Texas Insurance Code, Section 542A

Texas Insurance Code, Section 542A, is being used regularly now by insurance companies to prevent Plaintiffs from defeating diversity jurisdiction.

This Insurance Code Section was discussed by a court in the Southern District of Texas, Houston Division, in a case styled, Robert Ewell v. Centauri Specialty Insurance Company, et al.

Ewell filed a claim with Centauri, who insured Ewell’s home, for property damage alleged to have occurred during a severe storm on August 25, 2017.  Steven Wiley is the adjuster assigned to investigate the claim.  Centauri is alleged to have failed to pay the full amount of the claim.

On February 11, 2019, Centauri gave Ewell written notice of its election pursuant to 542A to assume liability for Wiley.  Ewell filed a lawsuit in state court on March 20, 2019, naming both Centauri and Wiley as defendants.

Centauri removed the case to this federal court and Wiley filed a Motion to Dismiss and Ewell filed a Motion to Remand.

Wiley argues that Texas Insurance Code, Section 542A.006(b) applies here and that Centauri’s timely acceptance of responsibility for the actions of Wiley preclude any liability on the part of Wiley.  The relevant section of the Insurance Code says that where, as here, the insurer makes an election of responsibility for the adjuster before suit is filed, that “no cause of action exists against the agent related to the claimant’s claim, and, if the claimant files an action against the agent, the court shall dismiss that action with prejudice.”

It is undisputed that Centauri made such an election to accept any liability for Wiley before the lawsuit was filed, thus, Wiley’s Motion to Dismiss was granted.

As a result of the dismissal of Wiley, the remaining parties, Ewell, a Texas resident, and Centauri, a Florida corporation, with its principle place of business in Florida, are diverse.  The amount in controversy exceeds $75,000.  Thus, Ewell’s Motion to Remand was denied.