Menu

Expect Focus Life Insurance, June 2018

Ninth Circuit: Face Amount Controls Amount-in-Controversy Questions Where Policy’s Validity is Disputed

Life Insurance & Annuity Litigation   |   Insurance   |   Financial Services Regulatory   |   Life Insurance & Financial Lines   |   June 25, 2018
Download   
Share Page

In March, the Ninth Circuit provided clarity on a key and recurring issue relevant to a district court’s ability to exercise subject matter jurisdiction in actions involving the validity of life insurance policies. On review of a summary judgment grant for the insurer, the court evaluated, sua sponte, whether the California federal district court that dismissed the action had subject matter jurisdiction. The case, Elhouty v. Lincoln Benefit Life Company, had landed in federal court as a result of the defendant’s removal. The Ninth Circuit recognized that, while the parties were completely diverse, as 28 U.S.C. § 1332(a) requires, “the contours of our amount in controversy jurisprudence are not entirely clear.”

The dispute and the plaintiff’s action for declaratory judgment focused on whether the plaintiff’s Lincoln Benefit life insurance policy “remained in full force and had not lapsed,” or had lapsed due to the plaintiff’s failure to pay the requisite policy premiums, even after notice. But the court distinguished the case before it from those where the dispute centers on whether the plaintiff owed the insurer some amount of money or the insurer owed the policyholder particular policy benefits. Rather, because “this case concerns whether the policy remains in force or was instead properly terminated,” the case is “one where the controversy relates to the validity of the policy” itself.

Citing decisions by multiple other Federal Courts of Appeal, the Ninth Circuit recognized “it is long-established that in declaratory judgment actions about whether an insurance policy is in effect or has been terminated, the policy’s face amount is the measure of the amount in controversy.” Thus, concluded the court, where Mr. Elhouty’s policy had a $2 million face amount,” that sum reflected the “value of the matter in controversy,” and the district court’s exercise of subject matter jurisdiction was proper.

Elhouty may also merit review for the court’s ruling that the district court did not abuse its discretion in striking the plaintiff’s expert witness, where, in addition to procedural failings (the plaintiff missed the deadline for disclosing expert reports and failed to timely respond to the defendant’s motion to strike), the plaintiff failed to “show[ ] how an expert opinion could help his case.”

 

©2018 Carlton Fields Jorden Burt, P.A. Carlton Fields practices law in California through Carlton Fields Jorden Burt, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.