Insurance agents who make mistakes in selling an insurance policy will sometimes end up being sued along with the insurance company issuing the policy. From a strategy point of view it is often times desirable to sue the agent to keep the lawsuit from being litigated in Federal Court. Here is a 2024 opinion dealing with how to sue the agent correctly. The opinion is from the Eastern District of Texas, Judge Campbell Barker. The opinion is styled, William McCalister v. United States Liability Insurance Company et al.
At issue in this insurance-coverage dispute is plaintiff ’s motion to remand the case back to state court for lack of subject-matter jurisdiction. This hinges on whether plaintiff improperly joined defendant Amanda DeShazo, the insurance agent who sold the policy to plaintiff. The petition asserted claims under the Texas Insurance Code, Section 541.061(1), the Texas Deceptive Trade Practices Act, Section 17.46(b)(5), and common-law breach of contract. Mostly these claims fit into two categories: misrepresentation and denial. The former pertains to front-end misrepresentations about the scope of the policy.
The statutory basis for removal is 28 U.S.C. § 1441(a), which provides that defendants may remove from state court “any civil action brought in a State court of which the district courts of the United States have original jurisdiction.” The relevant limitation is found in the next subsection: “A civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” As alluded to above, the basis for subject-matter jurisdiction in this case is diversity of citizenship under § 1332(a). Thus, if DeShazo was properly joined, then this court lacks jurisdiction and must remand.
In conducting the 12(b)(6)-type analysis under the first method, a court must apply the federal standard, not the state standard. That is, a court looks to the original petition filed in state court and asks whether
it satisfies the federal pleading standard found in Federal Rule of Civil Procedure 8 (or 9). The analysis is two-pronged. First, the court begins by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. The formulaic recitation of the elements of a cause of action will not do. Second, when there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.
The court now turns to the claims of misrepresentation. These are the two statutory claims—under the Texas Deceptive Trade Practices Act and the Texas Insurance Code. First is the legal-conclusions step. Plaintiff’s petition has a factual back ground section and three sections for his three causes of action. The cause-of-action sections essentially recite the applicable legal standards, largely copied and pasted from the statutes. Although they incorporate the above section of facts by reference, they do not contain any additional, specific factual allegations beyond that “Plaintiff was insured under the insurance policy.” They merely argue that “Defendants” violated the law. Accordingly, other than that plaintiff was insured under the policy, the allegations in sections V and VI of the complaint are not entitled to be presumed true.
Next is the second step—the determination whether plaintiff has pleaded sufficient factual allegations. Rule 9(b)’s heightened pleading standard might apply here. But whether it applies or not, plaintiff does not satisfy either standard.
To recap plaintiff’s factual allegations in the original petition: plaintiff purchased the policy through
DeShazo, the property sustained a loss, and defendants will not pay. Assuming the allegations to be true, that does not at all imply that DeShazo misrepresented the scope of the policy. Insurance coverage disputes happen regularly and for a variety of reasons. The mere existence of a disagreement does not make reasonable the conclusion that the person who sold the policy misrepresented something material about it. Therefore, plaintiff has failed to show a reasonable basis for relief as to both the denial claims and the misrepresentation claims.
However, plaintiff’s motion to remand and declaration in support contain more detailed allegations about the misrepresentation claims. There, plaintiff argues that DeShazo advised him that the policy would provide coverage for use of the Bobcat equipment near water and that the denial of his claim stems from USLIC’s exclusion of water damage.
Here, the Plaintiff was allowed to replead the lawsuit.