Waste Management, Inc. et al v. AIG Specialty Insurance Company f/k/a Chartis Specialty Insurance Company et al
OPINION AND ORDER denying 6 Motion to Remand and Request for costs and fees is DENIED..(Signed by Judge Melinda Harmon) Parties notified.(jdav, 4)
United States District Court
Southern District of Texas
August 10, 2017
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
AIG SPECIALTY INSURANCE COMPANY §
f/k/a CHARTIS SPECIALTY
INSURANCE COMPANY and AIG
CLAIMS, INC. f/k/a CHARTIS
David J. Bradley, Clerk
WASTE MANAGEMENT, INC. and
WASTE MANAGEMENT HAWAII, INC.,
CIVIL ACTION H-16-3676
OPINION AND ORDER OF REMAND
The above referenced insurance cause of action alleges breach
of contract against AIG Specialty Insurance Company (“Specialty”),
against Specialty, and penalty and interest against both Defendants
for Texas Insurance Code violations,1 and seeks coverage of claims
purportedly excluded under several provisions of a Defendant AIG
The alleged violations include Unfair Settlement Practices, Tex. Ins. Code §§
541.060(a)(1)(taking inconsistent positions and misrepresenting terms of Policy and applicable
law when Defendants stated that the defense costs for Waimanalo Gulch Sanitary Landfill
(“WGSL”) Parallel Proceedings were not covered under the Policy) and (a)(4)(failing to affirm
or deny coverage of the WGSL Coverage Claim within a reasonable time), 541.060(a)(2)(A)
(failing to settle Plaintiffs’ claims of coverage in good faith in a fair manner after the insurer’s
liability has become reasonably clear under the Policy), 541.060(a)(7)(refusing to pay the WGSL
Coverage Claim without conducting a reasonable investigation), 541.002-541.152 (continuing to
defend itself in WGSL Parallel Proceedings, 541.060 (treble damages to the extent Defendants
knowingly committed the acts complained of); and 541.152 (attorney’s fees and defense costs
resulting from unfair settlement practices under § 541.152) and reasonable attorney’s fees and
costs for declaratory judgment under Tex. Civ. Prac. & Rem. Code § 37.009.
Specialty Insurance Company (“Specialty”) environmental liability
Pending before the Court is Plaintiffs Waste Management,
Hawaii’s”)(collectively “Plaintiffs’”) motion to remand to the 281st
Judicial District Court in Harris County, Texas, where it was
initially filed under case number 2016-77640, on the grounds that
there is not complete diversity between the two sides since both
(“Claims”) were incorporated in and are citizens of the State of
In addition Plaintiffs request an award of costs and
1447(c), incurred because the removing party, Specialty, lacked an
objectively reasonable basis for seeking the removal.
Defendant Specialty’s opposition to the motion to remand
citizenship was correctly disregarded for diversity purposes.
The right to remove depends upon the plaintiffs’ pleading at
The excluded claims arise out of claims made against WM Hawaii for an alleged
pollution discharge from the Waimanalo Gulch Sanitary Landfill on Oahu, Hawaii (“WGSL
Claims”) under a Pollution Legal Liability Select Policy (the “Policy”), policy number PLS
544079, for a period January 1, 2011--January 1 2014, issued by Specialty to named insured
WM (and WMH as a wholly owned subsidiary of WM) up to a limit of $50,000,000, subject to a
$5,000,000 Self-Insured Retention. The WGSL is an Insured Property under the Policy. Claims
is an agent for Specialty and Specialty’s adjuster for the WGSL Claims.
Specialty is an Illinois corporation with its principal place of business in New York,
the time of the petition for removal.
Pullman Co. v. Jenkins, 305
U.S. 534, 537-38 (1939); Cavallini v. State Farm Mutual Auto Ins.,
44 F.3d 256, 264 (5th Cir. 1995); Ford v. Property & Cas. Ins. Co.
of Hartford, No. Civ. A. H-09-1731, 2009 WL 4825222, *2 (S.D. Tex.
Dec. 9, 2009).
Under 28 U.S.C. § 1441(a)4 any state court action over which
federal courts would have original jurisdiction may be removed from
state to federal court.
Gasch v. Hartford Accident & Indemnity
Co., 491 F.3d 278, 282 (5th Cir. 2007; Guttierrez v. Flores, 543
jurisdiction in any case where it has original jurisdiction.”).
The removing party, here Specialty, bears the burden of
showing that subject matter jurisdiction exists and that removal
Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d
720, 723 (5th Cir. 2002).
Any doubts are construed against removal
because the removal statute is strictly construed in favor of
Under 28 U.S.C. § 1332, a defendant may remove a case if there
is (1) complete diversity of citizenship and (2) the amount in
Title 28 U.S.C. § 1441(a) states, “Except as otherwise expressly provided by Act of
Congress, any civil action brought in a State court of which the district courts of the United
States have original jurisdiction, may be removed by the defendant or the defendants, to the
district court of the United States for the district and division embracing the place where such
action is pending.” The removing party bears the burden of showing that subject matter
jurisdiction exists and that removal was proper. Manguno v. Prudential Prop. & Cas. Ins. Co.,
276 F.3d 720, 723 (5th Cir. 2002). Any doubts are construed against removal because the
removal statute is strictly construed in favor of remand. Id.
controversy is greater than $75,000, exclusive of interests and
The citizenship of a corporation is determined under 28
U.S.C. § 1332(c) by the state under whose laws the entity was
organized or where it has its principal place of business.
jurisdiction is based on diversity, citizenship must be distinctly
and affirmatively alleged.
Getty Oil Corp. v. Ins. Co. of North
America, 841 F.2d 1254, 1259 (5th Cir. 1988), citing McGovern v.
American Airlines, Inc., 511 F.2d 653, 654 (5th Cir. 1975).
The doctrine of improper joinder, or fraudulent joinder,5
diversity by the presence of an improperly joined, non-diverse
defendant. Borden v. Allstate Ins. Co., 589 F.3d 168, 171 (5th Cir.
The citizenship of an improperly joined party is totally
disregarded in determining the court’s subject matter jurisdiction.
Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 572 (5th Cir.
“The joinder of a local claims adjuster in a state court
action against a non-citizen insurance company is an attempt to
avoid federal court jurisdiction that apparently has become a
popular tactic.” Gonzalez v. State Farm Lloyds, No. 4:15-CV-305-A,
2015 WL 3408106, at *3 (N.D. Tex. May 27, 2015); Lopez v. United
Prop. & Cas. Ins. Co., 197 F. Supp. 3d 944, 949 (S.D. Tex. July 11,
The Fifth Circuit prefers the term “improper joinder” to “fraudulent joinder” because it
is more consistent with the statutory language in 28 U.S.C. §§ 1141 and 1332. Smallwood v. Ill.
Cent. R. Co., 385 F.3d 568, 571 n.1 and 572-73 (5th Cir. 2004)(en banc), cert. denied, 544 U.S.
particularity and supported by clear and convincing evidence.”
Parks v. New York Times Co., 308 F.2d 474, 478 (5th Cir. 1962),
cert. denied, 376 U.S. 949 (1964).
Improper joinder may be
jurisdictional facts or (2) an inability to establish a cause of
action against the non-diverse defendant in state court.
491 F.3d at 281; Smallwood, 385 F.3d at 573.
The latter is alleged
improper joinder based on this second
prong bear a heavy burden of showing there is no possibility of
recovery by the plaintiff against the in-state defendant in state
court, i.e., in other words that there is no reasonable basis for
predicting that state law would allow recovery against the in-state
Travis v. Irby, 326 F.3d 644, 649 (5th Cir. 2003);
Smallwood, 385 F.3d at 576.
A “reasonable basis” means more than
a mere a hypothetical basis.
Griggs v. State Farm Lloyds, 181 F.3d
694, 701 (5th Cir. 1999)(“whether the plaintiff has stated a valid
state law cause of action depends upon and is tied to the factual
fit between the plaintiffs’ allegations and the pleaded theory of
To determine whether a plaintiff has a “reasonable basis for
recovery under state law, the court may “conduct a Rule 12(b)(6)type analysis.”
Smallwood, 385 F.3d at 573; Anderson v. Georgia
Gulf Lake Charles, 342 Fed. Appx. 911, 915 (5th Cir. 2009).
the court should look at the pleadings to determine whether the
allegations state a claim under state law, but under federal
pleading standards of Rules of Civil Procedure 86 and 9,7 against
Federal Rule of Civil Procedure 8(a) provides,
(a) Claim for Relief. A pleading that states a claim for relief must contain:
(1) a short and plain statement of the grounds for the court’s jurisdiction,
unless the court already has jurisdiction and the claim needs no new
(2) a short and plain statement of the claim showing that the pleader is
entitled to relief; and
(3) a demand for the relief sought, which may include relief in the
alternative or different types of relief.
The purpose is “‘to give the defendant fair notice of what the . . . claim is and the grounds upon
which it rests.’” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). The court must
accept as true all facts the plaintiff alleges in support of its claims and must construe those
allegations in the light most favorable to the plaintiffs. Bowlby v. City of Aberdeen, Miss., 681
F.3d 215, 219 (5th Cir. 2012). The factual allegations must “be enough to raise a right to relief
above the speculative level.” Twombly, 550 U.S. at 555.. “[D]etailed factual allegations” are
not necessary, but the pleading must provide “more than an unadorned, the-defendantunlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). If the
allegations “state a claim to relief that is plausible on its face” and “raise a right to relief above
the speculative level,” the complaint is sufficient and “will survive a motion to dismiss.” Wilson
v. Birnberg, 667 F.3d 591, 595 (5th Cir. 2012), quoting Twombly, 550 U.S. at 570. Nevertheless,
“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements,” do not establish facial plausibility. Iqbal, 556 U.S. 678.
There is a split of authority on whether Federal Rule of Civil Procedure 8(a) or 9(b)
applies to claims for violations of Texas Insurance Code Chapter 541, which proscribes unfair
and deceptive practices. For example of a court applying Rule 8(a) to claims based on §§
541.060(a)(2)(3), 541.060(a)(4), and 541.060(a)(7) of the Texas Insurance Code, see Jimenez v.
Allstate Texas Lloyd’s, Civ. A. N. 4:10-CV-4385, 2012 WL 360096, at *3-4 (S.D. Tex. Feb. 2,
2012)(requiring only the statement of a plausible claim under Rule 8).
“Rule 9(b) supplements but does not supplant Rule 8(a)’s notice pleading,” and
“requires “only ‘simple, concise, and direct’ allegations of the ‘circumstances constituting
fraud,’ which after Twombly must make relief plausible, not merely conceivable, when taken as
true.” U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 186 (5th Cir. 2009). Of the claims
asserted here, as an example of a court holding that Rule 9(b) applies to Section 541.061(a)
because “these allegations involve misrepresentations and are substantively claims of fraud” and
the “gravamen of the claim is fraud.” Khan v. Allstate Fire & Cas. Ins. Co., Civ. A. No. H-112693, 2012 WL 1601302, at *4, 7 (S.D. Tex. May 7, 2012). See also SHS Inv. v. Nationwide
Mutual Ins. Co.. 798 F. Supp. 2d 811, 815 (S.D. Tex. 2011)(Rule 9(b) applies to Texas Insurance
Code claims “where the gravamen of the claim is fraud even though the theory supporting the
claim is not technically fraud.”); Burton v. Companion Property & Casualty Ins. Co., Civ. A.
No. W-14-CV-054. 2014 WL 12490005. at *4 (W.D. Tex. July 29, 2014)(“Claims alleging a
violation of . . . the Texas Insurance Code . . . are subject to the requirements of Rule 9(b).”),
citing Lone Star Ladies Inv. Club v. Schlotzky’s, Inc., 238 F.3d 363, 368 (5th Cir. 2001)(applying
the heightened pleading requirements to statutory claims based on allegations of fraud since
“Rule 9(b) applies by its plain language to all averments of fraud, whether they are part of a
claim of fraud on not.”).
Rule 9(b) provides,
In all averments of fraud or mistake, the circumstances constituting fraud or
mistake shall be stated with particularity. Malice, intent, knowledge, and other
condition of mind of a person must be averred generally.
“In every case based upon fraud, Rule 9(b) requires the plaintiff to allege as to each
individual defendant ‘the nature of the fraud, some details, a brief sketch of how the fraudulent
scheme operated, when and where it occurred, and the participants.” Hernandez v. Ciba-Geigy
Corp. USA, 200 F.R.D. 285, 291 (S.D. Tex. 2001). In a securities fraud suit, the plaintiff must
plead with particularity the circumstances constituting the alleged fraud: Rule 9(b) requires the
plaintiff to “‘specify the statements contended to be fraudulent, identify the speaker, state when
and where the statements were made, and explain why the statements were fraudulent.’”
Southland Securities Corp. v. INspire Ins. Solutions, Inc., 365 F.3d 353, 362 (5th Cir. 2004),
quoting Williams v. WMX Technologies, Inc., 112 F.3d 175, 177-78 (5th Cir. 1997), cert. denied,
522 U.S. 966 (1997). “‘In cases concerning fraudulent misrepresentation and omission of facts,
Rule 9(b) typically requires the claimant to plead the type of facts omitted, the place in which the
omissions should have appeared, and the way in which the omitted facts made the
representations misleading.’” Carroll v. Fort James Corp., 470 F.3d 1171, 1174 (5th Cir. 2006),
quoting United States ex. rel. Riley v. St. Luke’s Hosp., 355 F.3d 370, 381 (5th Cir. 2004). The
Ninth Circuit views Rule 9(b) as imposing two discrete requirements for alleging fraud: (1) the
plaintiff must identify the time, place and nature of misleading statements, representations or
specific acts, or the “who, what, when, where and how of the alleged misconduct,” and (2) the
complaint must explain why the statement or omission at issue was false and misleading.
Residescu v. Midland Credit Management, Inc., 435 F. Supp. 2d 1090, 1095 (S.D. Cal. 2006),
citing Kaplan v. Rose, 49 F.3d 1363, 1370 (9th Cir. 1994); Vess v. Ciba-Geigy Corp. v. USA. 317
F.3d 1097, 1106 (9th Cir. 2003); and Yourish v. California Amplifier, 191 F.3d 983, 993 (9th Cir.
Unlike the alleged fraud, Rule 9(b) allows a plaintiff to plead intent to deceive or defraud
the in-state defendant.
Smallwood, 385 F.3d at 573; Int’l Energy
Ventures Management, LLC v. United Energy Group, Ltd., 818 F.3d
193, 203 (5th Cir. 2016). If the “plaintiff has stated a claim, but
has misstated or omitted discrete facts that would determine the
propriety of joinder,” the court may look beyond the pleadings and
consider summary judgment-type evidence.
Appx. at 915-16.
Georgia Gulf, 342 Fed.
Discovery should be restricted and the summary
inquiry should be limited to identifying “discrete and undisputed
facts that would bar a plaintiffs’ recovery against an in-state
jurisdiction and into the resolution of the merits . . . .’”
generally. Nevertheless a mere conclusory statement that the defendant had the required intent is
insufficient; the plaintiff must set forth specific facts that raise an inference of fraudulent intent,
for example, facts that show the defendant’s motive. Tuchman v. DSC Communications Corp.,
14 F.3d 1061, 1068 (5th Cir. 1994)(“Although scienter may be averred generally, case law amply
demonstrates that pleading scienter requires more than a simple allegation that a defendant had
fraudulent intent. To plead scienter adequately, a plaintiff must set forth specific facts that
support an inference of fraud.”); Melder v. Morris, 27 F.3d 1097, 1102 (5th Cir. 1994).
“[Wh]en agency is an element of a fraud claim, agency must be pleaded with particularity
required under Rule 9(b).” Whitney National Bank v. Medical Plaza Surgical Center, L.L.P.,
No. H-06-1492, 2007 WL 400094, *3 (S.D. Tex. 2007), citing Kolbeck v. LIT America, Inc., 923
F. Supp. 557, 570 (S.D.N.Y. 1996), aff’d, 152 F.3d 918 (2d Cir. 1998); American Credit Union
v. HCG Financial Servs., Inc., No. 89 C 9583, 1990 WL 77992, *4 (N.D. Ill. June 1, 1990);
Chou v. University of Chicago, 254 F.3d 1347, 1362 (Fed. Cir. 2001); Abels v. Farmers
Commodities Corp., 259 F.3d 910, 916 (8th Cir. 2001); and Lachmund v. ADM Investor Servs.,
Inc., 191 F.3d 777, 783 (7th Cir. 1999).
A dismissal for failure to plead with particularity in accordance with Rule 9(b) is
treated as a Rule 12(b)(6) dismissal for failure to state a claim. Lovelace v. Software Spectrum,
Inc., 78 F.3d 1015, 1017 (5th Cir. 1996). If it appears that given an opportunity to amend the
pleading, the plaintiff would be able to state a claim upon which relief could be granted, the
court should grant leave to amend. People’s Choice Home Loan, Inc. v. Mora, No. 3:06-CV1709-G, 2007 WL 708872, *4 (N.D. Tex. Mar. 7, 2007), citing Kennard v. Indianapolis Life Ins.
Co., 420 F. Supp.2d 601, 608-09 (N.D. Tex. 2006).
at 916, quoting Smallwood, 385 F.3d at 573-74.8
A defendant may
transcripts in support of the defendant’s removal petition.
Carriere v. Sears, Roebuck & Co., 893 F.2d 98, 100 (5th Cir. 1990).
Furthermore, where the reasons for finding that there is no
reasonable basis for recovery against the in-state defendant would
also dispose of all claims against the diverse defendants, the
entire case should be remanded because “there is no improper
joinder; there is only a lawsuit lacking merit.”
Id. at 574.
The district court must resolve all contested fact issues and
ambiguities of state law in favor of the plaintiff and remand.
Gasch, 491 F.3d at 281.
The Fifth Circuit explains, since “‘the
effect of removal is to deprive the state court of an action
The removal statute is therefore to be strictly
construed, and any doubt about the propriety of removal must be
resolved in favor of remand.”
Id. at 281-82, quoting Carpenter v.
Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365-66 (5th Cir.
When a court’s determination that there is no reasonable basis for predicting that state
law would permit the plaintiff to recover against the in-state defendant “also compels the same
result for the nonresident defendant, there is no improper joinder; there is only a lawsuit lacking
in merit. In such cases, it makes little sense to single out the in-state defendants as ‘sham’
defendants and call their joinder improper.” Smallwood, 385 F.3d at 574, quoted by McDonal v.
Abbott Laboratories, 408 F.3d 177, 183 (5th Cir. 2005). Where the inquiry shows the same
result for resident and nonresident defendants, it becomes an issue on the merits, which is
beyond the bounds of the jurisdictional inquiry of an improper joinder review, and remand is
necessary. McDonal, 408 F.3d at 183-84.
Moreover, “the existence of even a single valid cause of
action against the in-state defendants (despite the pleading of
several unavailing claims) requires remand of the entire case to
Grey v. Beverly Enterprises-Mississippi, Inc., 390
F.3d 400, 412 & n.11 (5th Cir. 2004)(and cases cited therein).
“This Court has required a plaintiff to satisfy Rules 8, 9,
and 12(b)(6) and Twombly to allege specific actionable conduct by
the adjuster and to distinguish claims against the adjuster from
generic, conclusory, statute-tracking claims against the insurer.
Okenkpu v. Allstate Texas Lloyd’s, Civ. A. No. H-11-2376, 2012 WL
1038678, at *7 (S.D. Tex. March 27, 2012), citing a number of
Centro Cristiano Cosecha Final, Inc. v. The Ohio Casualty
Ins. Co., Civ. A. No. H-10-1846, 2011 WL 240335, *14 (S.D. Tex. Jan
20, 2011); Gonzales v. Homeland Ins. Co. of New York, Civ. A. H-11123,
Deliverance Temple of Refuge, Inc. v. Scottsdale Ins. Co., Civ. A.
H-10-4162, 2011 WL 2837588 (S.D. Tex. July 18, 2011); Jiminez v.
Travelers Indem. Co., Civ. A. No. H-09-1308, 2010 WL 1257802, at *6
(S.D. Tex. Mar. 25, 2010); Glen Willow Apartments v. Lexington Ins.
Co., Civ. A. No. H-10-2095, 2011 WL 1044206, at *3 (March 16,
2001). In accords, e.g., South Austin Pharmacy, LLC v. Pharmacists
Mutual Ins. Co., No. A-15-CV-0271LY-ML, 2015 WL 2445969, at *3
(W.D. Tex. May 19, 2015).
When it remands a case, the district court has the discretion
to award the “payment of just costs and any actual expenses,
including attorney’s fees, incurred as a result of removal.”
That discretion has limits:
circumstances, courts may award attorney’s fees under § 1447(c) only
where the removing party lacked an objectively reasonable basis for
Marin v. Franklin Capital Corp., 546 U.S. 132,
In deciding whether to grant such an award, the court
“‘do[es] not consider the motive of the removing defendant,” but
“considers the objective merits of removal at the time of removal,
irrespective of the ultimate remand.”
Diaz v. Cameron County,
Texas, 300 Fed. Appx. 280, 281 (5th Cir. Nov, 19, 2008), quoting
Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 292-93 (5th Cir.
In Martin v. Franklin Capital Corp., 546 U.S. 132 (2005),
reasonable basis for removal.
In accord, Hornbuckle v. State Farm
Lloyds, 385 F.3d 538, 541 (5th Cir. 2004)), cert. denied, 562 U.S.
1044 (2010),; Howard v. St. Germain, 599 F.3d 455, 457 (5th Cir.
2010)(citing Hornbuckle v. State Farm Lloyds, 385 F.3d 538, 541 (5th
Cir. 2004)), cert. denied, 562 U.S. 1044 (2010).
If an objectively
reasonable basis for removal exists, attorney’s fees should be
Howard v. St. Germain, 599 F.3d at 457 (citing Hornbuckle,
385 F.3d at 541.
Plaintiffs WM and WM Hawaii’s Motion to Remand (#6)
Plaintiffs point out that the Court may only ignore the
citizenship of non-diverse Defendant Claims if there is actual fraud
in pleading jurisdictional facts or if Plaintiffs cannot establish
a cause of action under state law against this Defendant.
v. Stone Ins., Inc., 509 F.3d 665, 669 (5th Cir.
doctrine of improper joinder is a ‘narrow exception’ to the rule of
complete diversity, and the burden of persuasion on a party claiming
improper joinder is a ‘heavy one.’‘” Id., quoting McDonal v. Abbott
Labs., 408 F.3d 177, 183 (2005).
Whether “‘there is arguably a
liability . . . means that there must be a reasonable possibility
for predicting that state law might impose liability, not merely a
Id., quoting Ross v. Citifinancial, Inc., 344
F.3d 458, 462 (5th Cir. 2003).
Here Defendants do not argue that there was actual fraud in
Plaintiffs cannot establish a state law cause of action against
Claims, the non-diverse adjuster Defendant.
Plaintiffs argue that
Specialty errs in contending that (1) violations of the Texas
Plaintiffs fail to allege enough facts to satisfy Rule 9(b)’s
heightened pleading standards.
Specialty maintains that neither
argument is supported by Texas case law nor by the facts here.
Specialty bears a heavy burden to show fraudulent joinder,
i.e., “that there is no possibility of recovery by the plaintiff
against the [non-diverse] defendant.”
Smallwood, 385 F.3d at 574,
If there is even one valid claim against the nondiverse
defendants, the court must remand the whole case to state court.
Gray v. Beverly Enterprises-Mississippi, Inc., 390 F.3d 400, 412
(5th Cir. 2004).
Claims based on violations of the Texas Insurance Code Section
541.060 are actionable against an adjuster.
Hayden v. Allstate
Texas Lloyds, Civ. A. No. H-10-646, 2011 WL 240388, at *7 (S.D. Tex.
Jan. 20, 2011)(and cases cited therein)(“It is clear that Texas law
recognizes causes of action against an insurance adjuster for
violations of the Texas Insurance Code, common law fraud, and
conspiracy to commit fraud.”).
Chapter 541 Subchapter A of the
Texas Insurance Code prohibits a “person” from engaging in deceptive
practices in the business of insurance.
See Tex. Ins. Code §
Texas Insurance Code § 541.002(2) defines “person” to
Gasch v. Hartford Acc. & Indem. Co., 491 F.3d
278, 282-84 (5th Cir. 2007)(“Texas law clearly authorizes [Texas
Insurance Code] Article 21.219 actions against insurance adjusters
in their individual capacities”)(citing Liberty Mutual Insurance Co.
Article 21.21 is the predecessor statute to current Section 541.060 of the Texas
Insurance Code. Richard Geovera Specialty Ins. Co., 2016 WL 6525438 at *3 n.15 (citing Act
of May 22, 2003, 78th Leg., R.S., ch. 1274, § 26(a)(1), sec. 561.060 2003 Tex. Gen. Laws 3611,
3662, 4138 (effective April 1, 2005))(S.D. Tex. Nov. 3, 2016).
v. Garrison Contractors, Inc., 966 S.W. 2d 482, 487 (Tex. 1998)(“To
come within the statute, an employee must engage in the business of
insurance,” e.g., have responsibilities including soliciting and
prospective buyers, explaining premium calculations to consumers,
having a measure of expertise in the field necessary for the
job)(holding that “section 16 of Article 21.21 provides a cause of
action against insurance company employees whose job duties call for
them to engage in the business of insurance.”) .
See also, e.g.,
Vargas v. State Farm Lloyds, 216 F. Supp. 2d 643, 648 (S.D. Tex.
2002)(“[A]n insurance adjuster . . . engages in the business of
insurance by investigating, processing, evaluating, approving, and
denying claims. . . . [T]he Court is sufficiently satisfied that an
insurance adjuster is a person engaged in the business of insurance
for purposes of Article 21.21.”); Roach v. Allstate Vehicle and
Property Insurance Co., Civ. A. No. 3:15-CV-3228-G, 2016 WL 795967,
at *4 (N.D. Tex. Feb. 29, 2016)(“Texas law recognizes suits against
insurance adjusters in their individual capacities under the Tex.
specifically held that ‘[t]he business of insurance includes the
investigation and adjustment of claims and losses [citing Vail v.
Texas Farm Bureau Mutual Insurance Company, 754 S.W. 2d 129, 132
(Tex. 1998)]. “The Fifth Circuit has also held that an adjuster who
services insurance policies for an insurer engages in the business
of insurance, is subject to the Tex. Ins. Code, and may be found
liable under it.”
Roach, 2016 WL 795967 at *4, citing Gasch, 491
F.3d at 282.
Courts have held adjusters liable for violating the specific
provisions of the Texas Insurance Code Section 541 that Plaintiffs
have charged Defendants with here:
1. Section 541.060(a)(1)(prohibits an insurance adjuster
from “misrepresenting a material fact or policy provision
relation to coverage at issue”:
Campos v. American
Bankers Ins. Co. of Florida, Civ. A. No. H-10-0594, 2010
WL 2640139 (S.D. Tex. June 30, 2010);
Section 541.060(a)(2)(“failing to attempt in good
settlement of . . . a claim with respect to which the
Richard v. Geovera Specialty Ins. Co., Case No. 4:16-CV2496,
support of possible claim against adjuster”).
Section 541.060(a)(4)(“failing within a reasonable
time to . . . affirm or deny coverage of a claim to a
Centaurus Unity v. Lexington Ins. Co.,
766 F. Supp. 2d 780, 788 (S.D. Tex. 2011) (finding
coverage within one year sufficient to state a claim
under Texas Insurance Code § 541.060(a)(4); and
4. Section 541.060(a)(7)(refusing to pay a claim without
conducting a reasonable investigation with respect to the
Ross v. Nationwide Property & Casualty Ins.
Co., No. H-3495, 2013 WL 1290225, at *4 (S.D.
26, 2013)(“Under § 541.060(a)(7) an adjuster may not
‘refus[e] to pay a claim without conducting a reasonable
investigation with respect to the claim” and must bolster
this cause of action with facts “to create a ‘reasonable
basis’ to predict recovery.”).
Plaintiffs have alleged these same violations of the Texas Insurance
Code against Claims, so Plaintiffs urge that this case should be
Furthermore to meet Rule 8(a) requirements for a violation of
§ 541.060(a)(7), Plaintiffs claim they need only allege facts
showing that Claims conducted a “substandard inspection” because it
did not spend adequate time examining Plaintiffs’ property and
failed to identify damage to it.
Richard, 2016 WL 6525438, at *4.
See also Rodriguez v. Standard Guaranty Ins. Co., Civ. A. No. H-103065, 2010 WL 4877774, at *3-6 (S.D. Tex. Nov. 23, 2010)(adjuster
devoted only ten minutes).
Plaintiffs insist that they have stated
sufficient facts to establish an independent, distinguishable claim
against Claims for violation of Section 541.060(a)(7); (1) Claims
was assigned to “adjust, handle, investigate, process, evaluate, and
approve or deny the Waimanalo Gulch Sanitary Landfill (“WGSL”) Claim
(Petition ¶ 68); to aid the investigation, Plaintiffs provided
Claims “with all the investigation that was requested” on June 4,
2012 (Id. at ¶ 69); Plaintiffs submitted to Claims “updates and
further information in support of its WGSL
at ¶ 72; Plaintiffs gave Claims “all the invoices associated with
the WGSL Parallel Proceedings.”
Id. at 72; five days later Claims
denied coverage for defense costs “without looking at the invoices”
and “without a reasonable basis.”
investigation was done.
Id. at ¶ 73; and “Defendants
Id. at ¶ 109.
Plaintiffs argue that
Claims, the sole entity responsible for evaluating and processing
the defense costs, did not even examine the invoices, let alone
investigation claim clearly violates § 541.060(a)(7), satisfies Rule
8's pleading standards, and by itself provides a basis for remanding
the case to state court.
Plaintiffs assert that Claims’ utter
failure to examine the invoices is even more concerning because
Claims agreed to join in the defense and remediation associated with
a Claim for Clean-up Costs resulting from the WGSL Pollution
Condition under Coverage D of the Policy (#1-5, Petition at ¶ 70).
Claims did not perform claims handling that an insurer and its
employees might handle in a different case.
The Petition alleges
that Plaintiffs gave only to another separate, legally independent
entity, incorporated in a different state from the insurer, i.e.,
Claims, complete authority to adjust, handle, investigate, process,
evaluate, and approve or deny the WGSL Coverage Claim, unlike the
cases cited in the Notice for Removal, ¶ 14. Because Claims, alone,
bore the responsibility of evaluating and processing the invoices,
but failed to even look at them, Claims, by itself, committed unfair
or deceptive practices.
Thus Plaintiffs are entitled to a distinct
remedy and did allege an independent claim against Claims for its
particular misconduct in violation of the Texas Insurance Code.
In a separate and independent claim against it, Claims is also
the only defendant charged with failing to affirm or deny coverage
of a claim to a policy holder within a reasonable time under section
See Centaurus Unity, 766 F. Supp. 2d at 785, 788;
Rankin Road, Inc. v. Underwriters at Lloyds of London, 744 F. Supp.
2d 630, 636 (S.D. Tex. 2010).
The parties agree that Claims waited
more than a year to affirm or deny coverage after receiving all the
information it had requested.
During that year Plaintiffs had to
defend themselves and bear the costs.
satisfy Rule 8(a) pleading standards for this claim, so removal was
Courts have also found that plaintiffs have adequately stated
a claim under § 541.060(a)(2) where they have alleged that an
adjuster suborned independent judgment to reach the insurer’s
desired result and ignored communications with the insureds. Linron
Properties, Ltd. v. Wausau Underwriters Insurance Company, Civil
Action No. 3:15-CV-00293-B, 2015 WL 3755071, at *5 (N.D. Tex. June
16, 2015)(“Linron asserts that Springman violated various provisions
of . . . § 541.060(a)(2)(A), by retaining an engineer and a
contractor who were known for arriving at findings that favored
insurance companies, refusing to identify damage to the structure
that was covered under the Policy, and failing to respond to
Linron’s inquiries regarding the status of the claim and payment.
. . . [T]he Court finds [these allegations] sufficient to support
a claim against Springman in her individual capacity for violating
Thus there is a reasonable basis to predict
Plaintiff’s recovery against Claims.
Courts have also found that
an inadequate investigation can result in an unfair settlement of
an insurance claim in violation of § 541.060(a)(2).
See, e.g., The
Denley Group, LLC v. Safeco Insurance Company of Indiana, Civ. A.
No. 3:15-CV-1183-B, 2015 WL 5836226, at *4 (N.D. Tex. Sept. 30,
2015)(Section 541.060.(a)(2)(A) prohibits “failing to attempt in
good faith to effectuate a prompt, fair, and equitable settlement
of a claim with respect to which the insurer’s liability has become
investigating and evaluating insurance claims, insurance adjusters
unquestionably have the ability to affect or bring about the
‘prompt, fair, and equitable settlement of claims, because it is
upon their investigation that the insurance company’s settlement of
a claim is generally based. . . . Therefore, a delay in an
adjuster’s investigation will undoubtedly cause a delay in the
payment of the claim, and an insufficient investigation may well
lead to a less than fair settlement of a claim.”
Id. at *4.
Plaintiffs also note that one court has concluded that a
private cause of action exists under § 541.060(a)(2)’s predecessor
statute Article 21.21 “when an insurer breaches its duty to defend
Presbyterian Healthcare Resources, 313 F. Supp. 2d 648, 652 (N.D.
Plaintiffs insist that they have adequately pleaded that Claims
had the authority to settle a claim, but failed to do so. Petition,
#1-5, ¶¶ 68, 70-73, 108.
As in Linron, Claims suborned independent
judgment to reach the insurer’s desired result by ignoring the
invoices that violated § 541.060(a)(2).
Claims also conducted an
inadequate investigation that led to a failure to settle the WGSL
Coverage Claim in violation of § 541.060(a)(2).
See Richard, 2016
WL 6525438, at *4; Rankin Road, 744 F. Supp. 2d at 636; Presbyterian
Healthcare, 313 F. Supp. 2d 652 (obligation to participate in
remediation and defense of WGSL Coverage Claim, but failure to look
at invoices or pay any costs constitutes a failure to settle the
claim when liability is clear, in violation of § 541.060(a)(2)).
In sum, Plaintiffs have an independent and distinguishable
claim against Claims because Claims, unlike Specialty, had the
authority to adjust, handle, investigate, process, evaluate, and
approve or deny the WGSL Coverage claim, conducted the insufficient
investigation, suborned independent judgment, disregarded claim
updates, and paid no attention to defense costs.
decided there was an obligation to participate in the remediation
process and defense of the WGSL Coverage Claim, and therefore
admitted liability for that claim.
Despite that fact, Claims did
Plaintiffs have alleged facts to state a claim plausible on its face
for violating of Section 541.060(a)(2).
Specialty’s Opposition to Motion to Remand (#7)
Specialty insists that Claims is not a proper party and should
be disregarded for diversity purposes because Plaintiffs have failed
to state a valid claim against Claims for several reasons:
Plaintiffs fail to satisfy the heightened pleading requirements of
Rule 9(b) which properly apply to unfair and deceptive insurance
Plaintiffs allege statutory claims against Claims that cannot be
distinguished from the same statutory claims they allege against
Specialty and are therefore not actionable against the adjuster; and
(3) Plaintiffs only allege contractual damages against Claims, which
Specialty alone would be obligated to pay.
Contrary to Plaintiffs’ claim, Specialty agrees with Plaintiffs
that adjusters can be held liable under Chapter 541 of the Insurance
Code, but only in certain circumstances, and those circumstances do
not exist here.
Gasch, 491 F.3d at 282-83 (Tex. Ins. Code §
Specialty relies on finding certain Insurance Code claims against
adjusters are non-actionable because those types of claims when
brought against the adjuster cannot be distinguished from the same
types of claims asserted against the carrier and were based on
conduct that cannot be distinguished from the carrier’s conduct.
The courts cannot impose liability on adjusters where logically only
For example, § 541.060(a)(2)(a)(prohibiting “failing
to attempt in good faith to effectuate a prompt, fair and equitable
settlement” of claims where the insurer’s liability is reasonably
clear) requires insurers to try to reach a reasonable settlement of
a claim when liability is reasonably clear.
Mainali Corp. v.
Covington Specialty Ins. Co., 2015 WL 5098047, at *4 (N.D. Tex. Aug.
31, 2015)(“‘An adjuster ‘cannot be held liable under this section
because, as an adjuster, [he] does not have settlement authority on
behalf of [the insurer].’”, citing One Way Investments, Inc. v.
Century Sur. Co., No. 3:14-CV-2839-D,
2014 WL 6991277, at *4 (N.D.
Tex. Dec. 11, 2014), and Messersmith v. Nationwide Mutual Fire Ins.
Co., 10 F. Supp. 3d 721, 724 (N.D. Tex. 2014)(same).10
Lopez v. United Property & Casualty Insurance Co., 3:16-CV-0089,
2016 WL 3671115, at *3 (S.D. Tex. July 11, 2016).
In another example, Plaintiffs cannot recover against Claims
under § 541.060(a)(4), which requires insurers to affirm or deny
coverage or reserve rights, within a reasonable time.
contends that only the insurer that issued the policy can affirm or
obligation to provide a reasonable explanation of the insurers’s
Lopez, 2016 WL 3671115, at *4.
541.060(a)(7), which prohibits the insurer from refusing payment
without a reasonable investigation.
The insurer, not the adjuster
“refuses” to pay a claim.
But see Roach, 2015 WL 795967 at *5 (rejecting this line of cases because “[t]he Texas
legislature’s decision to use the word “effectuate” [“meaning ‘to cause to come into being’ or ‘to
bring about’] instead of the word ‘finalize’ indicates that § 541.060(a)(2)’s ‘prohibition extends
to all persons who play a role in bringing about a prompt, fair, and equitable settlement of a
claim.’”), quoting Denley Group, 2015 WL 5836226, at *4. Furthermore “the adjuster, as the
person primarily responsible for investigating and evaluating insurance claims, has the ability to
affect or bring about the ‘prompt. fair, and equitable settlement’ of claims, because it is upon his
investigation that the insurance company’s settlement of a claim is generally based.’”). Roach,
2016 SL 795967, at *5, citing Arana v. Allstate Texas Lloyds, No. 3:13-CV-0740-D, 2013 WL
2149589, at *5 (N.D. Tex. May 17, 2013)(“Adjusters play a role in the investigation, estimation,
and settlement of insurance claims.”); and Vargas. 216 F. Supp. 2d at 648 (noting that the
adjuster “engages in the business of insurance by investigation, processing, evaluation,
approving, and denying claims”); and Denley Group, 2015 WL 5836226, at *4 (“[A] delay in an
adjuster’s investigation will undoubtedly cause a delay in the payment of the claim, and an
insufficient investigation may well lead to a less than fair settlement of a claim.”). See also
Olivo v. Certain Underwriters at Lloyd’s London, 2016 WL 7742786, at *2 (S.D. Tex. July 8,
2016)(“This Court is persuaded by the Roach court)(collecting cases in agreement).
In addition, Specialty argues that Plaintiffs have alleged
541.606(a)(4)(failing within a reasonable time to affirm or deny
coverage or reserve rights), 541.060(a))(2)(a)(failing to settle
when liability is reasonably clear), and 541.060(a)(7)(refusing
payment without reasonable investigation) against both Specialty and
Claims that are indistinguishable from each other’s.
accomplished by the insurer through an agent and when the claims
against the adjuster are identical to those against the insurer, the
adjuster’s actions are indistinguishable from the insurer’s actions
and hence are insufficient to support a claim against the adjuster.”
Keen v. Wausau Bus. Ins. Co., 875 F. Supp. 2d 682, 686 (S.D. Tex.
2012); Dalton v. State Far, Lloyd’s, Inc., Civ. A. No. H-12-3004,
2013 WL 3157532, at *2 (S.D. Tex. June 19, 2013); Young v. Travelers
Personal Security Ins. Co., Civ. A. No. 4:16-CV-235, 2016 WL
4208566, at *4 (S.D. Tex. Aug. 10, 2016); Spring Street Apts. Waco,
LLC v. Philadelphia Indemnity Ins. Co., Case No. W-16-CA-00315-JCM,
2017 WL 1289036 (W.D. Tex. Apr. 6, 2017).
Specialty also argues that Plaintiffs have failed to satisfy
the heightened pleading standards of Rule 9(b) to these claims of
unfair or deceptive practices.
Frith v. Guardian Life Ins. Co. of
Am., 9 F. Supp. 2d 734, 742 (S.D. Tex. 1998)(claims alleging unfair
and deceptive practices in violation of Texas Insurance Code Chapter
541 are subject to the requirements of Rule 9(b)); SHS Inv. v.
Nationwide Mut. Ins. Co., 798 F. Supp. 2d 811, 815 (S.D. Tex. 2011)
Plaintiffs failed to state alleged fraudulent statements, the
speaker’s identity, when and where the statements were madeand why
they were fraudulent.
Instead of providing the who, what, when,
where, and how, Plaintiffs merely describe their own conduct or
recite statutory provisions as facts.
Thus they fail to state an
Insurance Code Chapter 541 claim under federal standards.
Specialty also contends that Plaintiffs’ Chapter 541 claims
against Defendant Claims are not actionable under any standard
because they cannot be distinguished from the same claims against
Specialty since they all arise from the alleged failure to perform
This Court has repeatedly opined that “when an
adjuster’s actions can be accomplished by the insurer through an
agent and when claims against the adjuster are identical to those
against the insurer, the adjuster’s actions are indistinguishable
from the insurer’s actions and hence are insufficient to support a
claim against the adjuster.”
See, e.g., Keen, 875 F. Supp. 2d at
686; Dalton, 2013 WL 3157532, at *7; Van Tassel v. State Farm
Lloyds, No. 4:12-CV-3711, 2013 WL 5152324, at *2 (S.D. Tex. Sept.
11, 2013). All the following acts can be accomplished by an insurer
through an agent:
Specialty “charged Claims to adjust, handle,
investigate, process, evaluate, and approve or deny the WGSL Claim
against [Plaintiffs]” (Petition at ¶ 68); “[o]n July 4, 2012 WM gave
Claims all the information that was requested” (Petition at ¶69);
WM “continued to provide the Defendants with updates and further
information in support of [the WGSL Claims], but [Specialty] never
participated in the defense of the WGSL Parallel Proceedings”
(Petition at ¶ 73); and “Defendants refused to pay the [WGSL Claims]
without conducting a reasonable investigation” (Petition, ¶ 109).
denying claims is what insurers do.
Therefore everything Claims
allegedly did could have been done by Specialty through an agent and
the claims are indistinguishable.
Note that ¶¶ 71-73 AND 106-113
of the Petition do not relate only to Claims.
Thus Plaintiffs do
not have a viable claim against Claims and Claims is improperly
Finally, because Plaintiffs’ claims are for denial of Policy
benefits, since Claims did not issue the Policy and is not a party
to it, Plaintiffs can only assert extracontractual claims against
To recover on extracontractual claims, Plaintiffs must
plead and prove damages that are independent of contract damages,
i.e., independent of damages from failure to pay policy benefits.
complained of acts or omissions caused injury independent of those
that would have resulted from a wrongful denial of policy benefits.”
Parkans Int’l, LLC v. Zurich Ins. 299 F.3d 514, 519 (5th Cir. 2002).
Subsequently the Fifth Circuit reaffirmed this rule in Great Am. Co.
v. AFS/IBEX Fin. Servs., 612 F.3d 800 (5th Cir. 2010):
In its briefing, [the insured] argues that it did not
need to prove a separate injury in order to maintain its
extracontractual claims. It argues that [the insurer’s]
denial of insurance proceeds, standing alone, entitled it
to recover on its extracontractual claims.
assertion does not comport with this court’s case law.
This Court observes that recently the Texas Supreme Court
addressed this issue in USAA Texas Lloyds Company v. Menchaca, No.
14-0721, 2017 WL 1311752 (Tex. Apr. 7, 2017).
The Texas Supreme
Court opines that the “general rule” is that insured cannot recover
policy benefits as actual damages caused by an insurer’s statutory
violation if the insured does not have a right to those benefits
under the policy because the Insurance Code only allows an insured
to recover actual damages “caused by” the insurer’s statutory
Plaintiffs’ Reply (#10)
WM and WMH insist that Specialty has not met its heavy burden
of showing that all four Texas Insurance Code violations alleged
against Claims fail a Rule 12(b)(6) review. Courts only deny remand
recovery against an in-state adjuster would be unlikely.”
v. Allstate Tex. Lloyd’s, Civ. A. No. H-10-0753, 2010 WL 1790744,
at *5 (S.D. Tex. Apr. 30, 2010), citing Jimenez. 2010 WL 1257802,
at *4 (denying remand where instate adjuster named as the defendant
was not the adjuster who analyzed and denied the claim), and Frisby
v. Lumbermens Mutual Casualty Co., Civ. A. No. H-07-015, 2007 WL
2300331, at * 5 (S.D. Tex. Feb. 20, 2007)(denying remand where
defendant presented deposition testimony by the plaintiff that the
instate defendant “never made any untrue statements to him, never
failed to tell him an important fact, and never made a statement in
a way that led him to a false conclusion.”).
WM alleges numerous
specific, actionable facts alleged solely against Defendant Claims,
Petition at ¶¶ 68,69,70,71,11 combined with specified violations of
reasonable basis to predict that WM might be able to recover against
Claims and satisfy Rule 12(b)(6).
Stevenson v. Allstate Texas
Lloyd’s, Civ. A. No. 11-cv-3308, 2012 WL 360089, at *4 (S.D. Tex.
Feb. 1, 2012)(“[C]ourts in the Southern District of Texas have found
individual insurance adjuster and conclusory legal allegations
against all defendants provide a reasonable basis for predicting
recovery against the individual defendant under the Insurance Code),
citing Edwea, Inc. v. Allstate Insurance, Civ. A. No. H-10-2970,
2010 WL 5099607, at 8 (S.D. Tex. Dec. 8, 2010)).
Examples include that Claims as charged to “adjust, handle, investigate, process,
evaluate, and approve or deny” WM’s claim, requested and received claim information, delayed
a year to issue a coverage opinion, and agreed to participate in the defense and remediation but
did nothing to settle the claim or defend WM.
While Specialty argues that Claims cannot be independently
liable because those very tasks are what insurers do, those tasks
would be done through a agent of Specialty.
But Plaintiffs note
that the Texas Supreme Court and the Fifth Circuit have held that
individually liable for performing those tasks in violation of the
Liberty Mut. Ins. Co. v. Garrison Contr., 966 S.W.
2d 482, 47-87 (Tex. 1998); Gasch v. Hartford Indemnity Co., 491 F.3d
278, 282 (5th Cir. 2007); Hayden, 2011 WL 240388, at *7.
under the second pronfin the Keen test, 875 F.2d at 686, to deny
remand the allegations against an adjuster must be identical to
those against the insurer, but here they are not–-WM has alleged
different, specific, actionable facts against Claims that satisfy
Finally, for those claims under the Insurance Code
that do not involve fraud, the more lenient pleading standard of
Rule 8 applies. Khan, 2012 WL 1601302, at *4. Conceding that there
is a split of authority over which pleading standard applies,
Plaintiffs argue that “Frith applied the standards under Rule 9(b)
only to the violations of the Texas Insurance Code where ‘the
gravamen of the claim is fraud.’”
Id. at *7 (giving examples of
decisions finding Insurance Code claims that Plaintiffs assert were
not based on fraud and to which Rule 8 applied), citing Frith, 9 F.
Supp. 2d at 742.
Finally Plaintiffs are not required to plead extracontractual
harm-–“conflat[ing] an evidentiary requirement with a pleading
Palma v. Allstate Texas Lloyd’s, Civ. A. No. 7:13-CV-
575, 2014 WL 66867, at (S.D. Tex. Jan. 8, 2014)(“The Fifth Circuit
has indicated that allegations that the adjuster himself directly
pleading requirements at this early stage of the proceedings. While
Plaintiff must demonstrate damages independent of the denials of
insurance coverage to recover from the Adjusters, Plaintiffs do not
need to plead such damages as to state a cause of action against
him. Here Plaintiff specifically alleged the Adjusters violated the
insurance code, and that these violations resulted in Plaintiffs’
This allegation suffices to state a claim under state law
against the Adjusters.”).
See also Vail, 754 S.W. 2d at 136.
As noted the Texas Supreme Court and the Fifth Circuit have
insurance, can be individually liable for actions that violate the
Texas Insurance Code.
Claims based on violations of the Texas
Insurance Code Section 541.060 are actionable against an adjuster.
Hayden v. Allstate Texas Lloyds, Civ. A. No. H-10-646, 2011 WL
240388, at *7 (S.D. Tex. Jan. 20, 2011)(and cases cited therein)(“It
is clear that Texas law recognizes causes of action against an
insurance adjuster for violations of the Texas Insurance Code,
common law fraud . . . .”).
Chapter 541 Subchapter A of the Texas
Insurance Code prohibits a “person” from engaging in deceptive
practices in the business of insurance.
See Tex. Ins. Code §
Texas Insurance Code § 541.002(2) defines “person” to
include an “adjuster.”
Gasch v. Hartford Acc. & Indem. Co., 491
F.3d 278, 282-84 (5th Cir. 2007)(“Texas law clearly authorizes
[Texas Insurance Code] Article 21.2112 actions against insurance
adjusters in their individual capacities”)(citing Liberty Mutual
Insurance Co. v. Garrison Contractors, Inc., 966 S.W. 2d 482, 487
(Tex. 1998)(“To come within the statute, an employee must engage in
the business of insurance,” e.g., have responsibilities including
soliciting and obtaining insurance policy sales, explaining policy
terms to prospective buyers, explaining premium calculations to
consumers, having a measure of expertise in the field necessary for
the job)(holding that “section 16 of Article 21.21 provides a cause
of action against insurance company employees whose job duties call
for them to engage in the business of insurance.”) .
“While it is true that Texas law may permit adjusters to be
found individually liable for certain violations of the Texas
Insurance Code, ‘for an adjuster to be held individually liable,
they [sic] have to have committed some act that is prohibited by the
section, not just be connected to an insurance company’s denial of
Article 21.21 is the predecessor statute to current Section 541.060 of the Texas
Insurance Code. Richard Geovera Specialty Ins. Co., 2016 WL 6525438 at *3 n.15 (citing Act
of May 22, 2003, 78th Leg., R.S., ch. 1274, § 26(a)(1), sec. 561.060 2003 Tex. Gen. Laws 3611,
3662, 4138 (effective April 1, 2005))(S.D. Tex. Nov. 3, 2016).
Lopez, 197 F. Supp. 3d at 949-50, citing Messersmith,
10 FF. Supp. 3d at 724.
The majority of courts addressing §
541.060(a)(2)(A)(“a failure to attempt in good faith to effectuate
a prompt, fair, and equitable settlement of . . . a claim with
respect to which the insurer’s liability has become reasonably
clear”) have held that this provision applies only to insurers, and
not to adjusters.
Id. at 950, citing Merritt Buffalo Events Ctr.,
LLC v. Cent. Mut. Ins. Co., 3:15-CV-3741-D, 2016 WL 931217, at *4
(N.D. Tex. Mar. 11, 2016)(“Massey and Cagle are both adjusters, and
[a]n adjuster ‘cannot be held liable under this section because, as
an adjuster, he does not have settlement authority on behalf of the
The Court finds that Defendants have established that
Plaintiffs have no reasonable possibility of recovering against
ORDERS that Plaintiffs’ motion to remand this action to the
281st Judicial District Court in Harris County, Texas, where it was
Furthermore, the Court
ORDERS that their request for costs and fees under 28 U.S.C.
§ 1447(c) is DENIED.
SIGNED at Houston, Texas, this 9th day of August, 2017.
UNITED STATES DISTRICT JUDGE
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