MAY 2014 BAD FAITH CASES: DISTRICT COURT DENIES MOTION TO REMAND WHERE BAD FAITH CLAIMS COULD RESULT IN PUNITIVE DAMAGES AWARD THAT WOULD EXCEED $75,000 (New Jersey Federal)
In Carevel, LCC v. Aspen American Insurance Company, a Super Storm Sandy coverage case, the court addressed the issue of whether to remand the matter to state court for failure to meet the federal jurisdictional minimum of $75,000.
The complaint asserted claims for breach of contract; failure to promptly effectuate a settlement to conduct an investigation to justify its refusal, forcing the insured to seek resolution through litigation; and gross misconduct, bad faith and a breach of defendants’ duty of good faith and fair dealing owed to Plaintiff as established by New Jersey’s Unfair Settlement Practices Act, N.J.S.A. 17:29B-1 et seq., N.J.S.A. 17B:30-13.1 and N.J.A.C. 11:2-17.1 et seq. The insured sought damages, interest and costs of suit, attorney’s fees and punitive damages.
Under New Jersey statutory law, where punitive damages are permitted, there may be an award that is up to 5 times compensatory damages. The court found a claim had been stated that could provide for punitive damages. The record included an invoice for $23,130 that could constitute compensatory damages. Under the case law and the punitive damages statute, punitive damages could rise as high as five times that sum; and therefore a jury could return punitive damages of as much as $115,650.
Thus, the jurisdictional minimum was met as the insured plaintiff could not demonstrate to a “legal certainty” that the damages would not exceed $75,000.