Dallas Fort Worth Insurance Lawyer Blog
Denied insurance claims can vary greatly in value. Factors that figure into the value of the claim include, 1) the base amount of the claim, 2) exemplary damages, 3) Prompt Payment of Claims damages, and 4) attorney fees.
The goal of insurance companies is to litigate cases in Federal Court, while attorneys representing insured would rather litigate case in the State or County Courts.
There are two main issues the Courts look to for deciding whether a case which is removed to a Federal Court by an insurance company gets to be litigated in Federal Court or whether the case gets remanded to the State or County Court.
Under 28 U.S.C. 1332(a), Federal District Courts have original jurisdiction over all civil actions involving citizens of different states, where the matter in controversy exceeds $75,000, exclusive of interest and costs. Section 1441(a) provides that:
[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.
When assessing the amount in controversy for diversity-jurisdiction purposes, “the sum claimed by the plaintiff controls if the claim is apparently made in good faith” unless the law gives a different rule. A sum pled by a plaintiff, however, is made in bad faith and will not control when the specified sum is made in contravention of the state law’s pleading requirements.
This issue arose in a 2021, Northern District of Texas, Fort Worth Division, opinion styled, Ewa K. Nelson and Michael F. Nelson v. Safeco Insurance Company of Indiana.
When a defendant seeks to remove a case, the question of whether jurisdiction exists is resolved by looking at the complaint at the time the petition for removal is filed. If the plaintiff contests, then removal is proper on the basis of an amount in controversy asserted by the defendant if the district court finds, by the preponderance of the evidence, that the amount in controversy exceeds the jurisdictional threshold.
In the present action, the parties’ diversity of citizenship is undisputed. The only issue is whether the required showing has been made that the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs. Accordingly, the Court must determine if (a) the sum pled by the Nelsons was made in bad faith, and, if so (b) whether Safeco has demonstrated by a preponderance of the evidence that the Nelsons’ claims, if successful, would in fact trigger a recovery exceeding $75,000, and, if so, (c) whether the Nelsons effectively bound themselves to an award below the jurisdictional threshold.
Based on binding Fifth Circuit precedent, the Nelsons’ attempt to limit the amount of relief sought to $75,000 does not control because such a demand is not permitted under Texas law. A sum pled by a plaintiff outside of the amounts provided in Texas Rule of Civil Procedure 47 is made in “bad faith” and will not control when the specified sum is made in contravention of the state law’s pleading requirements. A plaintiff cannot avoid removal by pleading for damages under the jurisdictional amount where a state rule prevents such a pleading. Rule 47 requires that a plaintiff provide “a statement that the damages sought are within the jurisdictional limits of the court”; and
(c) a statement that the party seeks:
(1) only monetary relief of $100,000 or less . . . ; or
(2) monetary relief of $100,000 or less and non-monetary relief; or
(3) monetary relief over $100,000 but not more than $200,000; or
(4) monetary relief over $200,000 but not more than $1,000,000; or
(5) monetary relief over $1,000,000;
Thus, the plain language of Rule 47 does not permit a plaintiff to plead for monetary relief of “$75,000 or less.”
The Court stated that here, the Nelsons’ Petition does not include any of the damage ranges stated under Rule 47. Accordingly, it appears that the Nelsons purposefully contravened the Texas rules governing pleading requirements to avoid federal jurisdiction, resulting in their Petition not being in “good faith.” Consequently, the sum claimed therein does not control.