Insurance companies prefer to have lawsuits litigated and fought in Federal Court. Attorneys who represent individuals and companies in Dallas, Fort Worth, Arlington, Grand Prairie, Weatherford, or any other community in Texas, prefer to be in the local State and County Courts. There are several reasons an insurance company prefers to be in Federal Court, but the bottom line is, it is better for them to be in Federal Court.
One fight an insurance company recently lost was in the case, Rosario Mayorga, v. Government Employees Insurance Company. The opinion on this case was issued on January 20, 2010.
The Mayorga case was originally filed in the 79th District Court of Jim Wells County. Mayorga sued Government Employees Insurance Company (GEICO) and the adjuster, Sean Hicks. GEICO is an insurance company with its headquarters located outside of Texas, which is a condition that would allow for the case to be removed to Federal Court. However, the adjuster, Hicks, was a Texas resident which would prevent removal. GEICO claimed that Hicks was improperly sued and because he was improperly sued the case should be allowed into Federal Court.
The Federal Court analysed the burden of proof for the fraudulent joinder of Hicks in the lawsuit to stand. The Court cited Texas law stating that the burden of proof is on the insurance company to prove that the joinder of Hicks was a sham to keep the case from being in Federal Court. And that this burden was a heavy burden.
Analysing the causes of action asserted against Hicks, the Court looked at the Texas Insurance Code, Section 541. In that section, Hicks met the definition of a “person” and it defined how Hicks could be personally responsible for his actions rather than just being an agent of GEICO. The law in Texas says a person may be personally liable for deceptive acts notwithstanding the fact that he acted within the scope of his employment. The only insurance company employees exempted from this personal liability in Section 541 of the Texas Insurance Code, are those employees who have no responsibility for the sale or servicing of insurance policies and no special insurance expertise, such as a clerical worker or janitor.
Next, the Court analysed whether or not there were acts committed by Hicks, whereby he could be personally liable. Mayorga asserted that Hicks failed to conduct a reasonable investigation of her claim and failed to effect a prompt resolution of her claim. In this regard, the Insurance law in Texas is clear, insurance employees that fail to properly adjust insurance claims are liable under Section 541 and can be sued individually.
The allegations do not have to be allegations that are definite winners. As the Court said, the allegations are to be taken in the light most favorable to Mayorga and when they demonstrate there is a possibility of success, that is all that is required.
The value in this case is in demonstrating to an Insurance Law Attorney, good ways of maintaining a case against an insurance company in the State Courts, rather than having a case removed to Federal Court, where the outcome for the policyholder is usually less favorable.