Insurance Cases – Stipulation Of Damages

As stated before, insurance companies prefer to litigate cases in federal court, whereas, lawyers suing insurance companies prefer to litigate in state court.  The laws are such that the insurance companies get their way most of the time.  However, one of the ways to keep a case in state court involves properly stipulating to the amount of damages at issue in the case.

This issue is discussed in the 2019, Southern District of Texas, Houston Division, opinion styled, Osiel Rubio v. State Farm Lloyds.

Rubio filed suit arising out of an insurance claim against State Farm in state court.  State Farm timely removed the case to federal court.  Rubio filed a Motion to Remand which was denied.

Under 28 U.S.C., Section 1441(a) any state court civil action over which a federal court would have original jurisdiction may be removed from state to federal court.  The party seeking to assert federal jurisdiction has the burden of proving by a preponderance of the evidence that subject matter jurisdiction exists.

Pursuant to 28 U.S.C., Section 1332(a), the federal courts have original jurisdiction over civil actions between citizens of different states where the amount in controversy exceeds $75,000.  Rubio’s state court petition states Rubio is seeking “relief over $200,000 but not more than $1,000,000. including damages of any kine, penalties, costs, expenses, prejudgment interest, and attorney fees.”  However,  Rubio now contends the lawsuit should be remanded because (1) the actual amount in controversy is less than $75,000, and (2) because Rubio has signed a binding stipulation that the amount in controversy is $75,000 or less.  State Farm argues that the amount stated in the state court petition controls and that Rubio’s stipulation does not defeat federal jurisdiction because he executed it after the case had already been removed.

Where the plaintiff has alleged a sum certain that exceeds the requisite amount in controversy, that amount controls if made in good faith.  In state court, Texas Rule of Civil Procedure 47 generally requires plaintiffs to state in an original petition the range of monetary relief sought.  A plaintiff’s declaration pursuant to Rule 47 that the suit seeks more than $75,000 satisfies the amount-in­controversy requirement for removal to federal court.  Rubio’s Rule 47 statement that the lawsuit seeks to recover $200,000 to $1,000,000 facially establishes an amount in controversy over $75,000.

A plaintiff must file a binding stipulation along with the complaint to conclusively establish the amount in controversy and avoid removal.  This was not done in this case until after the case was removed to federal court.

The stipulation that Rubio signed on October 22, 2019, stating that he does not seek an award exceeding $75,000, post­dates the action’s removal on September 27, 2019.  A state-court plaintiff seeking to avoid federal jurisdiction may do so by filing a binding stipulation with the original complaint that limits recovery to an amount below the jurisdictional threshold.

The stipulation must be filed in state court before removal because federal courts determine removal jurisdiction on the basis of the claims in state court as they existed at the time of removal.  Because Rubio did not file his binding stipulation in state court before removal, the stipulation is not effective to defeat the court’s jurisdiction.