February 2009 Bad Faith Cases: Bad Faith Case Remanded For Failing To Meet Amount In Controversy Requirement, Despite Insured’s Refusal To Stipulate Limit On Amount (Philadelphia Federal)

In Rutherford v. Progressive Northern Insurance Company, the court remanded the case to the Court of Common Pleas of Philadelphia County because the amount in controversy did not meet the requirement of being more than $75,000, despite there being no stipulation to that effect.

The insured originally filed claims in state court for breach of contract, bad faith, and violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1, et seq., the Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa. C.S.A. § 1731 et seq., and the Pennsylvania Unfair Insurance Practices Act, 40 P.S. 1171.1 et seq. after the insurer refused to pay the uninsured motorist benefits under the policy.

The insurer removed to federal court on the basis of diversity.  It argued, in response to the insured’s objection, that the complaint could reasonably be read to show claims exceeding $75,000 and that the insured did not execute a stipulation limiting the damages to $75,000 or less.

The court determined that, although the complaint sought punitive damages under the bad faith claim that could possibly cause the amount in controversy to exceed $75,000, the insured had limited the case to $50,000 or less on the cover sheet to the original civil complaint.  Under local rule in the Court of Common Pleas of Philadelphia County, this designation on the cover sheet results in the case being referred to compulsory arbitration.  The court did not find anything in the complaint to contradict that, and cited precedent for considering the effect of the compulsory arbitration designation as being supportive of limiting the amount in controversy.  Consequently, the lack of a stipulation limiting the amount was irrelevant.

The court remanded the case for lack of diversity jurisdiction based on the amount in controversy requirement not being met.

Date of Decision:  December 9, 2008

Rutherford v. Progressive N. Ins. Co., CIVIL ACTION No. 08-4850, , 2008 U.S. Dist. LEXIS 99350 (E.D. Pa. Dec. 9, 2008)(McLaughlin, J.)