American Family Mutual Insurance v. Orozco et al

Filing 17

MEMORANDUM DECISION AND ORDER denying Defendants' 10 Motion to Dismiss for Lack of Jurisdiction. Signed by Judge Dale A. Kimball on 3/1/2018. (eat)

_________________________________________________________________________
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH

AMERICAN FAMILY MUTUAL
INSURANCE,

MEMORANDUM DECISION AND
ORDER

Plaintiff,
Case No. 2:17CV00969DAK

vs.

Judge Dale A. Kimball

NICOLAS OROZCO and EVA
GONZALEZ,
Defendant,

This matter is before the court on Plaintiff American Family’s Motion to Dismiss for lack
of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure.
A hearing on the motion was held on February 8, 2018. At the hearing, Plaintiff was represented
by Bryan J. Stoddard, and Defendants were represented by Darren A. Davis. The court took the
matter under advisement. The court has carefully considered the memoranda and other materials
submitted by the parties, as well as the law and facts relating to the motion. Now being fully
advised, the court renders the following Memorandum Decision and Order.
BACKGROUND
In 2013 Defendants Nicolas Orozco and Eva Gonzalez were in an accident and sought
uninsured motorist benefits from Plaintiff American Family. American Family filed the instant
action in this court, seeking declaratory judgment that Defendants’ claims are barred by the
relevant statute of limitations. Defendants responded by filing the present motion to dismiss for
lack of subject matter jurisdiction.

DISCUSSION
Defendants seek to dismiss American Family’s claim pursuant to Federal Rule of Civil
Procedure 12(b)(1). Defendants concede complete diversity but deny that the amount in
controversy exceeds $75,000. The court presumes that a plaintiff’s amount in controversy
controls subject matter jurisdiction. Adams v. Reliance Standard Life Ins. Co, 225 F.3d 1179,
1183 (10th Cir. 2000). And the party asserting jurisdiction bears the burden of proving subject
matter jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).
The party meets this burden by alleging sufficient facts to convince the court that each party’s
recoverable damages bear a reasonable relation to the minimum jurisdictional floor. Gibson v.
Jeffers, 478 F.2d 216, 221 (10th Cir. 1973).
American Family asserts that the amount in controversy exceeds the $75,000
jurisdictional threshold because in cases seeking declaratory relief, the amount in controversy is
the value of litigation to the parties. Lovell v. State Farm Mut. Auto. Ins. Co., 466 F.3d 893, 897
(10th Cir. 2006). In this case, the value of litigation for American Family is the $100,000 policy
limit on each of Defendants’ respective policies. Under Tenth Circuit law, the amount in
controversy is measured by “the maximum limit of the insurer’s liability under the policy.” State
Farm Mut. Auto. Ins. Co. v. Narvaez, 149 F.3d 1269, 1271 (10th Cir. 1998) (finding maximum
policy limits to be amount in controversy where bona fide claim exceeds policy limits); see also
Terra Nova Ins., Ltd. v. Fort Bridger Historical Rendezvous Site, Corp., 2005 WL 2671947, **2
(10th Cir. 2005) (finding amount in controversy to be equal to maximum policy limits).
Defendants contend that the amount in controversy should be tied to the amount
Defendants may recover. Under Tenth Circuit law, this court’s jurisdictional determination turns
on which damages are legally certain. See Lovell, 466 F.3d at 897. Generally, dismissal for lack

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of legal certainty only occurs if (1) a contract limits any possible recovery, (2) the law limits the
amount recoverable, or (3) there is an obvious abuse of federal court jurisdiction. Woodmen of
the World Life Ins. Soc’y v. Manganaro, 242 F.3d 1213, 1216–17 (10th Cir. 2003).
In this case, it is a legal certainty that the insurance contract limits any possible recovery
to $100,000 for each Defendant. Although Defendants’ claims alleged specific damages in the
amount of $20,344.62 and $13,847.86 respectively, well below the $75,000 threshold,
Defendants do not specifically state the amount they seek in general damages. In order to meet
the amount in controversy, therefore, a 4:1 or 5:1 general to specific damages ratio would be
required. Defendants claim that, absent aggravated liability or catastrophic injury, this would be
a rare occurrence. But even if the necessary ratios are improbable, they are nonetheless possible.
Damages are like a box of chocolates; you never know what you are going to get. In the realm of
legal certainty, mere possibilities are fatal: “[i]ndeterminacy of the amount to be recovered is
therefore not sufficient to defeat diversity jurisdiction.” See Jumara v. State Farm Ins. Co., 55
F.3d 873, 877 (3rd Cir. 1995).
Perhaps anticipating this problem, Defendants offered an affidavit containing their and
their counsel’s opinion that full compensation for their injuries would require less than $75,000.
But were this case to proceed to trial, there is only one opinion that would matter—the factfinder’s. If the fact-finder determined that Defendants’ damages merited more than $75,000,
Defendants would not object. Defendants did not stipulate to damages in an amount less than
$75,000, and this court’s jurisdictional analysis requires something more firm than a mere
opinion. The standard is “legal certainty” not “legal probability.”

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The court concludes that Defendants’ insurance policy limit is the only legal certainty
regarding the amount in controversy. The court, therefore, has subject matter jurisdiction over
this case pursuant to 28 U.S.C. § 1332(a)(1).
CONCLUSION
Based on the above reasoning, Defendants’ Motion to Dismiss is DENIED.
DATED this 1st day of March, 2018.
BY THE COURT:

__________________________________
Dale A. Kimball,
United States District Judge

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