Colony Insurance Company v. DTC Services Inc.
- Valerie Caproni
- 1:24-cv-07466
- U.S. District Court · Southern District of New York
- 3
In Colony Insurance v. DTC Services, Judge Caproni required more proof of jurisdiction before considering default judgment in an insurance-coverage case.
Colony Insurance Company must provide additional evidence that more than $75,000 is in dispute and serve it on DTC Services Inc.; otherwise, default judgment cannot be entered at the scheduled hearing.
What happened
Colony Insurance Company sued DTC Services Inc., seeking a declaration that DTC was not entitled to a defense or indemnity in an underlying New York personal-injury lawsuit. Colony sought default judgment after DTC did not appear as required.
The court questioned whether the amount in controversy exceeded $75,000, as required for the asserted federal jurisdiction. The underlying lawsuit sought more than $50,000, but not necessarily more than $75,000, and the court found it implausible on the stated facts that the insurance policy’s $1 million limit was at issue. Colony also had not shown that defense costs would exceed $75,000.
Judge Valerie Caproni ordered Colony to submit an affidavit addressing the amount-in-controversy requirement by February 5, 2025, and to serve it on DTC. The court stated that failure to do so would prevent entry of default judgment at the scheduled February 7 hearing.
The detailed version
- Colony Insurance Company v. DTC Services Inc. · No. 1:24-cv-07466
- Valerie Caproni
- Feb. 3, 2025
Background
Colony Insurance Company brought this action seeking a declaratory judgment—a ruling defining the parties’ legal rights—about its insurance obligations to DTC Services Inc. Colony asked the court to declare that DTC was not owed a defense or indemnity in an underlying personal-injury action pending in New York state court.
The court had previously ordered the parties to appear on February 7, 2025, for DTC to show why default judgment should not be entered against it. The opinion does not enter default judgment. Instead, it examines whether the court has subject-matter jurisdiction based on diversity jurisdiction under 28 U.S.C. § 1332, including the requirement that more than $75,000 be in dispute.
Amount in Controversy
Colony’s complaint alleged that the amount-in-controversy requirement was satisfied because DTC would incur more than $75,000 in defense costs. In support of its default-judgment motion, Colony also relied on two other theories: that the injured person in the underlying action sought more than $75,000, and that the insurance policy had a $1 million per-occurrence liability limit.
The court found that Colony had not alleged facts allowing a reasonable inference that defense costs would exceed $75,000. The supporting affidavit also did not state that defense costs had exceeded or would exceed that amount. The court noted that the underlying complaint sought damages exceeding the jurisdictional limit of New York’s lower state courts—more than $50,000—but did not seek more than $75,000.
The court rejected the theory based on the policy limit. It explained that the amount in controversy is measured by the value of the subject of the lawsuit and concluded that, based on the facts alleged, it was not plausible that the policy limit was implicated by the underlying action. The court stated that the relevant measure could be the damages sought in the underlying action or the cost of defending it, but Colony had not adequately shown that either exceeded $75,000.
Order
Judge Valerie Caproni ordered Colony to submit, by February 5, 2025, an affidavit addressing whether the amount-in-controversy requirement had been met, with exhibits if necessary. The court ordered Colony to serve the order and supplemental affidavit on DTC and file proof of service by February 6, 2025. The order states that failure to submit the affidavit would preclude entry of default judgment at the February 7 hearing.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.