Decided: March 7, 2013
The Francises appealed a decision by the district court finding that diversity jurisdiction existed and granting summary judgment to Allstate on its claim that the Francises’ insurance policy did not provide coverage for the claims asserted in the underlying action. The Fourth Circuit upheld both decisions by the district court and affirmed.
In March 2008, Troy Towers, an employee at the Maryland School for the Deaf, sued the Francises, alleging that they made false statements claiming sexual abuse by Towers. At the time, the Francises were insured under a California Renters Policy issued by Allstate. The Francises filed suit against Allstate, contending that Allstate had a duty to defend them against Towers’ suit pursuant to the policy. By the time a final judgment in favor of the Francises was rendered in the underlying suit, the Francises had incurred $66,347 in attorney’s fees and costs. Allstate removed and filed a motion for summary judgment, contending that the insurance policy did not provide coverage for the claims asserted in the underlying action. The Francises moved to remand on the ground that the amount in controversy did not exceed $75,000. The Francises also opposed Allstate’s motion on the merits. The district court granted Allstate’s motion for summary judgment. The Francises appealed.
When Allstate filed its Notice of Removal, the object of the litigation was the Francises’ request that Allstate defend them in the underlying action, which cost $66,347, so the Francises argued that the amount in controversy was not satisfied. Allstate countered that the requirement was satisfied when attorney’s fees were added. Attorney’s fees are not generally included in the amount in controversy calculation, except where the fees were provided for by contract or are permitted by statute. Allstate brought its action under a suit that permitted recovery of attorney’s fees and thus satisfied the amount in controversy requirement. Next, the Francises challenged the merits of the district court’s coverage determination. The Fourth Circuit found that Maryland choice of law provisions applied, and, under those provisions, California law controlled whether Allstate had a duty to defend the Francises in the underlying action. Under California law, the Francises had to establish that the underlying action arose from an accident. The Fourth Circuit found that the Francises’ behavior was not an accident because it was calculated and deliberate—they clearly intended to make the statements at issue. Accordingly, the Fourth Circuit affirmed the district court’s ruling.