United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit December 14, 2006
Charles R. Fulbruge III
Clerk
No. 06-40675
Summary Calendar
JORGE CASTILLO, as the representative of the Estate of Jorge
Castillo
Plaintiff - Appellant
v.
STATE FARM LLOYDS; STATE FARM LLOYDS INC
Defendants - Appellees
------------------------------------------------------------
JORGE CASTILLO
Plaintiff - Appellant
v.
STATE FARM LLOYDS; STATE FARM LLOYDS INC
Defendants - Appellees
Appeal from the United States District Court For the Southern
District of Texas, McAllen Division
7:05-CV-198
Before DAVIS, BARKSDALE, and BENAVIDES, Circuit Judges.
PER CURIAM*
Plaintiff-Appellant Jorge Castillo, Jr., as representative of
the estate of his father Jorge Castillo, appeals the district
court’s denial of his motion to remand this case to state court and
its subsequent dismissal of the non-diverse defendant State Farm
Lloyds, Inc., as well as the district court’s grant of summary
judgment in favor of Defendant-Appellee State Farm Lloyd’s. For
the following reasons, we AFFIRM the judgment of the district
court.
I. FACTUAL AND PROCEDURAL BACKGROUND
In May 2005, Jorge Castillo (“Castillo”) filed suit in state
court against his homeowners’ insurer, State Farm Lloyd’s (“State
Farm”), and its attorney in fact, State Farm Lloyds, Inc. (“Lloyds,
Inc.”), alleging breach of contract, breach of the duty of good
faith and fair dealing, and violations of the Texas Insurance Code
and the Deceptive Trade Practices-Consumer Protection Act (“DTPA”),
arising from insurance claims submitted by his attorney in 2002.1
State Farm removed the case to federal court, arguing that Lloyds,
Inc., a Texas corporation, was improperly joined, and the amount in
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
1
Castillo initially filed three separate suits against State
Farm and Lloyds, Inc. based on three separate insurance claims.
The district court granted State Farm’s unopposed motion to
consolidate the three removed cases.
2
controversy exceeded $75,000 exclusive of interests and costs.2
Lloyds, Inc. consented to the removal. Castillo then filed a
motion to remand, which the district court denied.
Lloyds, Inc. filed its motion to dismiss arguing that it was
not a proper party to the suit. While this motion was pending,
State Farm and Lloyds, Inc. filed their motion for summary
judgment, arguing that Castillo failed to file suit within the
applicable statute of limitations and that certain policy
provisions precluded coverage for the insurance claims. The
district court concluded that Lloyds, Inc. was not a proper party
to the suit and granted Lloyds, Inc.’s motion to dismiss. The
district court then granted summary judgment in favor of State Farm
on statute of limitations grounds. Castillo now appeals.
II. DISCUSSION
A. Motion to Remand
Castillo first argues that the district court erred by (1)
concluding that Lloyds, Inc. was improperly joined; (2) denying his
motion to remand; and (3) dismissing Lloyds, Inc. from the lawsuit.
We review a denial of remand to state court de novo. Great Plains
Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 311
(5th Cir. 2002). The party invoking the removal jurisdiction on
the grounds of improper joinder bears a heavy burden. See Sid
2
Although addressed by State Farm in its notice of removal,
no issue has been presented to this court regarding whether the
amount in controversy exceeds 75,000 exclusive of interest and
costs.
3
Richardson Carbon & Gasoline Co. v. Interenergy Res., Ltd., 99 F.3d
746, 751 (5th Cir. 1996). The removing party may satisfy its
burden by showing either:(1) actual fraud in the pleading of
jurisdictional facts; or (2) the plaintiff’s inability to establish
a cause of action against the non-diverse party in state court.
Travis v. Irby, 326 F.3d 644, 647 (5th Cir. 2005). Only the latter
method is relevant here because State Farm did not allege actual
fraud. Thus, the relevant question is whether State Farm has shown
that there is no reasonable possibility of recovery against the
non-diverse defendant, Lloyds, Inc., in state court. Smallwood v.
Ill. Cent. R.R., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). A
mere theoretical possibility of recovery is insufficient. Travis,
326 F.3d at 648.
We agree with the district court’s conclusion that there was
no reasonable basis to predict that Castillo might prevail against
Lloyds, Inc. in state court. Castillo argues that Lloyds, Inc. was
properly joined because Lloyds, Inc., in a services agreement with
State Farm Fire & Casualty Co.,3 retained the “ultimate control and
authority” to adjust claims.4 Based on this contractual right of
3
Pursuant to the services agreement, State Farm Fire &
Casualty handles, investigates, and pays or denies insurance
claims made on State Farm policies, and provides the details,
means, and methods of the insurance operations and claims
handling for State Farm. R. 328.
4
Lloyds, Inc. entered into this services agreement acting on
behalf of State Farm.
4
control, Castillo argues that Lloyds, Inc. can be held liable for
the acts and omissions of the adjusters.
State Farm sells insurance under a so-called “Lloyd’s plan,”
which consists of a group of underwriters who combine to issue
insurance through an attorney in fact - in this case, Lloyds, Inc.
See Tex. Ins. Code Ann. § 941.001 (Vernon Supp. 2006). “[T]he
attorney in fact acts as an agent for the Lloyd’s group.” Royal
Insurance Co. of America v. Quinn-L Capital Corp., 3 F. 3d 877, 882
(5th Cir. 1993) (emphasis provided by court); see also Massey v.
State Farm Lloyds Insurance Co., 993 F. Supp. 568, 570 (S.D. Tex.
1998). “[T]he attorney in fact has to be authorized by the
underwriters to execute insurance policies and acts for those
underwriters by so doing.” Quinn-L Capital Corp., 3 F. 3d at 882.
The attorney in fact does not bear risks, and has no contractual
relationship with the insured. Lloyds, Inc. is not even an
insurance company.5
Under Texas law, agents are generally not liable for contracts
entered into on behalf of a principal or for any actions that are
within the scope of their authority. See French v. State Farm Ins.
Co., 156 F.R.D. 159, 162 (S.D. Tex. 1994). Consequently, unless
Lloyds, Inc. was acting outside of the scope of its authority with
5
Lloyds, Inc. does not sell policies of insurance; it does
not earn premium income and it is not required to file an annual
statement with the Texas Department of Insurance in its own name
or for its own account. Lloyds, Inc. has no employees, and it
renders services only as an attorney in fact as authorized by
Texas law.
5
respect to Appellant’s claims, Lloyds, Inc. is not individually
liable. See Arzehgar v. Dixon, 150 F.R.D. 92, 94-95 (S.D. Tex.
1993). Appellant has included no claims of specific wrongdoing on
the part of Lloyds, Inc., nor any claims that might suggest it
acted outside the scope of its authority. Absent allegations that
Lloyds, Inc. was acting in anything other than a representative
capacity or that it actually engaged in any deceptive or unfair
practices in connection with Appellant’s claims, Lloyds, Inc.
cannot be held individually liable. See id. Therefore, the
district court was correct in denying Castillo’s motion to remand
and subsequently dismissing the claims against Lloyds, Inc.
B. Motion for Summary Judgment
Castillo next argues that the district court erred by granting
summary judgment in favor of State Farm. We review a district
court’s grant of summary judgment de novo, applying the same
standard as the district court. Riverwood Int’l Corp. v. Employers
Ins. of Wasau, 420 F.3d 378, 382 (5th Cir. 2005). Castillo argues
that because State Farm made partial payments without any
indication of finality, the statute of limitations did not begin to
run until, at the earliest, July 28, 2003, when State Farm sent a
letter stating that “the claims remained closed.”6 However, State
Farm communicated a final determination on all of Castillo’s claims
by March 31, 2003, when State Farm sent the payments on the kitchen
6
This letter was sent in response to the settlement offer
from Castillo’s attorney.
6
and bathroom claims, along with decision letters on both claims.
This was the last payment made to Castillo. There is no evidence
that State Farm was attempting to string Castillo along ”without
denying or paying a claim . . . .” Murray v. San Jacinto Agency,
Inc., 800 S.W.2d 826, 828 n.2 (Tex. 1990).
The claims process in this case was rather drawn out,
beginning on May 1, 2002, when Castillo submitted a claim for water
damage and mold in the hallway and bedroom, and ending on March 31,
2003, when State Farm issued the above-mentioned decision letters.
On May 30, 2002, after an initial inspection of the house, State
Farm sent a letter and payment to Castillo. On October 24, 2002,
State Farm spoke with Castillo’s attorney’s office regarding a
request for additional living expense (“ALE”) benefits for
Castillo. State Farm stated that ALE benefits were not available
to Castillo because he was not a named insured or spouse of a named
insured.
On December 7, 2002, after receiving the final copy of the
Naismith Engineering report regarding its water assessment and
fungal investigation at Castillo’s house, State Farm sent a letter
to Castillo’s attorney asking him if he wanted to open an
additional claim for bathroom #1. State Farm then inspected the
Castillo house in order to prepare estimates based upon the
Naismith report, even though Castillo had not yet requested that
additional claims be opened. On January 27, 2003, State Farm sent
Castillo a repair estimate and a decision letter on his first
7
claim. The decision letter stated that “this claim is closed as of
today,” but also stated that if Castillo wished to pursue claims
for damage in the kitchen from the dishwasher leak and damage in
the bathroom from the sink leak, Castillo need only submit the two
claims and State Farm would adjust those claims accordingly.
On March 26, 2003, Appellant’s counsel submitted two
additional claims for the kitchen and bathroom. Each claim was
assigned a separate claim number. Since State Farm had already
inspected these areas and determined the scope of the repairs,
State Farm allocated the costs between the two new claims and sent
the payments on these two claims, along with decision letters on
both claims, to Appellant on March 31, 2003. State Farm then
closed its files for these two claims on March 31, 2003.
In light of the above-mentioned correspondence, we agree with
the district court’s conclusion that Castillo’s cause of action
began to accrue, at the latest, upon the issuance of the March 31,
2003, letters. See Mangine v. State Farm Lloyds, 73 S. W. 3d 467,
468 (Tex. App. - Dallas 2002, pet. denied) (holding issuance of
“building estimate” constituted a denial of claim and triggered the
running of the limitations period); see also Provident Life and
Accident Ins. Co. v. Knott, 128 S.W. 3d 211, 223 (Tex. 2004)
(holding letter to policyholder was outright denial although the
letter did not use the word “deny,” but conveyed insurer’s position
that insured was not entitled to portion of benefits claimed). We
agree with the district court that letters from Appellant’s counsel
8
requesting, inter alia, that State Farm reopen the claims do not
toll or extend the limitations period following the claims
decisions. See Pace v. Travelers Lloyds of Tex. Ins. Co., 162
S.W.3d 632, 634-35 (Tex. App. - Houston [14th Dist] 2005, no pet.).
Although State Farm was willing to review additional information
submitted by Appellant’s attorney, State Farm never changed its
position on any of the claims after the final decision letters were
issued on March 31, 2003.
The limitations period for Appellant’s breach of contract
action relating to the insurance policy is two years and one day
pursuant to the express terms of the policy.7 The statute of
limitations for Appellant’s extra contractual causes of action
brought under common law theories,8 under the Texas Insurance Code,
and under the Texas Deceptive Trade Practices Act is two years.
See Tex. Civ. Prac. & Rem. Code § 16.003(a); see Tex. Bus. & Com.
Code § 17.565; see Tex. Ins. Code 21.21 § 16(d);9 see Campbell v.
Texas Employers’ Ins. Ass’n, 920 S.W.2d 323, 329 (Tex. App. -
Houston [1st Dist.] 1995, no pet.). The statute of limitations
period had run on all of the Appellant’s claims by the time
7
The policy provision states in relevant part that “[a]ction
brought against us must be started within two years and one day
after the cause of action accrues.” R. 660.
8
Specifically, Appellant alleges breach of the duty of good
faith and fair dealing.
9
Appellant’s claims were filed under the old Articles 21.21
and 21.55 that have been replaced with Article 541.151 et seq of
the Texas Insurance Code. See Tex. Ins. Code § 541.162(a).
9
Appellant filed suit on May 6, 2005. Therefore, the district court
correctly granted summary judgment to State Farm.
III. CONCLUSION
For the reasons above, the judgment of the district court is
AFFIRMED.
10