FEDERAL COURT FINDS ALLEGATIONS AGAINST EMPLOYEE ADJUSTER SUPPORT INSURANCE CODE ALLEGATIONS – REMANDS CASE TO STATE COURT

Last week, a Federal District Court in Houston, Texas analyzed allegations against an employee adjuster and held the allegations were sufficient to support causes of action alleged against the adjuster, so as to defeat diversity jurisdiction and remanded the case to state court. In Sarkar Investments, Inc. d/b/a Palace Inn – Tomball v. Travelers Property Casualty Company of America, WL 706471 (S.D. Tex. February 5, 2018), the insured presented a claim for wind, hail and water damage alleging a 2015 storm damaged the insured property. Travelers assigned its adjuster who was responsible for retaining experts, investigating and adjusting the claim. Unhappy with the findings, the insured brought suit in state court against Travelers and the adjuster. Travelers removed the case to federal court alleging that the adjuster was improperly joined to defeat diversity jurisdiction. The insured, believing they had sufficiently stated causes of action against the adjuster, filed a motion to remand the case to state court.

The court noted that it could make the improper joinder determination in two ways, a Rule 12(b)(6) review of the pleadings to determine if the allegations state a claim on which relief may be granted, or the court could look beyond the pleadings and conduct a summary inquiry. But it could not do both. So choosing to analyze the pleadings, the court observed several, specific allegations such as assertions of a biased investigation, retaining biased experts, overlooking wind and hail damage, underestimating and misrepresenting “the actual cost to repair or replace the under scoped wind and hail damage…particularly with respect to the necessary costs of materials, labor, taxes, and contractor overhead and profit” and similar allegations. Applying federal pleading standards, and analyzing the Texas Insurance Code allegations, the court held that the insured’s “allegations contain adequate detail to reach the threshold of facial plausibility and thus to state a claim on which relief can be granted under Texas Insurance Code § 541.060(a)(2)(A)” against the adjuster. Accordingly, diversity jurisdiction was defeated and the case was remanded to state court.

Editor’s Note: This case illustrates the merits of an insurer electing to take responsibility for its own employee / agent’s actions in handling wind and hail property damage claims under Texas Insurance Code § 542A.006(a) and then being able to seek dismissal of any related causes of action under § 542A.006(b).