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A federal district court in Texas has issued a decision that may serve as a roadmap for insureds and their attorneys interested in having their coverage cases heard in a Texas state court rather than having them removed by insurers to federal court.

The Case

In August 2017, Hurricane Harvey's winds and rain damaged the Texas home owned by Joan Murray. Ms. Murray timely submitted a claim to her insurer, Allstate Vehicle and Property Insurance Company, for losses to the roof, vents, flashings, windows, window screens, fascia, gutters, downspouts, the HVAC system, and interior areas of the kitchen, dining room, guest room, master closet, and garage.

Ms. Murray subsequently sued Allstate, an Illinois corporation, in a Texas state court, alleging breach of contract, violations of the Texas Insurance Code and the Deceptive Trade Practice Act (“DTPA”), breach of the common law duty of good faith, and fraud.

Ms. Murray also sued Allstate's claim adjuster, Brandon Chisolm, a Texas citizen, for violations of Chapter 541 of the Texas Insurance Code and the DTPA, and for common law fraud, negligence, and gross negligence.

She alleged that Allstate had assigned Mr. Chisolm, an in-state adjuster, to evaluate her claim; that he had inspected the property and estimated the damages at $4,467.71, below the deductible, while a third-party adjuster's evaluation was $36,645.98; that his damage estimates were unfair and deceptive; that he had found only 47 damaged items, while the third-party adjuster found 109; and that he had an incentive to undervalue damages to maintain his employment, and that he had done so.

Ms. Murray also alleged that Mr. Chisolm knew of the deductible and misrepresented the property damage, stating that it was from wear and tear or a previous claim, to avoid Allstate having to pay.

Allstate removed based on diversity jurisdiction under 28 U.S.C. § 1332(a), arguing that Mr. Chisolm had been improperly joined to defeat federal jurisdiction.

Ms. Murray responded, arguing that she had pleaded enough facts to state plausible claims against Mr. Chisolm.

The District Court's Decision

The district court remanded the case to state court.

In its decision, the district court explained that Ms. Murray's complaint “closely track[ed] the language of the Texas Insurance Code and the DTPA.”

The district court added that she also alleged “specific facts” to state a plausible claim against the adjuster: “that the adjuster estimated damages in an amount substantially lower than the third-party adjuster; conducted an inadequate inspection; and knowingly or recklessly underestimated the losses in order to reach a result below the deductible.”

The district court concluded that Ms. Murray had stated “a sufficient factual basis to raise a reasonable possibility” that she might recover against Mr. Chisolm. Accordingly, it ruled, he had been “properly joined” and Allstate's removal was improper.

The case is Murray v. Allstate Vehicle and Property Ins. Co., No. H-18-3411 (S.D. Tex. Oct. 31, 2018). Attorneys involved include: For Joan Elaine Murray, Plaintiff: Chad Troy Wilson, LEAD ATTORNEY, Chad T. Wilson Law Firm PLLC, Webster, TX; David P Wilson, LEAD ATTORNEY, Provost & Umphrey, Beaumont, TX; Tara Lace Peveto, LEAD ATTORNEY, Chad T. Wilson Law Firm, Webster, TX. For Allstate Vehicle and Property Insurance Company, Defendant: Robert Edward Valdez, Valdez Trevino PC, San Antonio, TX.

Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.