JANUARY 2007 BAD FAITH CASES PUNITIVE DAMAGES INCLUDED TOWARD AMOUNT IN CONTROVERSY FOR PURPOSES OF REMOVAL, WHERE INSURED ALLOWED TO AMEND COMPLAINT ADDING BAD FAITH CLAIM (Western District)

In Dennis Bruce Landscape Management Services, Inc. v. Merchant’s Mutual, the United States District Court for the Western District of Pennsylvania denied Plaintiff’s motion to remand and held that the amount in controversy had been met.  In addition, the court granted defendant insurer’s motion to dismiss plaintiff’s claim for punitive damages, but granted plaintiff’s request to file an amended complaint to include  a claim for bad faith.  Plaintiff owned trucks and equipment, which were insured by the defendant.  After sustaining fire damage to one of its trucks and vandalism damage to another, plaintiff submitted two claims to defendant, however, defendant made no payment, denial or adjustment and retained possession of the truck.  Plaintiff’s instituted an action in the Allegheny County Court of Common Pleas alleging two claims for breach of contract, a claim for violation of the Pennsylvania Unfair Trade Practices and Consumer Protection (“UTPCPL”) and a claim for punitive damages.  Defendant removed the complaint to federal court based on diversity jurisdiction.  Plaintiff filed a motion to remand arguing that the amount in controversy was not sufficient to sustain jurisdiction.  Defendant filed a motion to dismiss the UTPCL claim as well as the claim for punitive damages.

The court denied Plaintiff’s motion to remand and held that although the damages alleged in Plaintiff’s complaint only amounted to $74,545.00, $455 lower than the jurisdictional minimum, the punitive damages sought also may be included in the amount in controversy calculation unless they are “patently frivolous and without foundation.”  The court held that although punitive damages are not available for breach of contract or UTPCPL claims, the Plaintiff was clearly attempting to assert a bad faith claim rather than a claim under the UTPCPL.  The court, therefore, also granted defendant’s motion to dismiss the UTPCPL and punitive damage claims, but allowed plaintiff to amend its complaint to assert a claim for bad faith, which permits punitive damages.

Four relatively recent decisions on removal and remand addressing the $75,000 jurisdictional minimum are summarized on this blog, and can be found under the procedural issues category.  These include:

Brownstein v. Allstate Insurance Company, Valley v. State Farm Fire and Casualty Company, Howard v. Allstate Insurance Company, and