MARCH 2012 BAD FAITH CASES: COURT REFUSES TO REMAND EVEN WHERE PLAINTIFF STIPULATES HER CLAIM WOULD NOT EXCEED $75,000 (Philadelphia Federal)

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The court heard an insured’s motion to remand her action to state court. The motion stemmed from a breach of contract and bad faith action brought after the carrier failed to pay life insurance benefits pursuant to the insured’s policy. After filing the suit in the Philadelphia Court of Common Pleas, the carrier removed to federal court.

The insured subsequently moved to remand. Although the parties were diverse in citizenship, the insured claimed that the amount in controversy did not exceed the requisite $75,000. The court flatly disagreed with this contention, denying the insured’s motion.

First, it reasoned that, under Third Circuit precedent a court must give a “reasonable reading of the value of rights being litigated,” making it impossible to say with certainty that the claim would not exceed $75,000. In making this determination, the court held that bad faith claims offer a potential award of punitive damages would easily surpass $75,000. The court also recognized that potential attorney’s fees would likely exceed the jurisdictional threshold.

Second, the court held it does not matter that the insured stipulated that damages would not exceed $75,000. It reasoned that a court must examine whether the “actual monetary demands in the aggregate exceed the threshold, irrespective of whether the plaintiff states that the demands do not.” As such, the court denied the insured’s motion.

Comment: It is not clear whether the removal in this case took place prior to the effective date (January 6, 2012) of the most recent amendments to28 U.S.C. §§ 1441, 1446. Under amended § 1446(c)(2), a good faith statement of damages in the initial pleading “shall be deemed to be the amount in controversy”; however, the removing defendant may assert the amount in controversy where the state’s law “permits recovery of damages in excess of the amount demanded” as in Pennsylvania. When that occurs, the district courts shall determine whether, by a preponderance of the evidence, the amount in controversy exceeds the statutory minimum. Some commentators note a court may even take discovery on this issue.

Date of Decision: February 23, 2012

Morris v. Banker’s Life & Casualty Company, NO. 11-7675, 2012 U.S. Dist. LEXIS 23952 (E.D. Pa. Feb. 23, 2012) (Stengel, J.)

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