Here is an insurance law situation not seen very often. This is a 2021, opinion from the Western District of Texas, San Antonio Division. It is styled, Amali Obaya v. Allstate Vehicle & Property Insurance Company.
Obaya owned property in San Antonio that was insured by a policy of insurance, when the property was damaged in a wind/hailstorm. A claim was submitted. Obaya asserts that her claim was unreasonably investigated, improperly adjusted, and that the Defendant wrongfully denied the claim. Obaya sued Allstate Vehicle and Property Insurance Company for violations of the Texas Insurance Code, DTPA, breach of contract, and other causes of action. The lawsuit was filed in State Court. No claims were asserted against Allstate Texas Lloyd’s in State Court, nor did Allstate Texas Lloyd’s utilize procedural means to become an actual party to the lawsuit.
Allstate Texas Lloyd’s removed the case to this Federal Court. Plaintiff timely moved to remand, arguing that Allstate Texas Lloyd’s was not an actual party to the state court action and thus lacked the power to remove the case to federal court.
On a motion to remand, and pursuant to 28 U.S.C., Section 1441(a), a court must consider whether removal to federal court was proper. Removal is proper in any civil action brought in State court of which the district courts of the United States have original jurisdiction. The burden of establishing subject matter jurisdiction in federal court rests on the party seeking to invoke it.
When, as here, the federal court’s subject matter jurisdiction is based on diversity of citizenship under 28 U.S.C., Section 1332, diversity of citizenship must exist at the time of removal. Furthermore, a case filed in state court may be removed to federal court only by the defendant or the defendants. Because removal raises significant federalism concerns, the removal statute is strictly construed and any doubt as to the propriety of removal should be resolved in favor of remand.
In this case, the burden is on Allstate Texas Lloyd’s, the entity asserting diversity
jurisdiction, to prove it was entitled to remove the case to this Court. Plaintiff argues that Allstate Texas Lloyd’s was not entitled to remove the case because it
was not a defendant to the state court proceedings. Allstate Texas Lloyd’s argues that it is the proper defendant in this case and that Plaintiff’s mis-identification does not destroy diversity jurisdiction because both Allstate Texas Lloyd’s and Allstate Vehicle and Property Insurance are Illinois citizens and Plaintiff is a Texas citizen. However, the Fifth Circuit specifically rejected the notion that mis-identification grants the misidentified party the power to remove a case.
Regardless of whether Allstate Texas Lloyd’s and Allstate Vehicle and Property
Insurance are diverse of Plaintiff, the central question remains: Did Allstate Texas Lloyd’s have the authority to remove this case to federal court? The answer, is no. Allstate Texas Lloyd’s concedes that it is a separate legal entity from the named defendant Allstate Vehicle and Property Insurance. Nothing in the state court record establishes that Allstate Texas Lloyd’s was an actual party to the lawsuit prior to filing its Notice of Removal. The law is clear that a case filed in state court may be removed to federal court only by the defendant or defendants . . . and . . . a non–party, even one that claims to be the proper party in interest, is not a defendant and accordingly lacks the authority to remove a case. Allstate Texas Lloyd’s was not a defendant in the state court action, thus it lacked the power to
remove the case to this Court.