Arizona Bad Faith Insurance Update

In Romero v. Mendota Ins. Co., 2016 WL 6775950 (D. Ariz. Nov. 16, 2016), the Arizona District Court granted a Motion to Remand a breach of contract and insurance bad faith case arising from UIM claims-despite the Insureds certifying the case was worth more than the $50,000 compulsory arbitration limit and seeking punitive damages-because the Insurer did not prove the amount in controversy “more likely than not” exceeded $75,000.

In granting the Motion to Remand, the District Court relied on these principles:

• “Courts strictly construe the [removal] statute against removal jurisdiction.” Romero, 2016 WL 6775950, at [1] 
• “There is a strong presumption against removal and federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” Id. (internal cites omitted)
• The Insurer “always has the burden of establishing that removal is proper.” Id.
• “Where doubt regarding the right to removal exists, a case should be remanded to state court.” Id.
• “Where a complaint does not demand a specific dollar amount, the defendant bears the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeds $75,000.” Id. (internal cited omitted).
•  An Insurer must “present specific facts in support of jurisdiction rather than relying on conclusory allegations.” Id. at [2]
• An Insurer is “not confined by the face of the complaint”; rather, the Insurer “may submit facts presented in the removal petition as well as any summary judgment-type evidence relevant to the amount in controversy at the time of the removal,” such as a settlement letter. Id. at [2].

In Romero, the District Court remanded because the complaint alleged no specific amount of damages, the Motion to Remand alleged both Insureds incurred less than $8,000 in medical expenses, and-despite the combined policy limits of $50,000, the Insureds’ certification that the claim was worth more than $50,0000, and the claim for punitive damages-the Insurer failed to allege sufficient specific facts and simply made the conclusory allegation that it was a “reasonable inference” that the amount in controversy exceeded $75,000. Id.

The District Court remanded the case “because doubt regarding the right to removal exists.” Id. The District Court did not mention whether the complaint sought attorney fees and did not address the line of Arizona District Court and Ninth Circuit cases that indicates a potential award of attorney fees to Insureds should be considered in determining whether the amount in controversy exceeds $75,000.

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About the Author: Nathan D. Meyer is a Partner at the Phoenix law firm of Jaburg Wilk. One of his specialties is insurance coverage and bad faith. Micalann C. Pepe is an attorney at Jaburg Wilk who focuses her practice on insurance law. Nate and Micalann advise and represent insurance clients in coverage, bad faith, contribution and liability matters.

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[1] Romero v. Mendota Ins. Co., 2016 WL 6775950 (D. Ariz. Nov. 16, 2016)

[2] Manonev. Farm Bureau Prop. &Cas. Co., 2016 WL 1059539, at (D. Ariz. Mar. 17, 2016) (amount in controversy may attorney fees and costs);
[2] Wood v. State FarmMut. Auto. Ins. Co., 2015 WL 3953909, at (D. Ariz. June 29, 2015) (if recoverable, amount in controversy includes reasonable attorney fees);
Haskell v. State FarmMut. Auto.Ins. Co., 69 F. App’x 877, 878 (9th Cir. 2003) (same);
Nasiriv. AllstateIndem.Co., 41 Fed.Appx. 76 (9th Cir. 2002) (court may consider reasonable estimate of attorney fees when determining amount in controversy in bad faith case);
Galt v. JSS Scandinavia, 142 F.3d 1150, 1156 (9th Cir.1998) (if recoverable, court may consider reasonable estimate of attorney fees).