By Daphne Zhang

Law360 (October 22, 2020, 5:03 PM EDT) -- Allstate Insurance Co. fired back at a Texas magistrate judge's recommendation to send a dentist's COVID-19 coverage suit back to state court, saying it was wrong for the policyholder to add the claim adjuster to the suit to defeat federal jurisdiction.

The carrier said in a Wednesday objection that U.S. Magistrate Judge Richard B. Farrer incorrectly ruled that Orsatti DDS PC, a dental office in Bexar County, Texas, sufficiently stated its claim against insurance claim adjuster Blessing Sefofo Wonyaku.

Earlier in October, Judge Farrer recommended the case to be remanded back to state court, ruling that Allstate failed to show that it wasn't right for the claims adjuster to join the suit. The judge said Orsatti sufficiently alleged that the adjuster failed to conduct a proper investigation of its claim.

On Wednesday, Allstate contended that though the dental office accused Wonyaku of inadequate claim investigation, it failed to show "a single document or piece of evidence that she should have considered," and there was "no physical evidence" for Wonyaku to consider because the office never experienced any physical damage covered under its policy.

The carrier claimed that the dental practice is 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.

"Texas federal courts have long recognized the 'popular tactic' of naming non-diverse insurance adjusters in an attempt to defeat diversity jurisdiction," the carrier said.

Orsatti suspended business because of the government pandemic closure orders in March. The office said it lost income and filed a coverage claim to 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.

In Wednesday's objection, Allstate said the dental office wasn't able to show any facts to establish that Wonyaku's investigation was "inadequate," as Orsatti "does not allege that COVID-19 was present at its premises for defendants to inspect."

And because the dental practice failed to allege any particular property damage that went through "tangible physical alteration," there was no physical loss for Wonyaku to investigate in the first place, the insurer said. Orsatti's claimed losses from COVID-19 shutdown orders are also strictly precluded by the policy's virus exclusion, it added.

Orsatti did not demonstrate "what additional information could or should have been sought that would have changed the coverage analysis in any way," the insurer said.

There was "nothing for Ms. Wonyaku to 'investigate' through an onsite property inspection," Allstate said in the objection, adding that the dental office should focus on its dispute with Allstate, over policy interpretation, instead of the claim adjuster.

Representatives for the parties could not be immediately reached for comment on Thursday. 

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 Company et al., 5-20-CV-00840, in the U.S. District Court for the Western District of Texas. 

--Editing by Amy Rowe.

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