Thanks for visiting! Welcome to a new way to research case law. You are viewing a free summary from Descrybe.ai. For citation and good law / bad law checking, legal issue analysis, and other advanced tools, explore our Legal Research Toolkit — not free, but close.
Vyas v. Atain Specialty Ins. Co.
Citation: 380 F. Supp. 3d 609Docket: Civil Action No. H-19-960
Court: District Court, S.D. Texas; May 15, 2019; Federal District Court
Lee H. Rosenthal, Chief United States District Judge, presided over a case involving plaintiffs Sucheta Vyas and Davis Vyas (collectively "Vyas") who filed suit against Atain Specialty Insurance Company and Team One Claims in Texas state court. The Vyas alleged that the defendants inadequately investigated and underpaid an insurance claim related to storm damage to their hotels. Atain Insurance removed the case to federal court, claiming diversity jurisdiction and asserting that Team One was improperly joined as a defendant. Vyas responded with a motion to remand, arguing Team One was a proper defendant, which led to conflicting contentions regarding jurisdiction. The case originated from a February 2018 storm that damaged the Vyas' hotels. Vyas accused Atain Insurance of neglecting to address the damage adequately and paying insufficient compensation. They claimed Team One's investigation was inadequate, failing to recognize significant damage at two of their properties—the Casa Loma Motel and Holiday Plaza Motel. The Vyas contended that Team One's unreasonable investigation resulted in wrongful underpayment and that Atain ratified Team One's findings. In January 2019, Vyas initiated legal proceedings in the 85th Judicial District Court of Brazos County, Texas, alleging breach of contract and violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act against both defendants. Atain Insurance argued for removal based on its non-Texas citizenship and claimed that Vyas improperly included Team One as a defendant, citing Texas Insurance Code § 542A.006, which allows insurers to assume liability for their adjusters' actions. Atain submitted a letter indicating its acceptance of liability for Team One's actions prior to the suit's filing. Vyas's motion to remand was based on the assertion that § 542A.006 prevents insurers from claiming complete diversity when they assume responsibility for adjusters who are non-diverse. Atain contended that Vyas's case against Team One lacked merit since they had accepted liability before the lawsuit commenced, arguing that the claims against Team One had no possibility of success. The court ultimately concluded that there was improper joinder and denied the motion to remand, with detailed reasoning to follow. To remove a case based on diversity jurisdiction under 28 U.S.C. § 1332, the diverse defendant must prove all required elements are met, including complete diversity of citizenship and an amount in controversy exceeding $75,000, excluding interests and costs. A district court cannot exercise jurisdiction if any party has been improperly or collusively joined, with improper joinder typically established by demonstrating the plaintiff's inability to pursue a cause of action against a non-diverse party in state court. The critical determination is whether there is any possibility of recovery against an in-state defendant, meaning the district court must assess if the plaintiff could reasonably expect to succeed against that party. The burden to prove improper joinder is substantial. Courts may apply a Rule 12(b)(6)-type analysis, reviewing the complaint’s allegations to see if they state a valid claim under state law against the in-state defendant. Generally, if a plaintiff can withstand a Rule 12(b)(6) challenge, improper joinder is not present. However, courts can also investigate further if a plaintiff has incorrectly stated or omitted facts that impact the joinder's propriety. Regarding the Texas Insurance Code, as of September 2017, insurers can accept liability for an agent's actions related to a claim through written notice, which mandates the dismissal of claims against the agent with prejudice. Specifically, if an insurer elects to assume liability before a claimant initiates an action, no cause of action exists against the agent. If a claim is filed against the agent after the insurer’s election, the action must also be dismissed with prejudice. There is a split among district courts on whether an insurer's election under § 542A.006 after a lawsuit allows for removal due to improper joinder, particularly when the insurer had previously accepted liability before the agent was named in a lawsuit. Atain Insurance contends that its November 2018 election letter to Vyas renders Team One’s joinder improper, as the letter explicitly accepted liability for Team One's actions regarding the claim. Under Texas law, this acceptance means Vyas has "no cause of action" against Team One, necessitating dismissal of the claims with prejudice according to TEX. INS. CODE. 542A.006(a-b). The court distinguishes this case from those cited by Vyas, which involved post-lawsuit elections, emphasizing that such elections do not affect the analysis of improper joinder. The November 2018 letter indicates that Vyas had "no possibility of recovery" against Team One at the time of the lawsuit. Consequently, the motion to remand is denied, as Atain Insurance is not a Texas citizen and the jurisdictional amount is satisfied. The court also highlights that an insurer's acceptance of responsibility for an agent after a lawsuit begins does not necessarily invalidate the agent's joinder unless independent grounds for improper joinder are demonstrated. Even with viable claims against an insurance agent, an insurer's election of liability can substantiate improper joinder by negating any reasonable expectation of recovery against the agent.