Dallas Fort Worth Insurance Lawyer Blog
Here is a 2022, opinion from the Northern District of Texas, Dallas Division. It is styled, Pasha & Sina, Inc. V. The Travelers Home And Marine Insurance Company, And Doug Salsbury.
This is a commercial policy case.
Plaintiff purchased the policy from Travelers. Plaintiff attempted to recover from Travelers for damage to the property for roof leaks. A dispute arose and Plaintiff sued Travelers and Salsbury in State Court alleging causes of action for negligence, negligent misrepresentation, common-law fraud, fraud by nondisclosure, violation of the duty of good faith and fair dealing, and violation of Chapter 542 of the Texas Insurance Code.
Travelers removed the case to Federal Court alleging Salsbury had been improperly joined. Plaintiff filed a motion to remand.
Plaintiff argues that the improper joinder analysis is governed by Texas state pleading standards. It is not. It is well-established in the Fifth Circuit that the federal pleading standard governs the Rule 12(b)(6)-type analysis in determining whether an in-state defendant has been improperly joined. Crucially, improper joinder is assessed only on Plaintiff’s original state court petition and not any post-removal amended complaints, as the jurisdictional facts that support removal must be judged at the time of removal.
a. Plaintiff fails to state a claim of negligence against Salsbury.
Under Texas law, the threshold inquiry in a negligence case is duty. Under Texas law, the threshold inquiry in a negligence case is duty. Plaintiff fails to plead any facts establishing that Salsbury, as an insurance adjuster, owed Plaintiff a duty of care. Instead, Plaintiff’s pleadings merely recite the elements of negligence and assert that “SALSBURY’s negligence and negligent misrepresentation, as alleged herein, proximately caused the occurrence made basis of this action and Plaintiff’s damages in excess of the jurisdictional limits of this Court.” This conclusory assertion is insufficient to establish a claim of negligence against Salsbury.
b. Plaintiff fails to state a claim of negligent misrepresentation, common-law fraud, or fraud by nondisclosure against Salsbury.
In federal court, a plaintiff must plead claims of fraud or mistake with particularity pursuant to Federal Rule 9(b). While the rule by its terms does not apply to negligent misrepresentation claims, the Fifth Circuit has held that Rule 9(b) applies to such claims when, as here, a plaintiff’s fraud and negligent misrepresentation claims are based on the same set of alleged facts. The Rule 9(b) standard requires that plaintiffs plead factual content specifying the statements (or omissions) considered to be fraudulent, the speaker, when and why the statements were made, and an explanation why they are fraudulent. Essentially, Rule 9(b) requires that plaintiffs lay out “the who, what, when, where, and how.” Plaintiff’s pleadings do not survive this heightened pleading standard with respect to the claims of negligent misrepresentation, common-law fraud, and fraud by nondisclosure.
Under Texas law, both fraud and negligent misrepresentation require a showing that a defendant made a false representation. Thus, to state these claims against Salsbury, Plaintiff must identify discrete statements made by Salsbury, the content of those statement, when and where those statements were made, and the form in which those statements were given. Plaintiff does not do so. As with the negligence claim discussed above, Plaintiff’s original petition merely recites the elements of these claims.
Plaintiff does not point any specific statement made by Salsbury that it alleges is a false
representation. In fact, only twice does Plaintiff even allude to an alleged misrepresentation. To make matters worse, the first of these representations is attributed to both Travelers and Salsbury. To state a claim against an insurance adjuster that is joined with an insurance company, plaintiffs must differentiate between conduct that is attributable to the adjuster and conduct attributable to the insurance company. Thus, even if this allegation was not conclusory in nature, it cannot form the basis of a claim of common-law fraud or negligent misrepresentation against Salsbury because Plaintiff fails to identify the speaker.
The second representation to which Plaintiff alluded, while attributed to Salsbury, fails as
well. Plaintiff alleges that Salsbury “misrepresented to Plaintiff that Plaintiff were not entitled
to full coverage under the policy for the extensive damage to the property.” As with the first alleged misrepresentation, Plaintiff does not provide the particulars of the statement. Further, Plaintiff does not identify when or where the statement was made, whether the statement was written or oral, nor how the statement was false. Therefore, this allegation is insufficient to establish a claim of common-law fraud or negligent misrepresentation against Salsbury.
With respect to fraud by nondisclosure, Plaintiff pleads no facts whatsoever that support a
reasonable inference of Salsbury’s liability. As with negligence, the threshold inquiry in a fraud by nondisclosure claim is duty. Once again, Plaintiff merely recites the elements of the claim. This time, however, Plaintiff does not include even conclusory statements to support this claim. Plaintiff pleads no facts whatsoever to establish that Salsbury had a duty to disclose certain information, let alone that he failed to do so. As such, Plaintiff has not established a claim of fraud by nondisclosure against Salsbury.
c. As a matter of law, Plaintiff cannot state a claim against Salsbury for violation of the Prompt Payment of Claims Act.
Chapter 542 of the Texas Insurance Code only applies to specifically listed “insurers,” and, as an adjuster, Salsbury is not an insurer. Thus, Plaintiff cannot establish a claim against Salsbury under Chapter 542 of the Texas Insurance Code.
d. Plaintiff fails to state a claim against Salsbury for violation of the duty of good faith and fair dealing.
Under Texas law, a plaintiff can only recover under the duty of good faith and fair dealing from a party to a contract. Plaintiff has alleged no facts indicating that it is a party to a contract with Salsbury. Thus, there is no basis under Texas law for Plaintiff’s claim against Salsbury for breach of the duty of good faith and fair dealing.
In sum, none of Plaintiff’s claims against Salsbury satisfy the federal pleading standard; therefore, the Court concludes that Salsbury was improperly joined as a party to this lawsuit. Accordingly, Plaintiff’s claims against Salsbury are dismissed without prejudice. Because disregarding Salsbury’s nondiverse citizenship results in complete diversity between Plaintiff and State Farm, the Court finds that it has subject-matter jurisdiction over this case and denies Plaintiff’s motion to remand.