Insurance Cases In Federal Court

Insurance lawyers should know ways that work to stay out of Federal Court.  Not knowing how to properly plead the case will result in the case being in Federal Court.  This is illustrated in a January 2020 opinion from the Southern District of Texas, Houston Division, styled, Mario Rodriguez v. Ocean Harbor Casualty Insurance Company.

Mario had filed suit in State Court based on a property claim dispute with Ocean Harbor.  Ocean Harbor removed the case to this Federal Court based on diversity jurisdiction.  Mario filed this motion to remand.

When a defendant removes a case to Federal Court the defendant has the burden of proving by a preponderance of the evidence that subject matter jurisdiction exists.  Operative facts and pleadings are evaluated as they exist at the time of removal.

Federal Courts have exclusive jurisdiction over civil actions between citizens of different States, in which the amount in controversy exceeds $75,000, exclusive of interest and costs according to 28 U.S.C. Section 1332(a)(1).  The amount in controversy is ordinarily determined on the basis of the sum demanded in good faith in the initial pleading.  A demand made in bad faith does not control.  A demand is made in bad faith if its purpose is to defeat federal jurisdiction.  Where a plaintiff’s bad faith damages statement does not control, the removing defendant must show by a preponderance of the evidence that the amount in controversy exceeds $75,000.

Once a defendant is able to sow that the amount in controversy exceeds the $75,000 amount, removal is proper, provided plaintiff has not shown that it is legally certain  that his recovery will not exceed the amount stated in the State Court complaint.  This showing of legal certainty can be shown by plaintiff filing a binding stipulation or affidavit with their complaint.  A stipulation filed after removal is irrelevant to the analysis by the Federal Court.

Mario’s State Court petition stated he did not seek an amount above $74,000, exclusive of interest and costs.  This pleading is not required by State Court rules and is an attempt to avoid federal jurisdiction.

Ocean Harbor points out that Mario’s pre-suit demand letter demanded $25,315.78 with economic damages being $21,915.78, in addition to attorney fees and other costs.  The letter also stated that Mario would not seek more than $75,000 if he sued, but that promise is non-binding because Mario did not file a binding stipulation along with the original petition.  Mario, in his State Court pleadings also seeks exemplary damages, treble damages, and attorney fees, in addition to the actual damages which raises the amount in controversy above the $75,000 threshold.

As a result, the motion to remand was denied.

Contact Information