Properly Suing The Adjuster

Insurance lawyers will usually attempt to keep their clients cases in State Court rather than Federal Court.  Trying to do so and being successful at doing it are two different matters.  Here is a case where it was successful.  It is a Southern District, Houston Division opinion.  The case is styled, Marcus Richard, et al v. Geovera Specialty Insurance Company, et al.

Plaintiffs allege in essence that there was a leak and water overflow from the plumbing system within their home that caused significant damage to walls, flooring, windows, and balcony of the home, as well as damage to Plaintiffs’ personal belongings and contents of the home.  Plaintiffs allege they submitted a claim under their policy with Geovera and that the adjusters handling the claim were inadequately and/or improperly trained and supervised, and failed to perform a thorough and reasonable investigation.

A lawsuit was filed in State Court and promptly removed to Federal Court by the Defendants.  The Defendants claim the removal was proper pursuant to diversity jurisdiction, 28 U.S.C. Sections 1332(a), 1441(a), and 1446.  The Defendants allege that the adjuster were improperly joined in an effort to defeat diversity jurisdiction.  This Federal Court ultimately ruled in favor of Plaintiffs.

A defendant is improperly joined if the moving party establishes that (1) the plaintiff has stated a claim against a diverse defendant that he fraudulently alleges is nondiverse, or (2) the plaintiff has not stated a claim against a defendant that he properly alleges is nondiverse.  The 5th Circuit has repeatedly explained that a defendant seeking to defeat a motion to remand on the basis of improper joinder must demonstrate “that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant.”

Defendants assert the adjusters were improperly joined because Plaintiffs have not alleged facts sufficient to state a legally viable claim against them under Texas state law.  With respect to these adjusters, Plaintiffs assert cause of action for five violations of the Texas Insurance Code under Section 541.001 et seq.  Under Texas law, adjusters may be held liable in their individual capacities for violations of the Texas Insurance Code.

To the extent Defendants argue that Plaintiffs do not state a legally viable claim upon which relief may be granted, the argument fails under the standard for improper joinder.  The Court at this stage does not determine whether the plaintiff will actually or even probably prevail on the merits of the claim, but looks only for a possibility that the plaintiff might do so.  The holistic approach to removal mandates that the existence of even a single valid cause of action against in-state defendants requires remand of the entire case to state court.

Here, Plaintiffs allege that Lee (one of the adjusters) conducted a substandard inspection because he spent an insufficient amount of time examining Plaintiffs’ property, and failed to recognize damage to Plaintiffs’ balcony and their belongings.  Plaintiffs also allege Lee undervalued damages to Plaintiffs’ property in his report because, in part, Lee underpriced the cost of materials required for repairs and misapplied a material sales tax in performing his calculations.  Plaintiffs’ claims with respect to Lee include specific facts pertaining to Lee’s alleged actions investigating the damage, preparing a report on which the corporate adjusters or Defendants relied, and the harm to Plaintiffs that flowed from the forgoing.  These and other factual allegations in the Petition are specific and independent of those asserted against Lee’s co-defendants.

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