UNITED STATES DISTRICT COURT 

WESTERN DISTRICT OF TEXAS 

EL PASO DIVISION 

PROJECT VIDA and P.V. COMMUNITY 

DEVELOPMENT CORPORATION, 

Plaintiffs, 

v. 

PHILADELPHIA INDEMNITY 

INSURANCE COMPANY and ROBERT 

L. BETTS, 

Defendant.

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EP-20-CV-00082-DCG

MEMORANDUM ORDER REMANDING CASE 

 Presently before the Court is Plaintiffs Project Vida and P.V. Community Development 

Corporation’s (collectively, Plaintiffs) “Motion to Remand” (ECF No. 5) filed on April 7, 2020. 

The case originated in the 327th Judicial District Court of El Paso County, Texas, and by the 

instant motion, Plaintiffs request the Court to remand the case to that court. For the reasons that 

follow, the Court grants the motion. 

I. BACKGROUND 

This case involves an insurance claim for hail damage to a real property. Plaintiffs are 

Texas non-profit corporations with their principal offices located in El Paso County, Texas.1

 

Defendant Philadelphia Indemnity Insurance Company (hereinafter, Philadelphia Insurance) is 

an insurance company formed under Pennsylvania law with its principal place of business in 

Bala Cynwyd, Pennsylvania.2

 Defendant Robert L. Betts is an individual who resides in El Paso 

1

 Pl.’s Original Pet. at ¶ 3 (hereinafter, “Pet.”), ECF No. 1-1.

2

 Notice of Removal, at 2. 

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County, Texas; Philadelphia Insurance, through an adjusting firm, retained Betts as the adjuster 

for the insurance claim at issue.3

Plaintiffs own, among others real properties, the property located at 3612 Pera Avenue, 

El Paso, Texas 79905 (the “Pera Property”).4

 The Pera Property (also known as Naftzger Clinic) 

is a 7,923 square foot building and functions as a community center with a healthcare center and 

an early childhood development center.5

 Philadelphia Insurance issued Commercial Property 

Policy No. PHPK1458047 (the “8047 Policy”) to Plaintiffs, effective from February 21, 2016 

and February 21, 2017.6 The 8047 Policy provided coverage for loss and damage to the Pera 

Property caused by, among other perils, hailstorms.7 

On November 4, 2016, which fell within the 8047 Policy period, a hailstorm caused 

damage to the Pera Property.8

 Plaintiffs timely submitted an insurance claim, and Philadelphia 

Insurance assigned claim number PHNP17091108228 to Plaintiffs’ claim (the “Pera Claim”).9 

Philadelphia Insurance retained the adjusting firm Sedgwick to investigate the claim, and 

Sedgwick, in turn, assigned the claim to Betts.10 Betts, as the assigned adjuster, retained the 

services of an engineer, Gary L. Whightsil, with the engineering firm of Unified Investigations & 

3

 Pet. at ¶¶ 5, 13; Pl.’s Mot. to Remand at 1. 

4 Id. at ¶ 9. 

5 Id.; Def. Resp. to Mot., Ex. 5, ECF No. 6-5. 

6

 Pet. at ¶ 10. 

7 Id. at ¶¶ 10–11. 

8 Id. at ¶ 11. 

9 Id. at ¶ 13. 

10 Pl.’s Mot. to Remand at 1; Def.’s Resp. to Mot. at 2. 

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Sciences, Inc., a Sedgwick related company, to inspect the Pera Property and prepare written 

reports.11 

Betts and Whightsil inspected the Pera Property, and Whightsil submitted a written report 

dated September 29, 2016.12 Whightsil’s report concluded that there was no wind or hail 

damage to the property’s roofing and that any interior water intrusion resulted from pre-existing 

openings.13 On February 16, 2018, Philadelphia Insurance sent a letter to Plaintiffs denying 

coverage and payment on the Pera Claim and closed the claim.14 Thereafter, Plaintiffs retained 

their own adjuster who determined that the actual cost to repair or replace all of the covered 

storm damage to the Pera Property exceeded $500,000.00.15

According to Philadelphia Insurance’s evidence, on May 21, 2018, Plaintiffs’ real 

property located at 4875 Maxwell Avenue, El Paso, TX 79904 (the “Maxwell Property”), 

allegedly sustained wind and hail damage.16 At the time, the Maxwell Property was insured 

under Commercial Policy No. PHPK1779181 (the “9181 Policy”) issued by Philadelphia 

Insurance; the policy period ran from February 21, 2018 to February 21, 2019.17 Plaintiffs 

submitted a claim for the alleged damage to the Maxwell Property, and Philadelphia Insurance 

assigned claim number PHNP19011241177 (the “Maxwell Claim”).18

11 Pet at ¶¶ 15–16; Def.’s Resp. to Mot. at 2; id., Ex. 3, ECF No. 6-5. 

12 Pet at ¶ 16; Def.’s Resp. to Mot., Ex. 3. 

13 Pet. at ¶ 16. 

14 Id. at ¶ 18; Def.’s Resp. to Mot. at 2. 

15 Pet. at ¶ 18. 

16 Def.’s Resp. to Mot., Ex. 6, ECF No. 6-6. 

17 Id., Ex. 7, ECF no. 6-7. 

18 Id., Ex. 6; Def.’s Resp. to Mot. at 2–3. 

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On April 16, 2019, Plaintiffs, by and through their counsel, sent a demand letter to Betts 

regarding the Pera Claim.19 On the same day, Plaintiffs’ counsel separately sent demand letters 

regarding claims on other properties, including the Maxwell Claim.20 On August 9, 2019, 

pursuant to Section 542A.006(a) of the Texas Insurance Code, Philadelphia Insurance, by and 

through its counsel, sent a letter to Plaintiffs’ counsel, to serve as a notice of its election to accept 

Bett’s liability, if any, to Plaintiffs.21 

On February 14, 2020, Plaintiffs brought this lawsuit in state court; the basis of the 

lawsuit is Defendants Philadelphia Insurance and Bett’s (collectively as “Defendants”) alleged 

misconduct in connection with the Pera Claim. Plaintiffs assert claims for violations of Chapter 

541 of the Texas Insurance Code (specifically, Tex. Ins. Code §§ 541.060(a)(1), 

541.060(a)(2)(A), 541.060(a)(4), 541.060(a)(7), and 541.051(1)(B)) against Defendants.22 

Plaintiffs assert additional state-law claims against Philadelphia Insurance. 

On March 24, 2020, Philadelphia Insurance removed the action to federal court premised 

upon diversity jurisdiction, 28 U.S.C. § 1332. Philadelphia Insurance claims that Betts, who is 

non-diverse, was improperly joined because by sending the August 9, 2019 letter, it elected to 

accept Betts’ liability; it asks the Court to assume jurisdiction over this lawsuit and dismiss 

Betts.23 On April 7, 2020, Plaintiffs filed the instant motion to remand. Philadelphia Insurance 

filed a response thereto, and Plaintiffs followed by filing their reply. 

19 Def.’s Resp. to Mot., Ex. 8, ECF No. 6-8. 

20 Id., Exs. 9, 11, ECF Nos. 6-9, 6-11. 

21 Id., Ex. 1, ECF No. 6-1. 

22 Pet. at ¶¶ 42–44. 

23 Notice of Removal at 2, 4–5. 

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II. DISCUSSION 

“The right of removal is entirely a creature of statute[,] and a suit commenced in a state 

court must remain there until cause is shown for its transfer under some act of Congress.” Hood 

ex rel. Mississippi v. JP Morgan Chase & Co., 737 F.3d 78, 84 (5th Cir. 2013). The federal 

removal statute allows for the removal of “any civil action brought in a State court of which the 

district courts of the United States have original jurisdiction.” 28 U.S.C. § 1441(a). To remove 

the case to federal court, Philadelphia Insurance invoked the district court’s diversity jurisdiction 

under 28 U.S.C. § 1332(a). “Diversity jurisdiction requires . . . ‘complete diversity’ of parties—

that all persons on one side of the controversy be citizens of different states than all persons on 

the other side.” Moss v. Princip, 913 F.3d 508, 514 (5th Cir. 2019) (quotation omitted). 

“The improper joinder doctrine constitutes a narrow exception to the rule of complete 

diversity.” McDonal v. Abbott Labs., 408 F.3d 177, 183 (5th Cir. 2005). To establish a claim for 

improper joinder, the party seeking removal must demonstrate either “(1) actual fraud in the 

pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action 

against the non-diverse party in state court.” Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 

573 (5th Cir. 2004) (en banc). Here, actual fraud has not been claimed; at issue is the second 

situation. Under this situation, the inquiry is: “whether the defendant has demonstrated that there 

is no possibility of recovery by the plaintiff against an in-state defendant.” Id. at 573. To 

determine such possibility of state-court recovery, a court may conduct a Rule 12(b)(6)-type 

analysis to assess the sufficiency of a plaintiff’s pleadings alone; or, in its discretion, “pierce the 

pleadings and conduct a summary inquiry,” id. at 574, considering “summary-judgment type 

evidence,” Davidson v. Georgia-Pac., L.L.C., 819 F.3d 758, 766 (5th Cir. 2016). “Ultimately, 

the burden is on the removing party; and the burden of demonstrating improper joinder is a 

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heavy one.” African Methodist Episcopal Church v. Lucien, 756 F.3d 788, 793 (5th Cir. 2014) 

(brackets and quotation omitted). 

Here, for purposes of diversity jurisdiction, Plaintiffs and Betts are citizens of Texas. 

Philadelphia Insurance however claims that Betts was improperly joined. It does not challenge 

the sufficiency of Plaintiffs’ pleading against Betts, but nudges the Court to conduct a summary 

inquiry. Specifically, it points out that prior to the lawsuit, it made an election under Section 

542A.006(a) of the Texas Insurance Code, assuming Betts’ liability and sent a letter to that effect 

to Plaintiffs. Def.’s Resp. to Mot. at 1. Consequently, it argues, there is no cause of action 

against Betts and in turn, Plaintiffs cannot recover against Betts. Notice of Removal at 3. 

Enacted in 2017 as part of Texas House Bill 1774, a tort-reform bill popularly known as 

the “hailstorm” bill, see Amy E. Stewart, 2017 Insurance Law Update, 83 The Advoc. (Texas) 7, 

1 (2018) (Westlaw citation, 83 ADVOCTX 7), Section 542A.006, provides in relevant part: 

(a) . . . in an action to which this chapter applies, an insurer that is a party to the 

action may elect to accept whatever liability an agent might have to the claimant 

for the agent’s acts or omissions related to the claim by providing written notice 

to the claimant. 

 

(b) If an insurer makes an election under Subsection (a) before a claimant files an 

action to which this chapter applies, no cause of action exists against the agent 

related to the claimant’s claim, and, if the claimant files an action against the 

agent, the court shall dismiss that action with prejudice. 

(c) If a claimant files an action to which this chapter applies against an agent and 

the insurer thereafter makes an election under Subsection (a) with respect to the 

agent, the court shall dismiss the action against the agent with prejudice. 

Tex. Ins. Code § 542A.006(a)–(c). As Philadelphia Insurance’s election of liability was made 

before Plaintiffs initiated this lawsuit, § 542A.006(b) governs. 

Plaintiffs point out that the pre-suit letter Philadelphia Insurance sent to serve as a Section 

542A.006(a) notice states that it “elects to accept liability, if any, Robert Betts, . . . may have to 

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your clients for their acts, omissions, statutory violations or other wrongdoing related to the 

claim referenced above.” Def.’s Resp. to Mot., Ex. 1 (emphasis added), ECF No. 6-1. At the 

top of the letter, it provides the Maxwell Claim’s number and date of loss therefor—i.e., 

PHNP19011241177 and May 21, 2018—but this lawsuit turns on the Pera Claim, i.e., Claim 

PHNP17091108228, and its date of loss was November 4, 2016. Id. Further, elsewhere, the 

letter refers to the 8191 Policy—which was not in effect on November 4, 2016; instead, the 8047 

Policy, pursuant to which Plaintiffs assert their causes of action in this lawsuit, was in effect on 

that date. Id. at 2. 

In arguing that its election letter was for the Pera Claim, Philadelphia Insurance points 

out that at the top of the letter, also listed is the address of the Pera Property, not that of the 

Maxwell Property. Def.’s Resp. to Mot. at 7; id., Ex. 1. Further, the letter refers to inspection 

reports prepared by Whightsil and another engineer, Luis Espino. Def.’s Resp. to Mot. at 7; id., 

Ex. 1. Although each of these reports mentions the address of the Pera Property, the election 

letter misstates the date of the Whightsil report. Def.’s Resp. to Mot., Exs. 3–4, ECF Nos. 6-3, 

604. Based on these, Philadelphia Insurance claims that the letter provided adequate notice, 

despite “the alleged typographical oversight” about the claim number. Id. at 7. 

As one court has observed, neither Texas courts nor the Fifth Circuit have provided 

guidance as to what constitutes sufficient notice of election under Section 542A.006(a). 

Greatland Inv., Inc. v. Mt. Hawley Ins. Co., No. CV H-19-1212, 2019 WL 2120854, at *3 (S.D. 

Tex. May 15, 2019). Philadelphia Insurance points out that unlike Section 542A.003, which 

requires that a claimant’s (like Plaintiffs here) pre-suit notice to the insurance company must 

contain a statutory list of information, see Tex. Ins. Code § 542A.003(b), Section 542A.006 

provides for no such information. While that is true, Section 542A.006(a) provides that the 

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insurance company may accept its agent’s liability “for the agent’s acts or omissions related to 

the claim by providing written notice to the claimant.” Tex. Ins. Code § 542A.006(a) (emphasis 

added). The plain language of Section 542A.006(a), therefore, suggests that an insurance 

company’s election of its agent’s liability is effective as to a specific claim. 

Here, at minimum, Philadelphia Insurance’s election letter contains statements and 

information that present an ambiguity as to whether its election of liability was made for the Pera 

Claim or the Maxwell Claim. On motion to remand, the Court resolves this ambiguity in favor 

of remand, concluding that the letter is most reasonably read as being related to the Maxwell 

Claim—not the Pera Claim, which is at issue in this lawsuit, and consequently, remand is 

warranted.24 See Rico v. Flores, 481 F.3d 234, 245 (5th Cir. 2007) (In making an improperjoinder inquiry, “we are obliged to resolve any contested issues of material fact, and any 

ambiguity or uncertainty in the controlling state law, in plaintiffs’ favor.” (brackets and quotation 

omitted)). 

Further, to argue that remand is unnecessary, Philadelphia Insurance states that if the case 

is remanded, it intends to adopt Betts’ liability (presumably with appropriate information 

identifying the Pera Claim) and that would render the case removable again. Def.’s Resp. to 

Mot. at 10–11. The only thing accomplished by the remand, continues Philadelphia Insurance, 

24 Philadelphia Insurance points out that in Greatland, the district court held that a Section 542A 

election letter that did not specifically name the insurer’s agent was nonetheless a sufficient “written 

notice” under that section. Def.’s Resp. to Mot. at 6. In Greatland, the insurance company’s notice 

stated: “Pursuant to section 542A.006(b), Mt. Hawley [i.e. the insurance company] therefore elects to 

accept any liability for any alleged acts or omissions relating to this claim by its employees, as well as 

Engle Martin & Associates, Risk Placement Services, Inc., and their respective employees.” Greatland 

Inv., Inc., 2019 WL 2120854, at *3 (emphasis added). There was no dispute that the non-diverse 

individual defendant, an insurance adjuster, “was an Engle Martin employee at the time of the inspection 

at issue.” Id. Thus, the broader, more general language “Engle Martin & Associates . . . and their 

respective employees” encompassed the adjuster—though the adjuster’s name was not specifically stated 

in the election letter. No such broader language to describe claim(s), much less one that may be read to 

encompass the Pera Claim, is present in Philadelphia Insurance’s letter; Greatland is therefore 

distinguished. 

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would be delaying litigation of this matter by a number of months. Id. at 11. A post-lawsuit 

election of agent liability is governed by Subsection (c) of 542A.006, quoted supra. Although 

Philadelphia Insurance’s hypothetical notice of successive removal is not before the Court, it 

makes the following observations. 

As Philadelphia Insurance recognizes, there is a spilt among the district courts in this 

circuit over the effect a § 542A.006(a) election’s timing has on the improper-joinder analysis. 

Yarco Trading Co., Inc. v. United Fire & Cas. Co., 397 F. Supp. 3d 939, 949–50 (S.D. Tex. 

2019) (citing River of Life Assembly of God v. Church Mut. Ins. Co., No. 1:19-CV-49-RP, 2019 

WL 1468933 (W.D. Tex. Apr. 22, 2019) (Pitman, J.)). One line of decisions holds that a § 

542.006(a) election made after a lawsuit commences but before removal renders the in-state 

adjuster improperly joined because § 542.006(c) “requires that the adjuster be dismissed with 

prejudice” precluding any recovery against the adjuster. Shenavari v. Allstate Vehicle & Prop. 

Ins. Co., No. 4:19-CV-4159, --- F. Supp. 3d ---, 2020 WL 1430529, at *3 (S.D. Tex. Mar. 23, 

2020) (collecting illustrative cases). The other line of decisions, which constitutes the majority 

view, concludes that “the touchstone of the improper joinder inquiry is whether parties were 

improperly joined at the time of joinder,” and therefore, a post-lawsuit § 542.006(a) election 

“does not by itself establish improper joinder.” Id. (same); Williams v. Allstate Vehicle & Prop. 

Ins. Co., No. 3:19-CV-0320-N, 2019 WL 3304684, at *3 (N.D. Tex. July 23, 2019). 

That split creates an ambiguity which must be resolved in favor of remand. See Manguno 

v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (“Any ambiguities are 

construed against removal because the removal statute should be strictly construed in favor of 

remand.”); see also Gasch v. Hartford Accident & Indent. Co., 491 F.3d 278, 281 (5th Cir. 2007) 

(“As the effect of removal is to deprive the state court of an action properly before it, removal 

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raises significant federalism concerns.” (quotation omitted)); B., Inc. v. Miller Brewing Co., 663 

F.2d 545, 546 (5th Cir. Unit A, Dec. 1981) (“[W]e should constantly remind ourselves that we 

must not trespass upon the judicial ‘turf’ of the state courts.”). 

III. CONCLUSION 

 For the foregoing reasons, IT IS ORDERED that Plaintiffs’ “Motion to Remand” (ECF 

No. 5) is GRANTED and therefore, the above-captioned cause is REMANDED to the 327th 

Judicial District Court of El Paso County, Texas. 

IT IS FURTHER ORDERED that all other pending motions, if any, are DENIED AS 

MOOT, and that the District Clerk shall CLOSE this matter. 

So ORDERED and SIGNED this 7th day of May 2020. 

____________________________________ 

DAVID C. GUADERRAMA 

UNITED STATES DISTRICT JUDGE

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