11th Circuit: Insurer Missed Deadline to Remove Bad Faith Case to Federal Court

By Jim Sams | December 16, 2021

Darryl A. Vachon did not accuse Travelers of bad faith in handling his $25,000 uninsured motorist claim until after a jury found he had incurred $1,022,780 in damages.

Because he didn’t, the insurer must now defend itself against a million-dollar lawsuit in state court, where it has already been outwitted by the plaintiff’s attorney but did not object until it was too late.

A panel of the 11th Circuit Court of Appeals on Tuesday affirmed a trial court ruling that Vachon’s lawsuit must remain in state court. Even though Vachon did not amend his civil complaint to allege bad faith until six years after filing the lawsuit, Travelers must still comply with a federal law that requires the defendant to seek removal to federal court no more than one year after a lawsuit is filed, the panel held.

The panel’s opinion says that Travelers was effectively arguing that the court should read words into US Code Section 1446 that are not there.

“If Travelers is unhappy with Section 1446 as it is currently written, ‘the remedy lies with Congress and not with the courts,'” Circuit Judge William Pryor wrote in a concurring opinion, citing a 1924 Supreme Court decision.

Federal courts have had mixed opinions on whether cases can be removed to federal courts after new allegations are added to lawsuits. The Florida Northern and Southern districts have consistently held that the one-year deadline in Section 1446 applies, but judges in the Middle District have issued conflicting opinions, according to arguments filed by Vachon’s attorneys.

Vachon was “permanently disfigured” and disabled by an auto accident on Memorial Highway in Tampa in 2011, according to his complaint. He sued Travelers Home and Marine Insurance Co. in 2013, after the carrier denied his underinsured motorist claim. His policy had a $25,000 limit, so Travelers could not remove the case to federal court because of rules that require the amount in controversy to exceed $75,000.

After a jury returned a verdict that found Vachon’s damages amounted to more than $1 million, a Hillsborough County Circuit Court judge awarded him the $25,000 policy limit. In June 2020, Vachon amended his complaint to allege that Traveler’s had acted in bad faith and sought the full amount of the damages that the jury determined he had suffered. Florida law allows plaintiffs to file a bad faith claim against an insurer either as an independent lawsuit or as an amendment to an existing lawsuit.

Travelers filed a motion to remove the case to federal court. The insurer argued Vachon had commenced a new action by filing an amendment to his existing complaint, so the one-year deadline in Section 1446 should not apply.

The insurer argued that Vachon had “manipulated rules of procedure to prevent Travelers from removing an otherwise removable case to federal court.” Furthermore, the carrier said, refusing to remove the case would violate the Supremacy Clause in the United States Constitution, which prohibits the states from interfering with the federal government’s exercising of its powers.

The district court thought otherwise and dismissed Traveler’s petition to remove the case to federal court in a short opinion.

Pryor explained the panel’s reasoning more thoroughly in his concurring opinion. He said defendants do not have a constitutional right to have cases heard by federal courts. Congress makes the rules under which the lower federal courts must operate. Section 1446 is part of its instruction.

Pryor acknowledged that some district courts have treated bad faith claims as separate and distinct causes of action, but they appeared to base their decisions on an earlier version of the federal removal statute. Congress amended the law in 2011 to delete a provision that treated bad faith claims as separate from the underlying lawsuits.

Congress left in place language that requires a petition for removal to be filed within 30 days after “commencement of an action,” or within one year after commencement of an action in instances where a lawsuit is amended to state claims that qualify for federal jurisdiction.

Pryor said the change that Congress made to the law in 2011 provides that the one-year deadline does not apply if the plaintiff has acted in bad faith to prevent a defendant from removing a case to federal court. Travelers, however, did not mention that amendment in its arguments.

“Because the parties did not brief the application of the amendment, I express no opinion about whether it might have applied in this case,” Pryor wrote. “But the possibility that Congress has already addressed Travelers’ concerns supplies another reason to decline to rewrite the statute.”

The case now moves back to Judge Rex Barbas’ courtroom in Hillsborough County. Travelers filed a motion to dismiss the case on July 1, arguing that Vachon did not comply with notice requirements. There is no online record of an order in response to the motion. On Nov. 30, Vachon filed a motion to compel discovery in the case.

About the photo: A Lady Justice statute outside the 13th Circuit Courthouse for Hillsborough County, Florida is shown.

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