Bad Faith insurance claims are common complaints when dealing with claims being denied. When fighting these cases a common tactic is to sue the adjuster for the wrongs the adjuster did in causing the claim to be denied. When suing an adjuster the insurance company is going to always claim that the adjuster is not a proper party to be sued in the case. The relevance of whether the adjuster is sued or not often determines whether the case will be litigated in a State Court or in Federal Court.
Properly suing an adjuster was discussed in this 2022 opinion from the Northern District of Texas, Dallas Division. The case is styled, Art Dallas, Inc. v. Federal Insurance Company and Derek Franks.
In this case, ADI made a claim for wind and hail damage. The insurance company, Federal, sent it’s adjuster, Franks, to inspect the claim. Franks determined the damage from wind and hail was minimum and that the roof damage was due to “wear and tear.”
ADI hired its own engineers and consultants who recommended the roof be replaced due to storm damage. Franks, who had hired HAAG to do an assessment of the damage, disagreed with ADI’s experts and denied the claim.
ADI filed suit in State Court against FIC and Franks, asserting claims for breach of contract and violations of the Texas Insurance Code, Section 541 and 542.
FIC removed the case to Federal Court alleging that Franks was an improper party to the lawsuit. ADI moved to remand the case to State Court.
Improper joinder is established by showing that there was either actual fraud in the pleading of jurisdictional facts or that the plaintiff is unable to establish a cause of action against the nondiverse defendant in state court. The test for improper joinder is whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is noreasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant. To assess
whether a plaintiff has a reasonable basis of recovery under state law:
[t]he court may conduct a [Fed. R. Civ. P.] 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. That said, there are cases, hopefully few in number, in which a plaintiff has stated a claim, but has misstated or omitted discrete facts that would determine the propriety of joinder. In such cases, the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry.
When deciding whether a defendant has been improperly joined, a federal district
court must apply the federal pleading standard. This standard requires the plaintiff to 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 plausibility standard is not akin to a probability
requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not shown — that the pleader is entitled to relief. Furthermore, under Rule 8(a)(2), a pleading must contain a short and plain statement of the claim showing that the pleader is entitled to relief. Although the pleading standard Rule 8 announces does not require detailed factual allegations, it demands more than labels and conclusions. And a formulaic recitation of the elements of a cause
of action will not do.
The opinion then discusses the Facts and Pleadings in this case and applies the foregoing analysis to reach its conclusion. This is a good reading for those facing these issues.