Suing The Insurance Agent Who Sold The Policy

Insurance lawyers learn quickly that when suing an insurance agent who sold a policy that the allegations against the agent must be specific.  Being too general with allegations can result in a battle being fought in Federal Court when usually the lawyer would want the fight to be in State Court.  This is illustrated ina 2020, opinion from the Eastern District of Texas, Sherman Division.  The opinion is styled, Oscar Bermudez and SA Polo, Inc. v. Indemnity Insurance Company of North America and Tin Top Insurance Agency, LLC.

Plaintiffs, Bermudez and SA Polo are residents of Texas.  Plaintiffs engaged Tin Top, a Texas citizen, to help them get insurance to cover property owned by Plaintiffs.  Indemnity, a resident of Indiana, issued and sold a policy to Plaintiffs.  After a storm that caused damage to their property, Plaintiffs submitted a claim to Indemnity.  The claim was denied.

A lawsuit was filed in State Court and Indemnity removed the case to Federal Court, citing lack of diversity in that the agent, Tin Top, was not properly joined.  In so doing, Indemnity filed a Rule 12(b)(6) motion to dismiss Tin Top.  Plaintiffs filed a Motion to Remand.

A party seeking removal based on improper joinder bears a heavy burden of proving that the joinder of the in-state party was improper.  The removing party must prove that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the in-state defendant in state court, or that there has been outright fraud in the plaintiff’s pleading of jurisdictional facts.  In deciding whether a party was improperly joined, courts resolve all contested factual issues and ambiguities of state law in favor of the plaintiff.

In cases like the one currently before the Court,

to determine whether the plaintiff has any possibility of recovery against the non-diverse defendant, the court should “conduct a Rule 12(b)(6)–type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant. Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder.”

Federal Rule 8(a)(2) require each complaint to include a “short and plain statement … showing that the pleader is entitled to relief.”  Each claim must also include enough factual allegations to raise a right above the speculative level.  When a plaintiff’s complaint fails to state a claim upon which relief can be granted, an opposing party may move for dismissal of the action.

A facially plausible claim exists when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.

First, courts should identify and disregard conclusory allegations because they are not entitled to the assumption of truth.  Second, courts consider the factual allegations in the complaint to determine if they plausibly suggest an entitlement to relief.  This standard simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of’ the necessary claims or elements.  Conducting a 12(b)(6) analysis is a contextual endeavor, and the Court is entitled to draw on its judicial experience and common sense.

After consideration of Plaintiffs’ claims against Tin Top, the Court is unconvinced that the claims survive 12(b)(6) scrutiny.  Plaintiffs assert claims for breach of contract, negligence, and negligent misrepresentation against Tin Top.  To support those claims, Plaintiffs’ plead that Tin Top, among other things, entered into a contract with Plaintiffs to secure insurance coverage for Plaintiffs’ property; failed to properly identify and obtain insurance coverage for the property; and misrepresented that the insurance coverage obtained for Plaintiffs sufficiently covered the events on which the litigation centers.  These are simply boilerplate legal allegations without factual matter supporting them.  Though Plaintiffs assert correctly that an insurance agent may be held individually liable under the asserted theories of recovery, they did not plead sufficient factual matter in their amended petition to support claims against Tin Top capable of withstanding scrutiny under Rule 12(b)(6).

Plaintiff’s Motion to Remand was denied.

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