Stipulation Of Damages In Insurance Disputes

Here is another case wherein there was a failure to properly stipulate to the amount of damages involved in the case and thus, ended up having to litigate his case in Federal Court, rather than the State Court in which the lawsuit was filed.

The case is from the Southern District of Texas, Houston Division, and is styled, Olga Rodriguez v. State Farm Lloyds.

Olga filed her claim against State Farm in State District Court and State Farm timely removed the case to Federal Court.

Pursuant to 28 U.S.C., Section 1332(a)(1), the U.S. Federal District 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.  The party seeking to assert federal jurisdiction, in this case State Farm, has the burden of proving by a preponderance of the evidence that subject matter jurisdiction exists.  Any ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand.

The courts must be 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 a 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 in a case 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, makes later filings irrelevant.

Here, the parties do not dispute diversity.  Instead, Olga argues that remand is proper because, the pre-suit demand was for $38,306.82 and it made clear that the insured would never demand an amount greater than $75,000.00,”and because Olga executed a binding stipulation to ensure that the amount in controversy in this lawsuit could not and would never exceed $75,000.00.  State Farm argues that “the amount in controversy requirement was satisfied at the time . . . of removal” because “Olga’s petition expressly seeks damages of an amount over $200,000 but not more than $1,000,000.”  State Farm also points out that Olga’s binding stipulation was executed on October 20, 2019, after removal, and therefore can not defeat federal jurisdiction.

The Petition states that “Plaintiff seeks monetary relief over $200,000 but not more than $1,000,000.00 pursuant to Texas Rule of Civil Procedure 47(c)(4).  This is the only portion of the petition that discusses any dollar amount.  District courts in this circuit are divided on whether a complaint pled under the Texas Rules of Civil Procedure may now demand a specific amount in damages.  Whether or not Olga could have pled a specific amount of damages, Olga could have cited to Rule 47(c)(2), which states that Plaintiff seeks “monetary relief of $100,000 or less.”

Olga’s election to cite a subsection providing a range of damages that even at the low end is within the federal diversity threshold, if not proof positive, is certainly proof by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional amount.  Were there any doubt about Olga’s ability to recover more than $75,000, the court notes that Olga’s bad faith claim includes a claim to exemplary and/or treble damages.

Because Olga’s binding stipulation was executed after removal, it has no legal effect.  Olga’s demand letter, although relevant, is insufficient to prove “as a matter of law” that she cannot recover damages in excess of $75,000.