FEDERAL COURT IN AUSTIN REMANDS CASE BASED ON LACK OF DIVERISTY JURISDICTION: INSURER PLACED IN AWKWARD POSITION OF ARGUING THAT THE INSUREDS’ ALLEGED DAMAGES WERE ACTUALLY HIGHER THAN THE INSUREDS WERE CLAIMING
Recently, a federal district court in Austin ruled that an insurer did not meet its burden of establishing diversity jurisdiction when faced with the insureds’ motion to remand to the state district court. Stockton and Stockton v. Allstate Fire and Cas. Ins. Co., No. 1:20-cv-00506-RP (W.D. Tex.—Austin, Dec. 10, 2020). This matter arose out of an underinsured claim made by the insureds with Allstate Fire and Casualty Insurance Company arising out of a motor vehicle accident in which the insureds were involved.
The insureds originally filed in state district court, alleging that they were seeking monetary relief of $100,000 or less, including damages, penalties, costs, expenses, and pre-judgment interest. In response, Allstate removed the suit to federal court based on diversity jurisdiction, which requires that the parties be citizens of different states and the amount in controversy to exceed $75,000.
After the case was removed to federal court, the insureds filed an amended complaint, restating their previous claims but adding an allegation that the amount in controversy did not meet or exceed $75,000, excluding costs and interest. Allstate then moved for dismissal under the federal rules, and the insureds filed a motion to remand arguing that diversity jurisdiction was lacking because the amount in controversy did not exceed the required threshold.
The Court stated that the removing party, Allstate, had the burden of showing federal jurisdiction existed and that removal was proper. The Court also reminded the litigants that it was required to consider the claims in the state court petition as they existed at the time of removal.
The insureds claimed that Texas law mandated the range of damages they pled in their petition ($100,000 or less), and they amended their federal complaint to show they were seeking about $30,000 in damages. Because no specific amount of damages was alleged in the state court petition, Allstate was required to prove by a preponderance of the evidence that the amount in controversy met the $75,000 threshold.
Allstate argued the insureds’ assertions in their state court petition that they could possibly recover amounts exceeding $75,000 was all the proof they needed to meet their burden, but the Court held that Allstate was required to provide more than conclusory allegations, and it was not “facially apparent” from the insured’s petition that the amount in controversy at the time of removal exceeded $75,000. As such, the Court granted the insureds’ motion to remand and sent the case back to state court.