Toller v. Sagamore Ins. Co., 514 F. Supp. 2d 1111 (E.D. Arkansas 2007).

The plaintiff, Gwendolyn Toller, filed suit against Sagamore Insurance Company following an automobile accident that caused damages, including medical expenses, in excess of Ms. Toller’s liability coverage. Ms. Toller alleged that at the time she applied for insurance she was not made aware of the availability of no-fault coverages, such uninsured motorist coverage, underinsured motorist coverage, medical benefits and income benefits, in violation of Arkansas law. You know insurance companies, they HATE to sell insurance policies with additional coverages for which they can charge even more premiums.

In her complaint filed in Arkansas state court, Ms. Toller alleged that she incurred medical expenses in excess of $48,000. She alleged that Sagamore wrongfully denied her claim and that she is entitled to additional coverage. Ms. Toller failed to specify in her complaint the amount of damages she sought or limit her damages to less than $75,000.

Dear readers, you are asking yourselves, but where does CAFA fit into this gem? Never fear, such a claim just screams class action. Ms. Toller brought suit on behalf of all persons similarly situated seeking to force Sagamore to provide no-fault insurance coverage to all of these persons. Ms. Toller did not seek a specified amount of damages but did state the sum will not exceed the sum or value of $4,999,999.  We wonder why she picked this particular amount!

Sagamore removed the case to federal court asserting jurisdiction on two grounds: 1) diversity and damages in excess of $75,000; and 2) under CAFA. Toller moved to remand and the district court decided not to decide (which is, after all, still a decision) allowing the parties to provide “summary judgment type evidence” of the amount in controversy.

In order to come to the decision not to decide, the district court started its analysis with a statement of the applicable burden of proof. The district court recognized that the 8th Circuit had not ruled on whether the burden of proof should be different under CAFA than under a traditional diversity analysis (Where are all the deciders in this jurisdiction?). This court recognized that district court of North Dakota in Ongstad v. Piper Jaffray & Co. (Editors’ Note:  See the CAFA Law Blog analysis of Ongstad posted on March 27, 2006) held that there was nothing in CAFA that contemplated a break with the traditional rule that the removing party has the burden of proof of establishing subject matter jurisdiction. The Arkansas district court in Toller decided what was good for North Dakota was good for it and held that the removing party, Sagamore, had the burden to prove the amount in controversy (Ok, so we are getting somewhere, although we think the wrong way).

But not so fast folks. The district court tackled the amount in controversy for Toller’s individual claim first. By Ms. Toller’s calculation, based on the penalties allowed under Arkansas statute, the amount in controversy for her individual claim was $55,658. This amount did not include the $48,000 in medical expenses plead in the original complaint, which Sagamore claimed should be included in the amount in controversy. Ms. Toller argued that the medical expenses should not be included because they had been paid by a third party insurer.

The district court did not include the medial expenses in the amount in controversy. Ms Toller had notified Sagamore before it filed its removal that she had settled with the third-party insurer and that they were no longer responsible for the medical expenses. So, because the amount in controversy was less than $75,000 at the time of removal, no federal court jurisdiction. On to CAFA.

Ms. Toller sought to avoid CAFA jurisdiction by limiting damages to an amount less than $5,000,000 (one dollar less to be exact). In this case, however, Ms. Toller sought not only monetary damages, but also equitable relief. Toller sought to force Sagamore to provide the statutorily mandated no-fault coverages to all of its insureds in Arkansas who had not rejected those coverages in writing. These coverage amounted to $42,800 in benefits for as many as 35,663 persons. It is mathematically possible, Sagamore argued, that using the face value of the policies, equitable relief could exceed the jurisdictional limits under CAFA. Oh, this is getting exciting. We are about to get to the decision.

But, no. The district court rejected the use of the face value of the policies as the measure of potential damages distinguishing this case from cases involving life insurance in which the face value of the policies is inevitably paid out (Unless you are a teenage boy, the face value of an auto policy will not necessarily be paid). Sagamore did not give up. It also calculated the difference between the filed rates for the policies with and without the no-fault coverage and came up with $241.74. If you multiply this number by 35,663, you still exceed the jurisdictional limits under CAFA by some $3 million dollars. And guess what, dear loyal CAFA readers, what this brings us back to? The burden of proof (Paraphrasing James Carville, “It’s the burden of proof, dummy.”).

Although Sagamore referred the district court to filings with the Arkansas Department of Insurance, the district court noted that Sagamore provided no copies of these documents or any other evidence supporting their calculation of the amount in controversy. Man, if only those attorneys for Sagamore had thought to bring EVIDENCE to an evidentiary hearing. 

But all is not lost for Sagamore, because the decider in this case, although not really deciding here, has decided to decide later. The district court held the motion to remand in abeyance pending receipt of summary judgment evidence on the issue of the amount in controversy. So the moral is, as my dear husband often claims, sometimes deciding not to decide is really deciding after all. (S. Tolson)