State Farm Wins Jurisdiction Fight

Carol Keough March 21, 2013

Policyholders and insurers usually face an initial jurisdiction fight over a lawsuit filed in state court because insurers find federal jurisdiction more appealing than state court.  On February 19, 2013, the federal Western District of Texas found in favor of State Farm and denied sending the Texas Insurance Code and Deceptive Trade Practices lawsuit of two homeowners, Ronald and Annie DeCluette, back to state court.  To prevent an insurer from removing a case to federal court, plaintiffs frequently sue insurance adjusters directly.  Under 28 U.S.C.1332, if both plaintiffs and defendants are citizens of the same state,  then a case cannot be removed to federal court for diversity.  The DeCluettes added the adjuster as a Defendant in DeCluette v. State Farm Lloyds, 2013 WL 607320,slip opinion,2013.  The Western District Court looked at the DeCluette complaint and found that the facts alleged against the adjuster could not support any independent liability against the adjuster.  Simply suing the adjuster is not enough to keep a case in state court.  State Farm successfully argued that the adjuster was improperly joined and there was no possibility of a recovery from the adjuster.  The Western District Court denied the plaintiffs motion to send this case back to the state court.   Lesson learned:  time spent on jurisdiction can be critical to where the lawsuit will be tried with an out of state Defendant.

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