Texas Insurance Law Newsbrief - May 2, 2024
“$250,000 OR LESS” COULD BE MORE OR LESS THAN $75,000
The above title may seem obvious. Nevertheless, that was the United States District Court for the Northern District of Texas determination in Werder v. Allstate Fire & Cas. Ins. Co., 2024 U.S. Dist. LEXIS 75380 (N.D. Tex April 25, 2024).
Janet Werder sued Allstate in state court in Dallas, Texas, alleging that she was seeking $250,000 or less in damages, the lower of four category amounts plaintiffs are required to choose from in Texas state courts. Allstate attempted to remove the case to federal court alleging in part that the amount-in-controversy exceeded the $75,000 federal court threshold. Ms. Werder objected to the removal, alleging that the $75,000 amount-in-controversy requirement for federal court jurisdiction was not met here.
The Federal Court noted that in general, when a plaintiff alleges a range of damages, the removing party then bears the burden to establish the requisite amount in controversy by a preponderance of the evidence. Then it followed that a plaintiff’s pleading amount could establish the amount in controversy by a preponderance of the evidence—in situations in which the plaintiff chooses one of the other Texas pleading categories. I.e., if a plaintiff pleads “$1,000,000 or more,” that satisfies the $75,000 amount in controversy. If a plaintiff pleads monetary relief of “$250,000 but not more than $1,000,000,” that satisfies the amount in controversy. If a plaintiff pleads…you get the idea. However, if a plaintiff pleads “$250,000 or less,” that alone cannot establish the requisite $75,000. It could be more, or it could be less. The Court gave Allstate until May 10, 2024 to find other evidence to establish the amount in controversy exceeds $75,000 in this case.
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FOOTERS DON’T CONTROL POLICIES; ENDORSEMENTS AND EXCLUSIONS DO
In Kinsale Ins. Co. v. Flyin’ Diesel Performance, 2024 U.S. App. LEXIS 10198 (5th Cir. April 26, 2024), Flyin’ Diesel purchased commercial general liability from Kinsale Insurance for a one-day drag racing event called Race Wars 2.
During the event, a vehicle lost control and crashed into nearby spectators, injuring some and killing others. Several injured people and estates of deceased ones sued Flyin’ Diesel. Flyin’ Diesel sought legal defense from Kinsale, which disputed that it owed defense.
Kinsale filed a declaratory action in federal court seeking a declaration that it did not owe coverage because of the policy’s Motorized Vehicles Endorsement:
“any claim or 'suit' for 'bodily injury,' 'property damage' or 'personal and advertising injury' arising directly or indirectly out of, related to, or, in any way involving the operation, maintenance, use, entrustment to others, or 'loading or unloading' of any motorized vehicle of any type.”
Flyin’ Diesel argued that the policy was ambiguous because of the policy’s footer in every endorsement:
“All other terms and conditions of the policy remain unchanged.”
While the federal district court agreed with Flyin’ Diesel, The United States Court of Appeals for the Fifth Circuit disagreed. The Fifth Circuit held that Flyin’ Diesel’s reading would give each endorsement’s footer precedence over every other one, and not read the policy as a whole—breaking a fundamental tenant of policy interpretation. Policies must be read as a cohesive whole and no one phrase, sentence, or section should be isolated and set apart from the other provisions. Flyin’ Diesel lastly argued that this exclusion rendered the policy meaningless, but the court noted that that was not the case. It could be covered, for example, for slip and fall claims that happened at the event. But as far as the out-of-control vehicle’s damages, Flyin’ Diesel is left to defend itself for these claims.
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