policy at issue in this case.

The Court in its discussion of this case pointed out that the removal statute, 28 U.S.C., sections 1441, 1446(b), are strictly construed and ambiguities are interpreted in favor of remand.  The removing party bears the burden of showing that federal jurisdiction exists and that removal was proper.

Federal jurisdiction exists if a well pleaded complaint includes a claim arising under federal law.

Here, the Muratores argue the claim did not arise from the National Flood Insurance Program, but from Shoaf’s failure to procure enough insurance coverage to protect the value of the home and its contents.  The Muratores claim Shoaf made a tortious misrepresentation when procuring the coverage.  They claim their allegations have to do with policy procurement, not claim handling and that the National Flood Insurance Program is not implicated, and thus, no federal question exists.

After a discussion of existing law the Court ruled in favor of the Muratores and remanded the case back to the State Court based on the pleading alleging state law procurement based claims.

This is a situation where an Experienced Insurance Law Attorney knew how to properly plead his case in an effort to avoid Federal Court.

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