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Law360 (November 9, 2020, 4:50 PM EST) -- A Texas federal judge on Monday sent a dentist's COVID-19 coverage suit back to state court in a final ruling and closed the case despite protests by Allstate Insurance Co., saying a magistrate judge's earlier recommendation held up after a period of court review.
U.S. District Judge Fred Biery adopted U.S. Magistrate Judge Richard B. Farrer's October recommendation to return the case to state court, terminating the suit in federal court and holding that no parties could show the report was "erroneous or contrary to law."
"We believe the court followed the law, and we are happy with the remand order," said Shannon Loyd, an attorney representing the dentist. "In Texas, adjusters have liability under the Insurance Code if they fail to conduct a reasonable investigation — which is for a jury to decide."
In October, Judge Farrer said the case should be remanded back to state court, holding that Allstate failed to show a claims adjuster was wrongly joined and that the suit did not meet the diversity of jurisdiction required in federal court.
Judge Farrer said Orsatti DDS PC, a dental office in Bexar County, Texas, has sufficiently alleged the adjuster failed to conduct a proper investigation of its claim.
Allstate fired back at the magistrate's judge's recommendation in late October, saying there was nothing for the claim adjuster to investigate since the dental office did not experience any property damage covered in the policy.
The carrier contended that though the dental office accused adjuster Blessing Sefofo Wonyaku of inadequate claim investigation, there was "no physical evidence" for Wonyaku to consider because Orsatti did not allege COVID-19 was present on its property for the adjuster to inspect.
Allstate claimed the dental practice was trying to increase the complexity of the case by wrongly including Wonyaku, a Texas citizen, to destroy complete diversity of citizenship for the case to stay in federal court.
Last week, in response to the insurer's October objection against sending the case back to state court, the dental office said the claim adjuster was not wrongly joined and that it "clearly has stated numerous plausible claims for relief against" her.
Orsatti suspended business because of the government pandemic closure orders in March. The office said it lost income and filed a coverage claim with Allstate. The Illinois-based carrier then assigned commercial property adjuster Wonyaku to investigate the claim. Orsatti said the adjuster never asked for any documents or information related to its claim.
Allstate subsequently denied coverage, asserting a virus exclusion and a lack of physical damage to Orsatti's property. In June, the dental office sued the insurer in Bexar County state court before the insurer removed the case to federal court a month later.
Counsel for both parties did not immediately respond to calls and emails seeking comment. Allstate could not be immediately reached for comment.
The dental office is represented by Shannon E. Loyd of Loyd Law Firm PLLC.
Allstate is represented by Leanna Anderson of Dentons and Dennis J. Windscheffel of Akin Gump Strauss Hauer & Feld LLP.
The case is Louis G. Orsatti DDS PC v. Allstate Insurance Co. et al., 5-20-CV-00840, in the U.S. District Court for the Western District of Texas.
--Editing by Marygrace Murphy.
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