JANUARY 2010 BAD FAITH CASES AFTER REMOVAL TO FEDERAL COURT, INSURED HAS TOUGH BURDEN FOR REMAND BASED ON AMOUNT IN CONTROVERSY REQUIREMENT (Middle District)

In Rice v. Allstate Assurance Company, the insured filed a complaint against the insurer for breach of contract and bad faith pursuant to 42 Pa. C.S.A. § 8371. In the insured’s breach of contract claim, he sought damages in the amount of $16,428.60 plus interest and penalties.  In his bad faith claim, the insured requested damages “in excess of $ 50,000.00” plus compensatory damages and punitive damages, interest, costs and attorney’s fees. The insurer filed a timely notice of removal of the case to federal court based on diversity jurisdiction, and the case was removed to federal court. The insured filed a motion to remand the case to state court, alleging that the amount in controversy did not exceed $75,000.

The court stated that since the insured did not make a demand for an exact monetary amount with respect to the bad faith claim, it had to make an independent appraisal of the claim and after a generous reading of the complaint, determine the reasonable value of the rights being litigated, including the value of potential compensatory and punitive damages.  The court emphasized that in order for a case to be remanded, it must be evident to a legal certainty that the insured cannot recover an amount greater than the $75,000 required for diversity jurisdiction.  The court found that based on the relief requested in the complaint, the insured did not expressly limit the amount in dispute to less than $75,000.  The court concluded that it could not be stated to a legal certainty that the insured could not recover more than the jurisdictional amount of $ 75,000.  Accordingly, the magistrate judge recommended that the insured’s motion to remand be denied.

Date of Decision: December 8, 2008

Rice v. Allstate Assur. Co., Civil Action No. 3:CV-08-1706, United States District Court for the Middle District of Pennsylvania, 2008 U.S. Dist. LEXIS 111820 (M.D. Pa. December 8, 2008) (Blewitt, U.S.M.J.).