Bad Faith Insurance Lawyers learn early on that the preferred places to litigate claims against insurance companies are State and County Courts, not Federal Court. Here is a 2022, opinion from the Northern District of Texas, Dallas Division, wherein the insureds prevailed in their attempt to litigate in State Court. The opinion is styled, Searcy Ferguson and Hanna Ferguson v. Cincinnati Insurance Company and John W. Schuster.
This is a claim for residential property insurance coverage after a hail storm. Plaintiffs suffered hail damage and filed a claim with their insurer, Cincinnati. Cincinnati assigned Schuster to adjust the claim.
Schuster issued a report denying Plaintiffs claim for benefits based on an engineering from EDT, an engineering firm. Plaintiffs hired their on engineer to provide Schuster and Schuster turned the report over to EDT. EDT determined there was some damage but that the damage was minimal compared to Plaintiffs report.
Plaintiffs filed suit against Cincinnati and Schuster for violations of Texas Insurance Code, Sections 541.060(a). Cincinnati timely removed the case to Federal Court, asserting that Schuster was improperly joined for the purpose of defeating diversity requirements. Plaintiffs argued that Schuster was not improperly joined and that Cincinnati had not carried its burden in proving an improper joinder.
Title 28 U.S.C., Section 1441(a) permits removal of any civil action brought in state court of which the district courts of the United States would have original jurisdiction. This case was removed based on diversity jurisdiction, 28 U.S.C., Section 1332. Diversity jurisdiction requires complete diversity whereby all persons on one side of the controversy are citizens of different states than all persons on the other side. Moreover, because removal raises significant federalism concerns, the removal statute is strictly construed and any doubt as to the propriety of removal should be resolved in favor of remand. However, complete jurisdiction is not defeated if joinder is improper.
The doctrine of improper joinder is a narrow exception to the rule of complete diversity, and the burden of persuasion on a party claiming improper joinder is a heavy one. There are two ways to establish improper joinder: (1) actual fraud in the pleading of jurisdiction facts, or (2) inability of the plaintiff to establish a cause of action against the nondiverse party in state court. In the instant case, only the latter method of proving improper joinder is at issue.
The Court then conducts a Rule 12(b)(6) analysis to determine whether the removing defendant has demonstrated there is no possibility of recovery by the plaintiff against the in-state defendant.
To survive this analysis, Plaintiffs must plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The Court will accept well pleaded facts as true and construes the complaint in the light most favorable to the Plaintiffs. The Court will not accept as true legal conclusions couched as factual allegations.
Cincinnati argues that Plaintiffs “failed to plead any specific facts against Schuster that would demonstrate that he is individually liable for causing damage to Plaintiffs. Thus, the sole issue is whether Plaintiffs have sufficiently pled facts to survive a Rule 12(b)(6)-type analysis. Focusing solely on this issue, the Court holds that Plaintiffs satisfied the requirements of Rule 12(b)(6) and that this Court’s prior rulings favors remanding this case.
This case needs to be read by insurance lawyers to see how Plaintiffs pled the case to defeat the removal.