Koenig v. Unitrin Safeguard Insurance Company et al
MEMORANDUM OPINION AND ORDER, the Court DENIES Plaintiffs Motion to Remand. All claims against Defendant Ladder Now and Eskew are dismissed without prejudice. Evidence of Ladder Now and Eskews acts or omissions may be offered at trial pursuant to Tex. Ins. Code § 542A.0006(g). The Clerk of Court is DIRECTED to terminate Ladder Now LLC and Charles Allen Eskew, Jr from this case. Signed by Judge Jason K. Pulliam. (wg)
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
UNITRIN SAFEGUARD INSURANCE
COMPANY, LADDERNOW, LLC AND
CHARLES ALLEN ESKEW JR,
MEMORANDUM OPINION AND ORDER
The Court has under consideration Plaintiff’s Motion to Remand (ECF No. 5), to which
Defendant Unitrin Safeguard Insurance Company (“Unitrin”) responded (ECF No. 6) and
Plaintiff replied (ECF No. 7). For the reasons that follow, the Court denies the motion to remand.
This case concerns an insurance claim arising from damages inflicted by a hailstorm.
Plaintiff Sharon Koenig (“Plaintiff”) commenced this action on June 1, 2020, in the 57th Judicial
District Court of Bexar County, Texas, against insurance companies Unitrin, Kemper, and Home
State County Mutual and against insurance adjusters Ladder Now LLC (“Ladder Now”) and
Charles Allen Eskew, Jr. (“Eskew”). See ECF Nos. 1-4; 5 at 1-2. In July 2020, Plaintiff
dismissed without prejudice all claims and causes of action against Home State County Mutual
and Kemper. Unitrin answered Plaintiff’s state court petition on July 27, 2020. ECF No. 1-13. In
its answer, pursuant to Texas Insurance Code section 542A.006, Unitrin elected to accept
whatever liability Ladder Now and Eskew might have to Plaintiff for Ladder Now and Eskew’s
acts or omissions related to the claim at issue. Id. at 3.
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There is no dispute that Ladder Now and Eskew are non-diverse parties. And “as long as
a nondiverse party remains joined, the only issue the court may consider is that of jurisdiction
itself.” Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 209 (5th
Cir. 2016). Federal courts always have “jurisdiction to determine [their] own jurisdiction.”
United States v. Ruiz, 536 U.S. 622, 622 (2002). “This limited authority permits the court to
grant a motion to remand if a nondiverse party is properly joined,” while also permitting “the
court to deny such a motion if a party is improperly joined and, in so doing, to dismiss the party
that has been improperly joined.” Int’l Energy, 818 F.3d at 209.
In general, “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.” 28 U.S.C. § 1441(a). There is no dispute, furthermore, that 28 U.S.C. §
1332(a) provides the federal courts with original jurisdiction over all civil actions between
“citizens of different States” when the amount “in controversy exceeds the sum or value of
$75,000, exclusive of interest or costs.” However, a “civil action otherwise removeable solely on
the basis of the jurisdiction under section 1332(a) of this title may not be removed if any of the
parties in interest properly joined and served as defendants is a citizen of the State in which such
action is brought.” See id. § 1441(b)(2).
A party may move to remand a previously removed case. See id. § 1447(c). “Because
removal raises significant federalism concerns, the removal statute is strictly construed ‘and any
doubt as to the propriety of removal should be resolved in favor of remand.’” Gutierrez v.
Flores, 543 F.3d 248, 251 (5th Cir. 2008) (quoting In re Hot-Hed, Inc., 477 F.3d 320, 323 (5th
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Cir. 2007)). “Any ambiguities are construed against removal and in favor of remand to state
court.” Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 397 (5th Cir. 2013). The removing party
has the burden to show “that federal jurisdiction exists and that removal was proper.” Scarlott v.
Nissan N. Am., Inc., 771 F.3d 883, 887 (5th Cir. 2014) (quoting Mumfrey, 719 F.3d at 397).
Unitrin removed this case solely on the basis of diversity jurisdiction. No party raises a
dispute about the jurisdictional amount required for diversity jurisdiction, but they disagree as to
whether Ladder Now and Eskew remain properly joined defendants after Unitrin’s election under
Tex. Ins. Code § 542A.006.
Plaintiff’s claims against Ladder Now and Eskew are grounded in their roles as adjusting
company and adjuster engaged by Unitrin to investigate Plaintiff’s insurance claim. While
insurance adjusters are subject to liability under Chapter 541 of the Texas Insurance Code, see
Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281-82 & n.2 (5th Cir. 2007) (applying
predecessor statute of the current § 541.060 of the Tex. Ins. Code while noting the amendments
did not change the legal standards), on September 1, 2017, a new provision of the Code took
effect. This provision allows insurers, in any action to which Chapter 542A applies,1 to accept
any liability found against its “agent”
by providing written notice to the claimant. Tex. Ins.
Code § 542A.006(a). Notice may be given prior to suit or after a suit is filed. Id. Whether an
By its terms, Tex. Ins. Code § 542A
applies to an action on a claim against an insurer or agent, including: (1) an action alleging a
breach of contract; (2) an action alleging negligence, misrepresentation, fraud, or breach of a
common law duty; or (3) an action brought under: (A) Subchapter D, Chapter 541; (B) Subchapter
B, Chapter 542; or (C) Subchapter E, Chapter 17, Business & Commerce Code. . . . an action that
relates to or arises from a policy renewed under Section 2210.703.
Id. A claim means a first-party claim “made by an insured under an insurance policy providing coverage for real
property or improvements to real property” that “arises from damage to or loss of covered property caused, wholly
or partly, by forces of nature, including an earthquake or earth tremor, a wildfire, a flood, a tornado, lightning, a
hurricane, hail, wind, a snowstorm, or a rainstorm.” Id. § 542A.001(2).
An agent is “an employee, agent, representative, or adjuster who performs any act on behalf of an insurer.” Tex.
Ins. Code § 542A.001(1).
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insurer makes an election prior to suit or after suit is filed, “the court shall dismiss” the action
against the “agent” with prejudice. See id. § 542A.006(b)-(c). The only difference between a presuit and post-suit election is that when the election is made prior to suit, “no cause of action
exists” against the agent. Id. § 542A.006(b). Once the election is made, an insurer may not
revoke the election and a court may not nullify it. Id. § 542A.006(f). The statute does not require
a particular form for the written notice of election or anything beyond a written notice of election
for the court to dismiss the action against the agent and sets no time limitation. See generally id.
Because Unitrin elected to accept liability for Ladder Now and Eskew, § 542A.006
demands that Ladder Now and Eskew be dismissed from the suit. Dismissing Ladder Now and
Eskew does not prevent Plaintiff from asserting claims under Chapter 541 of the Texas Insurance
Code. Nor does Ladder Now and Eskew’s dismissal preclude Plaintiff from implicating Ladder
Now and Eskew in those claims, deposing Ladder Now and Eskew, or presenting evidence of
their acts or omissions. See Tex. Ins. Code § 542A.006(d)-(g).
Shortly after § 542A.006 became effective, district courts began considering how to
apply the section when an insurer has made its election in the state court proceedings or at the
time of removal. A split of authority has developed on this issue. One line of cases has taken the
view that an insurer’s post-suit election to accept liability “does not by itself establish improper
joinder to defeat remand.” Shenavari v. Allstate Vehicle & Prop. Ins. Co., 448 F. Supp. 3d 667,
672 (S.D. Tex. 2020). These courts conduct the familiar “Rule 12(b)(6)-type analysis” articulated
in Smallwood3 and, where the plaintiff has plausibly alleged a claim against the non-diverse
defendant, decline to find improper joinder and grant remand. The other line of cases has
adopted the conclusion that where an insurer’s election “establishes the impossibility of recovery
See Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 574 (5th Cir. 2004) (en banc); Fed. R. Civ. P. 12(b)(6).
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against the non-diverse defendant in state court at the time of removal, the non-diverse defendant
is improperly joined and its citizenship may be disregarded for diversity jurisdiction purposes.”
Bexar Diversified MF-1, LLC v. Gen. Star Indem. Co., No. SA-19-CV-0773-XR, 2019 U.S. Dist.
LEXIS 200150, at *8, 2019 WL 6131455, at *11 (W.D. Tex. Nov. 18, 2019) (emphasis in
original). Not surprisingly, Plaintiff urges the Court to follow the so-called majority view,
expressed in Shenavari. ECF No. 5 at 10-11. And Defendant argues this Court should follow
what courts refer to as the minority view, established in Bexar Diversified. ECF No. 6 at 3-4.
This Court recently addressed this issue in Mazhar Footsteps, LLC v. AmGuard Ins. Co.,
No. SA-20-CV-00955-JKP-HJB, 2020 U.S. Dist. LEXIS 242301, 2020 WL 7670245 (W.D. Tex.
Dec. 24, 2020). The analysis therein applies equally to this case. In Mazhar, the insurance
company elected liability under § 542A.006 in its notice of removal. Here, the record evidence
includes the answer filed in state court that contains Unitrin’s notice of election under §
542A.006. See ECF No. 1-13. Because Unitrin’s election demonstrates that Plaintiff has no
possibility of recovery against Ladder Now and Eskew, these defendants are improperly joined
and their citizenship may be disregarded for diversity jurisdiction purposes.
In its answer to the state court petition, Unitrin elected to accept whatever liability Ladder
Now and Eskew have to Plaintiff for Ladder Now and Eskew’s acts or omissions related to the
claim. See ECF No. 1-13 at 3. Under § 542A.006 of the Texas Insurance Code, this election is
irrevocable and requires the dismissal of the action against Ladder Now and Eskew. With Ladder
and Eskew dismissed, Plaintiff and Unitrin are the only parties proceeding before the federal
court. Thus, complete diversity of citizenship exists and this Court may exercise subject matter
jurisdiction over this case.
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Accordingly, the Court DENIES Plaintiff’s Motion to Remand (ECF No. 5). All claims
against Defendant Ladder Now and Eskew are dismissed without prejudice.4 Evidence of Ladder
Now and Eskew’s acts or omissions may be offered at trial pursuant to Tex. Ins. Code §
542A.0006(g). The Clerk of Court is DIRECTED to terminate Ladder Now LLC and
Charles Allen Eskew, Jr from this case.
It is so ORDERED this 6th day of January 2021.
UNITED STATES DISTRICT JUDGE
Although § 542A.006 provides for dismissal with prejudice following an insurer’s election, under current Fifth
Circuit precedent, where a federal district court lacks subject matter jurisdiction over an improperly joined party, it
must dismiss that party without prejudice. Probasco v. Wal-Mart Stores Tex., L.L.C., 766 F. App’x 34, 36 (5th Cir.
2019) (citing Int’l Energy, 818 F.3d at 210).
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