Denette v. Life of Indiana Ins. Co., Civ. A. No. 88-C-655.

• Decision Date: 01 September 1988
• Docket Number: Civ. A. No. 88-C-655.
• Citation: 693 F. Supp. 959
• Parties: Janet O. DENETTE, Plaintiff, v. LIFE OF INDIANA INSURANCE CO., Defendant.
• Court: U.S. District Court — District of Colorado

693 F. Supp. 959

Janet O. DENETTE, Plaintiff, v. LIFE OF INDIANA INSURANCE CO., Defendant.

Civ. A. No. 88-C-655.

United States District Court, D. Colorado.

September 1, 1988.

Gary Nicholas, Denver, Colo., for plaintiff.

Bonnie J. McLaren, David G. Harris, Denver, Colo., for defendant.

ORDER

CARRIGAN, District Judge.

Plaintiff Janet O. Denette commenced this action by filing a complaint in the state district court for the City and County of Denver, Colorado. Defendant Life of Indiana Insurance Company ("Life") then filed a verified petition for removal pursuant to 28 U.S.C. § 1441. Defendant asserts that jurisdiction exists under 28 U.S.C. §§ 1331 and 1332. As will be explained, this case is now in a posture requiring that I determine whether this court has jurisdiction or the case should be remanded to the state court.

The complaint alleges the following: Denette is a Colorado resident who at all relevant times was employed by Juanitas, Inc., d/b/a Berardi and Sons. As an employee, she was covered under a group sickness and accident insurance policy issued by the defendant Life, an Indiana corporation. On April 6, 1987, following a routine physical examination, Denette's physician requested an electrocardiogram and other testing. As a result of those tests she was diagnosed for the first time to have a condition known as silent ischemia.

The complaint further alleges that from April 6, 1987 through November 1, 1987 Denette incurred expenses for medical services and supplies related to the diagnosis and treatment of silent ischemia, in an amount in excess of $1,500, and submitted claims to Life for payment under the insurance policy. Life has denied coverage and has refused to compensate Denette for the above-stated expenses. Life asserts that the plaintiff had previously sought treatment for her illness and that coverage was therefore precluded by the policy's "preexisting condition" clause.

Three claims for relief are alleged in the complaint, all dependent on state law. The first claim requests a declaratory judgment declaring that the "preexisting condition" clause of Life's policy violates Colo.Rev. Stat. § 10-8-116(2)(a). The second claim for relief alleges breach of contract. The third claim alleges outrageous conduct and breach of the covenant of good faith and fair dealing, all in violation of Colo.Rev. Stat. §§ 10-3-1113(1)(a), (c), 10-3-1104(1)(h)(I) to (XIV), and 10-8-116(2)(a)(V). The complaint includes a prayer for relief requesting actual and consequential damages, compensation for mental and emotional distress, punitive damages, and attorneys' fees.

On May 12, 1988, the plaintiff submitted a Response to Verified Petition for Removal, requesting that this action be remanded to state court because this court has neither diversity nor federal question jurisdiction. By minute order I directed that the "Response" be treated as a motion for remand. The parties have briefed the issues and oral argument would not materially assist my decision.

Section 1441(a), 28 U.S.C., states that unless otherwise provided by Act of Congress, "any civil action brought in a state court of which the district courts of the United States have original jurisdiction" may be removed by the defendant to the district court of the United States. Section 1446, 28 U.S.C., provides the procedure for removal. A case removed under § 1446 may be remanded only in accordance with 28 U.S.C. § 1447. Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 342, 96 S.Ct. 584, 588, 46 L.Ed.2d 542 (1976). The pertinent part of § 1447 is subsection (c). That subsection provides, in material part:

"If at any time before final judgment it appears that the case was removed improvidently and without jurisdiction, the district court shall remand the case, and may order the payment of just costs."

Defendant insists that removal was proper because diversity jurisdiction exists under 28 U.S.C. § 1332, and federal question jurisdiction is present pursuant to 28 U.S.C. § 1331. More specifically, the defendant asserts that diversity jurisdiction exists because (1) there is diversity of citizenship among the parties; and (2) the matter in controversy exceeds $10,000, exclusive of interest and costs. Alternatively, the defendant argues that federal question jurisdiction exists under 28 U.S.C. § 1331 because the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq., preempts the plaintiff's state law claims for relief.

In response, Denette insists that diversity jurisdiction does not exist because: (1) the defendant Life is a Colorado resident; and (2) she "has not requested an amount in excess of $10,000 in her complaint and she affirmatively states that she did not file the state court complaint seeking $10,000 or more, in damages." (Plaintiff's "Response," at 2; emphasis in original). Additionally, Denette contends that ERISA does not preempt her state law claims for relief.

There is no support in the record for the plaintiff's contention that Life is a Colorado resident. To the contrary, the affidavit of Sharon Akers, claims vice-president of Life, affirmatively states that Life is an Indiana corporation with its principal place of business in Indiana. See United Nuclear Corp. v. Moki Oil and Rare Metals Co., 364 F.2d 568, 569 (10th Cir.1966), cert. denied, 385 U.S. 960, 87 S.Ct. 393, 17 L.Ed.2d 306 (1966) (for purposes of § 1332 a corporation is deemed to be "a citizen of any state by which it has been incorporated and of the state where it has its principal place of business").

While the complaint is silent as to the amount in controversy, the defendant argues that "a reasonable reading of the Plaintiff's Complaint discloses the sum prayed for does in fact exceed $10,000.00." (Response, at 5.) Defendant alternatively argues that its removal petition establishes an amount in controversy greater than $10,000. However, as quoted above, the plaintiff contends that she is not seeking damages in the amount of $10,000 or more. Thus she has waived any award of damages above that amount. Accordingly diversity jurisdiction is not present.

The remaining issue therefore is whether federal question jurisdiction exists.

ERISA comprehensively regulates employee benefit plans. It establishes various uniform procedural standards concerning reporting, disclosure, and fiduciary responsibility. Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 732, 105 S.Ct. 2380, 2385, 85 L.Ed.2d 728 (1985). Under § 502(a), 29 U.S.C. § 1132(a)(1)(B), a civil action may be brought by a participant or beneficiary "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan...."

ERISA contains a broad preemption provision declaring that the statute shall "supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." Section 514(a), 29 U.S.C. § 1144(a). However, while § 514(a) broadly preempts state laws that relate to an employee-benefit plan, that preemption is substantially qualified by an "insurance saving clause," § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A). Metropolitan Life, 471 U.S. at 733, 105 S.Ct. at 2385.

Section 514(b) provides that "nothing in ERISA shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities." 29 U.S.C. § 1144(b). This saving clause exempts from preemption state laws that "regulate insurance." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39 (1987).

As mentioned above, the complaint alleges that the defendant violated Colo.Rev. Stat. §§ 10-3-1113(1)(a) and (c), 10-3-1104(1)(h)(I) to (XIV), and 10-8-116(2)(a)(V).

Section 10-3-1113(1)(a), Colo.Rev.Stat., provides that in any civil action for damages founded upon contract, or tort, or both, against an insurance company, "the trier of fact may be instructed that the insurer owes its insured the duty of good faith and fair dealing, which duty is breached if the insurer delays or denies payment without a reasonable basis for its delay or denial." Subsection (c) states that under a policy of first-party insurance, the determination of whether the insurer's delay or denial was reasonable "shall be based on whether the insurer knew that its delay or denial was unreasonable or whether the insurer recklessly disregarded the fact that its delay or denial was unreasonable."

Section § 10-3-1104(1)(h)(I) to (XIV), Colo.Rev.Stat., provides as follows:

(h) Unfair claim settlement practices: Committing or performing, either in willful violation of this part 11 or with such frequency as to indicate a tendency to engage in a general business practice, any of the following:

(I) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue; or

(II) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies; or

(III) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; or

(IV) Refusing to pay claims without conducting a reasonable investigation based upon all available information; or

(V) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; or

(VI) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear; or

(VII) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds; or

(VIII) Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material

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