Value Of Insurance Claim

What is the value of a claim?  That is always the question.  Just how much can be recovered depends on lots of factors.

The Southern District of Texas, Houston Division, had a case recently wherein the insurance company filed suit in the Federal Court and the defendant tried to have the case dismissed due to the amount in controversy not being the minimum required under Federal law.

The case style is, Palomar Specialty Insurance Company v. Maria Penaloza M. Beltran.

Palomar brought a declaratory judgment action seeking the Court’s declaration concerning an insurance appraisal provision and the applicability of the provision to Beltran’s chosen appraiser.  Beltran moves to dismiss Palomar’s Complaint under Federal Rule Civil Procedure 12(b)(1), arguing that the amount in controversy does not meet the requisite jurisdictional amount and that she has stipulated as such.

The amount in controversy, in an action for declaratory or injunctive relief, is the value of the right to be protected or the extent of the injury to be prevented.  When an insurer seeks a declaratory judgment regarding the coverage provided by an insurance policy, the object of the litigation is the policy and the value of the right to be protected is the insurer’s potential liability under that policy.  Thus, in addition to policy limits and potential attorney’s fees, items to be considered in ascertaining the amount in controversy when the insurer could be liable for those sums under state law are inter alia penalties, statutory damages, and punitive damages — just not interest and costs.  The burden of establishing subject matter jurisdiction in federal court rests on the party seeking to invoke it.  However, to justify dismissal, it must appear to a legal certainty that that the claim is really for less than the jurisdictional amount.

In this case, Palomar’s Complaint includes a demand letter from Beltran dated May 25, 2018, seeking economic damages of $58,971.31, treble damages, and attorney’s fees under the Texas Deceptive Trade Practices Act (DTPA) and Texas Insurance Code.  Furthermore, the policy limits exceed the jurisdictional amount.  The potential liability of Palomar, including statutory damages and attorney’s fees available under the DTPA and the Texas Insurance Code, exceeds the jurisdictional amount on its face.  Beltran argues that she stipulated damages will not exceed $75,000.  However, Beltran’s assertion of such in a demand letter is not sufficient to demonstrate with a legal certainty that Beltran’s insurance claim is less than the jurisdictional amount.  For Beltran’s “stipulation” to legally limit the damages sought, Beltran would have to file a binding stipulation or affidavit.  There is no evidence of such a legally binding stipulation.  Therefore, because the amount in controversy, including statutorily available damages and attorney’s fees, exceeds the jurisdictional amount, Beltran’s Motion to Dismiss is Denied.