Suing The Insurance Company And A Contractor

Here is an interesting twist on how to stay in State Court when suing an insurance company.  This is a 2021 opinion from the Northern District of Texas, Dallas Division is styled, Nayeb Family, LP v. Certain Underwriters At Lloyd’s London Subscribing To Policy No. CSSFQP0000024-00 and HD&S Management, LLC.

Nayeb Family, LP (NFLP) was insured by Lloyd’s.  A large windstorm caused significant damage to NFLP’s buildings while it was undergoing remodel by HD&S.  HD&S had covered exposed parts of the building to try to prevent damage when the storm hit but the building still suffered significant damage.

NFLP made a claim with Lloyd’s and eventually NFLP sued Lloyd’s in State Court against both Defendants alleging various Insurance Code violations against Lloyd’s  and negligence against HD&S.

Lloyd’s removed the case to Federal Court alleging that HD&S was fraudulently joined to defeat diversity jurisdiction.  NFLP filed this motion to remand.

The Court discussed at length the standards for removal and allegations of fraudulent joinder of a party.

Lloyd’s argues that the insurance contract between themselves and NFLP have nothing to do with HD&S and thus, HD&S has nothing to do with the case and is a fraudulent joinder in an effort to defeat diversity jurisdiction.

NFLP argues that the liability between HD&S for the work they performed and actions they took that led to the damages and the liability of Lloyd’s under the insurance contract have to be  divided for issues related to coverage.  As a result, HD&S is a necessary party to the lawsuit.

The Court ultimately ruled in favor of NFLP and as part of their reasoning states, “… a plaintiff sued its insurer for denying coverage for property damage resulting from a storm.  … plaintiff, NFLP has alleged that the negligence of a third party—HD&S—may be responsible for all or a portion of the damage suffered.  … the claims arise from the same occurrence—the storm.”

Moreover, the liability for the damage to the building creates a common question of . . . fact.”  Put simply, either Lloyds is liable for providing insurance coverage for the damage to the units or HD&S is liable for its negligent acts causing the damage, or both are liable, or neither are liable.  Thus, the fact-finder’s determination of the cause of the building’s damage is central to both claims.  This question of fact, standing alone, is sufficient to satisfy the “common question” requirement of permissive joinder under Texas Rule 40(a).

Therefore, the Court finds that HD&S was properly joined—thus destroying diversity of citizenship—and that NFLP’s Motion to Remand should be granted.

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