Properly Suing The Insurance Adjuster

The courts interpretation of the new rules regarding suing an insurance adjuster need special attention.  This is illustrated in the 2019, opinion from the Northern District of Texas, Wichita Falls Division.  The case is styled, Barnes Burk Self Storage, LLC v. United Fire & Casualty Company and Traci McCormick.

Barnes sued United and McCormick in State Court for claims arising from a wind and hail storm.  McCormick is a Texas resident and her presence in the lawsuit defeats diversity jurisdiction.

On December 7, 2018, Barnes sued United and McCormick in state court for violations of Texas law relating to its insurance claim.  On January 25, 2019, United informed Barnes that it had assumed any liability McCormick would have to Barnes in the case.  On February 7, 2019, United removed the case to federal court, alleging that diversity existed between Barnes and United and that this Court should disregard McCormick’s citizenship due to United’s assumption of McCormick’s liability pursuant to Texas Insurance Code, Section 542A.006.  On May 23, 2019, this Court rejected this argument and remanded the case.

On July 22, 2019, the state court dismissed McCormick from the case.  On August 20, 2019, United removed the case to federal court for the second time on the theory that it now satisfies federal diversity requirements due to McCormick’s dismissal.  On October 2, 2019, Barnes filed the current motion to remand.

Generally, a defendant may remove any case over which the federal district courts have original jurisdiction pursuant to the 2019, 5th Circuit opinion, Hoyt v. Lane Constr. Corp. and  28 U.S.C. Section 1441(a).  A defendant may also remove a case that becomes removable after the initial pleading is filed pursuant to Hoyt and 28 U.S.C. Section 1446(b)(3).  Removability is subject to the voluntary-involuntary rule: An action non-removable when commenced may become removable thereafter only by the voluntary act of the plaintiff.  However, When a state court order creates diversity jurisdiction and that order cannot be reversed on appeal . . . the voluntary-involuntary rule is inapplicable.

This Court’s decision on this Motion turns on the Fifth Circuit’s recent articulation of an apparent exception to the voluntary-involuntary rule in Hoyt.  In Hoyt, the Fifth Circuit upheld the removal of a case in which diversity was created when a state court granted the non-diverse defendant’s summary judgment motion and dismissed that party.  The summary judgment could not be reversed on appeal, because the plaintiff “apparently abandoned” the right to appeal.  Here, the effect of the state court’s order dismissing McCormick was to leave only diverse parties, and the dismissal of McCormick cannot be reversed on appeal, because Plaintiff waived its right to appeal by not opposing the dismissal.  Thus, while the voluntary-involuntary rule requires an action of the plaintiff for a case to be removable, the Hoyt exception applies, and, as a result, this case is properly before this Court.

In the federal district cases cited by Barnes, including this case on first removal, the voluntary-involuntary rule prompted a remand to state court.  These decisions pre-date Hoyt, which promulgated a narrow but clear exception to the voluntary-involuntary rule for state court orders that create diversity and which cannot be reversed on appeal.

Because the state court order dismissing McCormick created diversity and cannot be reversed on appeal, the voluntary-involuntary rule does not apply, so that this case was removable.

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