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HAMILTON v. HARTFORD ACCIDENT & INDEM. CO.

January 20, 1977

HUGH L. HAMILTON
v.
HARTFORD ACCIDENT AND INDEMNITY COMPANY



The opinion of the court was delivered by: GORBEY

 GORBEY, J.

 Jurisdiction in this case is based upon diversity of citizenship and the allegation that the amount in controversy is in excess of $10,000.

 Defendant has filed a motion to dismiss under Rule 12(b)(1) claiming that plaintiff's own allegations in the complaint show that the amount in controversy is only $7,800.

 In his first allegation, plaintiff alleges that defendant agreed to pay plaintiff the sum of $50 per week for a period not exceeding 260 weeks for each period of disability, in the event plaintiff became totally disabled. In the fourth allegation, plaintiff alleges that defendant made payment for a period totalling 104 weeks. Therefore, simple mathematics would indicate that the amount in controversy is $7,800, the figure ascertained by multiplying 156 weeks by $50.

 In response to the motion, plaintiff calls attention to paragraphs 5, 6 and 7 of the complaint which are the basis for a claim for punitive damages in a sum in excess of $10,000. Accordingly, it is urged that more than the requisite statutory amount is in controversy. Those paragraphs provide:

 
"5. Despite repeated demands for payment, Defendant has unreasonably, willfully, maliciously and with callous disregard for the Plaintiff and in breach of its contract refused to make any further payment to Plaintiff.
 
6. Plaintiff has timely and properly made payment of all premiums due under the terms of the policy and has otherwise properly complied with the terms and conditions of the policy of insurance.
 
7. As a result of Defendant's callous, malicious and bad faith refusal to pay Plaintiff the monies due under the terms of the policy Plaintiff was caused to suffer severe emotional distress."

 Defendant insists that the complaint is based upon an insurance contract and that under applicable state law punitive damages are not recoverable, as a general rule in contract actions, including insurance contract actions. Plaintiff, while admitting that he found no Pennsylvania cases on the question, cites two California cases which allegedly have recognized the desirability of punishing insurers by means of punitive damage awards for conduct which amounts to willful deception toward an insured, or which is outrageous and in conscious disregard of the rights of the insured.

 The instant case is not the first in which an insurer has refused to pay an insured on the alleged ground that the insured is no longer totally disabled as required by the policy for a continuation of disability benefits. Since multitudinous opportunities to award punitive damages in such cases have not resulted in a judicially declared policy to create an exception to the general rule, there is presented a question whether plaintiff's claim for punitive damages is solely for the purpose of creating jurisdiction in a federal court.

 Plaintiff, as an additional reason for his claim to punitive damages, cites a Pennsylvania statute, the Act of May 17, 1921, P.L. 682, Act III, § 347, 40 P.S. § 472 which provides:

 
"No insurance company, association, or exchange, or any member, officer, director, or attorney-in-fact thereof, or any other person in its behalf, shall issue, circulate or use, or cause or permit to be issued, circulated, or used, any written or oral statement or circular misrepresenting the terms of any policy issued or to be issued by such company, association, or exchange, or make and estimate, with intent to deceive, of the future dividends payable under any such policy."

 From this section of the statute, plaintiff has concluded that it creates a statutory duty not to deceive its insured, and subjects the insurer to potential liability for punitive damages. He cites no Pennsylvania case in support ...


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