Keck v. Fidelity and Casualty Company of New York

• Decision Date: 02 July 1965
• Docket Number: No. 65 C 174.,65 C 174.
• Citation: 250 F. Supp. 309
• Parties: Richard B. KECK, Plaintiff, v. FIDELITY AND CASUALTY COMPANY OF NEW YORK, Defendant.
• Court: U.S. District Court — Northern District of Illinois

250 F. Supp. 309

Richard B. KECK, Plaintiff, v. FIDELITY AND CASUALTY COMPANY OF NEW YORK, Defendant.

No. 65 C 174.

United States District Court N. D. Illinois, E. D.

July 2, 1965.

William J. Costello and John J. Enright, Arvey, Hodes & Mantynband, Chicago, Ill., for plaintiff.

Donald N. Clausen and Jacob T. Pincus, Clausen, Hirsh, Miller & Gorman, Chicago, Ill., for defendant.

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 point:

"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 ¶ 0.935.2, 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 force.

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.

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