NOVEMBER 2006 BAD FAITH CASES SPECULATIVE BAD FAITH DAMAGES NOT SUFFICIENT TO PLEAD AMOUNT IN CONTROVERSY MINIMUM AND CASE REMANDED TO STATE COURT (Middle District)

In Hulse v. State Farm Mutual Auto Insurance Company, Plaintiff was involved in a motor vehicle accident as a passenger and subsequently filed a coverage claim.  Defendant refused the claim and Plaintiff brought suit alleging breach of contract and bad faith.  Defendant moved to remove the case to federal court based upon diversity jurisdiction and alleging the amount in controversy would exceed the minimum of $75,000.  The United States District Court for the Middle District of Pennsylvania stated that the burden is on the Defendant to show to a legal certainty that Plaintiff was claiming an amount greater than the statutory diversity minimum.  Due to Plaintiff’s unclear damage pleading, the Court could not make a determination to a legal certainty that the amount would be met by Plaintiff’s claims. 

State Farm attempted to establish that punitive damages would get the case over the minimum.  The District Court looked to case law on awarding punitive damages, and that such damages must be reasonable when compared to the actual harm suffered.  Specifically, the Supreme Court had held that few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process.  In consideration of the reasonableness standard, and without knowledge of the compensatory damages sought, the Court could not determine with any accuracy the potential value of a claim for punitive damages, and therefore could not make a calculation as to the total damages Plaintiff sought to recover.  Thus the Court held that Defendant had not met its burden and granted Plaintiff’s Motion to Remand to the State Court.

Date of Decision:  November 7, 2006

Hulse v. State Farm Mut. Auto. Ins. Co., United States District Court for the Middle District of Pennsylvania, No. 3:06-CV-01080, 2006 U.S. Dist. LEXIS 81495 (M.D. Pa. November 7, 2006) (Caputo, J.)