United States District Court, Northern District of Illinois, E.D
July 2, 1965
RICHARD B. KECK, PLAINTIFF,
FIDELITY AND CASUALTY COMPANY OF NEW YORK, DEFENDANT.
The opinion of the court was delivered by: Decker, District Judge.
This is a motion to dismiss the complaint for failure to meet
the $10,000 jurisdictional amount required in diversity actions
under 28 U.S.C. § 1332, and for failure to state a claim upon
which relief can be granted.
Plaintiff insured sues on a health and accident insurance
policy which, in relevant part, provides the following benefits:
(1) If plaintiff becomes totally disabled, he receives $50 per
week for up to 200 weeks;
(2) If plaintiff is totally disabled for 200 consecutive weeks
and is totally and permanently disabled at the end of 200 weeks,
he receives a lump sum payment of $30,000;
(3) Lesser payments for partial disability are provided.
Plaintiff, following an accident, received thirty-six weekly
$50 payments for total disability. Defendant insurance company
then discontinued the $50 weekly payments and commenced paying
plaintiff partial disability benefits amounting to $37.50 weekly,
claiming that he was no longer totally disabled. Plaintiff
accepted those payments, but now sues for the difference between
what he has received to date and what he would have received
under the total disability provisions. He also seeks a
declaratory judgment that he is entitled to total disability
benefits for the remainder
of the 200 weeks. Neither of these claims, nor both taken
together, amount to $10,000, and thus they will not support
jurisdiction of this Court.
However, plaintiff also seeks a declaratory judgment that he
"* * * is now, and will continue to be at the
conclusion of such 200 weeks and for the remainder of
his life, totally and permanently disabled, * * * and
that plaintiff is, and can and will become, eligible
for the $30,000.00 total and permanent disability
benefit provided by the contract of insurance."
If the claim for $30,000 can be heard and decided by this
Court, the jurisdictional amount has been met. A suit for a
declaratory judgment under 28 U.S.C. § 2201 can be heard only if
there is an "actual controversy." The cases involving the problem
consistently turn on the distinction between suits based on total
repudiation or denial of the validity of a contract, on the one
hand, and suits for payments under provisions of a contract still
valid and in force. Professor Moore clearly summarizes this
"The cases have held that in a suit to recover
payments, future installments are not directly
involved, and therefore may not be counted in the
amount in controversy. Nor may the reserve for future
payments, which the insurer would have to set up if
the insured prevailed, be counted in the amount in
controversy. And in a suit for a declaratory judgment
on the question of the insured's continuing
disability, the future liability of the insurer may
not be counted in the jurisdictional amount.
"On the other hand, where the question is not the
disability of the insured, but the validity of the
policy itself, then the total value of the policy may
be counted in the amount in controversy in suits, for
example, to reinstate a policy, to cancel it, or to
enjoin its cancellation." 1 Moore, Federal Practice ¶
0.93[5.2], at pp. 854-56.
A sample of the case law will illustrate the distinction. In
Bell v. Philadelphia Life Ins. Co., 78 F.2d 322
(4th Cir. 1935),
plaintiff insured sued for a declaratory judgment that a $10,000
policy had not lapsed for non-payment of certain premiums as the
insurer had claimed. The Court held that the validity of the
entire policy was in issue, not merely certain benefits under it;
the "actual controversy" involved the policy itself, and
therefore its face value determined the jurisdictional amount.
The same rule was followed in Ballard v. Mutual Life Ins. Co. of
New York, 109 F.2d 388
(5th Cir. 1940), where the insurer sued
for a declaratory judgment that certain policies were not in
In contrast, in Mutual Life Ins. Co. of New York v. Moyle,
116 F.2d 434 (4th Cir. 1940), plaintiff insurance company sued for a
declaratory judgment that it was no longer liable under a
disability policy because the insured was no longer disabled
under the terms of that policy. The Court held that the only
controversy in the case was over payments then due, and did not
involve claims to future payments under a policy admitted to be
valid. The Court said (at page 435):
"We think it clear that all that is in controversy
is the right of the insured to the disability
payments which had accrued at the time of suit. The
company is obligated to make these payments only so
long as the condition evidencing total and permanent
disability continues; and, as this condition,
theoretically at least, may change at any time, it is
impossible to say that any controversy exists as to
any disability payments except such as have accrued.
New York Life Ins. Co. v. Viglas, 297 U.S. 672, 56
S.Ct. 615, 80 L.Ed. 971; New York Life Ins. Co. v.
Stoner, 8 Cir., 92 F.2d 845; United States Fidelity &
Guaranty Co. v. McCarthy, 8 Cir., 33 F.2d 7, 13, 70
A.L.R. 1447; Metropolitan Life Ins. Co. v. Hobeika,
D.C., 23 F. Supp. 1;
Small v. New York Life Ins. Co., D.C., 18 F. Supp. 820.
Such a case is to be distinguished from one
where the controversy relates to the validity of the
policy and not merely to liability for benefits
accrued; for, in the latter case, the amount involved
is necessarily the face of the policy in addition to
the amount of such benefits. See Stephenson v.
Equitable Life Assur. Soc., 4 Cir., 92 F.2d 406; Bell
v. Philadelphia Life Ins. Co., 4 Cir., 78 F.2d 322;
Pacific Mutual Life Ins. Co. of California v. Parker,
4 Cir., 71 F.2d 872."
The same result was reached in Commercial Casualty Ins. Co. v.
Fowles, 154 F.2d 884, 165 A.L.R. 1068 (9th Cir. 1946), in which
plaintiff insured attempted to include "future benefits" to reach
the jurisdictional amount in a suit on a disability policy. The
Court said (at page 886):
"Obviously, no right to such `future benefits'
existed at the time the action was commenced. No one,
at that time, knew or could have known whether such a
right would ever exist. Therefore, as to such `future
benefits,' there was and could have been, at that
time, no controversy."
In Bree v. Mutual Benefit Health and Accident Ass'n,
182 F. Supp. 181 (E.D.Pa. 1959), the rule was again applied.
I have found only one case which departs from this clear
pattern: Columbian National Life Ins. Co. v. Goldberg,
138 F.2d 192 (6th Cir. 1943). In that case, the insured sued for a
declaratory judgment to establish that he was released from
paying premiums under the terms of a disability policy because he
had become totally disabled. The insurance company denied the
insured's disability and his release from the duty to pay
premiums; the validity of the policy was not questioned. Only the
facts underlying plaintiff's claim were challenged: his age and
disability. The Court found an "actual controversy" in that case,
relying on Aetna Life Ins. Co. of Hartford, Conn., v. Haworth,
300 U.S. 227, 57 S.Ct. 461, 81 L.Ed. 617 (1937). Reliance on
Aetna seems misplaced, however, since Aetna involved the
question of whether an entire insurance policy had lapsed. The
Supreme Court found an "actual controversy" there, a decision
wholly consistent with the line of cases reviewed above.
Goldberg seems contrary to the cases which find no "actual
controversy" over future benefits. It cannot reasonably be
distinguished on its facts since the issue in it was whether
certain premiums were to be waived, which could have occurred
only on certain future contingencies. The case seems to hold that
any denial of liability by an insurer on any portion of an
insurance contract is sufficient to raise a controversy which can
be resolved under the Declaratory Judgment Act, an approach which
leaves few cases which cannot be so heard. I think the Act and
the cases draw a sharper line than that suggested by Goldberg,
a case which must be regarded as a deviation in this area of the
It is clear that the issue in these cases is whether, in the
words of the Act, there is an "actual controversy" between the
parties. In a case such as Moyle, in which the claim is for
future benefits only, the insurer does not deny his liability
under the conditions stated in the contract; he only denies that
the conditions have then been satisfied. He does not, and cannot,
contest his liability for future benefits because he cannot
foresee the future.
On the other hand, where the contract's validity is in issue,
the insurer denies that he owes or ever will owe anything under
the contract. A real controversy exists between him and the
insured who still claims future benefits will be due.
The distinction between the two lines of cases is further
sharpened by the differences in impact and basis of declaratory
judgments in each. In the case of future benefits, although it is
possible for a Court to say something about a present right to
receive benefits in the future under certain conditions —
essentially a restatement of the contract's terms — it
cannot finally determine the right to future benefits because it
has none of the necessary future facts. Future lawsuits will
almost certainly ensue with respect to the same right, and the
present declaratory judgment is of relatively little value.
In a suit on a contract's validity, however, the Court can make
a declaration which has some direct, immediate and significant
impact on the rights and duties of the parties because the Court
has before it all of the facts necessary for a final resolution
of the issues facing it. Future facts need not be divined;
flowering of the right need not await another day, or another
Plaintiff here clearly claims a future benefit. Because this is
not the kind of matter which this Court can hear under the
Declaratory Judgment Act, it cannot be included in plaintiff's
claim. Without this part of his claim, plaintiff does not allege
a sufficient amount in controversy to support jurisdiction of
this Court, and therefore the complaint must be dismissed.
An order will be entered this day granting defendant's motion
to dismiss the complaint.
© 1992-2003 VersusLaw Inc.