Whitaker v. Shelter Mutual Insurance Company
Filing
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OPINION AND ORDER REMANDING case to the Circuit Court of Logan County, Arkansas. Signed by Honorable P. K. Holmes III on March 15, 2019. (lw)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
DONALD K. WHITAKER, individually
and on behalf of all others similarly situated
v.
PLAINTIFF
No. 2:18-CV-02091
SHELTER MUTUAL INSURANCE COMPANY
DEFENDANT
and
SAMUEL BAGGETT, on behalf of himself
and all other similarly situated persons and entities
v.
PLAINTIFF
No. 2:18-CV-02190
SHELTER MUTUAL INSURANCE COMPANY
DEFENDANT
OPINION AND ORDER
Before the Court are two putative class actions against Defendant Shelter Mutual Insurance
Company (“Shelter”). Both cases were removed pursuant to the Class Action Fairness Act
(“CAFA”), 28 U.S.C. § 1332(d). Plaintiff Donald K. Whitaker’s action was removed to this Court
on May 23, 2018 from the Circuit Court of Logan County, Arkansas. Whitaker seeks certification
of the following class:
Residents of the State of Arkansas who, from January 15, 2011 through the date of
resolution of this action, (a) purchased a policy of insurance from the Defendant;
(b) made a claim for automobile medical payment or PIP benefits; (c) had their
benefits reduced by the defendant’s discounting scheme and (d) failed to exhaust
the limits of their med pay or PIP benefits.
(No. 2:18-CV-02091, Doc. 4, p. 7, ¶ 23). Plaintiff Samuel Baggett’s action was removed to the
United States District Court for the Eastern District of Arkansas on September 25, 2018 from the
Circuit Court of Pulaski County, Arkansas, and was transferred to this Court on November 7, 2018
because Shelter is Defendant in both Whitaker and Baggett, the classes are similarly defined, and
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there is substantial overlap of claims and relief sought. Baggett seeks certification of the following
class:
All Arkansas residents, including Plaintiff and all similarly situated persons for the
period from March 13, 2013 to the present (the “Class period”), who have or had
automobile liability insurance with a Med Pay provision issued by Shelter, and who
were denied Med Pay coverage because of payments made by another insurance
plan.
Excluded from the class are the agents, affiliates and employees of Shelter and the
assigned judge and his/her staff, and members of the appellate courts and their staff.
(No. 2:18-CV-02190, Doc. 5, p. 4, ¶ 2). Despite these different class definitions, Shelter’s notices
of removal in each case rely on amounts in controversy identified based on the same internal
analysis of claims. Both cases will be remanded because Shelter has not demonstrated that this
Court can exercise subject matter jurisdiction under CAFA.
In Baggett’s case, Baggett filed a motion (No. 2:18-CV-02190, Doc. 15) to remand and a
brief (No. 2:18-CV-02190, Doc. 16) in support, and Shelter has filed a response (No. 2:18-CV02190, Doc. 26) and brief (No. 2:18-CV-02190, Doc. 27) in opposition. Baggett filed a reply (No.
2:18-CV-02190, Doc. 30) with leave of Court. That motion will be granted and Baggett’s case
will be remanded.
In Whitaker’s case, no motion 1 to remand has been filed, but after the issue of subject
matter jurisdiction was raised in Baggett’s case, the Court entered an order (No. 2:18-CV-02091,
Doc. 21) in Whitaker’s case on January 24, 2019 directing Shelter to show that this Court has
subject matter jurisdiction over the removed action. Shelter has filed its response (No. 2:18-CV-
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Whitaker’s case has pending motions. Whitaker filed a motion (No. 2:18-CV-02091,
Doc. 15) to certify a class action and brief (No. 2:18-CV-02091, Doc. 16) in support, and Shelter
has filed a response (No. 2:18-CV-02091, Doc. 17) in opposition. The parties have also filed a
joint motion (No. 2:18-CV-02091, Doc. 18) to certify a question to the Arkansas Supreme Court
and a brief (No. 2:18-CV-02091, Doc. 20) in support. Because the Court is remanding, those
motions will terminated as moot.
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02091, Doc. 22) and brief in support (No. 2:18-CV-02091, Doc. 23). Whitaker did not file a reply.
Whitaker’s case will also be remanded.
I.
Law
“The district courts of the United States . . . ‘are courts of limited jurisdiction . . .
possess[ing] only that power authorized by Constitution and statute.’” Exxon Mobil Corp. v.
Allapattah Servs., Inc., 545 U.S. 546, 552 (2005) (quoting Kokkonen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 377 (1994)). “[S]ubject matter jurisdiction is primary and an absolute stricture
on the court.” In re Prairie Island Dakota Sioux, 21 F.3d 302, 304–05 (8th Cir. 1994). CAFA
vests subject matter jurisdiction in this Court for certain class actions where “the [putative] class
has more than 100 members, the parties are minimally diverse, and the amount in controversy
exceeds $5 million.” Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S.--, 135 S.Ct.
547, 552 (2014) (citing 28 U.S.C. § 1332(d)(2)).
When the Court’s subject matter jurisdiction over an action removed from a State court by
a defendant has been called into question, either because a plaintiff has challenged that defendant’s
removal allegations or because the Court has sua sponte raised the question, the removing
defendant must demonstrate, by preponderance of the evidence, that jurisdiction is proper. Dart
Cherokee Basin Operating Co., LLC, 135 S.Ct. at 553–54; Hartis v. Chicago Title Ins. Co., 694
F.3d 935, 944–45 (8th Cir. 2012). The removing party’s burden is to describe how the amount in
controversy exceeds the jurisdictional amount, and remains a pleading requirement, and not a
demand for proof. Hartis, 694 F.3d at 944–45.
II.
Jurisdictional Facts
From January 15, 2011 until the present, Shelter has sold automobile insurance in the State
of Arkansas.
Putative class members in both Whitaker and Baggett purchased automobile
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insurance policies from Shelter. The State of Arkansas requires that automobile insurance policies
“provide minimum medical and hospital benefits” to the insured, family members, passengers, and
others injured during motor vehicle accidents “without regard to fault, as follows:”
MEDICAL AND HOSPITAL BENEFITS. All reasonable and necessary expenses
for medical, hospital, nursing, dental, surgical, ambulance, funeral expenses, and
prosthetic services incurred within twenty-four (24) months after the automobile
accident, up to an aggregate of five thousand dollars ($5,000) per person, and may
include any nonmedical remedial care and treatment rendered in accordance with a
recognized religious method of healing. Expenses for hospital room charges may
be limited to semiprivate accommodations.
Ark. Code Ann. § 23-89-202(1). To comply with this provision, Shelter’s relevant automobile
insurance policies include a provision for a medical payment coverage benefit, which reads:
INSURING AGREEMENT FOR COVERAGE C
Subject to all conditions, exclusions, and limitations of our liability, stated in this
policy, [Shelter] will pay the reasonable charges for necessary goods and services
for the treatment of bodily injury sustained by an insured, if such bodily injury
directly results from an accident caused by the occupancy, use, or maintenance of
an auto. The reasonable charges must be incurred within two years of the accident
date.
(No. 2:18-CV-02091, Doc. 7, ¶ 13; No. 2:18-CV-02190, Doc. 10, ¶ 9).
Arkansas law prohibits accident insurance contracts from including a provision reducing
benefits paid “due solely to the existence of one (1) or more additional contracts providing benefits
to that individual” unless an insurance regulation allows for such a reduction. Ark. Code Ann.
§ 23-85-132. Whitaker’s and Baggett’s complaints each cite to “Rule 21” from the “Arkansas
Insurance Commission.” 2 (No. 2:18-CV-02091, Doc. 4, pp. 4–6, ¶ 18; No. 2:18-CV-02190,
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Arkansas has a “State Insurance Department.” Ark. Code Ann. § 23-61-101. This agency
refers to itself as the “Arkansas Insurance Department.” See https://www.insurance.arkansas.gov.
The Arkansas Insurance Department is headed by an “Insurance Commissioner,” which may have
led Whitaker and Baggett to identify this agency as the “Arkansas Insurance Commission.”
The website for the Arkansas Insurance Department publishes a “Rule 21” that appears to
be similar, but not identical, to the Rule 21 cited in the complaints. The Rule 21 on the website
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Doc. 5, pp. 3–4, ¶¶ 18–20). The complaints quote relevant provisions of this Rule 21, which
mandates that benefits under a primary plan that has no rules for coordination of benefits “must be
determined without taking the existence of any other plan into consideration.” (No. 2:18-CV02091, Doc. 4, p. 5, ¶ 18; No. 2:18-CV-02190, Doc. 5, p. 3, ¶ 19).
Whitaker alleges that Shelter has violated these laws and regulations and the medical
coverage payment provision in putative classmembers’ policies by negotiating lower bills directly
with healthcare providers and retaining the difference, rather than paying the amounts claimed to
its insured customers. Whitaker seeks to certify a class of Arkansas residents who, from January
15, 2011 onward, purchased a policy of insurance from Shelter; made a claim for medical expenses
under the policy’s medical coverage payment provision; for whom Shelter negotiated a lower bill
with the medical provider that did not exhaust the insured’s $5,000 policy limit; and to whom
Shelter did not pay the difference.
Baggett alleges that Shelter reduces the amount of benefits it pays under the medical
coverage payment provision to account for amounts paid by other insurance policies owned by the
insured. Baggett seeks to certify a class of Arkansas residents who, from March 13, 2013 onward,
purchased a policy of insurance from Shelter; made a claim for medical expenses under the
policy’s medical coverage payment provision; and for whom Shelter reduced the amount it paid
under the medical coverage payment provision because of payments made by another insurance
plan.
and the Rule 21 in the complaints is not the Rule 21 that appears either on the Arkansas Secretary
of State’s website or in the Arkansas Administrative Code published on Westlaw and represented
to be current through December of 2018. See Ark. Admin. Code §§ 054.00.21-1–054.00.21-7.
The Rule 21 appearing in the Arkansas Administrative Code includes different provisions than
those cited by Whitaker and Baggett. It may be an issue for the State courts on remand to determine
whether the Rule 21 cited by Whitaker and Baggett is valid under Arkansas’s Administrative
Procedures Act, Ark. Code Ann. § 25-15-201, et seq.
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To determine whether an adequate amount is in controversy in each case, Shelter reviewed
its claims system and obtained a report of every policy during the class period where a claim was
made under the medical coverage payment provision and the policy limits were not exhausted,
then aggregated that amount, which exceeds $5,000,000. (No. 2:18-CV-02091, Doc. 1-2; No.
2:18-CV-02190, Doc. 26-1 (affidavit of Mark Jones)). Shelter’s electronic recordkeeping system
is designed in such a way that Shelter is not able to determine the reason why full payment was
not made on any of those claims without doing an in-depth claim review. Id.; see also No. 2:18CV-02091, Doc. 22-1, pp. 27:18–35:4 (Deposition of Mark Jones).
III.
Analysis
Whether minimal diversity exists is not in question in either of these cases. What is in
question is whether Shelter has provided a plausible explanation for its claimed amount in
controversy that demonstrates by a preponderance of the evidence that CAFA is satisfied. In each
case, the answer is “no,” and the matters must be remanded.
Shelter has misidentified the amount in controversy. Shelter’s jurisdictional allegations
are incorrectly premised on these cases putting into controversy all medical coverage payment
provision claims for which the policy limits were not exhausted. Neither Plaintiff has identified
his putative class in a way that would plausibly put all those claims into controversy. Rather, the
putative classes are defined to include only those claims where policy limits were not exhausted
for a particular reason. Shelter’s computer reports do not reveal the reason why policy limits were
not exhausted in any given case. Shelter did not review the individual claims for which policy
limits were not exhausted to determine the reasons why. Shelter did not even review a sample of
those claims to conduct a statistical analysis of likely reasons that policy limits were not exhausted.
On the record before the Court, it is just as possible that payment on any given claim in Shelter’s
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report did not exhaust policy limits because the claim was for a small amount as it is because
Shelter negotiated a lower bill from the medical provider or reduced the benefit paid because some
other insurance policy paid some of the amount claimed. “[T]he amount in controversy is not
established by a preponderance of the evidence if a court must resort ‘to conjecture, speculation,
or star gazing.’” Waters v. Ferrara Candy Co., 873 F.3d 633, 636 (8th Cir. 2017) (quoting Pretka
v. Kolter City Plaza II, Inc., 608 F.3d 744, 754 (11th Cir. 2010)).
Because Shelter has failed to establish that a sufficient amount is in controversy for this
Court to exercise jurisdiction under CAFA, these matters must be remanded.
IV.
Conclusion
IT IS THEREFORE ORDERED that, in the matter of Whitaker v. Shelter Mutual Insurance
Co., No. 2:18-CV-02091, this case is REMANDED to the Circuit Court of Logan County,
Arkansas. All pending motions are TERMINATED.
IT IS FURTHER ORDERED that, in the matter of Baggett v. Shelter Mutual Insurance
Co., No. 2:18-CV-02190, Plaintiff’s motion (Doc. 15) to remand is GRANTED, and this case is
REMANDED to the Circuit Court of Pulaski County, Arkansas.
IT IS SO ORDERED this 15th day of March, 2019.
/s/P. K. Holmes, ΙΙΙ
P.K. HOLMES, III
U.S. DISTRICT JUDGE
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