Insurance Claims and Bad Faith Law Blog

Removal Yes, But it Sticks Only ...

                                ...  When It Is Proof Positive!

     The Defendant that claims fraudulent joinder of other local Defendants faces the burden of putting on proof.  There must not only be allegations and assertions of fraudulent joinder, but there must also be proof that the Plaintiff sued (joined) those local Defendants fraudulently.

     This means that there must be proof that the Plaintiffs in a Hurricane Katrina CatClaim Case, for example, sued local adjusters for Bad Faith under Louisiana law, but that the only possible outcome could not result in the Plaintiffs recovering Damages against the local Defendants who were sued only for the purpose of defeating the diversity-of-citizenship jurisdiction of the Federal Courts.

     Putting on no proof falls short of meeting this burden, said the Federal Judge granting Plaintiffs' Motion to Remand back to State Court in Thomas Matherne, Sr. & Anastasia Matherne v. Allstate Insurance Co. (E.D. La. Case No. 06-8120, Opinion Filed January 3, 2007).
                                  Please read the Disclaimer.

Discovery on Whether to Remand an Insurance Case.

    Remand is when a Federal District Court sends an Insurance case back to State Court that was filed in State Court in the first place, but then was "removed" to Federal Court for various reasons.   A pre-Christmas ruling in one of the Hurricane Katrina Insurance Coverage Cases teaches a lesson well learned.

    When discovery is available on the question of whether the Federal Judge should Remand the case back to State Court, or not, then the clear lesson in this new Insurance case is to take the discovery.  If the available discovery regarding Remand is not taken, then the Federal Judge may decide, not surprisingly, that the opportunity to take discovery regarding Remand knocked once, like Opportunity itself, and will not knock again, as in Download Ross and Sharon Dodds v. Nationwide (S.D. Miss. Case No. 1.06CV915, Opinion Filed December 20, 2006), and for this particular ruling see page 4.pdf.

    Best wishes to all for a Happy New Year!

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
 

FEDERAL REMAND: MORE ABOUT ....

                        .... Less Than $75,000 Bad Faith Damages.

    This issue was addressed in a previous post on October 26, 2006.  That post addressed two recent Federal Cases, one of which was decided in the Eastern District of Pennsylvania, Howard v. Allstate Insurance Co.  In the Howard case, the Federal Judge grants remand back to State Court whence the lawsuit came.  The reasons include that the Complaint filed by the Plaintiff, Mr. Timothy Howard, seeks Damages "not in excess of $50,000" although the Complaint includes a prayer for Punitive Damages too.  Further, under Federal Third Circuit Court of Appeals' precedent, remand has to be granted whenever it appears "'to a legal certainty'" that the Plaintiff is not entitled to recover the Federal Diversity Jurisdiction Amount of $75,000.

 Within the same Federal Third Circuit, but in the Middle District of Pennsylvania, the Plaintiff's Motion to Remand was Denied in the even more recent Federal Case of Download Carnathan_v. Ohio National Life Insurance Co. and Jefferson National Life Insurance Co. (M.D. Pa., Case No. 1.06-CV-999, Opinion Filed October 18, 2006).pdf.  Mr. Paul Carnathan filed that lawsuit seeking a Declaratory Judgment that would interpret and reinstate his disability income insurance policy.  The policy, if reinstated, would provide Mr. Carnathan "'a monthly benefit of $2500 a month [sic] for life if plaintiff becomes disabled.'"  The Complaint filed by Mr. Carnathan did not seek payment of the disability benefits nor did Mr. Carnathan's Complaint allege that he is presently disabled which he is not, although the Complaint includes a prayer for Punitive Damages.

    "It is clear that the amount in controversy has been met," wrote the District Judge in Mr. Carnathan's unwillingly Federal Case (Mr. Carnathan, at least, is unwilling to have his case decided there).  The Complaint and the case will stay in Federal Court under this ruling.

    Since Mr. Carnathan sought Declaratory Judgment, the demand for relief in his Complaint did not provide a sum of money against which to measure the required Jurisdictional Amount for Federal Diversity.  The Federal District Court looked therefore to Third Circuit precedent that "[w]here the validity of an insurance contract is at issue," such as in this Declaratory Judgment action, the amount in controversy can be figured out by taking into account "'the full value of the contract,'" including payments that "'may possibly'" be payable to the Policyholder.  No "legal certainty" standard here, which would have required remand if met.  No, to the contrary, as noted the standard applied here on these facts and allegations is "'may possibly'" meet the jurisdictional amount:  "If a possible award under the insurance policy could exceed the jurisdictional amount, the amount in controversy requirement is met."

    After that analysis, the Federal District Court had no problem calculating that if Mr. Carnathan possibly received disability benefits under this policy, then his disability benefits could meet the jurisdictional amount in 30 months.  Again, it bears repeating that a major lesson here seems to be that the facts and allegations are crucial to determining the outcome of remand motions in Federal Court, just as the facts and allegations also can often determine the outcome of the entire Bad Faith case in any Court including Federal Court.  Another issue  arises from even a quick comparison of the Howard v. Allstate decision in Pennsylvania's Eastern District, and this even more recent Carnathan v. Ohio National Life decision in Pennsylvania's Middle District.  It looks like the Federal Third Circuit Court of Appeals has some reconciliation tasks ahead of it on legal standards applicable to a Motion for Remand.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

FEDERAL REMAND: Less Than $75,000 Bad Faith Damages.

    Some Federal Court decisions issued only days apart, show the differences in facts and maybe in the law necessary to convince a Federal Judge to remand a Bad Faith case.  When any civil case is filed in State Court, it can sometimes be "removed" to Federal Court.  Insurance Companies, which are usually Defendants anyway, will often try to remove a case to Federal Court, in which the Insurance Company has been sued for Bad Faith Damages.

    The legal basis for removal is often Federal "diversity jurisdiction".  This is short-hand for jurisdiction that Federal District Courts have over civil actions between citizens of different States where the matter in controversy is over the value of $75,000.00, not including interest and costs.  The Plaintiff who filed a case in State Court, usually an injured claimant or policyholder, can ask the Federal Judge to "remand" back to State Court including because the controversy does not have a value exceeding $75,000.00.

    That is what happened in two recently decided Federal Court cases.  In one, a motion to remand was granted.  Mr. Timothy Howard filed a State Court Complaint against Allstate Insurance Company including a claim for statutory Bad Faith under Pennsylvania law.  The Complaint alleged claims for Punitive Damages and for Attorney's Fees.  However, the Complaint alleged that the Plaintiff, Mr. Howard, was seeking Damages "'not in excess of $50,000'".  Further, the "civil cover sheet" filed at the time the Complaint was filed lists damages "as $50,000 or less."  Finally, "the case was designated for compulsory arbitration" and under the Pennsylvania  Bad Faith Statute an arbitration award is capped at $50,000.  With these matters in the fact record, the Federal Court had no problem granting the motion to remand in Download Howard_v. Allstate Insurance Co. (E.D. Pa. Case No. 06-04017 Opinion Filed September 28, 2006).pdf.

    Parenthetically, this District Court is governed by the Federal Third Circuit Court of Appeals in which part of the legal standard to determine the $75,000 issue is that remand must occur whenever "'it appears to a legal certainty that the plaintiff [is not] entitled to recover the minimum amount''.  This legal standard is easily met in this case.  The above allegations would likely have caused remand, however, even under a  simpler legal standard such as "preponderance of the evidence," which this District Court says it would apply under Third Circuit precedent "[i]f facts are in dispute ...."  Again, the allegations in the record determine the outcome in this case, except that the alleged claims for Punitive Damages and Attorney's Fees were not enough to increase the likely value of the Claims here.

    In the second Federal Court case, the likely value of claims alleged for recovery of Punitive Damages and Attorney's Fees do help determine that the matter in controversy has a value which exceeds $75,000.  In this case, Mr. Robert Etchison filed a State Court Complaint against Westfield Insurance Company which included allegations that Westfield violated the West Virginia Unfair Trade Practices Act or "UTPA".    Here, the governing Federal appellate court is the Fourth Circuit, where the amount in controversy is determined by figuring out the judgment that the Plaintiff would receive if the Plaintiff prevailed on the merits of his entire case at the time it was removed.

    There, Mr. Etchison claimed Punitive Damages.  The Federal District Judge noted that the Supreme Court of the United States has permitted certain Punitive Damages amounts.  Mr. Etchison also claimed Attorney's Fees under UTPA.  The West Virginia Statute allows "increased expenses such as attorney's fees."  Mr. Etchison's Attorney's Fees, added to other Damages, "will more likely than not exceed the minimum in controversy requirement."  Further, Mr. Etchison at one time demanded $3,000,000.00 to settle his Claims, although by the time of remand his settlement demand was lowered to $70,000.00.  The Federal Judge denied Mr. Etchison's motion to remand on these facts and allegations in the record in Download Etchison_v. Westfield Insurance Co. (N.D.W. Va. Case Nos. 5.05CV99, 5.05CV132 Opinion Filed September 26, 2006).pdf.

    Three days later, the same Federal District Judge granted Westfield's Motion for Summary Judgment.  Download Etchison_v. Westfield Insurance Co. (N.D.W. Va. Case Nos. 5.05CV99, 5.05CV132 Opinion Filed September 29, 2006).pdf.

    One major lesson here seems to be that the facts and allegations are crucial to determining the outcome of remand motions in Federal Court, just as the facts and allegations also can often determine the outcome of the entire Bad Faith Case in any Court including Federal Court.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.