Ahh the joys of litigation and the many issues that parties face. Sometimes in insurance cases (as well as other types of cases) the parties litigate where to litigate the dispute. This may involve the question of in what jurisdiction (in what state or in what federal district) they will litigate the case; or it could mean whether the case is litigated in state or federal court. It can be common for insurers to remove state court complaints filed against them in property insurance cases where the insurance carrier is a national or international insurer (is domiciled out of state) and the amount in dispute between the parties exceeds $75,000. Sometimes the filing party may prefer to stay where they filed the complaint and after the other party seeks to remove the case to federal court, there can be litigation over where to litigate the case – federal or state court. This occurred in a recent property insurance case, MIR Convenience Store, Inc. v. Century Surety Company.1
The policyholder filed a lawsuit in state court for breach of contract due to Century Surety’s denial of a claim for water loss damages. The state court complaint was served on Century Surety on December 4, 2013. Over 30 days later, on February 20, 2014, Century Surety removed the case to federal court for the Southern District of Florida based on diversity jurisdiction.2
The policyholder opposed removal, arguing that the removal was untimely and wanted the case remanded to state court. The federal judge issued his opinion on the matter. The Court acknowledged that the parties agree the Federal Court for the Southern District of Florida had diversity jurisdiction over the matter; they just disagreed when the insurance carrier could first have determined that the amount in controversy threshold was satisfied. This part matters for timing purposes because once the party seeking removal learns the amount in controversy exceeds $75,000, a thirty (30) day clock begins to tick.
The policyholder argued that the insurance carrier knew or should have known the case exceeded the $75,000 threshold on December 4, 2013 – the day it was served with the complaint. The policyholder stated that by that time, they had already provided Century Surety with an estimate of damages totaling over $100,000. This estimate was provided to Century Surety pre-suit. The policyholder argued that Century Surety’s attempt to remove the case over two months after that point was untimely under the law.
The question for the federal court came down to when does the thirty (30) day clock begin to tick? In the Court’s analysis, the central issue was when could Century Surety have first intelligently ascertained that the case was removable after it received the initial pleading? The Court held this date was January 27, 2014, when the policyholder’s attorney first sent Century Surety a post-suit estimate of damages that exceeded $100,000. At that point, the insurance carrier had thirty (30) days to file its notice of removal. That notice of removal was done twenty-four (24) days later, so according to the court, it was timely. The parties to this case will litigate their case in federal court.
I guess there is only one way to describe this situation involving litigating over where to litigate the case:
“The legal system is often a mystery, and we, its priests, preside over rituals baffling to everyday citizens.” – Henry Miller
1 MIR Convenience Store, Inc. v. Century Surety Co., No. 14-60425, 2014 WL 2118878 (S.D. Fla. May 21, 2014).
2 Diversity jurisdiction means the amount in controversy exceeds $75,000 and the dispute is between parties that are residents of different states – corporations are generally treated as citizens of the state where incorporated and where their principal place of business is located.