Andrews v. Nationwide Mut. Ins. Co., No. 1:11 CV 1379, 2011 WL 5118309 (N.D. Ohio Oct. 26, 2011).

Nationwide is NOT on your side, say the plaintiffs in this case.  In this action, a District Court in Ohio held that if the court’s ruling requires a business establishment to change its business practice, then such “business practice” costs may be included in determining the amount in controversy. 

At the fag-end of their life, the plaintiffs, Stanley Andrews, aged 77 years and Donald C. Clark, aged 81 years, brought class action alleging that the defendants, Nationwide Mutual Insurance Company and Nationwide Life Insurance Company, failed to make a determination as to whether their insureds are still alive; as a result, the defendants improperly retained death benefits. According to the plaintiffs, the defendants should inquire on at least an annual basis as to whether they owe death benefits to any insured where the probability of death of the insured is at least 70%. The plaintiffs alleged that, based on the actuarial tables, there is 76% and 87% probability that they should not be alive, and while the plaintiffs are alive, nevertheless, many of their class members are deceased, and as to such deceased members policy proceeds are owing. Accordingly, the plaintiffs sought mandatory injunction and declaratory relief.


The defendants removed this matter to the federal court under CAFA. 


The plaintiffs moved to remand this matter to state court, which the District Court granted.


In attempting to prove that the amount in controversy had been met, the defendants identified three components of damages: (1) $826,000, which constitutes the face value of active life insurance policies for which the insured has been determined to be deceased, (2) $1,228,000, which constitutes the value of lapsed insurance policies during the past 15 years for which the insured has been determined to be deceased; and (3) the $10,200 annual cost to conduct yearly searches of the Death Master File (“DMF”) for active life insurance policyholders and monthly searches for all lapsed policies. 

The defendants argued that because the injunction the plaintiffs sought was indefinite and perpetual, the amount in controversy was satisfied by category three alone. The plaintiffs, however, argued that the Court should limit the annual cost associated with the injunctive relief request to a 30–year period, i.e., the time period insurers generally use for “pricing exercises.” 

The defendants replied that the complaint was not limited to a 30–year injunction. Further, on average, 100 insureds die each year without making a claim, and the average death benefit for these claims would be $6,961. The defendants thus argued that even applying the 30–year term, the value of the relief sought would total $20,883,000, which is far in excess of the $5 million amount in controversy.


The Court noted that the amount in controversy requirement is established by demonstrating the costs of complying with an injunction. The defendants, however, failed to establish a $5 million amount in controversy by a preponderance of the evidence. The defendants averred that they ran searches of their active and lapsed policies against the DMF, which indicated that there were approximately 230 active policies worth $826,000 for which defendants received an “exact or near exact match” and for which defendants could not locate the policy beneficiary. In addition, there were approximately 17 lapsed policies worth $1,228,000 that fit the same criteria. 


The Court stated that these dollar figures, however, were derived from searches of defendants’ entire book of business. Thus these figures did not accurately represent the interests at stake in this case, as the number of policies at issue was far less than defendants’ entire book of business. Specifically, there was no indication as to how many of the 230 active policies and 17 lapsed polices were held by class members. Nor was there any indication as to the value of the class members’ policies.


In addition, the Court rejected the defendants’ argument that the cost of running searches ad infinitum would itself exceed the jurisdictional amount because the injunction could not, by definition, run ad infinitum. The Court noted that Count one, which sought mandatory injunctive relief, asked the Court to order defendants to make reasonable inquiries as to the “lifestatus of the Class Members.” Similarly, count two asked to declare that defendants must pay death benefits to “ Class Members … without first requiring further notice of death.” Because the injunctive and declaratory relief was requested only on behalf of “Class Members,” and the class was defined generally as individuals who have policies that are “currently in force” or have been “wrongfully canceled” and who held such policies “within the period of time that commenced 15 years prior to the filing” of this lawsuit, the Court, construing the class definition as broadly as possible, remarked that the injunction could only last as long as the youngest person in the class was alive. Accordingly, the Court concluded that the defendants did not establish, by a preponderance of the evidence, that the cost to run DMF searches would satisfy the amount in controversy requirement.

The Court further found that the defendants failed to establish that the cost of paying out claims for insureds who did not provide notice of death exceeded the jurisdictional amount. The defendants failed to provide evidence as to the amount of alleged damages which would result from this litigation; rather, the defendants argued that they would be forced to change their business practices for all of their insureds located anywhere on a going forward basis. The Court rejected this argument although “business practice” costs may be included in determining the amount in controversy. The Court remarked that the defendants did not establish that a ruling in this case would require them to change their business practices nationwide. 


Further, the defendants provided information related to their entire business practice and did not provide any information specific to this case. Specifically, the defendants provided a general statement that 100 insureds die each year and fail to make a claim, but did not supply the Court with evidence of how many of these insureds fell within the class definition. Because the defendants made no effort to exclude from their calculation the amount of death benefits payable to insureds who are not class members, the Court concluded that the defendants failed to establish that the amount in controversy was satisfied.

Accordingly, the Court remanded the action to state court.