Properly Suing The Adjuster

Grand Prairie insurance lawyers need to read this case for seeing one way to properly sue an insurance company adjuster.  The case is from the U.S. Western District, Del Rio Division.  It is styled, Alfonso Gaytan and Tere Gaytan v. State Farm Lloyds and Alberto Garza.

This litigation arises out of storm that hit Eagle Pass, Texas, in April 2014.  The Plaintiffs submitted a claim for repairs under the State farm policy and Garza was the adjuster assigned to handle the claim.  Garza’s inspection was unacceptable to Plaintiffs and a lawsuit was filed in State Court and State Farm had the case removed to Federal Court based on 28 U.S.C. Section 1441(a).

Plaintiff’s filed a motion to remand and there was an argument about the 30 day deadline imposed by 28 U.S.C. Section 1447.  The Plaintiffs prevailed on this argument.

Next, State Farm alleged that the adjuster was improperly joined in the lawsuit and the Court discussed this issue as follows:

The Plaintiffs have pleaded a violation of Chapter 541 of the Texas Insurance Code against Garza.

Chapter 541 prohibits certain activities in the business of insurance as unfair or deceptive.  Relevant to this case, Section 541.060 proscribes some practices in the claims settlement process.  To enforce these prohibitions, Texas created a private right to action against certain “persons” whose use of a proscribed act or practice has caused the plaintiff to sustain actual damages.  This is found in 541.151(1).

The regulated class described by the term “person” encompasses not only the insurance company, but also its claims adjusters and other agents, who Texas considers to be just as much in the business of insurance as the company itself.  Here, it is undisputed that Garza was the adjuster who investigated the Plaintiff’s claim, so the Plaintiffs can bring suit against Garza for his involvement in State Farm’s settlement of their insurance claim.

For an adjuster to be liable for unfair practices in the settlement of a claim, the individual himself must have violated Section 541.060 in some way.  Garza is accused of violating Chapter 541 in several ways:  failng to conduct a reasonable investigation and inspection; stating that Plaintiffs damages were less severe that they were; using his own statements about the “non-severity” of the damages as a basis for denying properly covered damages; and failing to provide an adequate explanation for the inadequate compensation the Plaintiffs received.  Plaintiffs argue these are factual allegations supporting their claims that Garza violated 541.060(a)(1)’s prohibition against misrepresenting a material fact or policy provision to coverage at issue, Section 541.060(a)(2)(A)’s prohibition against failing to promptly settle in good faith, 541.060(a)(3)’s prohibition against failing to promptly provide a policyholder a reasonable explanation of the basis for denial, 541.060(a)(4)’s prohibition against failing to affirm or deny coverage within a reasonable time, and 541.060(a)(7)’s prohibition against refusing to pay a claim without conducting a reasonable investigation with respect to the claim.

The language of the complaint adequately pleads the act element because it raises a right to relief above the speculative level.  The allegations are more than labels and conclusions, and a formulaic recitation of the elements of a cause of action because they identify the alleged wrongful actions that would give rise to Garza’s potential liability for violating individual section of Chapter 541.  The allegations of failing to conduct a reasonable inspection of the Plaintiffs damages, stating that Plaintiffs damages were less severe than they were, using his own statements about the “non-severity” of damages as a basis for denying properly covered damages, and failing to provide an adequate explanation for the inadequate compensation the Plaintiffs received are factual allegations that, if proven, could subject Garza to liability under Chapter 541.060.  The Plaintiffs allege more than bare legal conclusions, and it is difficult to imagine what more the Plaintiffs could allege without the benefit of discovery.

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