Bad Faith Insurance Lawyers And Insurance Company Removal To Federal Court

As has been discussed at this site many times, insurance companies prefer to litigate insurance claims in the Federal Court system rather than the State or County courts.  However, they have standards they must meet to be able to get a case to Federal Court.  This is discussed in a 2022 opinion from the Northern District of Texas, Dallas Division.  The opinion is styled, Robert Stricklin v. State Farm Lloyds And Angel Hernandez.

This case concerns a dispute over residential property insurance coverage between Stricklin and State Farm.  Plaintiff claims to have suffered damage to his home as the result of a hail and windstorm.  State Farm assigned Hernandez to adjust the claim.  A dispute arose over the extent of covered damage to the property.  Stricklin filed suit in State Court for various violations of law in the Texas Insurance Code and for breach of contract.  State Farm removed the case to Federal Court arguing Hernandez was improperly joined in the lawsuit.

Federal courts are courts of limited jurisdiction.  Thus, courts must presume that a suit lies outside this limited jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking the federal forum.   And if the record does not contain sufficient evidence to show that subject matter jurisdiction exists, a federal court does not have jurisdiction over the case.  A defendant may remove a case from state to federal court based on diversity jurisdiction pursuant to 28 U.S.C., Sections 1332(a) and 1441(a).  The party seeking to assert federal jurisdiction has the burden of proving the facts establishing subject-matter jurisdiction by a preponderance of the evidence.  Thus, when a suit is removed based on diversity jurisdiction, the removing party must establish by a preponderance of the evidence that: (1) the amount in controversy exceeds $75,000; and (2) all person on one side of the controversy are citizens of different states than all persons on the other side of the controversy.

The amount in controversy is determined at the time of removal. A court may determine that removal is proper if it is facially apparent from the state court petition that the claims are likely to exceed the amount in controversy requirement.  Thus, to determine whether the amount in controversy requirement is met, courts must first look to whether a plaintiff has alleged a specific amount of damages in the original petition.  Here, Plaintiff stated in his original state court petition—which was operative at the time of removal—that he is seeking “monetary relief of less than $250,000.  The Plaintiff, then, provides no indication that the monetary relief he is seeking exceeds the $75,000 threshold required by 28 U.S.C. § 1332(a).  Therefore, it is not facially apparent from the state court petition that the claims are likely to exceed $75,000.

If the facially apparent test is not met, the removing defendant must prove by a preponderance of evidence that the amount in controversy exceeds $75,000.  Here, State Farm does not provide any evidence to establish that the amount in controversy exceeds the statutory requirement.  Instead, in its Notice of Removal, State Farm states only that:

Plaintiff pleads he seeks ‘monetary relief of $250,000 or less.’[] As such, a jury could award damages greater than $75,000 in this case and therefore the amount in controversy exceeds $75,000 or the purpose of diversity jurisdiction.

State Farm provides no evidence to support its assertion that the amount in controversy in this case exceeds $75,000.  Furthermore, it was Plaintiff who provided the only specific dollar figure relating to the damage to the covered property—he reported a claim of $24,063.66 to State Farm.  As such, State Farm has not proven by a preponderance of evidence that the amount in controversy meets the statutory requirements for diversity jurisdiction.

Here, the Court remanded the case.

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