Insurance Demand Letter Used For Federal Jurisdiction

Demand letters to an insurance company can be used as evidence to make even a small case subject to federal jurisdiction.  This is illustrated in a case from the Western District of Texas, San Antonio Division.  It is styled, Veronica Horton v. Allstate Vehicle and Property Insurance Company, Pilot Catastrophe Services, John Suther.

In this case Horton made a claim with Allstate for property damage to her home after a storm.  Allstate hired Pilot and Suther to adjust the claim.  It was alleged that Suther and Pilot did not know what they were doing and made mistakes that can be found in the opinion, and that Allstate accepted their report and ignored Horton’s report.  That this was done intentionally.

Horton sent a demand letter to Allstate requesting payment of $28,384.28 in damages, calculated as follows: (1) $18,554.34 for repairs, (2) $4,629.94 in interest pursuant to the Texas Prompt Payment Act and $1,200 in attorney fees, both incurred up to the date of the letter.  The letter expressed to Allstate that they should pay the offer or risk exposure to a judgment of $100,000 to well over $1 million.

No settlement was reached and suit was filed in state court which Allstate promptly had removed to federal court based on diversity jurisdiction and the amount in controversy being in excess of $75,000.

The issue is whether Allstate can carry its burden of showing the amount on controversy exceeds $75,000, pursuant to U.S.C. Section 1332(a).  This Court ruled that Allstate has carried this burden by showing that (1) it is facially apparent from the state court petition that the claim exceeds $75,000 and (2) evidence supports the requisite finding.

First, the state court pleadings state the cost to repair Horton’s damaged property is $19,764.34.  Also, Horton seeks an unspecified amount of damages for mental anguish, attorney’s fees, 18% interest pursuant to the Prompt Payment Act, and treble economic and mental anguish damages pursuant to the DTPA.  All these amounts are included in the amount in controversy calculation and reflect the amount of $75,000 is easily exceeded.

Horton’s pre-suit demand letter, which Allstate submitted as evidence, further supports the amount in controversy exceeding $75,000.  While Horton only requested $28,384.28 in actual damages in the letter, the letter by its express terms does not include Horton’s present demand for treble damages.