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Tovares v. Gallagher Bassett Services, Inc.

United States District Court, D. South Dakota, Western Division

September 12, 2017





         Plaintiff Annie Tovares filed an action against the defendants Gallagher Bassett Services, Inc., and Praetorian Insurance Company alleging bad faith and misrepresentation in violation of South Dakota law. (Docket 1). The complaint also seeks attorney's fees and punitive damages. Id. The defendants separately filed motions to dismiss the complaint pursuant to Fed. R. Civ. 12(b)(1), asserting plaintiff's damages would not exceed the jurisdictional threshold of $75, 000 required by 28 U.S.C. § 1332(a). (Dockets 11 & 12). Plaintiff resists the motions.[1] (Docket 15). Defendants' motions were referred to United States Magistrate Judge Daneta Wollmann pursuant to 28 U.S.C. § 636(b)(1)(B) and the standing order of March 9, 2015. Magistrate Judge Wollmann issued a report and recommendation (“R&R”) concluding the court should deny defendants' motions to dismiss. (Docket 25 at p. 8). Defendant Praetorian Insurance Company (“Praetorian”) timely filed objections to Magistrate Judge Wollmann's R&R. (Docket 26). Plaintiff filed a response to those objections. (Docket 27).

         The court reviews de novo those portions of the report and recommendation which are the subject of objections. Thompson v. Nix, 897 F.2d 356, 357-58 (8th Cir. 1990); 28 U.S.C. § 636(b)(1). The court may then “accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1). The court completed a de novo review of those portions of the R&R to which objections were filed. The court finds the magistrate judge's report and recommendation is an appropriate application of the law to the issue presented by the parties. For the reasons stated below, the defendant's objections are overruled and the report and recommendation of the magistrate judge is adopted as amended.


         Defendant Praetorian Insurance Company's objections to the report and recommendation are summarized as follows:

1. The magistrate judge erred when she emphasized the word “alleged.” (Docket 26 ¶ 1).
2. The magistrate judge erred when she included Praetorian as being involved in the denial of the claim letter sent to plaintiff. Id.
3. The magistrate judge erred when she used the emphasized language as supportive of plaintiff's claims. Id. ¶ 2.
4. The magistrate judge erred when she stated Praetorian had access to the video of plaintiff's fall and refused to provide a copy to plaintiff's counsel. Id. ¶ 3.
5. The magistrate judge erred when she stated Praetorian made the payment of $3, 225.12 to plaintiff, or that an agency relationship existed with Gallagher Bassett Services, Inc. (“Gallagher”). Id. ¶ 4.
6. The magistrate judge erred when she stated Ms. Tovares incurred $806.28 in attorney's fees based on Praetorian's unreasonable denial of the claim for benefits. Id. ¶ 5.
7. The magistrate judge erred when she stated the denial of benefits was unreasonable. Id.
8. The magistrate judge erred when she referenced Forshee v. Waterloo Industries, Inc., 178 F.3d 527, 531 (8th Circuit 1999), in support of the analysis of plaintiff's emotional distress damages claim. Id. ¶ 6.
9. The magistrate judge erred when she referenced Jordan v. State Auto Insurance Companies, CIV 16-4053, 2016 WL 7235688 (D.S.D. December 13, 2016), in support of plaintiff's claims. Id. ¶ 7.
10. The magistrate judge erred when she referenced Torres v. Travelers, CIV. No. 01-5056 (D.S.D. 2001), in support of plaintiff's claims. Id. ¶ 8.
11. The magistrate judge erred when she found plaintiff alleged facts to support her punitive damages claim so as to exceed the jurisdictional minimum. Id. ¶ 9.
12. The magistrate judge erred when she relied on SDCL § 58-12-3 to conclude plaintiff would be entitled to attorney's fees which would count toward the jurisdictional minimum. Id. ¶ 10.
13. The magistrate judge erred when she relied on SDCL § 58-33-5, because the attorney's fees of $806.28 were already incurred and cannot support the jurisdictional minimum. Id. ¶ 11.


         Ms. Tovares filed her complaint as a diversity action pursuant to 28 U.S.C. § 1332. (Docket 1 ¶ 5). For a case to qualify as a diversity action plaintiff must satisfy two elements: (1) that the parties are “citizens of different States”; and (2) that the amount “in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs.” 28 U.S.C. § 1332(a). Defendants move to dismiss the complaint pursuant to Fed. R. Civ. 12(b)(1), asserting plaintiff's damages cannot meet the $75, 000 requirement of § 1332(a). (Dockets 11 & 12).

         Under a Rule 12(b)(1) motion to dismiss, a defendant has the right to challenge the “lack of subject-matter jurisdiction . . . .” Fed.R.Civ.P. 12(b)(1). While considering a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, the court must “accept all factual allegations in the pleadings as true and view them in the light most favorable to the nonmoving party.” Great Rivers Habitat Alliance v. Federal Emergency Management Agency, 615 F.3d 985, 988 (8th Cir. 2010). The court “has authority to consider matters outside the pleadings when subject matter jurisdiction is challenged under Rule 12(b)(1). . . . This does not . . . convert the 12(b)(1) motion to one for summary judgment.” Harris v. P.A.M. Transp., Inc., 339 F.3d 635, 638 (8th Cir. 2003). “The district court may take judicial notice of public records and may thus consider them on a [Rule 12(b)(1)] motion to dismiss.” Stahl v. U.S. Department of Agriculture, 327 F.3d 697, 700 (8th Cir. 2003).

         The Supreme Court instructed trial courts to apply the “legal certainty” test to determine whether the amount in controversy element has been met.

The rule governing dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. . . . [I]f, from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount, and that his claim was therefore colorable for the purpose of conferring jurisdiction, the suit will be dismissed. Events occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction.

St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938).

         Plaintiff's statement in the complaint that her damages exceed $75, 000 is adequate, unless that declaration is challenged by the opposing party through a Rule 12(b)(1) motion. Scottsdale Ins. Co. v. Universal Crop Protection Alliance, LLC, 620 F.3d 926, 931 (8th Cir. 2010). If a challenge is made, plaintiff must prove the jurisdictional amount in controversy by a preponderance of the evidence. Id. “When the pleadings are inconclusive to establish the amount in controversy, [the court] may look to other evidence in the record.” Dupraz v. Aventis CropScience USA Holding, Inc., 153 F.Supp.2d 1102, 1104 (D.S.D. 2001).

         At this point in the litigation, defendants have not answered the complaint and their Rule 12(b)(1) motions challenge only the $75, 000 damages threshold required by § 1332(a). For purposes of resolving defendants' motions only, the allegations of the complaint are deemed true. Great Rivers Habitat Alliance, 615 F.3d at 988. Those facts are as follows.

         Praetorian issued a worker's compensation insurance policy to Ms. Tovares' employer, Menard, Inc. (“Menards”). (Docket 1 ¶ 6). Praetorian delegated its claim administration services to Gallagher. Id. ¶ 7. Both defendants understood that Praetorian would act as the principal and Gallagher would act as Praetorian's agent in performing claim administration duties. Id. ¶ 8. Those duties included good faith and fair dealing, processing paperwork relating to claims, investigating claims, obtaining medical reports, monitoring treatment, verifying coverage, adjusting, settling and defending claims and issuing checks for payment of benefits. Id. Gallagher performed all claim administration services for claims submitted under Menards' worker's compensation policy, including Ms. Tovares' claim. Id. ¶¶ 9-10. Gallagher knew it had the duty to handle claims in good faith and Praetorian knew it would remain responsible for Gallagher's violations of that duty. Id. ¶¶ 11 & 12.

         On March 19, 2014, while working at Menards in Rapid City South Dakota, Ms. Tavares fell sideways and landed hard on a concrete floor, bruising her left hip and arm. Id. ¶ 13. Menards received actual notice of her fall and the incident was recorded on one of its security cameras. Id. ¶ 14.

         Over the next week, Ms. Tovares began experiencing intermittent ringing in her ears, blurry vision, light-headedness and headaches. Id. ¶ 15. On March 26, 2014, she went to the Rapid City Regional Hospital emergency room. Id. After obtaining her history of the work-related fall, the attending physician prescribed a CT scan of Ms. Tovares' head in order to rule out the presence of internal bleeding or other brain injuries. Id. ¶ 16. The CT scan was negative for internal bleeding. Id. ¶ 17. Her attending physician noted the “most likely cause of her symptoms is . . . [her] head injury.” Id. ¶ 18. Ms. Torvares was referred to an eye doctor to address her blurry vision. Id. ΒΆ 19. The eye examination disclosed no ...

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