A recent Legal Intelligencer story by Steven Meyerowitz, “$55K in Fees for Insured’s Breach-of-Contract Case Against Insurer Was Not ‘Reasonable Fee’,” reports that an insured seeking no more than $20,000 in medical benefits from her auto insurer could not reasonably pay $55,000 in attorney fees, a magistrate judge in Pennsylvania has opined.

Sandra Benko sued Allstate Insurance Co. for breach of contract by filing a complaint in a Pennsylvania state court.  Allstate removed the case to the U.S. District Court for the Western District of Pennsylvania, predicating subject matter jurisdiction on diversity of citizenship.  In its notice of removal, Allstate pleaded a “good faith belief” that the amount in controversy exceeded the $75,000 limit of 28 U.S.C. 1332(a).

The court ordered Allstate to show cause as to why the case should not be remanded due to lack of federal jurisdiction.  Allstate responded that Benko’s claims for “medical bills, interest at 12 percent, costs of suit and attorney’s fees,” were sufficient to support its contention that the case had been properly removed.

The court, in an opinion by a magistrate judge, recommended that the matter be remanded to state court.  The court explained that the amount in controversy generally is decided from the face of the complaint itself.  The amount in controversy is “not measured by the low end of an open-ended claim, but rather by a reasonable reading of the value of the rights being litigated,” the court added.  It then stated that it was “clear” that the amount in controversy had to be calculated “exclusive of interests and costs” under 28 U.S.C. 1332(a).  The court added that, with respect to Benko’s medical bills, Allstate’s insurance policy limited recovery for medical expenses to $10,000.  The court observed that even if the applicable coverage were “stacked,” $20,000 fell “woefully short of the jurisdictional limit.”

Finally, the court considered whether the $55,000 deficiency could be made up in attorney fees.  It pointed out that, in Suber v. Chrysler, the U.S. Court of Appeals for the Third Circuit instructed that “attorney’s fees are necessarily part of the amount in controversy if such fees are available to successful plaintiffs under the statutory cause of action.”

Under Pennsylvania law, 75 Pa.C.S. 1798(b), the court continued, in the event an insurer was found to have acted with no reasonable foundation in refusing to pay motor vehicle liability insurance first-party benefits when due, “the insurer shall pay, in addition to the benefits owed and the interest thereon, a reasonable attorney fee based upon actual time expended.”

“Put simply,” the court then stated, $55,000 did “not appear to be a reasonable fee in a simple breach of contract case such as this, particularly where [Benko had] not asserted a bad faith claim.”  Concluding that Allstate had not met its burden of establishing that the applicable policy coverage plus reasonable attorney fees met or exceeded the jurisdictional requirement of $75,000, the court recommended that the case be remanded to state court.

The case is Benko v. Allstate Insurance.