MAY 2012 BAD FAITH CASES: COURT REMANDS FOR LACK OF JURISDICTION ON BASIS THAT CLAIMS CANNOT BE AGGREGATED AND CONCERN WITH A “REMOVE AND DISMISS” APPROACH BY THE CARRIER (Philadelphia Federal)

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In Cruz v. State Farm Insurance Company, the court denied the carrier’s motion to dismiss and remanded the insureds’ bad faith claims to state court. The case was initially filed in Lehigh County’s Court of Common Pleas as a suit for underinsured motorist benefits by two accident victims insured by the carrier. The carrier then removed the action to federal court on the basis of diversity jurisdiction, alleging that the insured’s punitive damage claims for bad faith would bring the total claims above the jurisdictional requirement of $75,000.

In its original petition for removal, the carrier alleged that each insured party sought $50,000 and punitive damages, contending that this amount in controversy exceeds the jurisdictional requirement of $75,000.00. The court recognized that this is an incorrect understanding of the law, because two separate claims by two distinct plaintiffs may not be aggregated for jurisdictional purposes. However, the court also noted that the carrier has been inconsistent – first they used the projected punitive damage award as the basis for removal, and then second sought to dismiss the suit for damages as baseless. The court rejected these so-called “remove-and-dismiss” tactics and ordered the case to be remanded back to state court.

Date of Decision: April 19, 2012

Cruz v. State Farm Ins. Co., NO. 12-cv-1629, 2012 U.S. Dist. LEXIS 55157, United States District Court for the Eastern District of Pennsylvania (E.D. Pa. Apr. 19, 2012) (Davis, J.).

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