We all know that insurance adjusters are “persons in the business of insurance” under the Texas Insurance Code. Many times insurance adjusters are sued along with the insurance company in a policyholder’s lawsuit. Because the insurance adjuster tends to be a resident of the state where the lawsuit it filed, having the adjuster as a defendant in the lawsuit will destroy diversity of citizenship jurisdiction and prevent the carrier from removing the case to federal court (or more aptly allow for remand back to state court).
I perceive that many insurance counsel are cynical about whether the policyholder is really serious about causes of action against the insurance adjuster. I perceive that most insurance counsel think the policyholder is suing the insurance adjuster for the sole purpose of destroying diversity. In reading slip opinions I have unfortunately and increasingly sensed that some federal courts have joined in the cynicism. Having said all that, I want to stress that in those cases where federal courts deny remand, the policyholder’s claims against the insurance adjuster in their state court petitions are thin at best. There are maybe one or two sentences claiming bad faith by the insurance adjuster or there is boilerplate regurgitation of the Insurance Code. That is why insurance counsel and federal courts have to ask whether the policyholder is “for real” when it sues the insurance adjuster.
Those of us who represent policyholders need to do a better job highlighting why the insurance adjuster is liable under the Code. I think this is best illustrated in the recent case of Bobby Joe Manziel and Oil Palace Inc. v. Seneca Insurance Company.1
Briefly, Seneca (NY resident) was the carrier. Seneca retained Vericlaim (Illinois resident) as its outside adjusting firm. Shaun Keefer (Texas resident) was an independent adjuster working for Vericlaim and assigned to the claim. Manziel sued Seneca, Vericlaim and Keefer. Seneca removed the case. Manziel filed a motion for remand. Seneca claimed that Keefer was improperly joined. In remanding the case the federal district court cited allegations Manziel made against Keefer in its state court petition holding that Manziel’s petition provided “a reasonable basis to predict that Plaintiffs might be able to recover against Keefer. Since there is a reasonable basis, the Court finds that Plaintiffs’ Petition is sufficient under the federal pleading standard to state a claim against Keefer under Tex. Ins. Code § 541.060(a)(2)(A). Iqbal, 556 U.S. at 678.”
Here is the allegation in Manziel’s petition that the court relied upon:
Keefer failed to prepare any estimates or scopes of damage to the Property. Instead, Keefer falsely represented that there was no hail damage to the Property. Additionally, Keefer retained an engineer to assess damage to the Property; that engineer was inadequate to evaluate the damage. Keefer refused to provide the report of findings to Oil Palace. Throughout the claims process Keefer failed to respond to emails or provide updates to Oil Palace, prolonging and delaying any claims resolution. As a result… [Oil Palace] was forced to hire its own consultants and representatives [, who] point[ed] out obvious damages that [Keefer] continued to ignore.
The attorney for the policyholder did a wonderful job specifically setting out why the policyholder really, really does have a serious and valid cause of action against the local adjuster. If you really think the local adjuster did something wrong then please be specific about it.