Claims And Issues

WHEN COVERAGE IS NOT ENOUGH, CAN BAD FAITH PREVENT REMAND?

In Alber v. GEICO General Ins. Co., No: 6:17-cv-160-Orl-31KRS, 2017 WL 1045504 (M.D. Fla. March 20, 2017) (Presnell, J.), a U.S. District Court denied a plaintiff's motion to remand because the plaintiff had filed a bad faith claim in addition to his claim for uninsured motorist (UM) coverage.

Under the UM contract claim, the plaintiff in this case conceded that he was seeking recovery of $40,000.00 in UM benefits.  That left $35,000.00 in order to reach the $75,000.00 federal jurisdictional limit in this case.

Under the bad faith claim, "[a]ssuming," said the Court, that the bad faith claim "ripens," the plaintiff could theoretically seek to recover all the damages he incurred as a result of the UM carrier's coverage denial.  In this case, those damages, the Court said, include:

• “'[B]odily injury and resulting pain and suffering, disability, disfigurement, mental anguish, loss of capacity for the enjoyment of life, expense of hospitalization, medical and nursing care and treatment, loss of earnings, loss of ability to earn money, and aggravation of a previously existing condition'”;
• "[H]e also asserts that these injuries are continuing and that he expects to suffer more in the future."
• The plaintiff also "asserts that he suffers from serious pain in his back and neck, that he has undergone $15,000 in spinal injections and that he intends to have more in the future."
• The plaintiff's "orthopedic surgeon opined that if Alber's pain continues, he may be required to undergo a discogram to his spine for surgical planning."

In the Court's eyes, "[t]hose alleged damages, combined with the attorney's fees incurred in pursuing the instant case, could easily exceed $35,000, taking the amount in controversy beyond the jurisdictional minimum."  Alber v. GEICO General Ins. Co., No: 6:17-cv-160-Orl-31KRS, 2017 WL 1045504, at *2 (M.D. Fla. March 20, 2017).

However, consider that this same District Court has held that a bad faith claim in a UM case in Florida should be abated, because it will not be actionable unless UM coverage is determined in favor of the plaintiff in the first place.  See "FLORIDA UM BAD FAITH CLAIM ABATED UNDER SECTION 624.155," posted on Insurance Claims and Bad Faith Law Blog on March 24, 2016.  See in addition "REMOVAL DOES NOT REMOVE VALUE," posted here on March 1, 2017 (federal jurisdictional limit of $75,000.00 was met where record established that policyholder demanded $100,000.00 UM policy limit before removal).  That would seem to make the bad faith claim speculative at best, and so perhaps an uncertain ground on which to assert federal jurisdiction.

Further, the mention of attorney's fees being available under the bad faith claim ignores the fact that in Florida an insured prevailing on coverage can recover his attorney's fees anyway, even without the bad faith claim.  See Fla. Stat. § 627.428.

Using theoretically recoverable damages to ignore whether a bad faith claim is viable in the first place.  That is how this motion to remand came to an end.  Now, having retained federal jurisdiction over this UM case, the federal court will be in a position potentially to award $40,000.00 in contract damages and grant a future motion to dismiss or for summary judgment on the bad faith claim, thereby removing the bad faith claim from this case and simultaneously adjudicating the absence of federal jurisdiction.  In such an event, attorney's fees alone would most likely not make up all of the $35,000.00 shortfall in order to reach the $75,000.00 federal jurisdictional threshold in this particular case.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

REMOVAL DOES NOT REMOVE VALUE.

In Becker v. Progressive Am. Ins. Co., No: 6:17-cv-114-Orl-31TBS, 2017 WL 735404, at *1 (M.D. Fla. February 24, 2017) (Presnell, J.), a policyholder demanded Underinsured Motorist (UIM) policy limits of $100,000.00.  When the limits were not paid, she served a Civil Remedy Notice of Insurer Violation of Florida's Bad Faith Statute.

The Court quoted her counsel's letter to the UIM carrier:  "Plaintiff's counsel filed a civil remedy notice alleging bad faith on Progressive's part for its failure to pay the $100,000 policy limit, which he claimed was clearly warranted because Plaintiff's damages are 'far in excess of the minimal $100,000 policy limits.' (Doc. 9 ¶ 39.)"   Becker v. Progressive Am. Ins. Co., No: 6:17-cv-114-Orl-31TBS, 2017 WL 735404, at *1 (M.D. Fla. February 24, 2017).

Thereafter the policyholder filed suit in Florida State Court for breach of contract, declaratory judgment, and alleged statutory bad faith.

The UIM carrier removed the case to Federal Court, where one of the requirements was that the case must present an amount in controversy in excess of the jurisdictional limit of $75,000.00.  In many cases, policyholders dispute removal of their lawsuits to Federal Courts from the State Courts where they filed their bad-faith lawsuits by arguing that the amount in controversy has not been demonstrated in the record.

Holding that the amount in controversy requirement was met in this case, the U.S. District Court denied the policyholder's motion to remand her case back to Florida State Court.  The Court effectively held that the policyholder's demand for $100,000.00 UIM policy limits precluded any argument based on record evidence of the amount in controversy in this case:  "Speaking of bad faith, Plaintiff's counsel cannot, in good faith, contend that, under these circumstances, the value of this case does not meet the $75,000 jurisdictional threshold."

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

REMAND IN FLORIDA FIRST-PARTY BAD FAITH CASE.

 

               A unique burden of proof falls upon defendants in cases presenting first-party bad faith claims removed to Federal Court, in which the plaintiff has not pled a specific damages amount in her, his or its complaint.  “Where the plaintiff has not pled a specific amount of damages, the removing defendant must prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional requirement.”[1]

               In the first-party bad faith case of Becker v. Infinity Auto Insurance Co., [2] Ms. Veronica Becker filed a complaint for damages allegedly caused by the bad faith of an underinsured motorist carrier but she did not plead a specific amount of damages.  The defendant removed the case to U.S. District Court and Ms. Becker filed a motion to remand.  Although she did not allege it in her complaint, Ms. Becker contended in her motion that the defendant UIM carrier confessed judgment for the $50,000.00 UM/UIM policy limit in an earlier action for breach of contract in Florida State Court.[3]  She contended that, with the $50,000.00 policy limit deducted from what the record might show as the amount of damages and attorney’s fees in controversy, the jurisdictional limit of $75,000.00 was not established in her case and so the case should be remanded to Florida State Court.

               Assuming without deciding that Ms. Becker had a point with that contention, the District Judge analyzed the record as to what it otherwise displayed concerning the jurisdictional amount in that case.  The Court noted that in State Court, Ms. Becker had alleged various severe damages, but these allegations are general, not specific, and are of the kind that most personal injury plaintiffs are required to allege in order to pursue claims for injury.  However, the Court concentrated on specific amounts of damages reflected in the record:

               $60,000.00+ lost earnings, which Ms. Becker asserted in an answer to an interrogatory; and

               $45,000.00+ for the cost of surgery as a result of the automobile accident in question.

Note that after putting the effect of the $50,000.00 confession of judgment to one side, this combined amount of $105,000.00+ would by itself have exceeded the jurisdictional amount of $75,000.00, exclusive of interest and costs.  The Federal Judge did not mention that fact in this case, however.

               Instead, the Federal Judge in this case went on to consider the issue of what amount of attorney’s fees Ms. Becker would likely obtain in the event she was successful in proving her bad faith claim.  With no citation to the record of the case, here the Court chose to express the obvious:  “Those fees will almost certainly exceed $20,000 if the matter proceeds through trial.”[4]

               Considering the amount of $105,000.00+ in damages displayed by the record, taken together with a prevailing attorney’s fees award which would clearly bring the total amount in controversy up to at least $125,000.00+, “[e]ven after subtracting the $50,000 that Becker has already recovered, the amount at issue in these proceedings still exceeds $75,000.”

Please Read The Disclaimer.  ©2015 by Dennis J. Wall.  All rights reserved.  No claim to Original U.S. Government Works.

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[1] Becker v. Infinity Auto Ins. Co., No. 6:14-cv-1954-Orl-31DAB, 2015 WL 574257 *1 (M.D. Fla. February 11, 2015).

 

[2] Becker v. Infinity Auto Ins. Co., No. 6:14-cv-1954-Orl-31DAB, 2015 WL 574257 (M.D. Fla. February 11, 2015).

 

[3] Becker v. Infinity Auto Ins. Co., No. 6:14-cv-1954-Orl-31DAB, 2015 WL 574257 *2 (M.D. Fla. February 11, 2015).

 

 

[4] Becker v. Infinity Auto Ins. Co., No. 6:14-cv-1954-Orl-31DAB, 2015 WL 574257 *2 (M.D. Fla. February 11, 2015).

 

NO "RIGHT OF REMOVAL" REQUIRES DISMISSAL RATHER THAN ABATEMENT.

    An insurance company sued for alleged bad faith refusal to settle appealed an order from a trial court.  That is not news.  The carrier's contention was newsworthy, though:

The carrier contended that it had a "right to remove" the bad faith lawsuit from State Court to Federal Court.

    Building on the "right to remove" premise, the carrier contended that when the trial court in that case entered an order abating the bad faith lawsuit rather than dismissing the bad faith lawsuit, the carrier's "right to remove" was deeply infringed and so the order was illegal; in other words, all the trial court could do (despite settled Florida law to the contrary) was to dismiss and never to abate since abatement destroyed the carrier's "right to remove" the case to Federal Court.

    On appeal to Florida's Fourth District Court of Appeal, the appellate court said "no".  The trial court's order was correct.  The appellate court acknowledged that although it had ruled in several previous cases "that an order which prevented removal of a [bad faith] case to federal court constituted irreparable harm and departed from the essential requirements of law," they did not make that a bright-line rule which applies every time in every case.

    Far from it, that decision was distinguished in the present case.  The appellate court wrote that although there was "irreparable harm" here, the insurance company failed to show "that the trial court departed from the essential requirements of law."  Far from it.  Here, "the trial court's abatement of the bad faith action in lieu of dismissal" is supported by the law.

    The trial court's order of abatement stands.  Safeco Insurance Co. v. Beare, 2014 WL 4626851 (Fla. 4th DCA September 17, 2014).

Please Read The Disclaimer.  Copyright 2014 by Dennis J. Wall.  All rights reserved.  No claim to Original Government Works.

 

Related articles

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Determining Damages in U.m. Bad Faith Cases: the Florida Feed.

Florida Bad Faith Action After U.m. Verdict: Discovery, Damages, Due.

Lawyer's Ethical Rules Trump Professional Liability Policy "Voluntary Payments" Provision.

No Judicial Estoppel in This Florida Health Insurance Case.

PREMATURITY: THE CATCH IN SIMULTANEOUS MOTIONS TO REMAND AND DISMISS.

    In Wallace v. GEICO General Insurance Co., 2014 WL 4540328 (M.D. Fla. September 11, 2014), an Uninsured Motorist carrier removed its policyholder's bad faith lawsuit from State Court to Federal Court.  Then the policyholder filed a motion to remand and the insurance carrier filed a motion to dismiss.

    The basis was the same for both motions:  Prematurity.

    The Federal Court had no problem whatsoever finding that the instant case involved prematurity:  "A bad faith claim does not accrue until the conclusion of the underlying uninsured motorist case.  [Citations omitted.]  It is undisputed that the state court has not entered a final judgment in the underlying uninsured motorist case."  Wallace v. GEICO General Insurance Co., 2014 WL 4540328 *2 (M.D. Fla. September 11, 2014).

    This helped only the policyholder on his motion to remand, however.  It was fatal to the UM carrier's motion to dismiss.  The insurance company defendant failed to provide the Federal Court with a basis in the record to determine "that the value of the bad faith claim meets the jurisdictional threshold of $75,000."  Wallace v. GEICO General Insurance Co., 2014 WL 4540328 *1 (M.D. Fla. September 11, 2014).  Accordingly, said the Federal Court, "the Defendant has not met its burden to demonstrate that the Court has subject matter jurisdiction."

    The moral of this story (well, one of the morals, anyway):  Be careful what you wish for.  You might get it.  In this case, the defendant wished that the Judge would find that the bad faith claim against it was premature.  The Judge gave the defendant what it wanted, in that sense:  The Judge found that the bad faith claim was premature. 

    Then the Judge granted the plaintiff's motion to remand the case back to State Court.

Please Read The Disclaimer.  Copyright 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government Works.

Related articles

Late Notice Coverage Defense: Recent Florida Cases, New York Law.

Lawyer's Ethical Rules Trump Professional Liability Policy "Voluntary Payments" Provision.

Silence in the Face of Improper Removal Is Not Rewarded.

Determining Damages in U.m. Bad Faith Cases: the Florida Feed.

Florida Bad Faith Action After U.m. Verdict: Discovery, Damages, Due.

Insurance Coverage Case: Expert Excluded From Testifying Concerning Settlement Allocation.

Anticipated Life Expectancy Long Term Care Payments Not Controversy Amount.

    The amount in controversy is determined for removal to Federal Court as of  the time of removal.  In a recent decision, expected  payments under Long Term Care Insurance over the anticipated life expectancy of the Policyholders did not satisfy the amount-in-controversy requirement for removal from State Court based on Federal Courts' diversity jurisdiction.  Tober v. Transamerica Life Ins. Co., 2012 WL 2413766 *2 (S.D. Fla. June 26, 2012)(Order Remanding Case to State Court and Denying Plaintiffs' Request for Attorney's Fees).

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Claim Adjuster's Individual Liability: Alleged Claim Handling Misrepresentations Prevent Remand.

   Claims adjusters employed by Insurance Companies in Florida have always been like everybody else in that they are "susceptible to direct and individual liability for an intentional tort, including a fraud."  Leonhardt v. GEICO Casualty Co., 2011 WL 5359840 *2 (M.D. Fla. October 28, 2011), Download Leonhardt v. GEICO Casualty Co. (M.D. Fla. October 28, 2011) PUBLIC ACCESS.

   However, in that case the Federal District Judge held that joinder of a Florida claims adjuster in a Bad Faith case filed against the adjuster and the Insurance Company she works for, totally defeated Federal diversity jurisdiction.

   The case involves alleged Bad Faith claims handling.  The Plaintiff alleged that the individual claims adjuster intentionally misrepresented "the amount of the available insurance coverage for a covered claim against the insured," among other things.  Id. at *3.  These claims defeated diversity of citizenship jurisdiction in Federal District Court and required remand to the Florida State Court for determination of the entire Bad Faith case.

   To put the holding in this case another way, the Federal Court decided that the Insurance Company did not demonstrate "clearly and convincingly that [the Plaintiff] cannot possibly succeed" on his claims against the adjuster.  Id. at *1.

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Federal Court Abstains From California Coverage, Environmental Tort Damages Both.

   The Federal Ninth Circuit Court of Appeals has recently affirmed a District Court's rare and unique two-punch decision to abstain both from a determination of California Insurance Coverage and a related environmental tort action for Damages:  Download R.R. Street & Co. v. Transport Insurance Co. (9th Cir. Case Nos. 10.55361, 10.55404 Opinion Filed September 2, 2011) PUBLIC ACCESS, also published as 2011 WL 3873804 *1 (9th Cir. September 2, 2011)(authorized password required to access Westlaw).  These are the circumstances and these too are the issues identified by the Ninth Circuit before it pronounced its decision in this appeal:

   This dispute emerges from a web of state and federal litigation over liability for damages and defense costs in certain environmental tort suits. The appeal before us concerns two cases that mirror each other: (1) an action for damages that the Appellants brought in federal court and (2) a declaratory judgment action that the Appellee brought in state court, which Appellants later removed to federal court. The district court declined to entertain these actions, by dismissing the former and remanding the latter, in light of a related third action that had been pending for several years in state court.

   The District Court's decision to abstain from California Coverage was affirmed on the discretionary Declaratory Judgment abstention doctrine announced 70 years ago in Brillhart v. Excess Insurance Co. of America, 316 U.S. 491 (1942).  In the case at bar, three factors articulated by the United States Supreme Court in Brillhart  were considered, and each was found to be in play:  (1) Avoiding "'needless determination of state law issues'"; (2) "discouraging 'forum shopping'"; and (3) "avoiding 'duplicative litigation.'"  Federal Courts are allowed to consider other factors as well.  R.R. Street & Co. v. Transport Insurance Co., 2011 WL 3873804 at *6.  The three enunciated factors were enough to affirm abstention from deciding California Insurance Coverage issues in this case.  See id. at *6-*8.

   The District Court also appropriately abstained from deciding Damages in the related environmental tort action because the "concurrent state proceeding" to determine California Insurance Coverage was the kind of "rare case" described by the U.S. Supreme Court in the case of Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).  As applied by the Ninth Circuit panel in affirming the District Judge's abstention from considering the environmental tort action for Damages here, the circumstances of this case warrant abstention after considering such factors as (1) "piecemeal litigation"; (2) "order of jurisdiction"; (3) "source of law"; (4) "adequacy of state court" protections; (5) "forum shopping"; and (6) "parallel suits".  Id. at *8-*14.

   This is not all.  The District Court also applied "the Rooker-Feldman doctrine," a doctrine examined on this Blog previously, under which Federal Courts refuse to function as courts of appellate review over State Court Judgments, in simple and basic terms.  The Ninth Circuit did not agree with the District Court's application of that doctrine in this case.  Here, there was no State Court Judgment, said the appellate panel.  Even if there had been a Judgment, the State Court Order in question did not apply to two of the three named Defendants.  Therefore, in the view of the Ninth Circuit panel on appeal, Rooker-Feldman is out of place here.  Id. at *5.

   Regardless of Rooker and irrespective of Feldman, though, in this case Federal Courts will not interpret California Insurance Coverage issues which apparently control all Jurisdiction over the environmental tort action for Damages as well.

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ERISA Claim for the Long Term: No Remand, No Dismissal.

   Mr. Glenn Herman was an insured under his Employer's long-term disability plan.  He successfully claimed long-term disability benefits and received monthly payments of $661.25 for a time.  Hartford, which issued the Disability Plan and Policy to Mr. Herman's Employer, adjusted Mr. Herman's benefits downward to reflect his receipt of individual disability benefits from the Social Security Administration.  The resulting payment by Hartford was an adjustment to $50.00 per month thereafter.  Download Herman v. Hartford Life and Accident Insurance Co. (S.D. Fla. Case No. 10.61661, Omnibus Order Filed April 15, 2011) PUBLIC ACCESS, also published as 2011 WL 1458050 (S.D. Fla. April 15, 2011)(authorized password required to access Westlaw).

   Mr. Herman filed suit in Florida State Court.  His Complaint against Hartford was in two counts:  Bad Faith failure to pay benefits under the Disability Plan, and a Declaratory Judgment to restore his previous level of disability insurance benefits.  Hartford removed the case to Federal Court and simultaneously filed a motion to dismiss based on failure to exhaust administrative remedies under ERISA, and the stage was set for the Federal Judge to hold both that ERISA applied to Mr. Herman's claims, and then to hold that it did not.

   First, the Federal Court denied Mr. Herman's motion to remand.  Hartford removed the case based on Federal question jurisdiction provided by ERISA.  The Federal Judge applied a "'general rule'" operating in the Eleventh Circuit that a case arises under Federal law only if it is Federal law that confers the claim or cause of action.  The Federal Judge in this case agreed that ERISA confers Mr. Herman's claim and denied his motion to remand.  Id. at *2.

   Second, the Federal Court denied Hartford's motion to dismiss based on Mr. Herman's alleged failure to exhaust administrative remedies.  Without mentioning a second time in this opinion that Mr. Herman was pursuing both a Bad Faith claim under Florida law, and as a claim for Declaratory Relief, the Court noted that "ERISA allows a plan 'participant or beneficiary' to bring a civil action to recover benefits due under the terms of a plan."  Id. at *2.  The Court was apparently convinced without further explanation that Mr. Herman had done this.  However, exhaustion of administrative remedies would depend upon the terms of the Disability Plan, said the Court.

   The Disability Plan in question in this case provided an administrative appeal process for outright denial of claims, but not for what the Court called "adjustment" of claims.  Mr. Herman's claim was not denied, it was adjusted, in the eyes of the Court.  Accordingly, there were no administrative remedies for Mr. Herman to exhaust and Hartford's motion to dismiss in this case was denied.  Id. at *2.

 The author is Co-Chair of the Health, Life and Disability Insurance Subcommittee of the American Bar Associaton's Insurance Coverage Litigation Committee.

Preemption of Bad Faith Claims under ERISA is examined in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §9:16 (Shepard's/McGraw-Hill Second Edition, West Publishing Company 2010 Supplement and Third Edition in process).

 

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Removal When Policyholder Seeks Policy Limits: Federal Court Denies Remand.

   There is sometimes a question about what to do if you are in an Insurance case and the Policyholder has not requested a sum certain.  Is the case appropriate for Removal to Federal Court, or suited for Remand if the Insurance Company tries to remove the case to Federal Court?

    At least where the Policyholder seeks the full Policy Limits in excess of the $75,000.00 jurisdictional amount required for diversity of citizenship jurisdiction in Federal Court, the answer is clear for one Federal Court:

Where the insured seeks to recover to the fullest extent of coverage, the court can determine the amount in controversy by reference to the face of the policy.

 Download Borja v. Geovera Specialty Insurance Co. (M.D. Fla. Case No. 8.11.cv.106, Order Filed February 22, 2011) PUBLIC ACCESS,, also published as 2011 WL 721475 *3 (M.D. Fla. February 22, 2011)(authorized password required to access Westlaw; denying Motion to Remand where Policyholder sought full Policy Limits of $100,000.00 for "Coverage A Dwelling" under Homeowner's Policy at bar).

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Remanded: Diversity Citizenship Not Disregarded Without Proof Recovery is Impossible.

   One test of whether Diversity Jurisdiction exists as a matter of law in a Federal Case, is whether the co-Defendant alleging the absence of true diversity can demonstrate that there is no possibility of recovery by the Plaintiff against the Defendant which is a citizen of the same State as the Plaintiff.  In Archway Rubicon, LLC v. Lawyers Title Insurance Corp., Download Archway Rubicon, LLC v. Lawyers Title Insurance Corp. (S.D. Tex. Case No.. H.10.1919, Memoranum and Order Filed July 26, 2010) PUBLIC ACCESS also published as 2010 WL 2991091 (S.D. Tex. July 26, 2010)(Westlaw subscription required to access Westlaw), one Austin Title Company sold a Title Insurance Policy to the Plaintiff, which sued both Austin Title and the Title Insurance Company which issued the Policy, Lawyers Title, for alleged violations of the Texas Insurance Code.

   Lawyers Title removed the lawsuit to Federal Court and claimed that Austin Title's Texas citizenship should be ignored for purposes of Federal Diversity Jurisdiction even though the Plaintiff is a Texas corporation.

  The Federal Court in that case disagreed with Lawyers Title's position and granted Plaintiff's Motion to Remand.  The Federal Court reasoned:  "It is well-established and undisputed that Texas law allows a plaintiff to maintain a cause of action for violations of the Texas Insurance Code against individuals other than the insurer, including the insurance agent."  Archway Rubcon, 2010 WL 2991091 at *2.

   Lawyers Title, the co-Defendant which argued in favor of disregarding the other Defendant's citizenship in that case, failed to meet its burden under both Federal and Texas law, in essence, that there was no possibility that Archway Rubicon could recover on its Claims against Austin Title for alleged violations of the Texas Insurance Code.

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Remand, Strictly Construed: Joinder of Defendant Merged Corporation Destroyed Diversity.

   The Plaintiff in the case of Bollea v. Wells Fargo Insurance Services Southeast, Inc., Download Terry Bollea aka Hulk Hogan v. Wells Fargo Insurance Services Southeast, Inc. (M.D. Fla. Case No. 8.10cv1085, Order Filed July 22, 2010) FREE ACCESS TO OFFICIAL REPORT also published as 2010 WL 2889672 (M.D. Fla. July 22, 2010)(Westlaw subscription required to access Westlaw), sued the Defendants "for alleged negligent breaches of fiduciary duty arising out of these insurance coverage issues[:] ...  Defendants' alleged negligent failure:  (1) to advise Bollea regarding Bollea's need for excess/umbrella insurance; (2) to obtain and excess/umbrella insurance quote and coverage for Bollea after Bollea's children reached legal driving age; and (3) to convey to Bollea the availability and desirability of such excess/umbrella insurance coverage."  Bollea v. Wells Fargo Insurance Services Southeast, Inc., 2010 WL 2889762 at *1.

   One of the three (3) Defendants sued by Mr. Bollea in State Court (and who alleged in his Complaint that he is also known as "Hulk Hogan") was Wells Fargo Southeast, incorporated in Florida and with its principal place of business in Florida.  Wells Fargo Southeast merged with Wells Fargo USA three (3) months before Mr. Bollea filed his lawsuit in Florida State Court, id., and before the Defendants removed the case to the United States Middle District of Florida of course. 

   Following precedent from another U.S. District Court in Florida, the Court held in this case that "a corporation does not lose its citizenship in its state of incorporation when it is dissolved or becomes inactive."  Id. at *3.  That includes merger.  Moreover, the Federal Court was informed by strictures to strictly construe removal statutes and to apply a presumption in favor of remand to State Court, and granted the Plaintiff's Motion to Remand in this Insurance Case.  Id. at *3-*4.

   This emerging rule of Remand in Removal Law has great implications, particularly in a jurisdiction such as Florida in which many Insurance Companies have given birth to litters of "pups," or specially incorporated Insurance Companies which exist for the purpose of only issuing Policies intended to provide Coverage for Florida residents and Florida Property.

Removal and Remand are addressed by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 3:12, 3:15, 9:19, and 11:1 (Shepard's/McGraw-Hill First Edition; West Publishing Company Second Edition and 2010 Supplement).

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Pennsylvania Federal Court Remands on Policyholder's "Certified" Amount in Controversy.

   In Rosado v. Encompass Insurance Co., Download ACCESS FREE OF CHARGE Rosado v. Encompass Insurance Co. (E.D. Pa. Case No. 10.1877, Memorandum Opinion and Order Filed June 10, 2010) also published as 2010 WL 2431829 (E.D. Pa. Opinion Filed June 10, 2010)(Westlaw subscription required to access Westlaw) a Federal Court granted the Plaintiff-Policyholder's Motion for Remand of his Bad Faith and other Claims under Pennsylvania Law.  The issue was the amount in controversy for Federal Jurisdiction.  The Plaintiff-Policyholder filed a "Certification of Damages" in which he certified that he was not seeking at or more than $75,000.00, the limit of Federal Jurisdiction.  The Defendant Insurance Company put on no evidence to the contrary.  The Federal Court thus remanded.  Rosado, 2010 WL 2431829 at *1-*3.

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Allegations, Property Insurance Claims and Litigation.

     It seems like an allegation made by one party often assists another party in the same litigation on an issue arising later in the lawsuit, whether in Property Insurance litigation or in any other kind of lawsuit.  Last Saturday, April 21, 2007, I touched on this during my Powerpoint presentation to the American Bar Association at Amelia Island, Florida on Property Insurance Claims Litigation.

     This post provides you with two recent Federal cases involving Homeowners Property Insurance Coverage issues, because together these cases show how allegations can sometimes assist either the policyholders or the Property insurance company.

     Both new Federal cases involve a motion to remand after the policyholders' lawsuit was filed in State Court  on claims for Insurance Coverage, Bad Faith, and Punitive Damages or "penalties".

     In Jack Punzak & Janet Punzak v. Allstate Insurance Co. (E.D. Pa. Case No. 07-1052), on April 16, 2007 the Court granted the policyholders' motion to remand back to State Court in this case of Federal diversity jurisdiction.  Among other things the amount in controversy in a diversity case must be in excess of $75,000.00 exclusive of interest and costs.

     Although this lawsuit was removed from State Court on the basis of unchallenged 'speaking denials' to requests for admissions, the District Judge held that those denials were trumped by the policyholders' allegations in their State Court Complaint that "[t]hey seek compensation for the property damage, as well as punitive damages, counsel fees and costs, 'in an amount not in excess of $50,000.00.'  Compl. at 8."  Here is why.

     The Federal Judge explained that the policyholders' State Court Complaint was filed in Philadelphia County in the Court of Common Pleas, a Court which provides by local rule for compulsory arbitration in cases where damages are claimed for not greater than $50,000.00.  Thus, when the policyholders alleged that their claims were for not greater than $50,000.00, they were required by Pennsylvania law to allege a figure for which they claimed damages at the time they filed their lawsuit in Philadelphia County, if they sought compulsory arbitration short of extended litigation.  The Federal Judge pointed out that compulsory arbitration, and authorization for local court rules, is provided by Statute in Pennsylvania involving cases in which such damages are claimed in amounts not greater than $50,000.00.

     Accordingly, the Federal Court in this case granted the policyholders' motion to remand:  "Pennsylvania law, therefore, gives legal effect to the ad damnum clauses in the Punzaks' complaint."  Here is the April 16, 2007 Order in the Punzak case:   Download Punzak_v. Allstate Insurance Co. (E.D. Pa. Case No. 07.1052, Order of April 16, 2007)..pdf

     In John "Jack" Dee v. State Farm Fire & Casualty Co. (E.D. La. Case No. 06-7984), on April 11, 2007 the Federal Judge denied a policyholder's motion to remand.  The policyholder's complaint, said the Court in that Order, was "not clear" and was "vague" to the extent that the policyholder might assert claims for damage for "improper adjustment", i.e., claims handling, under a Flood Insurance Policy issued by the insurance company defendant.  The Federal Court did not specifically mention the claims for Bad Faith and "penalties" asserted in the State Court Complaint in that case.  The Federal Judge's ruling in denying remand to State Court, was premised on what the Federal Judge saw as an inartfully worded State Court complaint that could affect the administration of Flood Insurance claims:  "Therefore, the Court finds original exclusive jurisdiction exists pursuant to the NFIA [National Flood Insurance Act]."  Here is the April 11, 2007 Order in Dee:  Download John.Jack.Dee v. State Farm Fire and Casualty Co.  (E.D. La. Case No. 06.7984, Order of April 11, 2007)..pdf

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Discovery And Remand of a Removed Hurricane Katrina Insurance Case.

     When any civil case is filed in State Court, it can sometimes be "removed" to Federal Court.  The legal basis for removal is often Federal "diversity jurisdiction".  This means jurisdiction in Federal District Courts in civil actions between citizens of different States, in basic and simple terms.  (Among other things, the matter in controversy has to be over the value of $75,000.00, not including interest and costs.)

     In a Hurricane Katrina  Insurance Coverage Case on March 28, 2007, the Federal Court granted the Plaintiff Policyholder's Motion to Remand her case back to State Court.  The Property Insurance Company Defendant opposed the Motion to Remand by arguing, among other things, that there really was diversity even though the Plaintiff, who lived in Louisiana, sued an insurance agency which was apparently also from Louisiana, in addition to the Property Insurance Company.

     In another Hurricane Katrina Insurance Case, but one decided by the Southern District of MIssissippi, a similar result and rule of law was posted here on December 28, 2006.  The Federal Courts usually allow discovery on whether to remand an Insurance Case.   In the most recent ruling in a Hurricane Katrina Insurance Case, the Eastern District of Louisiana ruled on March 28, 2007 in Download Gwendolyn_Tucker_v. Metropolitan Property & Casualty Insurance Co. (E.D. La. No. 06-9983, Order March 28, 2007), see page 11 of the official Court Opinion in this pdf:   "Without further factual development the Court cannot conclude that Plaintiff has no possibility of recovery against the in-state defendant." 

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Discovery on Whether to Remand an Insurance Case.

    Remand is when a Federal District Court sends an Insurance case back to State Court that was filed in State Court in the first place, but then was "removed" to Federal Court for various reasons.   A pre-Christmas ruling in one of the Hurricane Katrina Insurance Coverage Cases teaches a lesson well learned.

    When discovery is available on the question of whether the Federal Judge should Remand the case back to State Court, or not, then the clear lesson in this new Insurance case is to take the discovery.  If the available discovery regarding Remand is not taken, then the Federal Judge may decide, not surprisingly, that the opportunity to take discovery regarding Remand knocked once, like Opportunity itself, and will not knock again, as in Download Ross and Sharon Dodds v. Nationwide (S.D. Miss. Case No. 1.06CV915, Opinion Filed December 20, 2006), and for this particular ruling see page 4.pdf.

    Best wishes to all for a Happy New Year!

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
 

FEDERAL REMAND: MORE ABOUT ....

                        .... Less Than $75,000 Bad Faith Damages.

    This issue was addressed in a previous post on October 26, 2006.  That post addressed two recent Federal Cases, one of which was decided in the Eastern District of Pennsylvania, Howard v. Allstate Insurance Co.  In the Howard case, the Federal Judge grants remand back to State Court whence the lawsuit came.  The reasons include that the Complaint filed by the Plaintiff, Mr. Timothy Howard, seeks Damages "not in excess of $50,000" although the Complaint includes a prayer for Punitive Damages too.  Further, under Federal Third Circuit Court of Appeals' precedent, remand has to be granted whenever it appears "'to a legal certainty'" that the Plaintiff is not entitled to recover the Federal Diversity Jurisdiction Amount of $75,000.

 Within the same Federal Third Circuit, but in the Middle District of Pennsylvania, the Plaintiff's Motion to Remand was Denied in the even more recent Federal Case of Download Carnathan_v. Ohio National Life Insurance Co. and Jefferson National Life Insurance Co. (M.D. Pa., Case No. 1.06-CV-999, Opinion Filed October 18, 2006).pdf.  Mr. Paul Carnathan filed that lawsuit seeking a Declaratory Judgment that would interpret and reinstate his disability income insurance policy.  The policy, if reinstated, would provide Mr. Carnathan "'a monthly benefit of $2500 a month [sic] for life if plaintiff becomes disabled.'"  The Complaint filed by Mr. Carnathan did not seek payment of the disability benefits nor did Mr. Carnathan's Complaint allege that he is presently disabled which he is not, although the Complaint includes a prayer for Punitive Damages.

    "It is clear that the amount in controversy has been met," wrote the District Judge in Mr. Carnathan's unwillingly Federal Case (Mr. Carnathan, at least, is unwilling to have his case decided there).  The Complaint and the case will stay in Federal Court under this ruling.

    Since Mr. Carnathan sought Declaratory Judgment, the demand for relief in his Complaint did not provide a sum of money against which to measure the required Jurisdictional Amount for Federal Diversity.  The Federal District Court looked therefore to Third Circuit precedent that "[w]here the validity of an insurance contract is at issue," such as in this Declaratory Judgment action, the amount in controversy can be figured out by taking into account "'the full value of the contract,'" including payments that "'may possibly'" be payable to the Policyholder.  No "legal certainty" standard here, which would have required remand if met.  No, to the contrary, as noted the standard applied here on these facts and allegations is "'may possibly'" meet the jurisdictional amount:  "If a possible award under the insurance policy could exceed the jurisdictional amount, the amount in controversy requirement is met."

    After that analysis, the Federal District Court had no problem calculating that if Mr. Carnathan possibly received disability benefits under this policy, then his disability benefits could meet the jurisdictional amount in 30 months.  Again, it bears repeating that a major lesson here seems to be that the facts and allegations are crucial to determining the outcome of remand motions in Federal Court, just as the facts and allegations also can often determine the outcome of the entire Bad Faith case in any Court including Federal Court.  Another issue  arises from even a quick comparison of the Howard v. Allstate decision in Pennsylvania's Eastern District, and this even more recent Carnathan v. Ohio National Life decision in Pennsylvania's Middle District.  It looks like the Federal Third Circuit Court of Appeals has some reconciliation tasks ahead of it on legal standards applicable to a Motion for Remand.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

FEDERAL REMAND: Less Than $75,000 Bad Faith Damages.

    Some Federal Court decisions issued only days apart, show the differences in facts and maybe in the law necessary to convince a Federal Judge to remand a Bad Faith case.  When any civil case is filed in State Court, it can sometimes be "removed" to Federal Court.  Insurance Companies, which are usually Defendants anyway, will often try to remove a case to Federal Court, in which the Insurance Company has been sued for Bad Faith Damages.

    The legal basis for removal is often Federal "diversity jurisdiction".  This is short-hand for jurisdiction that Federal District Courts have over civil actions between citizens of different States where the matter in controversy is over the value of $75,000.00, not including interest and costs.  The Plaintiff who filed a case in State Court, usually an injured claimant or policyholder, can ask the Federal Judge to "remand" back to State Court including because the controversy does not have a value exceeding $75,000.00.

    That is what happened in two recently decided Federal Court cases.  In one, a motion to remand was granted.  Mr. Timothy Howard filed a State Court Complaint against Allstate Insurance Company including a claim for statutory Bad Faith under Pennsylvania law.  The Complaint alleged claims for Punitive Damages and for Attorney's Fees.  However, the Complaint alleged that the Plaintiff, Mr. Howard, was seeking Damages "'not in excess of $50,000'".  Further, the "civil cover sheet" filed at the time the Complaint was filed lists damages "as $50,000 or less."  Finally, "the case was designated for compulsory arbitration" and under the Pennsylvania  Bad Faith Statute an arbitration award is capped at $50,000.  With these matters in the fact record, the Federal Court had no problem granting the motion to remand in Download Howard_v. Allstate Insurance Co. (E.D. Pa. Case No. 06-04017 Opinion Filed September 28, 2006).pdf.

    Parenthetically, this District Court is governed by the Federal Third Circuit Court of Appeals in which part of the legal standard to determine the $75,000 issue is that remand must occur whenever "'it appears to a legal certainty that the plaintiff [is not] entitled to recover the minimum amount''.  This legal standard is easily met in this case.  The above allegations would likely have caused remand, however, even under a  simpler legal standard such as "preponderance of the evidence," which this District Court says it would apply under Third Circuit precedent "[i]f facts are in dispute ...."  Again, the allegations in the record determine the outcome in this case, except that the alleged claims for Punitive Damages and Attorney's Fees were not enough to increase the likely value of the Claims here.

    In the second Federal Court case, the likely value of claims alleged for recovery of Punitive Damages and Attorney's Fees do help determine that the matter in controversy has a value which exceeds $75,000.  In this case, Mr. Robert Etchison filed a State Court Complaint against Westfield Insurance Company which included allegations that Westfield violated the West Virginia Unfair Trade Practices Act or "UTPA".    Here, the governing Federal appellate court is the Fourth Circuit, where the amount in controversy is determined by figuring out the judgment that the Plaintiff would receive if the Plaintiff prevailed on the merits of his entire case at the time it was removed.

    There, Mr. Etchison claimed Punitive Damages.  The Federal District Judge noted that the Supreme Court of the United States has permitted certain Punitive Damages amounts.  Mr. Etchison also claimed Attorney's Fees under UTPA.  The West Virginia Statute allows "increased expenses such as attorney's fees."  Mr. Etchison's Attorney's Fees, added to other Damages, "will more likely than not exceed the minimum in controversy requirement."  Further, Mr. Etchison at one time demanded $3,000,000.00 to settle his Claims, although by the time of remand his settlement demand was lowered to $70,000.00.  The Federal Judge denied Mr. Etchison's motion to remand on these facts and allegations in the record in Download Etchison_v. Westfield Insurance Co. (N.D.W. Va. Case Nos. 5.05CV99, 5.05CV132 Opinion Filed September 26, 2006).pdf.

    Three days later, the same Federal District Judge granted Westfield's Motion for Summary Judgment.  Download Etchison_v. Westfield Insurance Co. (N.D.W. Va. Case Nos. 5.05CV99, 5.05CV132 Opinion Filed September 29, 2006).pdf.

    One major lesson here seems to be that the facts and allegations are crucial to determining the outcome of remand motions in Federal Court, just as the facts and allegations also can often determine the outcome of the entire Bad Faith Case in any Court including Federal Court.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.