United States: Federal Court In Texas Remands Storm Damage Suit Rejecting "Improper Joinder" Argument

A federal district court remanded a suit that was removed on the basis that independent adjusters were improperly joined to defeat diversity finding that the plaintiff had stated claims against the adjusters upon which relief could be granted. Lillie Jean Hooper v. Allstate Texas Lloyd’s, et al., 2017 WL 4475931 (S.D. Tex. Oct. 6, 2017).

An insured sued her insurer and two adjusters for storm damage to her home. The two adjusters inspected the property and reported no storm damage. The insurer removed the case asserting improper joinder of the adjusters who were Texas residents.

The court noted that there are two grounds for improper joinder, namely, fraud in the pleadings or an inability of the plaintiff to establish a cause of action against the non-diverse party. The test for fraudulent joinder is whether the defendant has demonstrated that there is no reasonable basis for the court to predict that the plaintiff might be able to recover against the in-state defendant. A court can scrutinize the complaint’s allegations to see whether it states a claim upon which relief can be granted or it can “pierce the pleadings and conduct a summary inquiry.” A court can use either of these methods, but it cannot use both. Either way, if even one cause of action can be maintained against the in-state defendant, then the case must be remanded.

The court elected the first method because no evidence had yet been developed for a summary judgment review. The court found that because an adjuster is a “person” under the Insurance Code, the adjusters had potential liability for violations under the Insurance Code. The court noted that other courts had found that adjusters could not be liable for violation of provisions concerning payment because they had no authority to make payment, but pointed out that the law is not well-settled and where there is a close question, the court must remand.

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