Although we make every effort and hope to resolve claims without filing suit, I am a trial lawyer. It is not uncommon for me to file suit on my client’s behalf. As with any jurisdiction, we evaluate whether to file in state or federal court when filing suit for a Texas property damage loss. As part of the state/federal court determination under Texas law, we assess whether an individual carrier representative committed wrongdoing of a nature to subject the individual to liability in Texas state court. A recent decision gives guidance on whether to sue in Texas state court against an out of state claim handler.1

Underlying Case

A Trustee for a Family Trust took out a $10,000,000 life insurance policy on Jeffrey Blanchard in April 2013. After Mr. Blanchard passed away in June 2014, the Trustee submitted a claim for the life insurance proceeds. In August 2014, an out of state claim hander sent a letter to the estate and Trustee rescinding the policy and refunding the premiums due to material misrepresentations in the application and underwriting process.

The Trustee filed suit against the out of state carrier and the claim handler in Texas state court. The Trustee alleged jurisdiction over the claim handler saying she engaged in insurance business in Texas, the case arose out of the business engaged in, and “sufficient contacts” exist to properly invoke jurisdiction.

The out of state claim handler filed pleadings opposing Texas state court jurisdiction. The Trustee filed pleadings asking the trial court to overrule the claim handler’s opposition. After a hearing, the trial court ruled against the claim handler and maintained jurisdiction. The claim handler appealed the ruling and sought relief from the San Antonio Court of Appeals.

Appellate Court Decision

In overruling the trial court by finding in the out of state claim handler’s favor, the Appellate Court noted the claim handler’s only “contacts” with Texas involved mailing a letter to the Texas estate. The Court found all the business of insurance activities – reviewing medical records, reviewing the life insurance application, conducting the claim investigation – took place out of state.

The Court specifically noted even though a jury could still find the claim handler violated the Texas Insurance Code, committing an act does not give Texas state courts jurisdiction over the actor.

What Does This Mean For Me?

As a policyholder or Public Adjuster representing policyholders, we hope your claims resolve without resorting to legal representation. If impasse results and attorney recommendations remain the best option, this case remains instructive on whether you should expect to proceed in state or federal court. Unless the carrier representative involved themselves in at least more than sending one letter to Texas, it seems a policyholder should not count on proceeding in Texas state courts.

Motivational Poster Of The Day

1 Buswell v. The GWSPI Company, LLC, 2015 WL5837851; TX Court of Appeals, San Antonio, 10/7/2015.