Attempting To Sue The Adjuster

Most insurance lawyers will attempt to keep any case they are involved with, out of Federal Court. One way of doing this is to sue the local adjuster who handled the claim. The Laredo Division, of the Southern District was inclined to agree with that method except the problem was showing that the adjuster the insured sued, did anything wrong. The style of the case is, Maria Rudolph v. Nationwide General Insurance Company, et al.
This is an insurance coverage dispute arising out of hail and storm damage to Rudolph’s property. Nationwide is an out of state insurer but adjuster Catherine Brown is the adjuster and a Texas resident. Brown’s Texas residency defeats the diversity jurisdiction to stay out of Federal Court. Rudolph filed a motion to remand.
The lawsuit was filed in State Court and Nationwide removed the case to Federal Court saying that Brown was fraudulently sued in order to defeat the diversity requirements of Federal Court removal.
Improper joinder can be established two ways: (1) actual fraud in the pleading of jurisdictional facts, or (2) the inability of the plaintiff to establish a cause of action against the non-diverse party in state court. To make the second showing, a defendant must demonstrate that there is no possibility that the plaintiff will recover against the non-diverse defendant under the relevant law.
Nationwide alleges Brown is improperly joined on the inability of Plaintiff to recover against Brown under Chapter 541 of the Texas Insurance Code.
The parties dispute whether there is any possibility that Plaintiff might recover against Brown on claims under Chapter 541 of the Insurance Code. Section 541.060 of the Texas Insurance Code provides that “it is an unfair method of competition or an unfair or
deceptive act or practice in the business of insurance to engage in “certain
enumerated “settlement practices with respect to a claim by an insured,” including:
(1) misrepresenting to a claimant a material fact or policy provision relating to coverage at issue;
(2) failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of: (A) a claim with respect to which the insurer’s liability has become reasonably clear; . .
(3) failing to promptly provide to a policyholder a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer’s denial of a claim or offer of a compromise settlement of a claim;
(4) failing within a reasonable time to: (A) affirm or deny coverage of a claim to a policyholder; or (B) submit a reservation of rights to a policyholder; . . .
(7) refusing to pay a claim without conducting a reasonable investigation with respect to the claim; ….
Claims under this statute can be brought against insurers and against insurance adjusters in their individual capacities.
Plaintiff’s Original Petition directs numerous allegations against Brown. These allegations focus on Brown’s substandard inspection, inadequate settlement offer, inequitable investigation, and underpayment and mishandling of claims. Even assuming that these allegations sufficiently state a cause of action against Brown, the undisputed discrete fact that Brown was never personally involved in evaluation of Plaintiff’s claim shows there is no possibility of recovery against Brown.
Here, it is uncontroverted that Brown was not the adjuster that investigated and denied Brown’s claim, and that Brown’s only involvement was limited to forwarding records to Plaintiff’s counsel. In an affidavit, Brown explains that she was not assigned to the claim until July 27, 2015, when Nationwide was contacted by Plaintiff’s counsel. After this date, Brown explains that she was not assigned the claim until Nationwide was contacted by Rudolph’s attorney. Additionally, Brown avers that she did not inspect Plaintiff’s property, adjust the claim, complete any reports on inspection or estimates of Plaintiff’s claim, apply Plaintiff’s deductible, or deny payment of Plaintiff’s claim.
Because it is uncontroverted that Brown herself was not involved in any substantive way with Plaintiff’s claim, the Court concludes Nationwide has met its burden of demonstrating there is no reasonable basis for recovery against Brown. Accordingly, the Court finds that the joinder of Brown was improper.