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Kay-Woods v. Minnesota Life Ins. Co.

May 20, 2008

DAWN M. KAY-WOODS, PLAINTIFF,
v.
MINNESOTA LIFE INS. CO., DEFENDANT.



The opinion of the court was delivered by: Reagan, District Judge

MEMORANDUM and ORDER

In February 2008, Dawn Kay-Woods ("Woods") filed suit in the Circuit Court of Madison County, Illinois against a single Defendant -- Minnesota Life Insurance Company ("MLIC"). Woods asserted that MLIC -- who had issued an insurance policy to Woods and her husband, Brian -- unfairly denied her accidental death benefits after Brian died in a single-vehicle accident. Woods claimed that this constituted consumer fraud and breach of contract. She also alleged that MLIC vexatiously refused to settle the matter.

Woods' state court complaint prayed for $61,887.00, plus prejudgment interest, attorneys' fees, costs and statutory penalties. An affidavit filed by Woods' counsel with the complaint attested that the damages sought exceeded $50,000.*fn1

MLIC timely removed the case to this District Court on March 20, 2008, invoking subject matter jurisdiction under the federal diversity statute, 28 U.S.C. § 1332. Now before the Court is Woods' motion to remand.

The question is whether MLIC, who bears the burden of demonstrating the existence of subject matter jurisdiction,*fn2 has satisfied all requirements of 28 U.S.C. § 1332. As to non-class actions, § 1332 confers original jurisdiction over suits in which the amount in controversy exceeds $75,000 and the parties are completely diverse. Analysis begins with the amount in controversy.

In a removed case, the amount in controversy is the amount required to satisfy the plaintiff's demands in full on the day the suit was removed. Oshana, 472 F.3d at 510-11, citing BEM I, LLC v. Anthropologie, Inc., 301 F.3d 548, 552 (7th Cir. 2002).

Once the defendant establishes the required amount in controversy, "the plaintiff can defeat jurisdiction only if 'it appears to a legal certainty that the claim is really for less than the jurisdictional amount.'" Oshana, 472 F.3d at 511, citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1939), and Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 541 (7th Cir. 2006).

There is nothing tricky about calculating the amount in controversy here. Woods seeks $61,887.00 on her consumer fraud claim and on her breach of contract claim. She also seeks, on her vexatious refusal claim, attorneys' fees and statutory penalties, which are properly considered in determining the amount in controversy.

Pursuant to 215 ILCS 5/155 (which governs vexatious refusal claims in actions against insurance companies), if Wood prevails on her claim, she is entitled to an additional $60,000 or 60% of the amount she is entitled to recover against the insurer (i.e., 60% of $61,887.00 claimed = $37,132.20). Adding either of those statutory penalties ($60,000 or $37,132.20) to the amount sought on Woods' other claims results in a total which clears the "over $75,000, exclusive of interest and costs" hurdle.

So the amount in controversy suffices. Which leaves the requirement that the parties be completely diverse. Plaintiff Woods is an Illinois citizen. Defendant MLIC, a corporation, is a Minnesota citizen (both incorporated in and maintaining its principal place of business in that state). But Woods -- in her one-page remand motion/memo, Doc. 9 -- argues that Minnesota should be treated as an Illinois citizen under 28 U.S.C. § 1332(c)(1).

Section 1332(c)(1) provides that in a "direct action against the insurer of a policy or contract of liability insurance,... to which action the insured is not joined as a party-defendant, [the] insurer shall be deemed a citizen of the State of which the insured is a citizen...."

At first blush, the case sub judice appears to fall within the scope of this provision. This is a suit against an insurer (MLIC) to which the insured (Woods) is not joined as a party-defendant (she is the plaintiff). Closer examination, however, produces the conclusion that this lawsuit is not a "direct action," as that term is intended and interpreted under § 1332.

The United States Court of Appeals for the Seventh Circuit has explained:

Section 1332(c)(1) creates a special rule for insurers in "direct actions" -- that is, cases in which a person with a claim against the insured sues the insurer directly. In direct actions, insurers have not only their normal ...


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