Fox v. AFLAC Incorporated et al

Filing 13

ORDER denying 6 Motion to Remand. Signed by District Judge Martin Reidinger on 9/6/11. (ejb)

IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:11cv177

CLIFFORD J. FOX,

)
)
Plaintiff,
)
)
vs.
)
)
AFLAC INCORPORATED, a Georgia )
corporation, and AMERICAN FAMILY )
LIFE ASSURANCE COMPANY OF
)
COLUMBUS, a Georgia corporation, )
)
Defendants.
)
)

ORDER

THIS MATTER is before the Court on the Plaintiff’s Motion to Remand
[Doc. 6].
PROCEDURAL HISTORY
On June 9, 2011, the Plaintiff Clifford J. Fox (Fox) initiated this action in
state court. [Doc. 7, at 1]. On June 20, 2011, he filed an Amended Complaint
in the state court action alleging claims for breach of contract, bad faith
insurance practices and unfair and deceptive trade practices in connection
with an accident insurance policy. [Doc. 1-1]. In the breach of contract claim,
Fox alleged that “[u]nder the terms of the policy, Defendants are indebted to

the Plaintiff in a sum of at least $25,000.00 for the coverage[.]” [Id., at 5]. In
the ad damnum clause of the Complaint, Fox sought compensatory damages
“in excess of $10,000.00" as to each cause of action as well as treble
damages pursuant to the bad faith insurance practices and unfair and
deceptive trade practices claims. [Id., at 6]. Fox also alleged that he is a
citizen and resident of North Carolina while each of the Defendants is a
Georgia corporation having their principal places of business in Columbus,
Georgia.1 [Id., at 1].
On July 15, 2011, the Defendants removed the action to this Court
within the thirty day provision required by 28 U.S.C. §1446(b). [Doc. 1]. The
Defendants’ removal was based on diversity jurisdiction because Fox seeks
“at least $25,000.00" in damages on the breach of contract claim and also
seeks treble damages as to the bad faith insurance practices and unfair and
deceptive trade practices claims. [Id., at 3]. Thus, the Defendants noted that
the aggregation of the damages sought exceeds the jurisdictional threshold
of $75,000.00. [Id.]. One week later, Fox moved to remand to state court on
the ground that the jurisdictional threshold is not met. [Doc. 7].

1

In the Answer, the Defendants clarified that American Family Life Assurance
Company of Columbus is actually a Nebraska corporation having its principal place of
business in Georgia. [Doc. 11, at 1].
2

FACTUAL BACKGROUND
Since January 2005, Fox has had an accident insurance policy, Policy
Number PD102701, issued by the Defendants for which he had paid all
monthly premiums. [Doc. 1-1, at 3]. The policy provided, among other things,
for a hospital confinement benefit of $250.00 per day when the insured is
confined, as the result of an accident, to a hospital room for at least 18 hours
per day, with the benefit not to exceed a 365 day period. [Id.]. In May 2010,
Fox was staying with his step-son in Kansas while recovering from back
surgery. [Id.]. While there, he fell in the bathroom and sustained fractures to
his vertebrae. [Id.].

Fox was hospitalized from June 6, 2010 until his

discharge on September 25, 2010. [Id.].
Fox applied for coverage for this period of hospitalization, seeking the
hospital confinement benefit of $250.00 per day for the 111 day period of
confinement.2

[Id.].

In May 2011, the Defendants denied the claim for

benefits. [Id.]. As a result, Fox sued for breach of the insurance contract, bad
faith in handling his insurance claim and unfair and deceptive trade practices
based on the bad faith handling of his claim.
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Fox calculates the period as 100 days, hence the demand for “at least $25,000.”
Unless the dates of admission and/or discharge are erroneously stated, this calculation
is incorrect. The Defendants calculate the period of hospitalization as 111 days
because they exclude the date of discharge. The hospital confinement benefit would
thus be valued at $27,750.00. Fox did not file a reply to the Defendants’ response in
which they value the benefit at $27,750.00 and the Court therefore finds it undisputed.
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DISCUSSION
The party seeking removal has the burden of establishing by a
preponderance of the evidence that the jurisdictional threshold amount in
controversy is met. Bartnikowski v. NVR, Inc., 307 Fed.Appx. 730, 734 (4 th
Cir.2009) (noting other circuits require preponderance standard although not
yet adopted in this circuit). “Generally, the amount specified in the complaint
will determine whether the jurisdictional amount is satisfied for purposes of
removal.” Id. “Determining the amount in controversy becomes more difficult,
however, where, as here,” the amount was stated in terms of a state court
complaint. Id. In North Carolina, “a plaintiff can plead for judgment in excess
of a certain dollar amount, ...making it difficult to determine the exact amount
in controversy[.]”

Lee Elec. Const., Inc. v. Eagle Elec., LLC, 2003 WL

21369256 **2 (M.D.N.C. 2003) (citing N.C.R.C.P. 8(a)(2) and 14C Charles
Alan Wright, Federal Practice and Procedure, §3725 at 79 (3d. 1998)). Such
is the case here where Fox alleged that the Defendants owe him “at least
$25,000.00" for the breach of contract claim but then stated damages in his
ad damnum clause as in excess of $10,000.00. Id.
The test in the Fourth Circuit for calculating the amount in controversy
is “the pecuniary result to either party which [a] judgment would produce.”
Dixon v. Edwards, 290 F.3d 699, 710 (4 th Cir. 2002) (citation omitted).
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Obviously, the pecuniary result here is the $27,750.00 hospital confinement
benefit. Burrell v. Sparkkles Reconstruction Co., 189 N.C.App. 104, 109, 657
S.E.2d 712, 716 (2008), disc. rev. denied 362 N.C. 469, 665 S.E.2d 738
(2008) (“when an insurance company breaches its policy with an insured
party, the damages owed to the insured are the amount of coverage due”).
Critical to the inquiry, however, is the issue of whether trebled damages may
be used to reach the jurisdictional threshold of $75,000.00. Without citing any
case law, Fox argues that such damages may not be so used. He further
argues that even if the $25,000.00 damages are trebled, the amount still does
not exceed $75,000.00, completely ignoring the fact that the record shows he
was hospitalized for more than 100 days.
Fox seeks trebled damages pursuant to N.C.Gen.Stat. §58-63-15 which
proscribes bad faith insurance practices.

“Although claims of unfair or

deceptive trade practices are generally brought under N.C.Gen.Stat. §75-1.1,
if such practices occur in the insurance industry, they are instead governed
by N.C.Gen.Stat. §58-63-15 and, if proven, deemed to be violations of
Chapter 75 as a matter of law.” Burrell, 189 N.C.App. at 111, 657 S.E.2d at
717 (citing Miller v. Nationwide Mut. Ins. Co., 112 N.C.App. 295, 302, 435
S.E.2d 537, 542-43 (1993), disc. review den. 335 N.C. 770, 442 S.E.2d 519
(1994) (other citations omitted).

Thus, if Fox prevails on the bad faith
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insurance practices claim, he would be entitled to treble his compensatory
damages of $27,750.00. Murray v. Nationwide Mut. Ins. Co., 123 N.C.App.
1, 13, 472 S.E.2d 358, 364 (1996), disc. review den. 345 N.C. 344, 483
S.E.2d 172 (1997) (“[A]n injury suffered may provide for both a cause of action
sounding in common law ..., and simultaneously constitute conduct which is
an unfair and deceptive trade practice.”). Such trebled damages would thus
exceed the $75,000.00 jurisdictional threshold amount. Wall v. Fruehauf
Trailer Services, Inc., 123 F.App’x. 572, 577 (4 th Cir. 2005) (trebling damages
would increase amount in controversy to in excess of $75,000.00 and thus the
amount in controversy requirement was met); R.L. Jordan Oil Co. of North
Carolina, Inc. v. Boardman Petroleum, Inc., 23 F.App’x. 141, 145 n.3 (4 th Cir.
2001) (“When calculating the amount in controversy, the district court should
consider any special or punitive damages, such as treble damages, available
to [plaintiff] under the [Unfair Trade Practices Act.]”) (citations omitted);
Mozingo v. Orkin, Inc., 2011 WL 845896 (E.D.N.C. 2011) (noting that trebled
damages for unfair trade practice would meet threshold except that claim had
been dismissed); Unitrin Auto and Home Ins. Co. v. Bastida, 2009 WL
3591190 (W.D.N.C. 2009) (noting that in considering whether threshold
amount in controversy is met for bad faith insurance claim the “full amount of

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the trebled damages can be considered”).3 For these reasons the Court
concludes tht the fact of the Complaint alleges facts and claims wherein the
amount in controversy exceeds $75,000. Therefore, the Defendants have
carried their burden to show that the threshold amount for diversity jurisdiction
is present in this case.
Fox also argues that the Defendants are prohibited from removing this
action from state court by state licensure laws.

It is true that insurance

companies doing business in North Carolina are held by law to submit
themselves to personal jurisdiction and service of process within the state.
N.C. Gen. Stat. §§58-3-1, 58-16-5. It is also true that no insurance company
may include a condition in its contracts concerning the court or jurisdiction
within which a suit may be brought. N.C. Gen. Stat. §58-3-35. None of these
provisions, however, bars an insurance company defendant from availing
itself of the federal procedural mechanism for removal of cases from state
court to a federal court having original jurisdiction thereof. Terral v. Burke
Construction Company, 257 U.S. 529, 42 S.Ct. 188, 66 L.Ed. 352 (1922)
(state law providing for revocation of licenses of foreign corporations to do

3

The Court thus finds the jurisdictional threshold has been shown without
considering the fact that Fox would also be entitled to recover an award of statutory
attorneys’ fees. Rasmussen v. State Farm Mut. Auto. Ins. Co., 410 F.3d 1029, 1031 (8th
Cir. 2005) (statutory attorneys’ fees count toward the jurisdictional minimum
calculation); Aikens v. Microsoft Corp., 159 F.App’x. 471, 474-75 (4th Cir. 2005).
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business in state when they remove cause to federal court unconstitutional);
Van Dyke v. Prudential Insurance Company, 192 N.C. 206, 134 S.E. 460
(1926).
ORDER
IT IS, THEREFORE, ORDERED that the Plaintiff’s Motion to Remand
[Doc. 6] is hereby DENIED.
Signed: September 6, 2011

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