Freeland v. Liberty Mutual Fire Insurance
632 F.3d 250, 2011 U.S. App. LEXIS 2177, 2011 WL 338039 (2011)
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Rule of Law:
In a declaratory judgment action regarding insurance coverage, the amount in controversy for diversity jurisdiction is the difference between the policy limit sought by the plaintiff and any undisputed portion of coverage the insurer concedes, not the total value of the policy sought.
Facts:
- John and Betty Freeland owned a minivan insured by Liberty Mutual Fire Insurance Co.
- The policy provided for a bodily injury limit of $100,000 and an underinsured/uninsured motorist (UM/UIM) limit of $25,000 per accident.
- The Freelands loaned the minivan to their son, John Freeland, Jr., who did not have his own car insurance.
- On March 7, 2007, Freeland, Jr. was in a car accident that killed him and his wife and seriously injured their three children.
- Because their son was an uninsured motorist, Liberty Mutual offered the Freelands the $25,000 per accident UM/UIM policy limit.
- The Freelands contended that the form they used to select the lower UM/UIM coverage was invalid under Ohio law, and therefore their UM/UIM coverage should be equal to their bodily injury coverage of $100,000.
Procedural Posture:
- The Freelands sued Liberty Mutual in an Ohio state court, seeking a declaratory judgment.
- Liberty Mutual removed the case to the United States District Court for the Northern District of Ohio, asserting diversity jurisdiction.
- The district court granted summary judgment in favor of Liberty Mutual.
- The Freelands (appellants) appealed the summary judgment ruling to the United States Court of Appeals for the Sixth Circuit, where Liberty Mutual was the appellee.
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Issue:
Does a declaratory judgment action to increase insurance coverage from an undisputed $25,000 to a disputed total of $100,000 meet the amount-in-controversy requirement of 28 U.S.C. § 1332, which requires the matter in controversy to exceed $75,000?
Opinions:
Majority - Thapar, District Judge
No, the action does not meet the amount-in-controversy requirement. For federal courts to have diversity jurisdiction, the matter in controversy must exceed the sum or value of $75,000. In an action for declaratory relief, the amount in controversy is measured by the value of the object of the litigation, which is the monetary value of the consequences of the lawsuit. Here, Liberty Mutual conceded that the Freelands were entitled to $25,000 in coverage. The dispute, or 'controversy,' was only over the additional $75,000 ($100,000 sought minus the $25,000 conceded). Because the amount in controversy is exactly $75,000, it does not 'exceed' $75,000 as required by statute, failing by a single penny. The court rejected arguments to include speculative future claims, holding that the inquiry is limited to the coverage applicable to the specific incident in dispute.
Analysis:
This decision strictly interprets the amount-in-controversy requirement of 28 U.S.C. § 1332, emphasizing that the amount must literally 'exceed' the jurisdictional minimum. It clarifies that for declaratory judgments in insurance cases, the amount in controversy is only the disputed portion of the claim, not the total potential policy limit. This holding reinforces the principle that federal courts are courts of limited jurisdiction and will police their own subject-matter jurisdiction, even when it leads to procedurally inefficient outcomes like remanding a fully litigated case.
