Scottsdale Insurance Company v. Acceptance Indemnity Insurance Company

Background

Scottsdale Insurance Company, One Team Restoration, Inc., Nautilus Realty Limited Partnership, and DNA Contracting and Waterproofing, LLC filed a declaratory judgment action against Acceptance Indemnity Insurance Company. The dispute arose from a personal-injury action brought by Patricio Cedillo after he allegedly fell while performing work at a construction site. Cedillo alleged that he was employed by DNA.

The plaintiffs alleged that Acceptance Indemnity issued an insurance policy to Miranda Contacting Corporation and that the policy’s additional-insured endorsement covered OneTeam, Nautilus, and DNA. They sought a declaration about Acceptance Indemnity’s obligations under that policy, along with claims for breach of contract, waiver and estoppel, and quantum meruit or unjust enrichment.

The plaintiffs originally filed the action in the Supreme Court of New York. Acceptance Indemnity removed it to the federal court. The plaintiffs moved to remand, arguing that the court lacked diversity jurisdiction because the amount in controversy did not satisfy the $75,000 requirement under 28 U.S.C. § 1332(a). The opinion states that the parties’ citizenship was not disputed; the only issue was the amount in controversy.

Amount in Controversy

For a declaratory judgment concerning insurance coverage, the amount in controversy is measured by the value of the underlying claim, rather than automatically by the insurance policy’s face amount. Acceptance Indemnity had relied in part on the policy’s $1 million proceeds, but the court rejected that measure.

The complaints did not specify the value of the coverage dispute or Cedillo’s personal-injury claims. The court therefore considered documents outside the pleadings, including two Verified Bills of Particulars from the underlying action. Those documents described serious and permanent injuries to Cedillo’s cervical spine, lumbar spine, left ankle, and left shoulder.

Cedillo claimed at least approximately $60,000 in physician costs, $15,000 in hospital expenses, lost earnings and future lost wages, and $2,500 for x-rays. The court noted that, even without considering future lost wages and medical costs, the amounts identified in the Bills of Particulars exceeded $75,000. The court also noted that Cedillo had claimed $100,000 in lost earnings as of November 13, 2018.

Ruling

The court concluded that Acceptance Indemnity had shown a reasonable probability that the value of Cedillo’s underlying claim—and therefore the value of the declaratory judgment action—exceeded $75,000. It held that removal was proper and denied the plaintiffs’ motion to remand.

Because it denied remand, the court also denied the plaintiffs’ request for costs and expenses under 28 U.S.C. § 1447(c). Judge Ronnie Abrams directed the Clerk of Court to terminate the motion at docket entry 4.