Hutchens v. Progressive Paloverde Insurance Co.

• Decision Date: 23 July 2002
• Docket Number: No. Civ.A. 5:02-0304.,Civ.A. 5:02-0304.
• Citation: 211 F.Supp.2d 788
• Parties: Robert E. HUTCHENS, on behalf of himself and all others similarly situated, Plaintiffs, v. PROGRESSIVE PALOVERDE INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Southern District of West Virginia

211 F.Supp.2d 788

Robert E. HUTCHENS, on behalf of himself and all others similarly situated, Plaintiffs, v. PROGRESSIVE PALOVERDE INSURANCE COMPANY, et al., Defendants.

No. Civ.A. 5:02-0304.

United States District Court, S.D. West Virginia, Beckley Division.

July 23, 2002.

Warren R. McGraw, II, McGraw Law Offices, Prosperity, WV, Edward S. Cook, Provost & Umphrey, Atlanta, GA, Jere L. Beasley, W. Daniel Miles, II, Clinton C. Carter, Beasley, Allen, Crow, Methvin, Portis & Miles, P.C., Montgomery, AL, for plaintiff.

James A. Varner, Catherine D. Munster, Tiffany R. Durst, McNeer, Highland, McMunn and Varner, L.C., Clarksburg, WV, for defendant Progressive Paloverde Insurance Co.

MEMORANDUM OPINION AND ORDER

HADEN, Chief Judge.

Pending are the motions of Plaintiff Hutchens to remand and Defendant Progressive Paloverde Insurance Company ("Progressive") to dismiss this action based either on Plaintiff's lack of standing or on failure to state a claim upon which relief can be granted. Plaintiff's motion is DENIED, Defendant's motion to dismiss under Rule 12(b)(6) is GRANTED and its motion to dismiss for lack of standing is DENIED as moot.

I. BACKGROUND

Hutchens alleges Progressive sold motor vehicle insurance policies which contained an "owned but not insured" exclusion,¹ but did not adjust the corresponding policy premium so the exclusion is "consistent with the premium charged." (Compl.¶ 14.) In effect, according to Hutchens, "Plaintiffs paid premiums for uninsured motorist coverage that was not provided." (Id. ¶ 19.)

Hutchens' complaint alleges fraud, suppression, breach of contract, unjust enrichment, negligence, wantonness, unfair trade practices, and bad faith. Among other damages, Plaintiff requests punitive damages as well as "any other legal or equitable relief ... in an amount not to exceed $74,500 (seventy four thousand five hundred dollars) per Plaintiff in the individual aggregate[.]"

II. DISCUSSION

A. Motion to Remand

District courts have original jurisdiction of all "civil actions where the matter in controversy exceeds the sum of $75,000, exclusive of interest and costs, and is between citizens of different States." 28 U.S.C. § 1332(a)(1). Defendants may remove any case of which the district courts have original jurisdiction. 28 U.S.C. § 1441(a). Removal statutes must be construed strictly against removal. See Mulcahey v. Columbia Organic Chem. Co., Inc., 29 F.3d 148, 151 (4th Cir.1994). The party seeking to remove a case to federal court has the burden of establishing federal jurisdiction. See id. If federal jurisdiction is doubtful, a remand is necessary. Id.

A respected commentary states, "the [preferred] practice is to treat the amount requested by the plaintiff in the state court as the amount in controversy." 14C Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 3d § 3725 at 98 (1998). However, the treatise notes this result is fully satisfactory only in states where recovery is not limited to the amount demanded. Id. In West Virginia courts, a plaintiff is not bound by the ad damnum clause and may seek to amend it after final judgment to conform to the evidence. See Berry v. Nationwide Mut. Fire Ins. Co., 181 W.Va. 168, 177, 381 S.E.2d 367, 376 (1989) ("In the final analysis it is not the amount stated in the ad damnum clause but the actual proof of the plaintiff's damages which will control the issue.").

This Court has previously found that a request for punitive damages, where properly recoverable, inevitably inflates a plaintiff's potential recovery. See Chiartas v. Bavarian Motor Works, AG, 106 F.Supp.2d 872, 874 (S.D.W.Va.2000) (citing Weddington v. Ford Motor Credit Co., 59 F.Supp.2d 578, 584 (S.D.W.Va.1999)); see also Cline v. Matney, 20 F.Supp.2d 977, 979 (S.D.W.Va.1998). A good faith claim for punitive damages may augment compensatory damages in determining the amount in controversy unless it can be said to a legal certainty that plaintiff cannot recover punitive damages in the action. See White v. J.C. Penney Life Ins. Co., 861 F.Supp. 25, 27 (S.D.W.Va.1994) (citing Bell v. Preferred Life Assurance Soc'y, 320 U.S. 238, 64 S.Ct. 5, 88 L.Ed. 15 (1943)).

Under West Virginia law, punitive damages are recoverable in tort actions, "where gross fraud, malice, oppression, or wanton, willful, or reckless conduct or criminal indifference to civil obligations affecting the rights of others appear[.]" Smith v. Perry, 178 W.Va. 395, 397, 359 S.E.2d 624, 625 (1987). Hutchens' complaint alleges Defendant's conduct constitutes fraud, as well as wanton and reckless behavior. Thus, punitive damages, presumably asserted in good faith, are potentially recoverable in this action.

In McCoy v. Erie Ins. Co., 147 F.Supp.2d 481 (S.D.W.Va.2001), this Court adopted the preponderance of the evidence standard for amount-in-controversy determinations. Id. at 489. The amount in controversy is determined by considering the judgment that would be entered if the plaintiff prevailed on the merits of his case as it stands at the time of removal. Id. (citing Sayre v. Potts, 32 F.Supp.2d 881, 886-87 (S.D.W.Va.1999)). The Complaint does not itemize the compensatory damages demanded, but demands $74,500 for all damages including punitives. West Virginia courts have upheld punitive damage awards substantially in excess of compensatory damages recovered. See TXO Prod. Corp. v. Alliance Res. Corp., 187 W.Va. 457, 419 S.E.2d 870 (1992), aff'd, 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993). On Defendant's account, it is more likely than not the amount in controversy exceeds the jurisdictional threshold of $75,000.

Plaintiff's affidavit, filed after Progressive removed this action, averring that he will neither seek nor accept more than $74,500 is unavailing. Under the rule adopted in McCoy, supra, this Court's previous honoring of these post-removal unilateral stipulations was modified to avoid unseemly conflicts between state and federal jurisdictions exercising concurrent authority:

The better rule requires a formal, truly binding, pre-removal stipulation signed by counsel and his client explicitly limiting recovery.... The stipulation should be filed contemporaneously with the complaint, which also should contain the sum-certain prayer for relief.

McCoy, 147 F.Supp.2d at 485-86 (citing DeAguilar v. Boeing Co., 47 F.3d 1404, 1412 (5th Cir.1995)). Because Hutchens' stipulation was not filed until after removal, the Court cannot accept it as determinative of the amount-in-controversy issue.

Accordingly, the Plaintiff's motion to remand is DENIED.

B. Motion to Dismiss for Failure to State a Claim

Defendant moved to dismiss this action for failure to state a claim upon which relief may be granted. Our Court of Appeals has often stated the settled standard governing the disposition of a motion to dismiss pursuant to Rule 12(b)(6):

In general, a motion to dismiss for failure to state a claim should not be granted unless it appears certain that the plaintiff can prove no set of facts which would support its claim and would entitle it to relief. In considering a motion to dismiss, the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993) (citations omitted); see also Brooks v. City of Winston-Salem, 85 F.3d 178, 181 (4th Cir.1996); Gardner v. E.I. Dupont De Nemours and Co., 939 F.Supp. 471, 475 (S.D.W.Va.1996). It is through this analytical prism the Court evaluates Defendant's motion.

In Mitchell v. Broadnax, 208 W.Va. 36, 537 S.E.2d 882 (2000), the Supreme Court of Appeals of West Virginia held that "when an insurer incorporates, into a policy of motor vehicle insurance", an exclusion pursuant to W.Va.Code § 33-6-31(k) ..., the insurer must adjust the corresponding policy premium so that the exclusion is "consistent with the premium charged." Id. 208 W.Va. at 47, 537 S.E.2d at 893. The exclusion at issue in Broadnax was an owned but not insured exclusion. The gravamen of Hutchens' complaint is that Progressive sold him an automobile insurance policy with such an exclusion, but failed to adjust the premium accordingly.²

In 2002 the West Virginia Legislature enacted House Bill 4670, which was passed March 7, 2002 and took effect ninety days from passage, that is, June 7, 2002. W.Va. Code § 33-6-30 (2002). The new statute was a direct response to Broadnax:

It is the intent of the Legislature that the amendments in this section enacted during the regular session of two thousand two are: (1) A clarification of existing law as previously enacted by the Legislature, including, but not limited to, the provisions of subsection (k), section thirty-one of this article; and, (2) specifically intended to clarify the law and correct a misinterpretation and misapplication of the law that was expressed in the holding of the Supreme Court of Appeals of West Virginia in the case of Mitchell v. Broadnax, 208 W.Va. 36, 537 S.E.2d 882 (2000). These amendments are a clarification of the existing law as previously enacted by this Legislature.

W.Va.Code § 33-6-30(c). Pertinently, the statute provides that:

certain classes of persons are seeking refunds of insurance premiums and seeking to void exclusions and other policy provisions on the basis that insurance companies allegedly failed to provide or demonstrate a reduction in the premiums charged in relation to certain terms or exclusions incorporated into policies of insurance[.]

Id. at (b)(3). All insurance rates and forms are approved by the state insurance commissioner, id. at (b)(4), a process that benefits both consumer and insurer, id. at (b)(1). Neither the Legislature nor the insurance commissioner "has ever required the insurer to demonstrate that there was a specific premium reduction for certain exclusions" in insurance policies. Id. at (b)(3). For these reasons,

the provisions of this chapter...