Insurance Disputes And Federal Jurisdiction

As has been stated many times, insurance companies prefer to litigate lawsuits in Federal Court rather than State Court.  Conversely, it is usually better for someone suing an insurance company to litigate the case in State Court rather than Federal Court.

Here is a 2019, opinion from the Southern District of Texas, Houston Division.  The opinion is styled, Antonio Diaz v. GeoVera Specialty Insurance Company.  In this case, Diaz alleges “GeoVera improperly denied and / or underpaid the claim.”  On August 22, 2019, a lawsuit was filed in State Court against GeoVera claiming violations of the Prompt Payment of Claims Act, various violations of the Texas Insurance Code, and breach of contract.  GeoVera timely removed the case to Federal Court on October 10, 2019.  Diaz timely filed a motion to remand.

Pursuant to 28 U.S.C., Section 1332(a)(1), Federal courts have original jurisdiction over all civil actions between citizens of different states where the amount in controversy exceeds $75,000, exclusive of interest and costs.

Case from the 5th Circuit says that courts must “remain vigilant to the potential for manipulation by the plaintiff who prays for damages below the jurisdictional amount even though he knows that his claim is actually worth more.”  The court looks to the face of the plaintiff’s original petition to evaluate the amount in controversy.  When the plaintiff’s complaint does not allege a specific amount of damages, the removing defendant must prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional amount.  If a defendant can show that the amount in controversy actually exceeds the jurisdictional amount, the plaintiff must be able to show that, as a matter of law, it is certain that he will not be able to recover more than the damages for which he has prayed.

The amount in controversy is determined at the time of removal.  Litigants who want to prevent removal must file a binding stipulation or affidavit with their complaints; once a defendant has removed the case later filing are irrelevant.

Diaz argues that remand is proper because, the “pre-suit demand was for $27,863.24 and it made clear that the insured would never demand an amount greater than $75,000.00,” and because “Diaz executed a Binding Stipulation to ensure that the amount in controversy in this lawsuit could not and would never exceed $75,000.00.”  GeoVera argues that Diaz’s “bare allegations of jurisdictional facts that the amount in controversy is ‘less than $74,000’ are insufficient to defeat federal jurisdiction” because Diaz cannot “demonstrate ‘to a legal certainty that the claim really is for less than the jurisdictional amount.’”  GeoVera also points out that Diaz’s binding stipulation was executed after removal, and therefore cannot defeat federal jurisdiction.

The court begins by looking at the face of the petition.  Diaz does not plead a specific amount of damages. Instead, the petition states that “Plaintiff seeks monetary relief under $100,000.00, including damages of any kind, penalties, costs, expenses, pre-judgment interest, and attorney’s fees. Tex. R. Civ. P. 47(c)(1).  Further, Plaintiff specifies that he seeks a maximum amount of damages that does not exceed the sum or value of $74,000, exclusive of interest and costs.”  However, Diaz’s bad faith claim includes a claim to “exemplary and/or treble damages.”  Moreover, Diaz does not state that he will not accept more than $74,000.00,only that he does not seek more than that.  Should Diaz be awarded his pre-suit demand of$27,863.24, treble damages alone would exceed the jurisdictional threshold.  Thus, GeoVera has shown by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional amount.

Because Diaz’s binding stipulation was executed on November 5, 2019, after removal, it has no legal effect.  Moreover, Diaz’s demand letter, although relevant, is insufficient to prove “as a matter of law” that he cannot recover damages in excess of $75,000.  Accordingly, Diaz’s motion was denied.

In this case, if Diaz had not pleaded for exemplary damages, maybe would have prevailed in his motion to remand.