Martin v. Progressive Specialty Insurance Agency Inc

Filing 18

ORDER denying as moot 5 Motion to Remand and denying 7 Motion to Remand. Signed by Senior Judge James T Moody on 5/14/2013. (kds)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
VERONICA MARTIN,
Plaintiff,
v.
PROGRESSIVE PALOVERDE
INSURANCE AGENCY, INC.
d/b/a PROGRESSIVE INSURANCE
Defendant.

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No. 3:13 CV 64

OPINION AND ORDER
This matter is before the court on plaintiff Veronica Martin’s amended motion to
remand this case to state court. (DE # 7.) On January 17, 2013, plaintiff filed the current
suit in LaPorte County Superior Court. (DE # 1.) Defendant Progressive Insurance
subsequently removed the case to this court. (DE # 2.) Plaintiff then filed a motion to
remand the case to state court (DE # 5) and an amended motion to remand the case to
state court (DE # 7). Defendant filed a timely response. (DE # 8.) For the following
reasons, that motion is denied.
I.

Factual Background
Plaintiff alleges that on December 5, 2010 she was involved in a motor vehicle

accident with an underinsured driver. (DE # 1.) Plaintiff further alleges that this
accident resulted in plaintiff suffering physical injury and property damage. (Id.)
Plaintiff alleges that at the time of the accident, defendant was plaintiff’s automobile

insurer. (Id.) Plaintiff’s insurance policy (“the insurance policy”) with defendant
included coverage for accidents involving uninsured and underinsured drivers. (Id.)
Plaintiff alleges that defendant had a duty under the insurance policy to pay
plaintiff benefits above the benefits paid by an underinsured driver’s insurance
company. (Id.) After the accident, plaintiff settled with the underinsured driver’s
insurance company for the underinsured driver’s policy limit. (Id.) Plaintiff also alleges
that she demanded that defendant pay her the benefits she is owed, but that defendant
refused, and plaintiff therefore filed this lawsuit. (Id.) In her complaint, plaintiff seeks
damages for breach of contract, and also seeks punitive damages. (Id.) Plaintiff does list
a specific amount of damages in her complaint. (Id.)
II.

Analysis
Defendant removed this action to federal court under 28 U.S.C. §§ 1441 and 1446.

(DE # 2.) Under Section 1441(a):
[A]ny civil action brought in a State court of which the district courts of the
United States have original jurisdiction, may be removed by the defendant
or the defendants, to the district court of the United States for the district and
division embracing the place where such action is pending.
28 U.S.C. § 1441(a). “The party seeking removal has the burden of establishing federal
jurisdiction, and federal courts should interpret the removal statute narrowly, resolving
any doubt in favor of the plaintiff’s choice of forum in state court.” Schur v. L.A. Weight
Loss Ctrs., Inc., 577 F.3d 752, 758 (7th Cir. 2009).
Defendant contends that this court has original jurisdiction over this case under
28 U.S.C. § 1332(a)(1), the diversity of citizenship statute. (DE # 2.) Section 1332(a)(1)

states that the “district courts shall have original jurisdiction of all civil actions where
the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and
costs, and is between . . . citizens of different States[.]” In her amended motion to
remand, plaintiff does not contest the “citizens of different States” requirement. Instead,
plaintiff argues that “no evidence exists to support [defendant’s] claim that the amount
in controversy exceeds [$75,000.]” (DE # 7 at 2.)
In Oshana v. Coca–Cola Co., the Seventh Circuit Court of Appeals explained the
standard for meeting the amount in controversy requirement in cases removed to
federal court. 472 F.3d 506 (7th Cir. 2006). “[T]he amount in controversy is the amount
required to satisfy the plaintiff’s demands in full on the day the suit begins, or in the
event of removal, on the day the suit was removed.” Id. at 510. In general, the
proponent of jurisdiction has the burden of showing by a preponderance of the
evidence facts that suggest the amount in-controversy requirement is met. Id.
Obviously, that is easier said than done when the plaintiff does not want to be in federal
court and provides little information about the value of her claims. Id. In such a case, “a
[defendant’s] good-faith estimate of the stakes is acceptable if it is plausible and
supported by a preponderance of the evidence.” Id.1

In her amended motion to remand, plaintiff argues that defendant, as the removing
party, must “establish any disputed aspect of jurisdiction by offering ‘evidence which
proves to a reasonable probability that jurisdiction exists.’” (DE # 7 at 3 (citing Chase v. Shop
‘N Save Warehouse Foods, Inc., 110 F.3d 424, 427 (7th Cir. 1997)).) The Seventh Circuit has
abandoned the “reasonable probability” standard. See Meridian Sec. Ins. Co. v. Sadowski, 441
F.3d 536, 540 (7th Cir. 2006); see also Back Doctors Ltd. v. Metropolitan Property and Cas. Ins.
Co., 637 F.3d 827, 829 (7th Cir. 2011).
1

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The Seventh Circuit has given several examples of how a removing defendant
can establish the amount in controversy in a given case: “[B]y contentions
interrogatories or admissions in state court; by calculation from the complaint’s
allegations . . . ; by reference to the plaintiff’s informal estimates or settlement
demands . . . ; or by introducing evidence, in the form of affidavits from the defendant’s
employees or experts, about how much it would cost to satisfy the plaintiff’s
demands . . . .” Sadowski, 441 F.3d at 541-42. “[O]nce the defendant in a removal case has
established the requisite amount in controversy, the plaintiff can defeat jurisdiction only
if it appears to a legal certainty that the claim is really for less than the jurisdictional
amount.” Oshana, 472 F.3d at 510–11. Ultimately, the question is whether it is legally
impossible for the plaintiff to recover greater than the jurisdictional amount. LM Ins.
Corp. v. Spaulding Enter. Inc., 533 F.3d 542, 553 (7th Cir. 2008).
In her amended motion to remand, plaintiff asserts that the maximum total
amount she could recover under the insurance policy is $75,000 (DE # 7 at 4),2 but that

The maximum amount payable under the insurance policy is $100,000. (DE # 7 at
4.) Plaintiff received $25,000 from the underinsured driver’s insurance company (DE # 5
at 10), and the parties agree that $75,000 is the total amount recoverable under the
insurance policy.
When the validity of an entire insurance policy is at issue, the amount in controversy
is indeed the face value of the policy. Hawkins v. Aid Ass’n for Lutherans, 338 F.3d 801, 805
(7th Cir. 2003). In disputes regarding the applicability of an insurance policy to a particular
occurrence, however, the amount in controversy is the value of the underlying claim, not
the face value of the policy. Motorists Mut. Ins. Co. v. Simpson, 404 F.2d 511, 515 (7th Cir.
1968). Although it is not clear whether defendant is contesting the validity of the entire
insurance policy at issue in this case, defendant does argue that the court must determine
the value of the underlying claim in ruling on plaintiff’s amended motion to remand.
(DE # 8 at 4.) The court will therefore assume that this is the proper analysis for purposes
2

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before filing this lawsuit, she only demanded $65,0003 (id.; see also DE # 5 at 10 (demand
for $65,000)). In response, defendant agrees with plaintiff that the most plaintiff can
recover under her breach of contract claim is $75,000, which, defendant concedes,
would not meet the amount in controversy requirement of § 1332(a). (DE # 8 at 2.)
Defendant, however, argues that the amount in controversy in this case is still
well above the $75,000 threshold. (Id. at 4-6.) Specifically, defendant first argues that the
amount in controversy for plaintiff’s breach of contract claim is $65,000. (Id. at 4.)
Defendant bases this number on a settlement demand that plaintiff made
approximately three months prior to filing this suit. (DE # 5 at 10; DE # 8 at 4.) As
mentioned above, the Seventh Circuit has noted that a defendant can establish that the
amount in controversy requirement has been met by referencing a plaintiff’s settlement
demands. Sadowski, 441 F.3d at 541-42; see also Rising-Moore v. Red Roof Inns, Inc., 435
F.3d 813, 815-17 (7th Cir. 2006). Thus, $65,000 is the amount in controversy for plaintiff’s
breach of contract claim. Rising-Moore, 435 F.3d at 816 (“[Plaintiff’s] lawyer has revealed
what he thinks his loss amounts to: between $180,000 and $200,000. This is the amount
‘in controversy.’”).4

of this opinion.
In plaintiff’s amended motion to remand, plaintiff notes that she has accumulated
approximately $21,000 in medical bills as a result of this incident. (DE # 7 at 4.) It is not
clear whether plaintiff is seeking compensation for these expenses. (Id.; DE # 5 at 10;
DE # 1.)
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Additionally, a settlement demand of $65,000 made prior to the filing of this
lawsuit indicates that plaintiff actually believed her breach of contract claim was worth the
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Second, defendant argues that plaintiff’s second claim, a claim of bad faith, puts
the amount in controversy in this case over $75,000. (See DE # 1 at 4; DE # 8 at 5.) In
Indiana, “there is a legal duty implied in all insurance contracts that the insurer deal in
good faith with its insured.” Erie Ins. Co. v. Hickman, 622 N.E.2d 515, 518 (Ind. 1993). A
claim of bad faith, also called a breach of the duty of good faith, exists when the insurer
breaches this duty by denying a claim when it knows that there is no rational,
principled basis for doing so. Freidline v. Shelby Ins. Co., 774 N.E.2d 37, 40 (Ind. 2002).
Plaintiff seeks punitive damages under that claim. (DE # 1 at 4.)
Punitive damages can satisfy the minimum amount in controversy required for
diversity jurisdiction if they are recoverable under state law. LM Ins. Corp., 533 F.3d at
551. Under Indiana law, punitive damages may be recoverable based on an insurer’s
breach of the duty of good faith and fair dealing, as has been alleged here, when the
defendant acted with malice, fraud, gross negligence, or oppressiveness. Hickman, 622
N.E.2d at 520. In this case, plaintiff’s complaint alleges that defendant has not
“attempted in good faith to effectuate prompt, fair, and equitable settlement of
[plaintiff’s insurance claim] when liability has become reasonably clear.” (DE # 1 at 4.) It
further alleges that this conduct is a result of bad faith on defendant’s part. (Id.) These
allegations go beyond the tort of breach of good faith and fair dealing, and venture into
the territory of malice, fraud, gross negligence, and oppressiveness. Hickman, 622

full $75,000. A demand of $65,000 indicates that plaintiff was willing to accept slightly less
than the full amount in order to avoid the expense and uncertainty of a lawsuit.
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N.E.2d at 520. Accordingly, punitive damages could be recovered under Indiana law in
this case.
The real question becomes whether or not it is “legally impossible” for plaintiff
to recover $10,0015 in punitive damages against defendant. LM Ins. Corp, 533 F.3d at
553. In this case, the court finds that it is not legally impossible. Such an award would
not violate the Indiana statute applicable to punitive damages awards, which caps the
amount of punitive damages to the greater of either $50,000 or three times the awarded
amount of compensatory damages. IND. CODE § 34-51-3-4. Further, the ratio of punitive
damages to compensatory damages would be approximately 0.15-to-1, even lower than
1-to-1; such a ratio would not offend the due process sensibilities of the Supreme Court,
which has frowned upon ratios exceeding 4-to-1. State Farm Mut. Auto. Ins. Co. v.
Campbell, 538 U.S. 408, 425 (2003) (noting that “few awards exceeding a single-digit ratio
[e.g., 9-to-1] between punitive and compensatory damages, to a significant degree, will
satisfy due process,” and that a 4-to-1 ratio “might be close to the line of constitutional
impropriety”); see also Anthony v. Sec. Pac. Fin. Servs., Inc., 75 F.3d 311, 315-17 (7th Cir.
1996) (rejecting punitive damages award more than 17 times the amount of actual
damages). Finally, a $10,001 punitive damages award would constitute approximately
13% of the jurisdictional amount required in this case, not nearly enough to be

This is the amount it would take to raise the amount in controversy from $65,000
to over $75,000.
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considered the “bulk” of the jurisdictional amount, which might render the award
excessive as a matter of law. Anthony, 75 F.3d at 315.
Plaintiff makes several arguments in support of her contention that the amount
in controversy in this case is not over $75,000. First, plaintiff directs the court to a
settlement counteroffer made by defendant to settle all of plaintiff’s claims for $500.
(DE # 5 at 12.) The Seventh Circuit has not conclusively determined whether a
defendant’s settlement offer is relevant to the amount in controversy analysis. Chase,
110 F.3d at 428-29. That court has, however, noted that “[i]n a case for money damages,
where the amount defendant stands to lose is equal to the amount plaintiff stands to
gain from judgment, the appropriate focus in determining the amount in controversy is
on plaintiff’s assessment of the value of her case.” Id. at 428 (emphasis added).
Additionally, as noted above, the inquiry into the amount in controversy focuses on
what the plaintiff hopes to recover from the suit. Oshana, 472 F.3d at 510-11 (“[T]he
amount in controversy is the amount required to satisfy the plaintiff’s demands in full on
the day the suit begins, or in the event of removal, on the day the suit was removed.”
(emphasis added)); Rising-Moore, 435 F.3d at 816 (“The burden, rather, is to show what
the plaintiff hopes to get out of the litigation; if this exceeds the jurisdictional amount, then
the case proceeds in federal court unless a rule of law will keep the award under the
threshold.” (emphasis added)); see also Gaffer v. Wal-Mart Stores, Inc., No. 10–CV–274,
2010 WL 2990936, at *3 (W.D. Wis. July 27, 2010) (concluding that defendant’s
settlement offer was irrelevant to amount in controversy analysis).

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In this case, even if the court were to assume that defendant’s settlement offer is
relevant to the amount in controversy analysis, defendant’s settlement offer of $500 is
not persuasive evidence of the value of plaintiff’s claim. As defendant points out in its
response brief (DE # 8 at 4), it provided no explanation of how it came up with the $500
figure in its settlement offer. (DE # 5 at 12). In contrast, plaintiff’s settlement demand of
$65,000 was based on the fact that plaintiff continues “to have difficulties with her right
lower leg.” (Id. at 10.) Plaintiff’s attorney went on to explain that plaintiff’s “mobility
and strength have been compromised.” (Id.) Finally, plaintiff’s attorney explained that
the $65,000 settlement demand was made “due to the injuries [plaintiff] sustained and
due to the fact that [plaintiff] continues to have difficulties as a result of the accident[.]”
(Id.) Thus, the court concludes that plaintiff’s settlement demand is the better indicator
of the value of plaintiff’s breach of contract claim.
Second, plaintiff argues that defendant did not request an admission as to
whether plaintiff was willing to limit the amount of her recovery to $75,000. (DE # 7 at
5.) Plaintiff, however, cites no authority that holds that defendant was required to do
this, and her argument therefore fails. Along these lines, plaintiff also asserts that she is
willing to enter into a stipulation that limits her recovery to $75,000 on all claims. (Id.) A
plaintiff can defeat removal of a diversity case by “irrevocably committing” to limiting
her damages to no more than $75,000, Walton v. Bayer Corp., 643 F.3d 994, 998 (7th Cir.
2011), but that commitment must be made prior to removal from state court. See id.; see
also Hunt v. DaVita, Inc., 680 F.3d 775, 777-78 (7th Cir. 2012) (“[Plaintiff’s] post-removal

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disclaimer of damages exceeding $75,000 could not defeat federal jurisdiction after a
proper removal based on the complaint.”). Thus, this argument also fails.
In sum, because the value of plaintiff’s breach of contract claim is $65,000, and
because it is not legally impossible for plaintiff to recover $10,001 in punitive damages
on her bad faith claim, defendant has shown, by a preponderance of the evidence, that
the amount in controversy in this case is over $75,000. Moreover, it does not appear “to
a legal certainty that [plaintiff’s claims are] really for less than the jurisdictional
amount.” Oshana, 472 F.3d at 510–11. Accordingly, federal jurisdiction in this case is
appropriate under 28 U.S.C. § 1332(a)(1).
III.

Conclusion
For the foregoing reasons, plaintiff’s amended motion to remand is DENIED.

(DE # 7.) Additionally, plaintiff’s original motion to remand is DENIED AS MOOT.
(DE # 5.)
SO ORDERED.
Date: May 14, 2013
s/James T. Moody
JUDGE JAMES T. MOODY
UNITED STATES DISTRICT COURT