In this putative class action, the Pennsylvania District Court remanded the action to state court concluding that the evidence to establish jurisdictional amount should be to a legal certainty, and not sheer speculation. One person’s legal certainty is another person’s sheer speculation.
Phyllis Lohr and David Lohr sought a declaratory judgment that the “Household” Exclusion—excluding the family members of the insured from uninsured or underinsured motorists’ coverage was unenforceable, and sought to require the insurance company to provide under-insured motorist coverage.
David Lohr obtained a commercial auto insurance policy from the defendants for his truck including uninsured and under-insured motorist coverage of $ 35,000 per person or per accident. According to the plaintiffs, Mrs. Lohr was an ‘insured’ under the terms of the policy and the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFR”). When the Lohrs were injured from a collision with an under-insured motorist, the defendants refused the under-insured motorist claim of Mrs. Lohr stating that the policy did not cover the relative of an insured.
The Lohrs asserted that the Household Exclusion was unenforceable because it conflicted with the express provisions of the MVFRL and violated public policy, and sought to represent a class of Pennsylvania citizens who were denied the uninsured or under-insured motorist coverage due to the Household Exclusion. The Lohrs also sought to refer this claim to arbitration pursuant to the terms of the policy.
The defendants removed this action to the federal court under CAFA. The Lohrs moved to remand arguing that the damages recoverable by the proposed class members would be less than $5 million and the number of class members was less than 100.
Because the Lohrs had not explicitly limited the damages sought to an amount less than $5 million, the Court observed that the defendants must prove to a legal certainty that the Lohrs could recover the jurisdictional amount.
The Court rejected the declaration furnished on behalf of the defendants holding that it was based on some questionable assumptions and an overly-expansive estimate of the amount in controversy. In the declaration, the defendants mathematically extrapolated that a review of the records covering the entire eight-year class period (May 1, 2001, through May 8, 2009) would yield a class numbering at least 141 members with $11,773,333 in policy limits as the amount in controversy.
First, the defendants argued that even if the balance of the 4,199 claims from the period April 2006 through April 2009 which had not yet been examined yielded no more class members, extrapolating the ratio of 53 class members to 4,199 claims over a three-year period would yield 141 members over an eight-year period. While the defendants did not explain their mathematical reasoning, the Court noted that this number could be calculated by determining the average number of claims per year in the three-year period (approximately 1,400) and multiplying by 8 years (11,197), then multiplying by a factor of 1.26%, the percentage of qualifying claims for the three-year period (53/4199.) The Court, however, stated that these assumptions had no factual support that the average number of claims per year for the period May 2001 through March 2006 was the same as the average per year for the period April 2006 through April 2009, and that the percentage of claims denied was equal over the entire period.
In addition, the Court noted that the 53 potential class members already identified were said to have ‘applicable policy limits of $4,415,000,’ but the damages sought in this case were not the policy limits but rather the ‘amount of uninsured or under-insured motorist benefits that should have been paid to them.’ The Lohrs claimed damages $35,000 stating that the under-insured motorist coverage was limited to $35,000 for each person or each accident. Thus, the Court concluded that the defendants calculation based on the total amount of each policy would be irrelevant as the class members’ damages would be limited to the amount of coverage. Thus, the amount of damages for 141 class members would total $4,935,000. And, if the average uninsured/under-insured motorist coverage were closer to the statutory minimum — $15,000 per person or accident — the damages sought by 141 plaintiffs would be approximately $2,115,000.
Second, the Court found that although MVFRL provides for attorneys’ fees, it could not predict the total fees as it had no firm assumption about the claims the class members might recover. The Court, however, noted that the Lohrs did not explicitly seek such fees in their complaint. Further, the policy provided for arbitration, and that each party should pay its own costs, expenses, and the fees of its own arbitrator and shared cost of the third arbitrator.
Finally, to the defendants’ argument that if the Household Exclusion were invalidated, they could incur over $7.7 billion in potential coverage requirements for which they had received no premiums, and that they would have to rewrite all of its 517,403 Pennsylvania policies, and would need to notify all policyholders of the changes in coverage, the Court found that the case must be remanded “if it appears to a legal certainty that the plaintiff cannot recover the jurisdictional amount,” not whether the defendant can show its potential damages are greater than the jurisdictional amount.