FEDERAL DISTRICT COURT REFUSES TO REMAND BECAUSE INSURER DID NOT GET PRE-SUIT NOTICE, INSTEAD REFUSES TO REMAND BECAUSE THE ADJUSTER HAD NOT BEEN SERVED

Last week, a Dallas federal judge refused to remand based on its narrow construction of Texas Insurance Code § 542A.006 even when the insurer had not been given the required pre-suit notice by the insured. But the court still denied the insured’s motion to remand because the adjuster had not been served at the time of removal. In Tadeo v. Great Northern Ins. Co., No. 3:20-CV-00147-G, 2020 WL 4284710 (N.D. Tex. July 27, 2020) (slip op.), the insured failed to give the insurer the 60-day pre-suit notice required by the Insurance Code, and thus the lawsuit was the insurer’s first notice of the dispute. 

Having had no opportunity to elect responsibility for its adjuster prior to suit, the carrier did so immediately upon being served and then removed the suit to federal court.  The court, following existing Northern District precedent, held the adjuster was properly joined at the time suit was filed because the 542A election was not made until after filing.  Therefore, the post-filing 542A election could not support remand.  The court noted that the statutory remedy for failure to give the required pre-suit notice is not dismissal of the adjuster, but abatement.

Ultimately, however, the removal was held to be proper because the adjuster had not been served at the time of removal, and only “properly joined and served” defendants are considered for purposes of removal.  The policyholder argued the adjuster had waived service because the attorneys representing him (the same attorneys representing the carrier) had appeared before the court.  The court rejected this waiver-of-service argument because the carrier’s attorneys had filed documents only on behalf of the carrier and not the adjuster, although they represented both.

Editor’s note: As jurisprudence concerning the relatively new Texas Insurance Code Chapter 542A continues to develop, the courts of the Northern District have led the way in building a prevailing body of law holding that a post-suit election under 542A.006 does not create a genuine improper joinder of the adjuster.  The court here followed its own existing rule, and declined to make any exception for circumstances which prevented the insurer from exercising its rights under §542A.006 before suit.  This ruling will likely motivate more policyholder attorneys to omit the statutory pre-suit notice, considering abatement an acceptable alternative to federal court.