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UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF TEXAS

SAN ANTONIO DIVISION

444 UTOPIA LANE, LLC and 29360 N. 

HWY 281, LLC

 Plaintiff, 

v. 

PELEUS INSURANCE CO., ET AL.

 Defendants.

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Civil Action No. SA-20-CV-0716-XR

ORDER

On this day, the Court considered Plaintiffs’ Motion to Remand (docket no. 5) and the 

response in opposition thereto. The issue is whether non-diverse party ClearView Risk Insurance 

Programs, LLC d/b/a Strata Underwriting Managers (“Strata Underwriting”) is improperly 

joined. After careful consideration, the Court will deny the motion.

Background

Plaintiffs 444 Utopia Lane, LLC and 29360 N. Hwy 281, LLC brought this insurance 

action against Peleus Insurance Company and Strata Underwriting, alleging that Plaintiffs

purchased a property insurance policy from Strata Underwriting to cover property losses, and 

that a hailstorm caused substantial damage to their property on or about May 26, 2016. Plaintiffs 

allege that they reported the loss to Strata Underwriting and their agents, who assigned a claim 

number. Plaintiffs allege Strata Underwriting then engaged Engle Martin and its adjuster to 

inspect the property and adjust the claim. Plaintiffs allege that the adjuster inspected on March 7, 

2019, and George Mares of Strata Underwriting denied coverage on the grounds that damages

were reported more than 365 days following expiration of the policy according to a covenant in 

the policy. Plaintiffs assert they did not agree to the covenant and that Defendants cannot invoke 

the covenant because they have not shown prejudice from the delay. 

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Plaintiffs sue both Peleus and Strata Underwriting under a joint enterprise liability theory, 

alleging that the policy lists Strata Underwriting as the issuing and responsible entity and names 

Peleus as one of the insurance companies providing coverage. Plaintiffs quote the Declarations 

Certificate, which states, “Strata Underwriting Managers is the underwriting manager for the 

placement of the master policies and the administrator of the insurance programs. Strata 

Underwriting Managers receives commissions and fees related to the insurance programs.” 

Plaintiffs note that Strata Underwriting is also listed as the surplus lines agent, who issued the 

subject insurance policy, and that the Declarations Certificate also names Strata Claims 

Management, LLC, a subsidiary of Defendant Clearview Risk Insurance Programs, LLC, as its 

designated adjuster for any loss or claim under the policy. Plaintiffs further allege that another 

Clearview affiliated entity, Strata Real Estate Services Association, is designated as the first

named insured and makes any claim payment due to the insured who purchased the policy.1

Plaintiffs allege “Stata is the principal in the insurance program with Peleus for the selling and 

issuing of the subject policy and the reporting, administering, and adjusting of any claims under 

that policy.” Plaintiffs allege that “[d]uring the adjustment of the claim, Plaintiffs had no direct 

communications with Peleus, but instead all of the communications came from Strata, including 

the ultimate claim decision.” 

1 The Declarations Certificate includes a “Sole Agent Provision,” which states, 

For any insurance afforded by this policy, Strata Real Estate Services Association shall act on behalf of 

all Named Insured with respect to the giving and receiving of notice of cancellation or nonrenewal, the 

payment of premiums and the receiving of return premiums, and accepting any endorsement issued to 

form a part of this policy. The retail agent is responsible for notifying all insured and lenders of such 

actions.

It also includes a provision titled “Designated Loss Adjusters,” which states that Strata Claims Management, LLC 

will adjust each and every loss unless otherwise designated by Strata Real Estate Services Association.

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Procedural Background

Plaintiffs sent a notice letter to Peleus, Strata Underwriting, and Strata Claims 

Management on December 19, 2019. On March 23, 2020, counsel for Peleus responded, stating 

that, upon receiving notice of the claim, Peleus, with the assistance of Strata Claims 

Management LLC (third party administrator) and Engle Martin & Associates, LLC (independent 

adjusting firm), promptly commenced its investigation and evaluation of the claim, and thereafter 

denied coverage because notice of the claim was untimely. At the end of the letter, counsel 

stated, “as noted in our correspondence dated February 17, 2020, pursuant to Texas Insurance 

Code § 542A.006, [Peleus] has elected to accept the liability of Strata Claims Management, 

LLC, Engle Martin & Associates, LLC, George Mares, Rodger Truitt, and any other agent or 

representative of [Peleus] with respect to (i) the alleged acts or omissions referenced in your 

notice letter dated December 19, 2019 and/or (ii) any other alleged acts or omissions relating to 

the Insured’s Claim.” ECF No. 1-10.

Plaintiffs filed this action on May 8, 2020, bringing claims against Strata Underwriting 

and Peleus for breach of contract, violations of Chapter 541 and Chapter 542 of the Texas 

Insurance Code, DTPA violations, and breach of the duty of good faith and fair dealing. Both 

defendants answered in state court, with Strata Underwriting denying that it is a party to the 

insurance contract. Defendant Peleus removed the case on the basis of diversity jurisdiction, 

asserting that Strata was improperly joined and citing its March 23, 2020 letter accepting liability 

of “any other agent or representative of Peleus.” In a footnote, Peleus also expressly stated its 

election to accept liability of Strata Underwriting with respect to all acts or omissions relating to 

Plaintiffs’ claim. Plaintiffs move to remand, asserting that Strata is properly joined and that 

diversity is lacking.

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Analysis

For diversity jurisdiction to be proper, the “court must be certain that all plaintiffs have a 

different citizenship from all defendants.” Getty Oil Corp., a Div. of Texaco, Inc. v. Insur. Co. of 

N.A., 841 F.2d 1254, 1258 (5th Cir.1988). The removing party bears the burden of showing that 

federal jurisdiction exists and that removal was proper. De Aguilar v. Boeing Co., 47 F.3d 1404, 

1408 (5th Cir. 1995). A removing party can establish federal jurisdiction based on diversity by 

demonstrating that a non-diverse defendant has been “improperly joined.” Smallwood v. Illinois 

Cent. R. Co., 385 F.3d 568, 573 (5th Cir. 2004). To establish improper joinder, a removing party 

must show an “inability of the plaintiff to establish a cause of action against the non-diverse 

party in state court.” Id. (quoting Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir. 2003). A plaintiff 

cannot establish a cause of action against a defendant if there is “no reasonable basis for the 

district court to predict that the plaintiff might be able to recover against” the defendant. 

Smallwood, 385 F.3d at 573. 

A court may resolve the issue in one of two ways. The court may conduct a Rule 

12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether 

the complaint states a claim against the in-state defendant. Ordinarily, if a plaintiff can survive a 

Rule 12(b)(6) challenge, there is no improper joinder. However, in some cases a plaintiff may 

state a claim, but misstate or omit discrete facts that would determine the propriety of joinder; in 

such cases, the district court may, in its discretion, pierce the pleadings and conduct a summary 

inquiry. Smallwood, 385 F.3d at 573; see also Gray v. Beverly Enterprises-Miss., Inc., 390 F.3d 

400, 405 (5th Cir. 2004) (“the court may ‘pierce the pleadings’ and consider summary judgmenttype evidence to determine whether the plaintiff truly has a reasonable possibility of recovery”). 

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Peleus asks the Court to pierce the pleadings and conduct a summary inquiry to make the 

improper joinder determination.2 Such a procedure is appropriate to identify the presence of 

discrete and undisputed facts that would preclude plaintiff’s recovery against the in-state 

defendant. Smallwood, 385 F.3d at 573-74.3“For example, the in-state doctor defendant did not 

treat the plaintiff patient, the in-state pharmacist defendant did not fill a prescription for the 

plaintiff patient, a party’s residence was not as alleged, or any other fact that easily can be 

disproved if not true.” Id. at 574 n.12. 

Peleus contends that Plaintiffs’ Petition misstates or omits discrete facts critical to this 

Court’s improper joinder analysis, including (without limitation): (a) known facts regarding 

Peleus’s relationship with Strata Underwriting Managers; (b) known facts regarding Strata 

Underwriting Manager’s role in the issuance of the insurance policy under which Plaintiffs seek 

coverage and the investigation/evaluation of the insurance claim made the basis of this lawsuit; 

and (c) the fact that Peleus elected to accept legal liability for any alleged acts or omissions of its 

agent – Strata Underwriting Managers – relating to the claim. Peleus contends that Strata 

Underwriting was Peleus’s managing general agent with respect to the binding and issuance of 

the policy, but that Strata Underwriting is not a party to the policy. Defendant contends that 

Plaintiffs have no viable right of recovery against Strata Underwriting because Peleus elected to 

accept legal responsibility for the alleged acts and/or omissions forming the basis of Plaintiff’s 

claims against Strata under Texas Insurance Code Chapter 542A.

2 Peleus also contends that the pleadings fail to state a claim against Strata Underwriting, but the pleadings satisfy 

Rule 12(b)(6), and in any event, the Fifth Circuit has directed courts to “use one and only one of [the two methods], 

not neither or both.” Int’l Energy Ventures Mgmt., LLC v. United Energy Grp., Ltd., 818 F.3d 193, 207 (5th Cir. 

2016).

3 However, the Court must “take into account the ‘status of discovery’ and consider what opportunity the plaintiff 

has had to develop its claims against the non[-]diverse defendant.” Davidson v. Georgia-Pac. LLC, 819 F.3d 758, 

765 (5th Cir. 2016) (quoting McKee v. Kan. City S. Ry. Co., 358 F.3d 329, 334 (5th Cir. 2004)). An absence of proof 

by the plaintiff is not alone sufficient for establish improper joinder.

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In their motion to remand, Plaintiffs contend that Strata was properly joined because “its 

conglomeration of entities provided insurance to Utopia through a Joint Venture with Peleus[;]

specifically Strata: (1) sold the policy; (2) underwrote the policy; and (3) provided the insurance 

coverage while being a named insured under the policy.” Plaintiffs argue that Peleus essentially 

assigned all of its responsibilities under the policy to Strata, and therefore Strata should be liable 

for both contractual and extra-contractual claims. Plaintiffs note their petition alleges that Strata 

handled virtually all aspects of placement of the insurance policy, that the declaration page is 

printed on Strata letterhead and outlines Strata’s broad powers and compensation, and the policy 

lists Strata as the surplus lines agent who issued the policy. Plaintiffs further allege that Strata 

Real Estate Services Association is the first named insured under the master policy and is 

designated to act on behalf of all Named Insureds. Thus, Plaintiffs contend, because Stratarelated entities sold the policy, underwrote the policy, and one is a named insured, Peleus and 

Strata were engaged in a joint enterprise to provide Plaintiffs with insurance. Plaintiffs contend 

that this is a valid theory of liability and claim under Texas law, citing Seureau v. ExxonMobil 

Corp., 274 S.W.3d 206, 222 (Tex. App.—Houston [14th Dist.] 2008, no pet.).

Plaintiffs further contend that Peleus could not elect to accept responsibility for Strata 

under Chapter 542A because it allows insurers to accept responsibility for adjusters and claims 

representatives, and is limited to whatever liability an agent might have. Plaintiffs argue that 

Strata was not an agent of Peleus in relation to the claim. Plaintiffs acknowledge that Peleus 

validly accepted responsibility for Strata Claims Management, the designated loss adjuster, and 

Plaintiffs did not sue Strata Claims Management. Rather, Plaintiffs sued Strata Underwriting, the 

underwriting manager, managing general agent, and surplus lines agent, and the actions Plaintiffs 

complain of to establish the joint venture predate the claim by more than 32 months. Plaintiffs 

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also argue that Strata cannot be both an insured (as Strata Real Estate) and an agent of the insurer 

on the same claim, that there are breach of fiduciary duty implications and “too many irons in the 

fire to clearly determine [that Strata] is an ‘agent’ of the ‘insurer’ in relation to the ‘claim.’” ECF 

no. 5 at 9. Plaintiffs contend that Strata Underwriting did not engage in any acts or omissions 

relating to the claim for Peleus to accept liability for, and thus it cannot accept liability for Strata

Underwriting.

Section 542A.006 provides that in any action to which Chapter 542A 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.” TEX. INS. CODE § 542A.006(a). 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. TEX. INS. CODE § 542A.006(b). 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(c). In any case, an insurer 

“may not revoke, and a court may not nullify, an insurer’s election.” TEX. INS. CODE § 

542A.006(f). The statute does not require the insurer’s written notice of the election to be made 

in any particular form, nor does it require the insurer to take any steps other than the election in 

order for the court to dismiss the action against the agent. “Agent” is defined as “an employee, 

agent, representative, or adjuster who performs any act on behalf of an insurer.” TEX. INS. 

CODE § 542A.001.

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The Court must decide if the evidence demonstrates that Plaintiff has no possibility of 

recovery against Strata Underwriting. Cumpian v. Alcoa Word Alumina, LLC, 910 F.3d 216, 220 

(5th Cir. 2018). The question is thus whether the evidence demonstrates that Strata Underwriting 

was Peleus’s agent with respect to its acts or omissions related to Peleus’s claim and whether 

Peleus accepted whatever liability it might have.

In this case, Peleus contends it made the election to accept responsibility for Strata 

Underwriting before Plaintiffs filed suit, and then re-iterated its election in its Notice of 

Removal. Peleus contends that Strata Underwriting is its agent with respect to the claim. It 

provides evidence in the form of an Affidavit from Tim Drake, Vice President – Claims 

Litigation for Strata Underwriting. He states that Strata Underwriting acted as the managing 

general agent for Peleus with respect to the binding and issuance of the policy and corresponding 

declarations certificate and acted as the surplus lines agent for Peleus with respect to the 

placement of the policy. Drake states that Strata Underwriting is not an insurer and is not a party 

to the policy, and all actions undertaken by Strata Underwriting with respect to the policy and/or 

Plaintiff’s claim for coverage were taken in its capacity as managing general agent for Peleus. 

Peleus contends that Strata Underwriting had no role in determining the cause, extent, and/or 

timing of the physical loss or damage made the basis of Plaintiff’s claim, nor did it make any 

recommendations or decisions as to whether the physical loss or damage made the basis of the 

Claim was covered under the policy.

Despite the allegations in their Petition, Plaintiffs do not dispute that Strata had no role in 

processing or denying their claim, and instead argue that Strata’s conduct as underwriting 

manager, managing general agent, and surplus lines agent is the basis for Plaintiffs’ joint venture 

claims against Strata Underwriting, and that Peleus cannot accept liability for these actions 

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because they do not relate to the claim. Plaintiffs allege that Peleus and Strata Underwriting were 

engaged in a joint enterprise to provide Plaintiffs with insurance. Plaintiffs argue that Strata 

Claims Management was the adjuster and is an agent for whom Peleus properly accepted 

liability, but Strata Underwriting “was the underwriting manager, managing general agent, and 

surplus lines agent, with regard to placement of the policy and creation of the insurance 

program” and “[a]ll of these actions predate the claim by more than 32 months” and form “the 

basis for Plaintiffs’ joint venture claims against Defendant Strata.” Plaintiffs assert that their 

chief complaint is about the reporting time requirement in the policy (used as the basis to deny 

the claim) being contrary to Texas law. Plaintiffs further contend that Strata is not clearly an 

agent of the insurer Peleus in relation to the claim because Defendant Strata’s subsidiary, Strata 

Real Estate Services, is the first named insured and the sole agent for Plaintiffs.

Plaintiffs incorrectly attempt to limit the scope of “agent” in § 542A.006 to 

representatives and adjusters. However, the definition includes any “employee, agent, 

representative, or adjuster who performs any act on behalf of an insurer.” TEX. INS. CODE §

542A.001. Thus, it clearly includes agents beyond representatives and adjusters. And, as 

Plaintiffs acknowledge, this Court has already decided that it can include entities, not just 

individuals. Bexar Diversified MF-1, LLC v. Gen. Star. Indemnity Co., No. SA-19-CV-00773-

XR, 2019 WL 6131455, at *5 (W.D. Tex. Nov. 18, 2019). Peleus may accept “whatever liability 

an agent might have to [Plaintiffs] for the agent’s acts or omissions related to the claim.” A 

“claim” is a first-party claim that is made by an insured under an insurance policy for real 

property, must be paid by the insurer directly to the insured, and arises from damage to or loss of 

covered property caused by forces of nature. “Acts or omissions related to the claim” is not 

restricted solely to claims handling once the insured files a claim. Thus, Strata Underwriting’s 

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acts or omissions in placing the insurance, as Peleus’s agent, are within the scope of § 542A.006. 

Peleus has provided uncontradicted evidence that Strata Underwriting acted as its agent in 

placing the insurance. The fact that another Strata entity, Strata Real Estate Services, has a role 

as a named insured does not alter the fact that Strata Underwriting is an agent for Peleus (as 

Plaintiffs admit) with respect to the acts complained of, and those acts relate to Plaintiff’s claim 

such that Peleus can accept liability for its acts and omissions. 

Although Peleus did not name Strata Underwriting as an agent for whom it accepted 

liability in its letter of March 2020, it included broadly “any agent” and then expressly named 

Strata Underwriting in its Notice of Removal. As Plaintiff concedes, this Court has previously 

decided that both pre-suit and post-suit elections of acceptance of liability are sufficient to 

establish improper joinder. Bexar Diversified MF-1, LLC v. Gen. Star. Indemnity Co., No. SA19-CV-00773-XR, 2019 WL 6131455, at *5 (W.D. Tex. Nov. 18, 2019). Thus, the Court finds 

that Strata Underwriting is improperly joined, and otherwise finds that diversity of citizenship 

exists between Plaintiffs and Peleus and that the amount in controversy requirement is met.

Conclusion

Plaintiff’s motion to remand (docket no. 5) is DENIED. The Court finds that Clearview 

Risk Insurance Programs, LLC d/b/a Strata Underwriting Manages is improperly joined and 

therefore DISMISSES all claims against it WITHOUT PREJUDICE for lack of subject matter 

jurisdiction.

SIGNED August 11, 2020.

XAVIER RODRIGUEZ

UNITED STATES DISTRICT JUDGE

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