Small $$$ Insurance Claims And Staying Out Of Federal Court

It is not unusual for an attorney to wish he could land a case worth millions of dollars. Every person who gets taken advantage of by an insurance company wishes they could sue the company and be compensated for millions of dollars. But the reality of everyday wrongs in the area of insurance law involve sums of money totaling much smaller amounts than millions of dollars.

What most people do not realize is the costs sometimes involved in fighting insurance claims. Most of the time an insurance company is not all that concerned about the cost. Their goal is to discourage people from challenging their decisions on claims. A lawsuit in State Court may cost an insurance company anywhere from $100 per hour to $300 per hour. That same case in Federal Court may cost $300 to $600 per hour with more hours being spent.

So why do insurance companies try to get lawsuits that are filed in State Court, removed to Federal Court? Because their chances of winning is usually better or if they lose, the dollar amount they lose is generally less when in Federal Court.

One thing to look for in an Insurance Law Attorney is someone who has experience in Federal Court. The other thing to look for and ask about is his knowledge in knowing how to keep a case from being moved to Federal Court. This is to improve the chances of winning and winning more.

On November 6, 2009, a Federal Judge ordered a case that had been moved to his Court from a State Court, to be remanded back to the State Court. The case, Scott E. Landreth v. Allstate Lloyd’s was a homeowners claim resulting from water damage in the residence.

For a lawsuit which is filed in State Court to be removed from the State Court to a Federal Court, there is generally three issues? The first is, does the case involve a Federal question of law. This would be the strongest arguement for an insurance company to justify moving the case to Federal Court, and it is usually not a hotly contested issue. The Landreth case involved issues of State Law, specificly the Texas Insurance Code.

The second reason for removal to Federal Court has to do with the citizenship of the parties to the lawsuit. When the plaintiff and the defendant are from different states then “diversity” exists and the case can be removed to Federal Court. This is an area where the plaintiffs attorney needs to know how to sue and who to sue in order to defeat the diversity arguement. In other words, the plaintiff’s attorney needs to know how to find someone such as the agent or adjuster to properly sue if the agent or adjuster are residents of the same state as the plaintiff. Doing this properly defeats the diversity arguement.

The third reason for removal to Federal Court involves the “amount in controversy”. To be in Federal Court the amount in controversy must exceed $75,000 unless the case involves a Federal question of law. This means that when the plaintiffs attorney files a lawsuit, he needs to carefully look at the value of the case and not just sue for big dollars to impress his client. He needs to make sure the amount he seeks is realistic, otherwise the case, which may be worth a smaller amount, will end up in Federal Court.

The Landreth case discusses issues two and three above. The Federal Judge in Landreth ordered that the case be remanded back to the State Court.