OCTOBER 2013 BAD FAITH CASES: DISTRICT COURT DENIES MOTION FOR REMAND WHERE PLAINTIFF SEEKS ONLY $13,500 IN COMPENSATORY DAMAGES, ON BASIS OF POTENTIAL FOR PUNITIVE DAMAGES (Philadelphia Federal)

In Hatchigian v. State Farm Ins. Co., plaintiff brought suit against the insurer in a third-party personal injury claim alleging six counts, including statutory bad faith, after the insurer improperly delivered the settlement funds by including the attorney as a payee on the settlement check. This alleged breach of duty from the settlement agreement permitted plaintiff’s attorney to improperly withhold $13,500 from plaintiff out of the settlement. Plaintiff sought compensatory damages for the $13,500 withheld from the original $30,000 settlement, as well as punitive damages under the statutory bad faith claim. Upon receiving the complaint, the insurer removed the case to federal court under 28 U.S.C. § 1332(a)(1), based on total diversity of the parties, and claiming the amount in controversy exceeded $75,000. Plaintiff then filed a motion for remand, claiming the damages alleged did not exceed $75,000.

Although the punitive damages would have to be more than four times the compensatory damages to reach the $75,000 threshold, the Court denied plaintiff’s motion for remand. The Court based its holding on analogous case law in which a plaintiff sought only $14,000 in compensatory damages in addition to punitive damages and removal was allowed. The court acknowledged an award of punitive damages sufficient to reach the threshold was “unlikely,” but also did not believe such an award would be “fanciful or a pie-in-the-sky” view of the possible outcome of the case. Thus, the Court allowed the removal to stand and denied plaintiff’s motion for remand.

Date of Decision:  July 11, 2013

Hatchigian v. State Farm Ins. Co., No. 13-2880, 2013 U.S. Dist. LEXIS 96860 (E.D. Pa. July 11, 2013) (Buckwalter, S.J.).