A federal judge of the Southern District of Texas, McAllen Division, recently rebuffed a policyholder plaintiff’s attempt to manipulate the appraisal process and to force a remand to state court.  See Friedrichs v. GeoVera Specialty Ins. Co., No. 7.12-CV-392, 2013 WL 674021 (S.D. Tex. Feb. 22, 2013). 

After the policyholder made a pre-suit demand for hail damage under her homeowners’ policy which exceeded $100,000, the insurer  invoked appraisal.  The insured responded by selecting an appraiser, and, just eight days later, simultaneously filed a lawsuit and an ex parte motion for appointment of an umpire.  The motion was filed before the 15-day period specified in the policy’s appraisal clause for the two appraisers to agree on an umpire.  Three days later, the state court judge granted the motion and appointed an umpire. (Although the court’s opinion does not reflect it, this almost certainly occurred before the insurer was served with the lawsuit.)  The insurer then answered the lawsuit, and a few days later, removed it to federal court and filed a motion to vacate the appointment of the umpire and to set aside the umpire’s award.

Just before the removal, the insured amended her petition to delete the breach of contract claim, leaving only a declaratory judgment claim at issue, and argued that the only amount in controversy at the time of removal was the attorney fees for the declaratory judgment. The court rejected this argument noting the amount in controversy for a declaratory judgment action is the value of the right to be declared, and observing that the insured’s pre-suit  demand made unmistakably clear that over $100,000 in potential coverage was actually at issue.  The insured also agreed to stipulate to damages less than $75,000, but the court also rejected this strategy, stating that its discretion to consider a post-removal stipulation is only triggered if the amount in controversy is ambiguous.

The court also summarily overturned the state court’s order appointing the umpire and the umpire’s award on the grounds that they were made without authority because the insured failed to allow the appraisers the contractually required 15 days to agree on an umpire before filing her motion for appointment.

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