The opinion of the court was delivered by: Haight, Senior District Judge.
MEMORANDUM OPINION AND ORDER
The amended complaint in this diversity action alleges that plaintiff
is entitled to disability benefits that Equitable has improperly refused
to pay. It is undisputed that under a Disability Income Insurance Policy
Equitable issued to Scherer in 1987 (the "Policy"), Scherer is entitled
to a monthly payment of $5,031 during such time as she is "totally
disabled" within the meaning of the Policy. The Policy also excuses
Scherer from paying premiums while she is disabled. Her premium payment
is $1,415 twice yearly. The Policy contains a ninety-day "elimination
period" after Scherer becomes totally disabled before
she is entitled to payment of benefits or waiver of premiums. Scherer avers
that she has been continuously totally disabled since January of 1995.
Equitable paid Scherer benefits under the Policy after she initially
claimed she was totally disabled. In March of 1997, however, Equitable
ceased payments and, in March of 1998, delivered to Scherer its final
refusal to pay under the Policy. Following this refusal Scherer brought
suit against Equitable for breach of contract in New York Supreme Court
on April 15, 1998 (the "State Action"). That case went to trial before a
jury which rendered a verdict against plaintiff on May 3, 2001.
Plaintiffs appeal of that judgment is pending.
Scherer submitted a new claim of total disability under the Policy on
August 31, 2001. In response, Equitable informed plaintiff that she owed
$7,075.25 in unpaid premiums as of September 1999. On November 1, 2001,
Equitable also informed plaintiff by letter that it would be adjudicating
plaintiffs new claim "with a start date of May 3, 2001" but that it would
cancel the policy if she did not pay the outstanding premiums by November
19, 2001. On November 17, 2001, plaintiff filed the instant suit seeking
a declaratory judgment that the premiums are not due and that she was
disabled from April 16, 1998 to November 19, 2001. Plaintiff filed an
amended complaint as of right on December 27, 2001. The amended complaint
seeks disability payments of $5,031 per month from April 16, 1998 to
November 19, 2001, as well as an accelerated payment of future benefits
under the Policy for the remaining period of her life expectancy. On the
date she filed her complaint, plaintiff also brought an Order to Show
Cause seeking a temporary restraining order ("TRO") and a preliminary
injunction preventing defendant from canceling the Policy for non-payment
of premiums pending an adjudication on the merits of this suit. The Court
initially granted the TRO but by Memorandum Opinion and Order reported at
2001 WL 1568327 (S.D.N.Y. Dec.5, 2001), familiarity with which is
assumed, denied plaintiffs request for a preliminary injunction because
plaintiff could not demonstrate the requisite irreparable harm.
In its memorandum opposing plaintiffs request for injunctive relief
defendant, inter alia, challenged this Court's subject matter
jurisdiction. Defendant argued that plaintiffs claim cannot meet the
$75,000 jurisdictional threshold imposed by 28 U.S.C. § 1332 (a)
because the most plaintiff can recover if she prevails is $10,062 in
benefits, for the two months beginning ninety days after May 3, 2001, and
the September 2001 premium payment of $1,415. After reviewing defendant's
papers which revealed this basis for dismissal, the Court converted
defendant's memorandum to a Rule 12(b)(1) motion to dismiss for lack of
subject matter jurisdiction and set a briefing schedule. The motion is
now fully submitted and, for the reasons set forth below, granted.
When a question is raised about the validity of diversity
jurisdiction, the proponent of jurisdiction, in this case the plaintiff,
carries the burden of showing that "it appears to a "reasonable
probability' that the claim is in excess of the statutory jurisdictional
amount." Tongkook America, Inc. v. Shipton Sportswear Co., 14 F.3d 781,
784 (2d Cir. 1994) (citation omitted). Unless it appears to a "legal
certainty" that plaintiffs good faith claim is for less than the
jurisdictional amount, dismissal is not warranted. See St. Paul Mercury
Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586, 82 L.Ed.
845 (1938). "If the right of recovery is uncertain, the doubt should be
resolved . . . in favor of the subjective good faith of the plaintiff."
Tongkook, 14 F.3d at 785-86 (internal quotations omitted). The amount in
controversy is measured as of the date the complaint is filed. See Chase
Manhattan Bank, N.A. v. American National Bank and Trust Co. of Chicago,
93 F.3d 1064, 1070 (2d Cir. 1996).
The amended complaint in the present case alleges that Scherer is owed
disability benefits of $5,031 per month from April 16, 1998 (the day
after she filed the State Action) or, alternatively, July 12, 1998 (90
days after she instituted that suit) to November 17, 2001, the date she
instituted the present lawsuit, for a total of more than $200,000. In
addition, plaintiff contends that as a result of defendant's complete
repudiation of the Policy, defendants must pay her a lump sum payment
equal to monthly disability benefits for her life expectancy, an amount
which plaintiff does not quantify. The amended complaint also requests an
award of punitive damages resulting from defendant's alleged bad faith
denial of plaintiffs claim and treble damages for defendant's alleged
deceptive practices under New York State General Business Law § 349.
Defendant contends that the bulk of the damages plaintiff seeks are
not attainable. As a preliminary matter, defendant argues that New York
law prohibits an award of accelerated future benefits under an insurance
contract except under special circumstances not shown here. Moreover,
defendant maintains that plaintiff is barred from seeking disability
benefits in this lawsuit from the period between April 16, 1998 and May
3, 2001 because the question of her entitlement to benefits during that
period was already adjudicated by the jury in the State Action. As a
result, by defendant's calculation, if plaintiff were to prevail on her
claim the most she would be able to recover would be only a fraction of
the $75,000 necessary to satisfy the requisite jurisdictional amount.
In New York,*fn1 a plaintiff who sues an insurer for failing to pay
benefits under an insurance policy may recover only those benefits that
have already accrued, not future benefits to which she may become
entitled. See Teig v. First Unum Insurance Co., 282 A.D.2d 669,
723 N.Y.S.2d 707 (2d Dep't 2001) ("Contrary to the plaintiffs
contentions, he cannot recover a lump sum award for future benefits under
his disability insurance policies."); Gordon v. Continental Casualty
Co., 91 A.D.2d 987, 457 N.Y.S.2d 844, 846 (2d Dep't 1983) ("[P]laintiff
is not entitled to a lump-sum money judgment, nor to a declaration to
that effect, with respect to defendant's future obligations arising under
the contract although he may be entitled to a money judgment (or
declaration) as to accrued installments."); Berlly v. The United States
Life Insurance Co., No. 00 Civ. 1999, 2001 WL 40771, *2 (S.D.N.Y. Jan.
16, 2001) ("Turning to New York law, it is well-established that a
plaintiff cannot recover anticipatory breach benefits under a disability
A narrow exception to this rule arises if the plaintiff can show
that the insurer has anticipatorily breached the insurance contract by
completely repudiating it. As many New York courts have articulated,
"[a]bsent special circumstances . . . New York does not apply the
of anticipatory breach where there is an alleged repudiation of an
executory contract for the payment of money only." Romar v. Alli,
120 A.D.2d 420, 501 N.Y.S.2d 877, 878 (1st Dep't 1986). However, "[a]
plaintiff can recover a judgment regarding future benefits if, for
example, the plaintiff is able to show that the insurer completely
repudiated the contract." Brauner v. Provident Life & Cas. Ins. Co.,
No. 97-Cv-3556, 1998 WL 812612, *2 (E.D.N.Y. March 24, 1998).
Courts applying New York law are in accord that the mere denial of
benefits under an insurance contract is not tantamount to complete
repudiation. See, e.g., Brauner, id.; Wurm v. Commercial Ins. Co. of
Newark, New Jersey, 2001 WL 1263363 (Sup.Ct.N.Y.Co. Sept. 5, 2001).
Something more than refusal of a claim by the insurer is necessary to
demonstrate the ...