WELCOME MAY — AND NOW BACK TO BUSINESS: MAY 2014 BAD FAITH CASES: DISTRICT COURT REMANDS BAD FAITH ACTION AS INSURER REMOVING CASE CANNOT SHOW DAMAGES MAY EXCEED $75,000 TO A LEGAL CERTAINTY, EVEN WHERE PLAINTIFF’S LAWYER WOULD NOT STIPULATE THAT CLAIM WOULD NOT EXCEED THAT SUM (Philadelphia Federal)
In Martino v. Hartford Ins. Co., the insured filed a breach of contract and bad faith action which the insurer removed to federal court. The case would be remanded if it appeared “to a legal certainty that the plaintiff cannot recover more than the jurisdictional amount of $75,000.” “When a case has been removed from state court to federal court, the party asserting federal jurisdiction bears the burden of showing, at all stages of the litigation, that the case is properly before the federal court.”
“To determine whether the minimum jurisdictional amount has been met in a diversity case removed to a district court, a defendant’s notice of removal serves the same function as the complaint would if filed in the district court.” “The amount in controversy is measured as of the date of removal, and the constraints of § 1332 should be strictly construed against removal.” In her first ad damnum clause, inserted after the facts section of the Complaint, the insured demanded judgment for a sum not in excess of $50,000.00 plus interest, costs and attorneys’ fees. The factual bases for damages alleged were present and future physical pain, mental anguish, humiliation, and medical bills and expenses. After her breach of contract count, she demanded judgment in a sum in excess of $50,000.00 plus interest, costs and attorneys’ fees; however, the court assumed there was a typographical error, and this claim should have read “not in excess of $50,000”.
In her bad faith count, she asserted damages pursuant to 42 Pa. C.S.A. § 8371, including interest equal to the prime rate plus three (3%) percent, court costs, attorney fees and punitive damages. Plaintiff then demanded damages in an amount not in excess of $50,000.00, including punitive damages, interest, attorney fees and costs of suit. In addition to including the ad damnum clauses, in the underlying action, the insured checked a box on the state court civil cover requesting damages to be assessed by arbitration, which, pursuant to Pennsylvania statute, is available only in actions where the sum in controversy does not exceed $50,000.
The court found that the insurer did not prove to a legal certainty that the insured may recover more than the jurisdictional minimum of $75,000. It observed that pursuant to the Pennsylvania statute governing arbitration, “the monetary limits of compulsory arbitration are jurisdictional.” In her complaint, however, the insured expressly limited her damages to $50,000.00; and a plaintiff may limit her damages to avoid federal jurisdiction.
The carrier argued that a Pennsylvania arbitration plaintiff can file a de novo appeal and seek more than the $50,000 arbitration limit, and thus might recover more than $75,000. The court chose to follow decisions by Federal District Court Judges Schiller and Baylson that “the legal certainty test would ring hollow . . . if the mere possibility that a plaintiff could recover more than $75,000 from an appeal of a compulsory arbitration satisfied Defendants burden.” Coates v. Nationwide Ins. Co., (quoting Menard v. Hewlett Packard Co.)
The court found that at the time of removal, the complaint explicitly limited damages to $50,000.00, and future appeals are merely speculative, not legally certain. Additionally, the fact that the insured’s counsel declined to sign a stipulation limiting damages did not persuade the Court; rather, the court reiterated that: “Defendants read too much into this unsigned stipulation . . . Lawyers tend to be cautious.” Instead, the court found the lack of stipulation not to undermine the limited damages apparent in the complaint. Thus the court held that the insurer did not meet its burden of proof and the case was remanded. However, the Court did not award attorneys’ fees or costs given that the insurer had a reasonable basis to remove this matter.
Date of Decision: April 24, 2014
Martino v. Hartford Ins. Co., CIVIL ACTION NO. 14-CV-1953, UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, 2014 U.S. Dist. LEXIS 57066 (E.D. Pa. April 24, 2014) (Joyner, J.)
