Allstate Fire and Casualty v. Allison Love
71 F.4th 348
5th Cir.2023Background
- 2016 auto accident: Allison and Tammy Love sued Jonathan Perez; Perez fled, pled nolo contendere; Allstate insured Perez.
- Allstate paid property-damage claims but the Loves rejected offers on bodily-injury claims and demanded policy limits ($50,000 per person).
- Perez failed to cooperate in defense; state court struck his pleadings and entered default judgment totaling $163,822 (Allison: $150,000; Tammy: $13,822).
- Allstate sued in federal district court for a declaratory judgment that it had no duty to indemnify the Loves for the state-court judgment, invoking diversity jurisdiction.
- Central legal issue: for amount-in-controversy under 28 U.S.C. § 1332(a), should the court measure exposure by the insurer’s policy limit or by the value of the underlying claim when there is potential extra-contractual liability (e.g., Texas Stowers doctrine)?
- District court found jurisdiction, concluded Allstate showed prejudice from Perez’s noncooperation, and entered summary judgment for Allstate; Fifth Circuit affirmed jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the amount in controversy for a declaratory-judgment action about an insurer’s duty is measured by policy limits or by the value of the underlying claim when insurer may face liability above policy limits | Allstate: amount in controversy is the underlying judgment ($163,822) because Stowers demands create a legal possibility of liability above policy limits; policy limits do not necessarily control | Loves: policy limits cap insurer exposure for jurisdictional purposes; Stowers claims were unasserted/unassigned and cannot be aggregated to meet federal threshold; service/amendment adding Perez did not create jurisdiction | Where there is a legal possibility the insurer could be liable for more than policy limits (e.g., via Stowers), the underlying claim controls the amount in controversy; Allstate met its burden by a preponderance of the evidence, so federal diversity jurisdiction exists |
Key Cases Cited
- Hartford Ins. Grp. v. Lou-Con, Inc., 293 F.3d 908 (5th Cir. 2002) (holds that in declaratory actions about policy applicability the amount in controversy is generally the value of the underlying claim rather than the face amount of the policy)
- Hunt v. Wash. State Apple Advertising Comm’n, 432 U.S. 333 (U.S. 1977) (in declaratory actions the amount in controversy is measured by the value of the object of the litigation)
- St. Paul Reins. Co. v. Greenberg, 134 F.3d 1250 (5th Cir. 1998) (party invoking diversity bears burden to prove amount in controversy; examine complaint first)
- Phillips v. Bramlett, 288 S.W.3d 876 (Tex. 2009) (explains Texas Stowers duty: insurer may be liable for entire judgment if it unreasonably refuses settlement within policy limits)
- Payne v. State Farm Mut. Auto. Ins. Co., 266 F.2d 63 (5th Cir. 1959) (amount in controversy may be fixed by policy limits when recovery beyond limits is legally impossible)
- De Aguilar v. Boeing Co., 47 F.3d 1404 (5th Cir. 1995) (party resisting jurisdiction must show it is certain it cannot recover more than state-court damages pleaded)
- C.E. Carnes & Co. v. Employers’ Liab. Assur. Corp., 101 F.2d 739 (5th Cir. 1939) (discussed in context of when policy limits determine amount in controversy)
- G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929) (establishes Stowers rule allowing excess-judgment liability for insurer that unreasonably refuses settlement)