Most insurance lawyers want to keep their cases out of Federal Court. One way of doing this, if the opportunity exists, is to find fault with the way an adjuster handled the claim. This is illustrated in a Northern District, Dallas Division opinion styled, Arlington Heights Memorial Post No. 8234 Veterans of Foreign Wars of the United States, Fort Worth, Texas v. Covington Specialty Insurance Company and Edward Martin Sewell, Jr.
Plaintiff initially sued Covington and Sewell in State Court for violations of the Texas Insurance Code, among other reasons. The lawsuit was filed, according to Plaintiff, due to the improper handling of a claim Plaintiff made after a hail and wind storm. Plaintiff alleges that Sewell (1) did not prepare any estimates or scopes of damages to the property or failed to provide those reports to the insured, (2) failed to hire any qualified experts to appropriately assess the damage, (3) delayed the claims process and failed to communicate with the insured, and (4) misrepresented the Policy’s coverage.
The Defendants removed the case to Federal Court based on 28 U.S.C, Section 1441(a), stating that Sewell was improperly sued in this case in an effort to defeat diversity jurisdiction. If the Defendants can prove that Sewell was improperly joined in the case, then the case will remain in Federal Court.
The United States 5th Circuit has held that federal pleading standards apply in applying a Rule 12(b)(6) analysis to determine whether the joinder was improper in that a claim against Sewell cannot stand on its on merits.
To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead enough facts to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.
The Court must determine whether Plaintiff sufficiently pled its Texas Insurance Code, Section 541.060(a)(2)(A) claim against Sewell. Some courts, including this one, have concluded that an individual insurance adjuster may be held liable under 541.060(a)(2)(A).
Section 541.060(a)(2)(A) prohibits the failure “to attempt in good faith to effectuate a prompt, fair, and equitable settlement of … a claim with respect to which the insurer’s liability has become reasonably clear.” Additionally, this Court has concluded this section applies only to conduct that precedes the settlement of a claim.
In order to support its claim, Plaintiff alleges in its Original Petition that Sewell “failed to effectuate a prompt, fair, and equitable settlement of a claim with respect to which liability has become reasonably clear.” Plaintiff also adds that Sewell: (1) “did not prepare any estimates or scopes of damages to the Property or failed to provide those to the insured”; (2) “failed to hire any qualified experts to appropriately assess the damage”; (3) “delayed the claims process and failed to communicate with the insured”; and (4) “misrepresented the Policy’s coverage.” The Court finds that Plaintiff’s allegations of delay and inadequate investigation provide a reasonable basis for concluding that Plaintiff might recover against Sewell for failing to effectuate a fair settlement of a claim. Thus, the Court finds that Plaintiff met its pleading burden, and Sewell is a properly joined in-state defendant.
The case was remanded to State Court.