SOUTHERN DISTRICT OF TEXAS JUDGE REMANDS TWO BAD FAITH CASES TO STATE COURT BASED ON CLAIMS AGAINST TEXAS ADJUSTERS

Federal Judge Kenneth Hoyt of the Southern District of Texas on August 31 granted two plaintiffs’ motions to remand to state court based on the plaintiffs’ claims against non-diverse defendant adjusters.  In Nichols v. Allstate Texas Lloyds, Civ. No. 4:12-cv-01524, 2012 WL 3780308 (S.D. Tex. Aug. 31, 2012), a homeowner’s case based on damage from a wildfire, and Benton v. Lexington Ins. Co., No. 4:12-cv-01546, 2012 WL 3780312 (S.D. Tex. Aug. 31, 2012), a windstorm claim, the defendants had removed the claims to federal court based on contentions that in-state defendants were improperly joined.  Judge Hoyt disagreed, remanding both cases on identical grounds and using substantially identical language.

The property claim underlying the Nichols lawsuit arose out of a September 2011 fire that damaged a number of homes in Matagorda County.  The Plaintiff sued Allstate and the adjuster assigned to the claim, alleging various generic first-party causes of action against Allstate individually, the adjuster individually, and both defendants together.  In Benton, the plaintiff’s insurance claims arose out of a July 2011 storm in Harris County.  The Plaintiff sued, alleging similar causes of action against Lexington, an independent adjusting company, and the adjuster assigned to the claim.  Both insurers filed notices of removal, asserting that the Plaintiffs’ claims against the in-state defendants were “vague” (Nichols) or “conclusory” (Benton), contained no more than verbatim recitation of statute, and that these pleading deficiencies established that the in-state defendants had been improperly joined.

In both opinions, after discussing the general standard of review and the parties’ arguments, Judge Hoyt determined that the plaintiffs’ pleadings established that the in-state adjusters “could potentially be held personally liable[.]” (Emphasis in originals.) Judge Hoyt stated that the insurers were under a “heavy burden to establish with certainty that the plaintiff has no reasonable possibility of recovery against [the adjusters] individually,” and that the insurers had not provided any evidence to meet this burden.  (Emphasis in originals.) Judge Hoyt, therefore, granted the plaintiffs’ motions and remanded both cases.