Hougland v. Metropolitan Casualty Insurance Company

• Court: District Court, W.D. Washington
• Decided: May 27, 2021
• Docket: 3:21-cv-05090
• Status: Unknown

Opinion

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5 UNITED STATES DISTRICT COURT 6 WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 SUZANNE HOUGLAND, CASE NO. C21-5090 BHS 8 Plaintiff, ORDER ON PLAINTIFF’S 9 v. MOTION TO REMAND AND DEFENDANT’S MOTION TO 10 METROPOLITAN CASUALTY CONSOLIDATE INSURANCE COMPANY, 11 Defendant. 12

13 This matter comes before the Court on Defendant Metropolitan Casualty Insurance 14 Company’s motion to consolidate cases, Dkt. 8, and Plaintiff Suzanne Hougland’s motion 15 to remand, Dkt. 11. The Court has considered the briefing filed in support of and in 16 opposition to the motion and the remainder of the file and hereby rules as follows. 17 I. FACTUAL & PROCEDURAL BACKGROUND 18 Hougland and Richard Stanfield were in an automobile accident on April 5, 2015 19 allegedly caused by an uninsured motorist. At the time, Hougland and Stanfield were 20 insured together under a shared policy with Metropolitan; the policy provides $100,000 21 per person and $300,000 total in uninsured motorist (“UIM”) coverage. Metropolitan 22 1 asserts that Hougland and Stanfield settled with the at-fault driver for policy limits of 2 $15,000 and then pursued claims for bodily injury under their UIM coverage.

3 After a demand from Hougland and Stanfield that Metropolitan pay the full limit 4 of $100,000 to each of them for their bodily injuries, Metropolitan made advance 5 payments of $58,000 and $50,000 to Hougland and Stanfield, respectively. Dkt. 19-7, 19- 6 8. Metropolitan made these advance payments without execution of any release. See Dkt. 7 18 at 3. 8 Hougland and Stanfield then filed a joint complaint in Pierce County Superior

9 Court, seeking to pursue the remainder of their uninsured motorist coverage (i.e., $42,000 10 for Hougland and $50,000 for Stanfield). See Hougland et al. v. Metropolitan Casualty 11 Ins. Co., 3:20-cv-06137-TSZ, Dkt. 1-1 (W.D. Wash. 2020). Metropolitan removed the 12 case to this Court on the basis of diversity jurisdiction, id., Dkt. 1, and Hougland and 13 Stanfield voluntarily dismissed their complaint, id., Dkt. 2.

14 Hougland and Stanfield then refiled their claims in Pierce County Superior Court, 15 albeit separately. See Dkt. 1-1; Stanfield v. Metropolitan Causaulty Ins. Co., 3:21-cv- 16 05092-BHS (W.D. Wash.), Dkt. 1-1. Metropolitan again removed the two cases on the 17 basis of diversity. Dkt. 1; Stanfield, 3:21-cv-05092-BHS, Dkt. 1. 18 Metropolitan seeks to consolidate this case with Stanfield. Dkt. 8. Hougland, on

19 the other hand, argues that removal was improper as the amount in controversy does not 20 reach the threshold $75,000 to confer diversity jurisdiction and moves to remand the 21 case. Dkt. 11. Hougland also seeks an award of fees and costs. See id. at 6–7. 22 1 II. DISCUSSION 2 If the Court does not have jurisdiction over this case, as Hougland contends, then

3 it cannot consolidate this case with Stanfield. Therefore, the Court will first address the 4 motion to remand and then turn to the motion to consolidate, if necessary. 5 A. Motion to Remand 6 “A defendant generally may remove a civil action if a federal district court would 7 have original jurisdiction over the action.” Allen v. Boeing Co., 784 F.3d 625, 628 (9th 8 Cir. 2015). Federal courts have original jurisdiction over, inter alia, cases where there

9 exists a complete diversity of citizenship and the amount in controversy exceeds $75,000. 10 28 U.S.C. § 1332(a); Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). Defendants who 11 remove cases on the basis of diversity jurisdiction must prove, by a preponderance of the 12 evidence, that removal is proper. Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. 13 Lhotka, 599 F.3d 1102, 1107 (9th Cir. 2010). There exists a “strong presumption against

14 removal jurisdiction,” which “must be rejected if there is any doubt as to the right of 15 removal in the first instance.” Id. (internal quotation omitted); see also Gaus v. Miles, 16 Inc., 980 F.2d 564, 566 (9th Cir. 1992) (courts should “strictly construe the removal 17 statute against removal jurisdiction”); Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 18 100, 108–09 (1941) (“Due regard for the rightful independence of state governments . . .

19 requires that [federal courts] scrupulously confine their own jurisdiction to the precise 20 limits which [§ 1441] has defined.”). 21 Metropolitan asserts that the amount in controversy is met because (1) Hougland 22 seeks attorney fees pursuant to Olympic Steamship; (2) she implicitly asserts claims of 1 bad faith; (3) the amount in controversy is not reduced by pre-litigation advances; and (4) 2 Hougland and Stanfield have aggregating damages for the purposes of diversity. The

3 Court will address each argument in turn. 4 1. Olympic Steamship Fees 5 In Washington, “an award of fees is required in any legal action where the insurer 6 compels the insured to assume the burden of legal action, to obtain the full benefit of his 7 insurance contract, regardless of whether the insurer’s duty to defend is at issue.” 8 Olympic Steamship v. Centennial Ins. Co., 117 Wn.2d 37, 53 (1991). “[T]he rule

9 articulated in Olympic Steamship is applicable where the insurer forces the insured to 10 litigate questions of coverage . . . .” McGreevy v. Oregon Mut. Ins. Co., 128 Wn.2d 26, 11 33 n.6 (1995). “‘Coverage means the assumption of risk of occurrence of the event 12 insured against before its occurrence.’” Kroeger v. First Nat. Ins. Co. of Am., 80 Wn. 13 App. 207, 210 (1995) (quoting Ryan v. Cuna Mut. Ins. Soc’y, 84 Wn.2d 612, 615 (1974)).

14 “Coverage disputes include both cases in which the issue of any coverage is disputed and 15 cases in which ‘the extent of the benefit provided by an insurance contract’ is at issue.” 16 Leingang v. Pierce Cty. Med. Bureau, Inc., 131 Wn.2d 133, 147 (1997) (quoting 17 McGreevy, 128 Wn.2d at 33). 18 On the other hand, “dispute[s] over the value of the claim presented under the

19 policy . . . are not properly governed by the rule in Olympic Steamship.” Dayton v. 20 Farmers Ins. Group, 124 Wn.2d 277, 280 (1994). “Where the insurer admits coverage 21 but, in good faith, denies or disputes the value of the claim, [Olympic Steamship] does not 22 authorize fees.” Solnicka v. Safeco Ins. Co. of Illinois, 93 Wn. App. 531, 533 (1999). 1 Often, however, there is a fine line between a coverage dispute and a claim dispute. The insurer may admit some coverage, but dispute the scope 2 of coverage and then contend the case involves a claim dispute. Coverage disputes include cases in which coverage is denied and those in which the 3 extent of the benefit is disputed. Coverage questions focus on such questions as whether there is a contractual duty to pay, who is insured, the 4 type of risk insured against, or whether an insurance contract exists at all. Claim disputes, on the other hand, raise factual questions about the 5 extent of the insured’s damages. They involve factual questions of liability, injuries, and damages and are therefore appropriate for arbitration. 6 Id. at 534 (citations omitted). 7 While Hougland’s complaint sets out a demand of Olympic Steamship fees in 8 praying “for an award of reasonable attorney’s fees and costs, pursuant to Olympic 9 Steamship and its progeny, and/or pursuant to contract law, common law or equity,” Dkt. 10 1-1 at 4, she argues that “the dispute is currently about only the value of these claims, not 11 whether coverage exists,” Dkt. 21 at 4. Notably, Metropolitan does not classify the case 12 as a coverage dispute; indeed, it appears that Metropolitan has conceded that Hougland is 13 covered by the UIM policy up to $100,000. See Dkt. 19-1. Metropolitan further states that 14 it “disputed [Hougland’s] asserted value of the claims, and attempted to negotiate a 15 reasonable settlement.” Dkt. 18 at 2. 16 Metropolitan provides evidence and lengthy analysis on Hougland’s Olympic 17 Steamship fees, but it has not established by a preponderance of the evidence that this 18 case is anything but a claim dispute. Hougland alleges that Metropolitan “agreed that 19 [she] was not fully compensated by the liability limits paid by the tortfeasor’s insurer and 20 paid $58,000 of the UIM limits” and that she “was not fully compensated and is entitled 21 to pursue claims for the remaining UIM benefits.” Dkt. 1-1, ¶¶ 3.10, 3.11. Based on these 22 1 allegations, it is a more reasonable assumption that this case involves “factual questions 2 of liability, injuries, and damages” instead of “interpretation of the meaning or

3 application of a policy . . . .” King Cty. v. Vinci Const. Grands Projets, 191 Wn. App. 4 142, 188–89 (2015) (internal citations and quotations omitted). 5 The Court thus concludes that, at this stage, Hougland brings a claim dispute 6 against Metropolitan and that Olympic Steamship fees are unavailable although pled. As 7 such, the speculated attorney’s fees cannot aggregate to satisfy the amount in 8 controversy.

9 2. Claims of Bad Faith 10 Metropolitan next argues that Hougland’s complaint satisfies the amount in 11 controversy because her “complaint is so vaguely and broadly pled that it encompasses 12 extracontractual claims of bad faith.” Dkt. 18 at 14. Relying on communications between 13 counsel, Metropolitan argues that Hougland threatened to pursue extracontractual bad

14 faith and Insurance Fair Conduct Act claims. While Hougland’s complaint is sparse, the 15 Court agrees that she has not alleged any IFCA violations or extracontractual claims. 16 Metropolitan’s argument that the Court should read in such claims is unsupported by any 17 legal authority. 18 Further, “a defendant who fails in an attempt to remove on the initial pleadings

19 can file a removal petition when subsequent pleadings or events reveal a new and 20 different ground for removal.” Fritsch v. Swift Transp. Co. of Ariz., LLC, 899 F.3d 785, 21 789 (9th Cir. 2018) (internal quotations omitted). If Hougland were to amend the 22 complaint to bring extracontractual claims, resulting in an amount in controversy greater 1 than $75,000, Metropolitan would have the opportunity to remove the case to federal 2 court within 30 days of receiving notice of amendment. See id. at 788. Therefore, the

3 “additional” bad faith claims cannot be included in the amount in controversy. 4 3. Prelitigation Advances 5 Metropolitan additionally argues that the amount in controversy should not be 6 reduced by the prelitigation advances it made to Hougland, i.e. that the amount in 7 controversy should be the entire $100,000 UIM policy. “In general, affirmative defenses, 8 counterclaims, and potential offsets may not be invoked to demonstrate the amount-in-

9 controversy is actually less than the jurisdictional minimum.” Cortez Martine v. Ford 10 Motor Co., 2019 WL 1988398, at *3 (E.D. Cal. May 6, 2019) (internal citations omitted). 11 Metropolitan concedes that it has been unable to locate authority on potential offsets 12 decided in the context of a defendant seeking removal. Dkt. 18 at 17. But it argues that 13 Hougland’s claim is that she is entitled to the entire $100,000 available under her UIM

14 policy and that the amount has been offset by the $58,000 it has already paid her. Further, 15 Metropolitan argues that it retains the right to recoup overpayment if it is determined that 16 Hougland’s claim is valued less than the advances it already paid to her. Thus, 17 Metropolitan argues that the amount in controversy should be deemed the entire 18 $100,000 UIM policy, not just the remaining $42,000.

19 The Court is not persuaded the potential offset establishes the entire $100,000 20 UIM policy as the amount in controversy. “Events occurring subsequent to the institution 21 of suit which reduce the amount recoverable below the statutory limit” do not eliminate 22 federal diversity jurisdiction. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 1 289–90 (1938) (emphasis added). The offer of the $58,000 to Hougland occurred prior to 2 the current lawsuit, leaving the remaining $42,000 of UIM coverage in controversy. The

3 Court would necessarily have to decide the merits of this case to determine whether the 4 amount in controversy is met if it had to evaluate Metropolitan’s potential offset 5 argument. See Geographic Expeditions, 599 F.3d at 1108. Hougland’s complaint plainly 6 states that she is pursuing “claims for the remaining UIM benefits.” Dkt. 1-1, ¶ 3.11. If 7 the entire $100,000 UIM policy again becomes at issue, Metropolitan would again have 8 the opportunity to remove the case to federal court. Metropolitan’s prelitigation advances

9 are thus not a part of the amount in controversy. 10 4. Aggregating Damages 11 Finally, Metropolitan argues that the damages between Hougland and Stanfield 12 can be aggregated to satisfy the amount in controversy. Dkt. 18 at 18 (citing Ali v. 13 Progressive Direct Ins. Co., Case No. C19-1015 RSM, 2019 WL 4565495, at *2 (W.D.

14 Wash. Sept. 20, 2019)). This Court has previously concluded that “aggregation has been 15 permitted in cases in which two or more plaintiffs unite to enforce a single title or right in 16 which they have a common and undivided interest.” Ali, 2019 WL 4565495, at *2 (citing 17 Synder v. Harris, 394 U.S. 332, 335 (1969)). Metropolitan thus argues that the Court 18 should find that Hougland and Stanfield’s claims constitute a common and undivided

19 interest because their contractual damages arise under a joint policy with an aggregate 20 policy limit. 21 However, the plaintiffs in Ali brought suit together whereas Hougland and 22 Stanfield have purposefully elected to bring separate claims. Hougland and Stanfield 1 were previously united to enforce their rights under the UIM policy but chose to 2 voluntarily dismiss and refile separately. See Hougland et al. v. Metropolitan Casualty

3 Ins. Co., 3:20-cv-06137-TSZ, Dkts. 1-1, 2 (W.D. Wash. 2020). The Court cannot say that 4 Hougland and Stanfield are united in litigation to enforce a single title or right in which 5 they have a common undivided interest, unlike Ali. Their claims are therefore not 6 aggregable to satisfy the amount in controversy. 7 The Court thus GRANTS Hougland’s motion to remand as Metropolitan has not 8 established the amount in controversy by a preponderance of the evidence.

9 B. Attorney’s Fees and Costs 10 “An order remanding the case may require payment of just costs and any actual 11 expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. 12 § 1447(c). “Absent unusual circumstances, courts may award attorney’s fees under 13 § 1447(c) only where the removing party lacked an objectively reasonable basis for

14 seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). “[T]he 15 standard for awarding fees should turn on the reasonableness of the removal.” Id. The 16 plaintiff does not have to prove that the defendant’s “action was frivolous, unreasonable, 17 or without foundation,” because “there is no basis here for a strong bias against fee 18 awards.” Id. at 138.

19 The process of removing a case to federal court and then having it remanded back to state court delays resolution of the case, imposes 20 additional costs on both parties, and wastes judicial resources. Assessing costs and fees on remand reduces the attractiveness of removal as a method 21 for delaying litigation and imposing costs on the plaintiff. The appropriate test for awarding fees under § 1447(c) should recognize the desire to deter 22 removals sought for the purpose of prolonging litigation and imposing costs 1 on the opposing party, while not undermining Congress’ basic decision to afford defendants a right to remove as a general matter, when the statutory 2 criteria are satisfied.

3 Id. at 140. 4 While Metropolitan’s improper removal delayed the proceedings and increased 5 Hougland’s costs of litigation, the Court is unable to conclude that an award of fees is 6 warranted. Hougland’s complaint contains a demand of Olympic Steamship fees, which 7 alludes to a claim of denial of coverage. See Dkt. 1-1 at 4 (praying “for an award of 8 reasonable attorney’s fees and costs, pursuant to Olympic Steamship and its progeny, 9 and/or pursuant to contract law, common law or equity.”). Based on a literal reading of 10 these allegations, the Court is unable to conclude that it was objectively unreasonable to 11 base removal on the possibility of an award of Olympic Steamship fees. Thus, 12 Metropolitan avoids an award of fees in this matter based on one reasonable argument. 13 C. Motion to Consolidate

14 As the Court has determined that the amount in controversy has not been met, it 15 does not have jurisdiction over this case. Metropolitan’s motion to consolidate is 16 therefore denied as moot. 17 18

19 20 21 22 1 III. ORDER 2 Therefore, it is hereby ORDERED that Hougland’s motion to remand, Dkt. 11, is

3 GRANTED and that Metropolitan’s motion to consolidate, Dkt. 8, is DENIED as moot. 4 The Clerk shall remand this action to Pierce County Superior Court and close this case. 5 Dated this 27th day of May, 2021. A 6 7 BENJAMIN H. SETTLE 8 United States District Judge

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