Birch v. Stillwater Insurance Company et al

Filing 14

ORDER GRANTING 5 Motion to Remand to State Court. For the foregoing reasons, the Court GRANTS Plaintiff's Motion to Reman to State Court. Signed by Judge David A. Ezra. (wg)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
JOYCE BIRCH,

§
§
Plaintiff,
§
§
v.
§
§
STILLWATER INSURANCE
§
COMPANY and JIMMIE POSPISIL, §
§
Defendants.
§
________________________________ §

CV NO. 5:15-cv-448-DAE

ORDER GRANTING PLAINTIFF’S MOTION TO REMAND
Before the Court is a Motion for Remand filed by Plaintiff Joyce
Birch (“Plaintiff” or “Birch”). (Dkt. # 5.) The Court held a hearing on Plaintiff’s
Motion on August 31, 2015. At the hearing, Shelly Enyart, Esq., represented
Plaintiff; Richard King, Mary Ellen King, and Kimberly Bishop, Esqs., represented
Defendants Stillwater Insurance Company (“Stillwater”) and Jimmie Pospisil
(“Pospisil”) (collectively, “Defendants”). Upon careful consideration of the
arguments asserted in the supporting and opposing memoranda, as well as the
arguments presented at the hearing, the Court GRANTS Plaintiff’s Motion for
Remand (Dkt. # 5).

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BACKGROUND
The instant suit arises out of damage caused to Plaintiff’s home during
a February 14, 2015 wind and hailstorm that struck San Antonio, Texas. (Dkt.
# 1-1 at 5–6.) Plaintiff’s home was insured by Stillwater, and, following the storm,
Plaintiff submitted a claim to Stillwater for roof and water damage that her home
sustained during the storm. (Id. at 6.)
On March 10, 2015, Pospisil, who was an adjuster employed by
Stillwater, inspected Plaintiff’s home as part of his investigation of Plaintiff’s
claim. (Id. at 25.) Plaintiff alleges that Pospisil improperly adjusted Plaintiff’s
claim by failing to include many of her damages, disallowing funds to cover repair
and restoration expenses, and reducing the number of shingles reported as
damaged. (Id. at 7–8.) Ultimately, Plaintiff alleges that Defendants’ failure to
properly adjust the claim resulted in a failure to pay the full proceeds of Plaintiff’s
insurance policy and adequately settle the claim. (Id.)
On April 28, 2015, Plaintiff, a Texas citizen, filed suit in the 73rd
District Court of Bexar County, Texas, alleging various state law claims against
Stillwater, which is a Florida and California citizen, and Pospisil, who is a citizen
of Texas. (Dkt. # 1-1 at 4–24.) Specifically, Plaintiff alleged a breach of contract
claim against Stillwater; claims of negligence and gross negligence and negligent
misrepresentation against Pospisil; and claims under §§ 541 and 542 of the Texas

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Insurance Code and the Deceptive Trade Practices Act (“DTPA”), as well as
breach of good faith and fair dealing, fraud, conspiracy, and aiding and abetting
claims, against both Defendants. (Id. at 11–18.) Plaintiff seeks compensatory
damages, consequential damages, additional damages under the DTPA and Texas
Insurance Code, and exemplary damages. (Id. at 5.)
On May 29, 2015, Defendants removed the action to federal court,
invoking the Court’s diversity jurisdiction. (Dkt. # 1.) On June 22, 2015, Plaintiff
filed the instant Motion to Remand. (Dkt. # 5.) On June 29, Defendants filed their
Response. (Dkt. # 7.) On August 6, 2015, Plaintiff filed an untimely Reply. (Dkt.
# 10.)
On August 12, 2015, after discovering that page five of the state court
petition, which Plaintiff cited in her Motion to Remand, was missing, the Court
ordered the page to be produced and granted Defendants additional time to file a
supplement to their Response. (Dkt. # 11.) In accordance with the Court’s Order,
Plaintiff produced page five of the state court petition on August 17, 2015. (Dkt.
# 12.) Defendants have not filed any supplemental Response.
LEGAL STANDARD
“It is axiomatic that the federal courts have limited subject matter
jurisdiction and cannot entertain cases unless authorized by the Constitution and
legislation.” Coury v. Prot, 85 F.3d 244, 248 (5th Cir. 1996). Accordingly, a

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defendant may only remove a case over which the district court has original
jurisdiction, either because of diversity of citizenship or the existence of a federal
question. 28 U.S.C. § 1441(a); Halmekangas v. State Farm Fire & Cas. Co., 603
F.3d 290, 295 (5th Cir. 2010).
On a motion to remand, the removing party bears the burden of
establishing that one of these bases of jurisdiction exists and that the removal was
not procedurally defective. BEPCO, L.P. v. Santa Fe Minerals, Inc., 675 F.3d 466,
470 (5th Cir. 2012); Shearer v. Sw. Serv. Life Ins. Co., 516 F.3d 276, 278 (5th Cir.
2008). Diversity jurisdiction exists where the amount in controversy exceeds
$75,000 and there is complete diversity of citizenship between the parties. 28
U.S.C. § 1332(a); Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996); Harvey v.
Grey Wolf Drilling Co., 542 F.3d 1077, 1079 (5th Cir. 2008).
Because removal jurisdiction implicates federalism concerns, “[a]ny
doubts regarding whether removal jurisdiction is proper should be resolved against
federal jurisdiction.” African Methodist Episcopal Church v. Lucien, 756 F.3d
788, 793 (5th Cir. 2014) (internal quotation marks omitted) (quoting Acuna v.
Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000)); Frank v. Bear Stearns &
Co., 128 F.3d 919, 922 (5th Cir. 1997).

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DISCUSSION
Plaintiff argues that the Court must remand the case to state court
because complete diversity of citizenship between the parties is lacking and
Defendants cannot establish improper joinder of Pospisil. (Dkt. # 5 at 1.)
Specifically, Plaintiff argues that she has alleged a valid cause of action against
Pospisil under § 541 of the Texas Insurance Code, that Pospisil has therefore been
properly joined, and that his citizenship destroys complete diversity. (Id. at 4–7.)
Defendants counter that there are no properly pled allegations supporting a cause
of action against Pospisil, and therefore, the improper joinder exception to
complete diversity applies. (Dkt. # 7 at 4–9.)
I.

Improper Joinder Standard
There are “two ways to establish improper joinder: ‘(1) actual fraud

in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a
cause of action against the non-diverse party in state court.’” Smallwood v. Ill.
Cent. R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). Only the second of the
two methods are before the Court in the instant case.
To resolve whether the plaintiff is able to establish a cause of action
against the non-diverse defendant, a court must typically conduct a Rule

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12(b)(6)-type analysis. 1 Id. To survive a Rule 12(b)(6) motion to dismiss, the
plaintiff must plead “enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
II.

Whether Pospisil Has Been Fraudulently Joined
Section 541 prohibits a person, as defined in the statue, from engaging

in a trade practice considered an unfair or deceptive act in the business of
insurance. Tex. Ins. Code § 541.003. An insurer’s employee who engages in the
business of insurance—such as an insurance adjuster—is a “‘person’ for purposes
of [§ 541] and thus may be held liable individually for a violation of that
[section].” Gasch v. Hartford Acc. & Indem. Co, 491 F.3d 278, 282 (5th Cir.
2007) (“Texas law clearly authorizes [§ 541] actions against insurance adjusters in
their individual capacities”)2; Tex. Ins. Code § 541.002(2) (emphasis added). This

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In a very limited category of cases where “a plaintiff has stated a claim, but has
misstated or omitted discrete facts that would determine the propriety of joinder,”
the court “may, in its discretion, pierce the pleadings and conduct a summary
inquiry.” Smallwood, 385 F.3d at 573. Defendants do not argue for said review,
so the Court limits its review to a 12(b)(6)-type review in this case.
2

Although Gasch was decided in 2007, after the Texas Insurance Code was
amended during the 78th Legislative session, it dealt with events that occurred
before the amendments and therefore referenced the pre-amendment version of
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is true of both independent agents and individuals employed directly by insurance
companies. Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482,
485 (Tex. 1998).3
To properly join an adjuster on a § 541 claim, a plaintiff must allege
facts showing that the adjuster, as an individual, committed a violation under §
541. Hornbucklev. State Farm Lloyds, 385 F.3d 538, 544 (5th Cir. 2004). The
parties do not dispute that, as an insurance adjuster, Pospisil could be liable under
§ 541. Instead, they dispute whether the factual allegations regarding Pospisil’s
conduct give rise to a claim.
§ 541, which appeared in Article 21.21. Because the amendments were
“nonsubstantive” and intended only to “reclassify[] and rearrang[e] the statutes in a
more logical order” and remove duplicative and invalid sections, Texas Bill
Analysis, H.B. 2922, 78th Leg., Reg. Sess. (Tex. 2003), the law interpreting the
corresponding portions of Article 21.21 remains applicable. See Gasch v. Hartford
Acc. & Indem. Co, 491 F.3d 278, 280 n.2 (5th Cir. 2007) (“[T]he legal standards
have not changed”); Farmers Grp., Inc. v. Lubin, 222 S.W.3d 417, 422 n.11 (Tex.
2007) (“[N]o material changes were made in the [relevant] provisions.”).
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In deciding this issue, the Court in Liberty Mutual explained its reasoning as
follows:
Liberty and Garrett maintain that some individuals, such as
independent agents and brokers, are “persons” under [§ 541], while
individuals who are employed by insurance companies are not. If we
were to accept that view, however, it would create anomalous results.
An independent agent would be subject to suit under [§ 541] . . . for
misrepresenting a policy’s terms, while an employee-agent would not.
That result is contrary to the Legislature’s intent to comprehensively
regulate and prohibit deceptive insurance practices.
Garrison Contractors, 966 S.W.2d at 486.
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Here, Plaintiff has made the following factual allegations with respect
to Pospisil:
(1) “Pospisil was the agent for Stillwater and represented Stillwater in regard to
Plaintiff’s claim.” (Dkt. # 1-1 at 6.)
(2) “Pospisil . . . adjusted the Plaintiff’s claim by investigating, processing,
evaluating, approving, and/or denying, in whole or in part, Plaintiff’s claim.”
(Id.)
(3) “Pospisil improperly adjusted the Plaintiff’s claim. Defendant Pospisil
conducted a substandard inspection, which is evidenced in his report, which
failed to include many of Plaintiff’s damages. His estimate did not allow
adequate funds to cover repairs to restore Plaintiff’s home. Without
limitation, Pospisil misrepresented the cause of, scope of, and cost to repair
the damage to Plaintiff’s Property, as well as the amount of and insurance
coverage for Plaintiff’s claim/loss under Plaintiff’s insurance policy.
Pospisil made this and other misrepresentations to Plaintiff as well as to
Stillwater. Plaintiff and Stillwater both relied on Pospisil’s
misrepresentations, including but not limited those regarding the cause of
scope of, and cost to repair the damage to Plaintiff’s Property, and Plaintiff
has been damaged as a result of such reliance.” (Id.)
(4) “Pospisil’s misrepresentations caused Stillwater to underpay Plaintiff on her
insurance claim and, as such, Plaintiff has not been able to properly and
completely repair the damages to Plaintiff’s property. This has caused
additional, further damage to Plaintiff’s property.” (Id.)
(5) “Pospisil . . . advised Plaintiff as to how she could repair her Property so as
to prevent further damage to the Plaintiff’s Property. This advice was
negligent and false because it turns out Plaintiff could not properly repair her
Property and prevent future damage by following Pospisil’s advice.
Plaintiff’s Property has sustained further damages as a result.” (Id.)
(6) “Stillwater and Pospisil misrepresented that the damages caused by the wind
and hailstorm were below the policy deductible. However, Defendants’
representations were false because Plaintiff’s wind and hailstorm damages

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exceed[ed] $33,000.00 and were caused by a covered occurrence.” (Id. at
7.)
(7) “Stillwater and Pospisil knowingly disregarded their own property
inspection report by misrepresenting that only seven (7) shingles were
damaged, when in fact they had already acknowledged that more than 25%
of the shingles on Plaintiff’s roof were lifted from wind.” (Id.)
(8) “Stillwater and Pospisil failed to properly adjust the claims and Defendants
have denied at least a portion of the claims without an adequate
investigation.” (Dkt. # 12-2, Ex. B at 1.)
In sum, the crux of Plaintiff’s allegations against Pospisil is that,
following the inspection, Pospisil failed to properly document all of Plaintiff’s
damages, including misrepresenting the shingle damage to Plaintiff’s roof, which
affected his estimate of the claim and the benefits that Stillwater ultimately paid
out to Plaintiff. Defendants are correct that a plaintiff must raise specific factual
allegations that, if true, give rise to claims against an insurer and its agent
individually. However, they are incorrect that Plaintiff has failed to do so in this
case. Plaintiff makes factual allegations that specifically identify conduct that can
give rise to liability under § 541. Taken in the light most favorable to Plaintiff,
these allegations are sufficient to state a claim under § 541 against Pospisil. See
Mayorga v. Gov’t Employees Ins. Co. (Geico), No. CIV.A. C-09-339, 2010 WL
300350, at *2–4 (S.D. Tex. Jan. 20, 2010) (granting remand in light of similar
factual allegations and collecting cases).

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Defendants assert additional arguments regarding the adequacy of the
other claims that Plaintiff has raised against Pospisil in her Petition. (Dkt. # 7 at
7–9.) However, because there is a live claim against Pospisil, he has not been
fraudulently joined and the case must be remanded. A motion to dismiss in state
court is the proper vehicle to raise the facial inadequacy of the remaining claims.
CONCLUSION
For the foregoing reasons, the Court GRANTS Plaintiff’s Motion to
Remand (Dkt. # 5) and REMANDS the case to state court.
IT IS SO ORDERED.
DATED: San Antonio, Texas, September 1, 2015.

_____________________________________
David Alan Ezra
Senior United States Distict Judge

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