SEPTEMBER 2008 BAD FAITH CASES
REMAND DENIED WHERE REASONABLE TO FIND INSURED’S CLAIMS COULD SATISFY AMOUNT IN CONTROVERSY REQUIREMENT BY ASSUMING 4 TO 1 PUNITIVES RATIO (Philadelphia Federal)

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The insured’s bad faith claim was based on his disability insurer’s alleged improper reduction of his benefits after he received  a lump sum worker’s compensation settlement.  The insured initiated a putative class action suit in the Court of Common Pleas of Philadelphia and alleged breach of contract and bad faith. The insured sought compensatory damages of $14,000 as well as punitive damages and attorneys fees under the bad faith statute for himself.

The insurer then successfully removed the action to the United States District Court for the Eastern District of Pennsylvania. The insured then filed a motion for reconsideration of the court’s denial of his motion to remand.

As this was a non-CAFA class action, the court looked to the jurisdictional amount of the plaintiff’s individual claim.  In this case, no specific sum was pleaded as to the total amount of the claim.  Where a specific amount of total damages is not put in the complaint, the case must be remanded only if it appears to a legal certainty that the plaintiff cannot recover the jurisdictional amount.

The amount in controversy requirement will be satisfied if the claims total more  than $75,000.  The court found that a four to one ratio of punitive damages could meet constitutional muster, which would yield $14,000 in compensatory damages, plus $56,000 in punitives, for a total of $70,000.  The court then concluded that an award of at least $5,001 in counsel fees based on the insured’s claims seemed more than reasonable at this stage.  Thus, the jurisdictional threshold was met, and the case stayed removed.

Date of Decision: July 18, 2008

Harvey v. United States Life Ins. Co., Civil Action No. 08-2175, 2008 U.S. Dist. LEXIS 55574 (E.D. Pa. July 18, 2008) (Harvey Bartle III, J.)

J.M.A.

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REMAND DENIED WHERE REASONABLE TO FIND INSURED’S CLAIMS COULD SATISFY AMOUNT IN CONTROVERSY REQUIREMENT BY ASSUMING 4 TO 1 PUNITIVES RATIO (Philadelphia Federal)”


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