Rudder v. Ohio State Life Insurance Company

• Decision Date: 07 September 1962
• Docket Number: No. 1024.,1024.
• Citation: 208 F. Supp. 577
• Court: U.S. District Court — Eastern District of Kentucky
• Parties: Newell Edward RUDDER, Plaintiff, v. The OHIO STATE LIFE INSURANCE COMPANY, Defendant.

208 F. Supp. 577

Newell Edward RUDDER, Plaintiff, v. The OHIO STATE LIFE INSURANCE COMPANY, Defendant.

No. 1024.

United States District Court E. D. Kentucky, Covington Division.

September 7, 1962.

Joseph J. Leary, Frankfort, Ky., for plaintiff.

Odis W. Bertelsman, Newport, Ky., for defendant.

SWINFORD, District Judge.

This action was begun in the Circuit Court for Lewis County, Kentucky in April 1962 to recover amounts alleged to be due as benefits under a disability insurance policy issued by defendant and amounts paid to defendant by plaintiff as premiums on two life insurance policies which contain provisions for the waiver of premiums in the event of disability. The complaint also seeks a declaration that plaintiff is permanently and totally disabled and entitled to disability benefits and the waiver of the premiums on the life policies. It is alleged that plaintiff became disabled on March 25, 1957, that the insurance policies had been in force for some years prior to that date and that plaintiff had fully performed all conditions precedent, that the defendant insurer had paid benefits and waived premiums on the life policies from March 25, 1957 until December 25, 1961 but that on January 29, 1962 defendant refused to pay a benefit installment and tendered payment of partial disability benefits through June 25, 1962. Plaintiff has paid under protest the premiums due on the life insurance from January 29, 1962.

The monthly benefit under the disability policies is $300.00. Assuming that plaintiff can establish the liability alleged in the complaint there would be due to him the sum of $1200.00 for the period January to April 1962. The premiums on the life insurance policies are $113.00 per month and $84.83 per year respectively, a possible total for the period of $536.83. These claims do not approach the minimum amount required to place this case within the jurisdiction of this court.

Nevertheless on May 9, 1962 defendant filed its petition for removal alleging diversity of citizenship and that the amount in controversy is in excess of $10,000.00. Along with this petition defendant filed a motion to dismiss, an answer and a counterclaim for the amount of all benefits paid to plaintiff and premiums waived on the life policies over the period May 25, 1958 through November 25, 1961, a total of $18,183.24. Defendant further demanded a declaration that plaintiff is not now and has not been since May 14, 1958 totally disabled within the meaning of the insurance policies.

On June 5, 1962 plaintiff filed a motion to remand this action to the state court. It is his position that the amount in controversy is not large enough to permit this court to assume jurisdiction. Defendant maintains on the other hand that the counterclaim for $18,183.24 is effective to fulfill the qualification as to the amount in controversy and that the demand for a declaration that plaintiff is permanently and totally disabled furnishes a controversy initiated by plaintiff that involves over $10,000.00. Plaintiff contends that the amount is determined solely by the complaint. There is good reasoning and impressive authority for both positions.

The most compelling consideration in favor of federal jurisdiction over a case of this character is that it preserves the right of an out-of-state claimant to choose between the state and federal forum. To decide otherwise permits one who is under heavy liability to a nonresident to initiate legal action in the state court on some trivial aspect of the transaction which created the liability thereby forcing his creditor to assert his rights by counterclaim in a court not of his choosing. See e. g. National Upholstery Company v. Corley, M.D.N.C.1956, 144 F.Supp. 658. The court is inclined to the view that this decision ought to be directed to the purpose of preventing this maneuver and it would not stand alone in this attitude. See National Upholstery Company v. Corley, ibid., and McLean Trucking Company v. Carolina Scenic Stages, M.D.N.C.1951, 95 F.Supp. 437. But the state of the law as it appears to the court seems to put such a result beyond the reach of the courts.

First of all, examination of the statutory provisions pertaining to diversity jurisdiction furnishes an indication that it was not the intent of congress that a counterclaim be added to what is sought in the complaint to arrive at the amount in controversy. 28 U.S.C.A. § 1332(b) provides that if the plaintiff who files the case recovers less than the minimum jurisdictional amount, the costs of the action may be assessed against him. There is no correlative provision placing liability for costs on the defendant where the case qualifies for federal jurisdiction on the basis of a counterclaim greater than the minimum jurisdictional amount. 28 U.S.C.A. § 1446(b) prescribes a time limitation of twenty days from the date that defendant receives the initial pleading for the filing of a petition for removal. It also provides that where the case stated by the initial pleading is not removable, the defendant may file his petition for removal within twenty days after the receipt of an amended pleading that does state a removable case. There is no corresponding provision for the case where federal jurisdictional requirements first appear in pleadings by the defendant. The latter section was brought to fore in Lange v. Chicago R. I. & P. R. Co., S.D.Ia.1951, 99 F.Supp. 1, but the court held that it merely prescribed a technique for effectuating removal and was not intended to substantially modify the jurisdictional qualifications. This court agrees that the features of this section alluded to above are not meant to circumscribe jurisdiction over diversity cases but they are nevertheless evidence that Congress did not contemplate that pleadings other than the complaint would determine the amount in controversy.

The United States Supreme Court has never been clearly confronted with the present issue but on two occasions has displayed unwillingness to look beyond plaintiff's pleadings to find the jurisdictional criteria. See Shamrock Oil & Gas Corporation v. Sheets, (1941) 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214, and St. Paul Mercury Indemnity Company v. Red Cab Company, (1938) 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845.

The view of the lower courts that have been compelled to squarely decide the...