You Have To Properly Word Pleadings Against An Insurance Adjuster

The Eastern District, Sherman Division, issued an opinion in May 2017, that, yet again illustrates how to NOT sue an insurance adjuster.  The opinion is styled, Hidden Cove Park and Marina v. Lexington Insurance Company and Glenn Hollmuller.

Severe storms caused damage to Plaintiff Hidden Cove.  Plaintiff sued defendants Lexington and the adjuster, Glenn Hollmuller, alleging the adjuster failed to properly conduct an investigation into the cause of loss, failed to issue timely payments, and wrongfully delayed or denied claims.

The lawsuit was filed in State District Court and for breach of contract, and various violations of the Texas Insurance Code Chapter 541 and Chapter 542.

Defendants timely removed the case to Federal Court alleging that the adjuster was sued solely to defeat diversity jurisdiction and thus, also sought to have the claims against him dismissed.

A defendant alleging improper joinder has the heavy burden of demonstrating either (1) actual fraud in the pleading of jurisdictional facts or (2) the plaintiff’s inability to establish a cause of action against the non-diverse party in state court.  Under the second prong, which provides the relevant inquiry in this case, the standard is whether the defendant has demonstrated that there is no reasonable basis to predict that the plaintiff might be able to recover against the in-state defendant.  Therefore, the question for the Court is whether defendants have shown that Plaintiffs have no possibility of establishing a valid cause of action against the non-diverse defendant, the adjuster.  The Court applies the Rule 12(b)(6) standard to in addressing the question of improper joinder.

Plaintiff’s bring claims against the adjuster for unfair settlement practices.  In their Original Petition, Plaintiffs allege that the adjuster is required to comply with the Texas Insurance Code and is individually liable for his unfair and deceptive acts.  Plaintiffs further allege the adjuster’s “unfair practices … of misrepresenting to Plaintiffs material facts relating to coverage at issue, constitutes an unfair method of competition and an unfair or deceptive act or practice in the business of insurance.  Plaintiffs generally allege the adjuster failed to properly investigate, evaluate, and adjust Plaintiffs’ claims and performed an outcome oriented investigation.

Under Texas law, an insured may have a valid cause of action against an insurance adjuster under the proper circumstances, but only if sufficient facts exist, and are pleaded, involving allegedly harmful conduct by the adjuster toward plaintiff.  Pursuant to Texas Insurance Code, Section 541.002(2), Texas law does permit an adjuster to be held individually liable for violations of the Texas Insurance Code.  However, to find a reasonable possibility that a Texas court would allow recovery against an insurance adjuster, the plaintiff must demonstrate that the adjuster, as an individual, committed the violation that caused the harm.  For an adjuster to be held individually liable, they have to have committed some act that is prohibited by the section, not just be connected to an insurance company’s denial of coverage.

Plaintiffs do not state a claim that is plausible on its face against the adjuster.  Plaintiffs assert only boilerplate allegations that the adjuster failed to properly investigate the claim and conducted an outcome oriented investigation.  No additional facts are alleged.  General allegations the adjuster’s investigation caused plaintiffs harm because it resulted in an under evaluation of the claims is not sufficient because there are no factual allegations of independent conduct on the adjuster’s part, which caused plaintiff any harm.

The remand request was denied and the adjuster was dismissed from the lawsuit.