The LHD/ERISA Advisor: Florida Federal Court Holds Claimed Future Benefits Cannot Be Used in Diversity Jurisdiction Determination

Hinshaw & Culbertson LLP

Hinshaw & Culbertson LLP

In Parrott v. Northwestern Mut. Life Ins. Co., 2019 U.S. Dist. LEXIS 128827 (M.D. Fla. Aug. 1, 2017), a U.S. District Court for the Middle District of Florida held that parties cannot include future disability benefits in the "amount in controversy" calculation for the purposes of establishing diversity jurisdiction when the complaint seeks such benefits, but the plaintiff concedes that they are not available as a matter of law.

That was the factual scenario in Parrott, where the plaintiff's complaint sought both past due and future benefits under an individual disability policy. The defendant insurer, Northwestern Mutual Life Insurance Company ("Northwestern Mutual"), removed the complaint on the basis that the damages requested exceeded $75,000. The plaintiff ("Parrott") sought to remand, conceding in his motion that he was not entitled to future benefits under state law.

As Parrott admitted, under Florida law, recovery under an individual disability income insurance policy is generally limited to the installments which have accrued at the institution of the action. There is an exception when an insurer repudiates the policy. Parrott, however, alleged breach—not repudiation—and he was thus limited to past benefits.

Northwestern Mutual argued that the future benefits sought in the complaint must be included in the court's calculation of amount in controversy regardless of their recoverability, because Parrott's withdrawal of the demand constituted a post-removal event.

The court rejected the argument, holding that because Parrott could never recover the future benefits, they should not be used to evaluate whether the $75,000 jurisdictional minimum had been satisfied. "Thus, the actual issue presented can be simply stated: if it appears to a legal certainty that Parrot can't recover future benefits under the policy, then the amount in controversy doesn't exceed $75,000, and the action should be remanded," the court said.

The Parrott case presents an interesting study on how to calculate the amount in controversy when a plaintiff's complaint seeks future benefits that are not available under the subject policy.

[View source.]

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Hinshaw & Culbertson LLP

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