Yet another case after the passage of Texas Insurance Code, Section 542A.006, dealing with suing the adjuster in storm damage claims. This is an issue that will eventually be addressed by the 5th Circuit. For now, this case is from the Northern District of Texas, Dallas Division, and is styled, Grant Stowell v. United Property & Casualty Insurance Company and Samantha Jenkins.
Stowell has a policy of insurance with United Property (UPC). Stowell suffered property damage after a hail storm and filed a claim with UPC. UPC assigned the claim to Jenkins. Stowell was not happy with the way the claim was handled in sued UPC and Jenkins in State Court for various violations of the Texas Insurance Code.
After the lawsuit was filed, UPC filed it’s election of responsibility, pursuant to Section 542A.006(c), in the State Court. UPC then removed the case to this Federal Court. Both Stowell and Jenkins are Texas citizens and thus, the joinder of Jenkins in the lawsuit beats diversity jurisdiction and thus, renders a lack of jurisdiction for this Federal Court.
UPC contends Jenkins was improperly joined in the lawsuit.
The improper joinder doctrine constitutes a narrow exception to the rule of complete diversity. Under this doctrine, the court may disregard the citizenship of an improperly joined, non-diverse defendant, dismiss that defendant from the case, and exercise subject matter jurisdiction over the remaining diverse defendants.
The 5th Circuit has not yet addressed the impact of an election under Section 542A.006 on improper joinder analysis when the election is made after an action is filed instate court. The Federal District Courts have been split on the issue of whether such an election for a nondiverse defendant by a diverse defendant supports a finding of diversity jurisdiction based on improper joinder.
This Court then does a good analysis of how the various Courts in the Texas 5th Circuit have been handling these situations and is good reading for attorneys handling these cases.
After reviewing the case law, this Court stated that when a defendant removes a case to Federal Court on a claim of improper joinder, the district court’s first inquiry is whether the removing party has carried its heavy burden of proving that the joinder was improper. And “until the removing party does so, the court does not have the authority to do more; it lacks the jurisdiction to dismiss the case on its merits. It must remand to the state court.” For the foregoing reasons, this Court concurs with the majority view and concludes that an election alone does not render the nondiverse Defendant improperly joined when the election is made after an action is brought.
Here, UPC fails to establish improper joinder of Jenkins. UPC does not dispute that its election occurred after Stowell had already brought suit in state court. UPC does not argue that Stowell fails to state a claim against Jenkins, or that Jenkins was improperly joined initially, but rather argues that Jenkins is improperly joined solely because UPC’s election under Section 542A.006 precludes recovery against Jenkins. The Court disagrees with UPC, as this “contention conflates the propriety of an improper joinder inquiry with the method of showing that a party is improperly joined.” UPC’s refiling of the election in this Court after removal, therefore has no bearing on whether Jenkins was improperly joined.
The case was remanded.