Two Oklahoma Federal Courts Rule on Diversity Issues in Insurance Disputes
On May 21, 2008, in Wormuth v. State Farm, 2008 U.S. Dist. LEXIS 40668, the U.S. District Court for the Northern District of Oklahoma awarded a plaintiff insured attorney’s fees incurred in responding to State Farm’s notice of removal based on fraudulent joinder. Wormuth sued State Farm and two State Farm investigators in Oklahoma state court. State Farm filed a notice of removal claiming the two investigators were fraudulently joined to defeat diversity jurisdiction. The trial court disagreed, found no fraudulent joinder and so no diversity jurisdiction and remanded the case to state court.
Wormuth sued for attorney’s fees incurred in responding to State Farm’s removal petition, relying on 28 U.S.C. § 1447(c) which allows a court to award attorney’s fees where the removing party lacks an objectively reasonable basis for seeking removal. State Farm argued the federal court lacked jurisdiction to consider Wormuth’s motion because she failed to request fees in the remand order itself and because its removal was based on objectively reasonable grounds. The trial court found State Farm lacked an objectively reasonable basis for removing the case and awarded Wormuth 60% of the fees requested.
Also on May 21, 2008, in Gulley v. Farmers Ins., 2008 U.S. Dist. LEXIS 40666, the U.S. District Court for the Western District of Oklahoma held the jurisdictional requirement for diversity jurisdiction had been met after considering together the allegations in plaintiff Gulley’s complaint and defendant Farmers’s notice of removal. Gulley sued Farmers for breach of contract and bad faith for failure to timely evaluate and pay Gulley’s underinsured motorists claim, alleging, among other things, that she had “repeatedly requested” Farmers provide her an evaluation of her claim but Farmers failed to do so. Her complaint sought contract damages of $30,000, unspecified compensatory damages and punitive damages “greater than $10,000.”
Farmers’ petition stated that Oklahoma law allowed a punitive damages award equal to actual damages or $100,000, whichever is greater. The punitive damages number together with the allegations in Gulley’s complaint that Farmers ignored her repeated requests to evaluate her claim, that she was owed $30,000 on her breach of contract and that her unspecified compensatory damages may conceivably include emotional distress or economic damages resulting from Farmers’ conduct, persuaded the court that the amount in controversy had been met.
