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Scottsdale Insurance Co. v. Calhoun Hunting Club and Lounge

United States District Court, M.D. Alabama, Northern Division

December 26, 2018

SCOTTSDALE INSURANCE COMPANY Plaintiff,
v.
CALHOUN HUNTING CLUB AND LOUNGE, TERRY BAITY, and TIFFANY MILLER, Defendants.

          OPINION

          MYRON H. THOMPSON, UNITED STATES DISTRICT JUDGE

         Plaintiff Scottsdale Insurance Company filed a complaint against defendants Calhoun Hunting Club and Lounge, Terry Baity, and Tiffany Miller, seeking a declaration that the insurance company had no duty to defend or indemnify the club and Baity (the club's owner) in a lawsuit brought by Miller in state court. This matter is now before the court on Baity's and Miller's motions to dismiss for lack of subject-matter jurisdiction. After thorough review of the law and the record, the court concludes that those motions should be granted and that this case should be dismissed in its entirety.

         I. JURISDICTION

         Scottsdale Insurance Company invokes the court's diversity jurisdiction pursuant to 28 U.S.C. § 1332, asserting that the parties are completely diverse and the amount in controversy is over $ 75, 000. Baity and Miller contend that the case is not properly in federal court because Miller is not claiming over $ 75, 000 in her state-court action.[1] For the reasons discussed below, the insurance company has not satisfied its burden to prove by a preponderance of the evidence the required jurisdictional amount.

         II. BACKGROUND

         This case arises out of a 2016 shooting at Calhoun Hunting Club and Lounge in Letohatchee, Alabama. A security guard at the club fired five to six shots into a car occupied by Nakia Rivers and Miller. Rivers was killed in the incident. Rivers's estate brought claims against, among others, the club and its owner Baity. Pursuant to a commercial-liability insurance policy, Scottsdale Insurance Company paid $ 300, 000, the full aggregate limit of the policy, in settlement of the estate's claims against the club.

         After the insurance company settled with Rivers's estate, Miller (the driver of the vehicle) sued the club and Baity in state court, seeking an unspecified amount of compensation for severe mental anguish, emotional distress, and damages to her vehicle. She also included a claim for punitive damages in an unspecified amount. She did not name the insurance company as a defendant.

         Scottsdale Insurance Company then filed this federal lawsuit pursuant to 28 U.S.C. § 2201 and Federal Rule of Civil Procedure 57, seeking a declaration that it had paid the full $ 300, 000 sum of the general aggregate limit of its policy with Calhoun Hunting Club and thus had no further duty to defend or indemnify the club or Baity in connection with Miller's suit. As stated, Baity and Miller moved to dismiss this declaratory-judgment action for lack of subject-matter jurisdiction.

         III. DISCUSSION

         “Federal courts are courts of limited jurisdiction.” Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994). A plaintiff seeking to invoke a federal court's diversity jurisdiction must establish that the amount in controversy exceeds $ 75, 000. See 28 U.S.C. § 1332(a). “When a plaintiff seeks injunctive or declaratory relief, the amount in controversy is the monetary value of the object of the litigation from the plaintiff's perspective.” Cohen v. Office Depot, Inc., 204 F.3d 1069, 1077 (11th Cir. 2000).

         In general, the plaintiff's allegation that the amount in controversy is met must be taken as true, see Dart Cherokee Basin Operating Co. v. Owens, 135 S.Ct. 547, 553 (2014), and may be dismissed only if it appears “to a legal certainty” that the claim does not exceed $ 75, 000. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938). But where, as here, jurisdiction is based on a claim for indeterminate damages (such as nonmonetary relief), the “‘legal certainty' test gives way, and the party seeking to invoke federal jurisdiction bears the burden of proving by a preponderance of the evidence that the claim on which it is basing jurisdiction meets the jurisdictional minimum.” Federated Mut. Ins. Co. v. McKinnon Motors, LLC, 329 F.3d 805, 807 (11th Cir. 2003).

         “[W]hen an insurer seeks a judgment declaring the absence of liability under a policy, the value of the declaratory relief to the plaintiff-insurer is the amount of potential liability under its policy.” First Mercury Ins. Co. v. Excellent Computing Distribs., Inc., 648 Fed.Appx. 861, 865 (11th Cir. 2016) (emphasis in original) (citing Stonewall Ins. Co. v. Lopez, 544 F.2d 198, 199 (5th Cir. 1976)). Such potential liability includes not only the amount of the claim against the insured for which the insurer may be liable, but also the costs of defending an underlying action against the insured. See Stonewall, 544 F.2d at 199.

         A. Face Value of the Policy

         Scottsdale Insurance Company argues the face value of the policy--$ 300, 000--“should be considered in determining the amount in controversy.” Sur-Reply in Opposition to Motion to Dismiss (doc. no. 30) at 4. For its argument, the insurance company cites Koester v. State Farm Ins. Co., No. 7:12-cv-02528-JEO, 2012 WL 5265783, at *4 (N.D. Ala. Oct. 22, 2012) (Ott, M.J.) (citations omitted), which held that “the face value of the policy generally controls where the parties' dispute involves either the validity of the policy itself ..., or coverage for claims that appear to put the face amount of the policy at issue.” Koester cited two cases in support of this conclusion: C.E. Carnes & Co. v. Employers' Liability Assurance Corp., 101 F.2d 739 (5th Cir. 1939), and Guardian Life Insurance Co. of America v. Muniz, 101 F.3d 93 (11th Cir. 1996) (per curiam). In Carnes, the plaintiff-insurer sought a declaration that its policy covering insured's truck did not extend to hauling butane gas. 101 F.2d at 740. The court held that the amount in controversy “is not ... what individual defendants claim by way of damages. ... The amount in controversy is the value of that which is sought to have declared free from ...


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