FEDERAL JUDGE DENIES MOTION TO REMAND AFTER A TIMELY SECTION 542A.006 ELECTION BY THE INSURER

Last week, a Houston federal judge denied a motion to remand because the insurer properly made an election to accept responsibility for the in-state adjuster under Section 542A.006 of the Texas Insurance Code before suit was filed.  Vyas v. Atain Specialty Insurance Company, No. 4:19-CV-00960, 2019 WL 2119733, (S. D. Tex, May 5, 2019) involved insurance coverage for alleged storm damage to hotels.   Vyas alleged that Atain Insurance “overlooked or ignored” the property damage and paid too little.  In an attempt to avoid removal, Vyas filed a state court suit against its insurance company, Atain, along with the Texas resident independent adjusting firm that handled the claim.   Atain availed itself of the new statutory right under Tex. Ins. Code Section 542A.006 to elect responsibility for the adjuster prior to the filing of the suit.  Atain promptly removed the case alleging improper joinder.  The Court addressed whether to remand the case or to keep it because the adjuster was improperly joined.

The Court noted that several cases in its circuit have found removal is proper in these circumstances as there can be no individual liability for the adjuster if the insurance company has made an election under 542A.006.   The Court then noted the authority relied on by Vyas found that when the election is made after the adjuster is joined, removal is improper.  The court noted the focus must remain on whether the nondiverse party was properly joined when joined.  Based on that analysis, the Court found that because the election was made before the adjuster had been joined, it was improper at the time.  The motion to remand was denied and the claims against the adjusting firm were dismissed with prejudice.