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Peterson v. Travelers Indemnity Co.

United States Court of Appeals, Eighth Circuit

August 15, 2017

Lori Peterson Plaintiff- Appellant
v.
The Travelers Indemnity Company, doing business as Travelers; The Phoenix Insurance Company, doing business as Travelers; The Charter Oak Fire Insurance Company, doing business as Travelers; Travelers Property Casualty Company of America, doing business as Travelers; The Travelers Indemnity Company of Connecticut, doing business as Travelers; The Travelers Indemnity Company of America, doing business as Travelers; Travelers Casualty Insurance Company of America, doing business as Travelers Defendants - Appellees

          Submitted: November 22, 2016

         Appeal from United States District Court for the District of South Dakota - Sioux Falls

          Before RILEY, Chief Judge, [1] WOLLMAN and BENTON, Circuit Judges.

          BENTON, Circuit Judge.

         Lori L. Peterson was injured in a car accident while driving a loaner vehicle from Billion Empire Motors, Inc. Peterson sued Travelers, [2] Billion's insurer, for coverage under the commercial insurance policy. The district court[3] dismissed for failure to state a claim. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

         I.

         Billion insured Peterson's vehicle under a commercial dealership policy from Travelers. After investigating the accident, Travelers told Peterson she was not insured under the policy. Peterson sued, alleging she is entitled to $5, 000 in auto medical coverage. She also asserted claims for bad faith, fraud, and unfair trade practice, seeking punitive damages and attorney's fees.

         Travelers moved to dismiss for lack of subject matter jurisdiction and failure to state a claim. Peterson moved for partial summary judgment. Finding Peterson not insured under the policy, the district court dismissed. It denied Peterson's post-judgment motions for reconsideration and leave to amend the complaint. Peterson appeals. This court reviews de novo dismissals under Rule 12(b)(6). In re K-tel Intern. Inc. Secs. Litig., 300 F.3d 881, 888-89 (8th Cir. 2002).

         II.

         Travelers argues the district court lacked subject matter jurisdiction because the amount in controversy does not exceed $75, 000. That court did not address this issue. "It is axiomatic that a court may not proceed at all in a case unless it has jurisdiction." Crawford v. F. Hoffman-La Roche Ltd., 267 F.3d 760, 764 (8th Cir. 2001). "If the defendant challenges the plaintiff's allegations of the amount in controversy, then the plaintiff must establish jurisdiction by a preponderance of the evidence." Kopp v. Kopp, 280 F.3d 883, 884-85 (8th Cir. 2002), citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 188-89 (1936). "[A] complaint that alleges the jurisdictional amount in good faith will suffice to confer jurisdiction, but the complaint will be dismissed if it 'appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount.'" Id. at 884, quoting Larkin v. Brown, 41 F.3d 387, 388 (8th Cir. 1994). "The legal certainty standard is met where the 'legal impossibility of recovery [is] so certain as virtually to negative the plaintiff's good faith in asserting the claim.'" Schubert v. Auto Owners Ins. Co., 649 F.3d 817, 822 (8th Cir. 2011), quoting JTH Tax, Inc. v. Frashier, 624 F.3d 635, 638 (4th Cir. 2010).

         Peterson seeks only $5, 000 in medical damages. To satisfy the jurisdictional amount, she relies on her request for tort damages, punitive damages, and attorney's fees. South Dakota law-which the parties agree controls this diversity action-"consistently recognize[s] emotional distress damages in tort actions." Stabler v. First State Bank of Roscoe, 865 N.W.2d 466, 479 (S.D. 2015). See Bell v. Allstate Life Ins. Co., 160 F.3d 452, 455 (8th Cir. 1998) ("State law controls the construction of insurance policies when a federal court is exercising diversity jurisdiction."). South Dakota allows punitive damages if malice exists. See Bierle v. Liberty Mut. Ins. Co., 792 F.Supp. 687, 691 (D.S.D. 1992). "[P]unitive damages are included in the amount in controversy, " but "the existence of the required amount must be supported by competent proof." OnePoint Sols., LLC v. Borchert, 486 F.3d 342, 348 (8th Cir. 2007), quoting Larkin, 41 F.3d at 388-89. "Statutory attorney fees do count toward the jurisdictional minimum for diversity jurisdiction." Crawford, 267 F.3d at 766, citing Missouri State Life Ins. Co. v. Jones, 290 U.S. 199, 202 (1933).

         Peterson alleges fraud, bad faith, and unfair trade practice. She seeks attorney's fees under S.D. § 58-12-3, which allows recovery where the insurer "refused to pay the full amount of . . . loss" and "such refusal is vexatious or without reasonable cause." S.D. § 58-12-3. Although she does not allege facts showing that her tort or punitive damages or attorney's fees would exceed $75, 000, it is not legally impossible that she could recover at least that amount. See Tripp v. Western Nat. Mut. Ins. Co., 664 F.3d 1200, 1202 (8th Cir. 2011) (affirming award of $65, 000 in attorney's fees under S.D. § 58-12-3). The district court had jurisdiction over the lawsuit.

         III.

         Peterson alleges she is insured for auto medical coverage under the policy. Travelers disagrees. Insurance contract interpretation is a question of law reviewed de novo. Noran Neurological Clinic, P.A. v. Travelers Indem. Co., 229 F.3d 707, 709 (8th Cir. 2000); National Farmers Union Prop. & Cas. Co. v. Universal Underwriters Ins. Co., 534 N.W.2d 63, 64 (S.D. 1995). "The existence of the rights and obligations of parties to an insurance contract are determined by the language of the contract, which ...


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