Insurance Companies Want To Be In Federal Court

Mineral Wells insurance attorneys can tell you that an insurance company would much prefer to fight a legal battle in Federal Court rather than State Court. In order to defeat them in this effort, it is vital to understand what Federal Judges look at when making a decision on whether a case gets to be maintained in Federal Court. The U.S. District Court for the Northern District of Texas, Dallas Division, provides guidance for what Federal Courts look for in a case. This is done in a 2015 case styled, Davis v. State Farm Lloyds and Leah McGee.
Plaintiffs Renee Davis and Reginald Davis filed this lawsuit against Defendants State Farm Lloyds and insurance agent Leah McGee for the improper handling of an insurance claim under a policy issued by State Farm. Plaintiffs alleged State Farm failed to pay the full proceeds of the policy and failed to settle the claim in an adequate and timely manner. They alleged that McGee constantly assured Plaintiffs that they were adequately insured and that McGee misrepresented to Plaintiffs that the insured person was covered by such peril although State Farm denied such coverage. The allegations were for violations of the Texas Insurance Code and The Texas Deceptive Trade Practices Act (DTPA).
This case was filed in State Court and timely removed by State Farm to Federal Court where State Farm alleged improper joinder of the agent McGee, to prevent diversity jurisdiction.
Plaintiffs first allege that McGee made a negligent misrepresentation regarding their insurance policy. To state a claim for negligent misrepresentation, a plaintiff must establish that (1) the defendant made a representation in the course of his business, or in a transaction in which he has a pecuniary interest; (2) the defendant supplied false information for the guidance of others in their business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating information; and (4) the plaintiff suffered pecuniary loss by justifiably relying on the representation. In addition, the false information complained of in a negligent representation claim must be a misstatement of an existing fact rather than a promise of future conduct.
The lawsuit echoes these elements in a general fashion, supplementing them only with the assertion that “Defendant Insurance Agent misrepresented to Plaintiff[s] that the insured person was covered by such peril although Defendant Insurance Company denied such coverage.” They further add that “[f]rom the time of sale of her policy to date, Defendant Insurance Agent constantly assured Plaintiff[s] that they were adequately insured even though a reasonable and prudent insurance agent would testify otherwise.
These allegations lack factual support or context from which the Court can draw the reasonable inference that McGee is liable for negligent misrepresentation. First, the statement that Plaintiffs were “covered by such peril” points to no facts regarding what this “peril” is and fails to disclose what McGee misrepresented. With respect to the statement that Plaintiffs were “adequately insured,” Plaintiffs’ pleadings and briefing fail to explain what this vague term means, how it relates to the loss to their property, and whether this was, in fact, a misrepresentation. Therefore, outside Plaintiffs’ recitation of the elements of the claim, they allege no facts indicating what misrepresentation McGee made, how they relied on McGee’s statements, and what damages this led them to incur. Although Plaintiffs’ petition includes the generic assertion that they incurred “actual damages, exemplary damages, interest, and court costs,” there are no allegations indicating what loss Plaintiffs suffered and how such loss was caused by their justifiable reliance on McGee’s misrepresentations. In short, Plaintiffs’ allegations are a collection of threadbare recitals of the elements of the claim, conclusory statements, and even ambiguous assertions that provide no facts to indicate the viability of the negligent misrepresentation claim.
As can be seen from the preceding, the Court trashed the pleading discussed and then went on to do the same with the rest of the pleadings.
The end result was that the case remained in Federal Court and was not remanded to State Court as the Plaintiffs had requested.