MAY 2007 BAD FAITH CASES PHILADELPHIA COMPULSORY ARBITRATION CASE REMANDED AFTER REMOVAL BY INSURER TO FEDERAL COURT, BECAUSE INITIAL CLAIM WAS LIMITED TO $50,000 (Philadelphia Federal)

 

In Punzak v. Allstate Insurance Company, the U.S. District Court for the Eastern District of Pennsylvania was presented with the common scenario of a carrier’s removing a case from the Philadelphia Court of Common Pleas’ Compulsory Arbitration Program, which has a maximum jurisdictional limit of $50,000, even though federal jurisdiction requires an amount-in-controversy of at least $75,000.  The insureds moved to remand the case to state court.  They argued that removal was improper because the case did not meet the minimum amount-in-controversy.  The insurer countered that the insureds could conceivably recover in excess of $75,000 if they succeeded on their contract claim, their bad faith claim (which sough punitive damages), and for attorneys fees.
Judges in the Eastern District have come to different conclusion in remanding or retaining jurisdiction.  Some have remanded these cases, reasoning that the insured effectively limited their recovery by agreeing to try their case in the arbitration program. (see, e.g., Valley v. State Farm; McFadden v. State Farm)  Other Judges have refused to remand the cases because the insured could recover in excess of $50,000.00 if awarded punitive damages and attorneys’ fees  (see, e.g., Howard v. Allstate, October 2006 archive on this site; Brownstein v. Allstate).  In this case, the Judge ruled that the case should be remanded because the damages clause of the Plaintiff’s Complaint sought damages “not in excess of $50,000.00.”
Date of Decision: April 16, 2007
Punzak, et al. v. Allstate Insurance Company, United States District Court for the Eastern District of Pennsylvania, No. 07-1052, 2007 U.S. Dist. LEXIS 28574 (E.D. Pa. April 12, 2007) (McLaughlin, J.)
On the same date, the same Judge reached an identical result in Espinoza v. Allstate Insurance Company, United States District Court for the Eastern District of Pennsylvania, No. 07-0746, 2007 U.S. Dist. LEXIS 28957 (E.D. Pa. 2007) (McLaughlin, J.)
See also the discussion of Dennis Bruce Landscape Management Services, Inc. v. Merchant’s Mutual in the January 2007 archive on this site, listing cases addressing the issue of removal and jurisdictional amount.