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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

SENTRY INSURANCE A MUTUAL 

COMPANY,

Plaintiff,

v.

JAMES J. MORGAN d/b/a MORGAN & 

SON RACING ENGINES,

Defendant.

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Civil Action No. 3:22-CV-1185-X

MEMORANDUM OPINION AND ORDER

Sentry Insurance a Mutual Insurance Company (“Sentry”) provided coverage 

for two of James Morgan’s properties. After a storm damaged those properties, the 

parties disagreed on the amount of the loss. Accordingly, Sentry sued to seek judicial 

appointment of an umpire—a neutral third party—to resolve that dispute. Morgan 

now moves to dismiss for lack of subject-matter jurisdiction, citing an inadequate 

amount in controversy. [Doc. 15]. For the reasons below, the Court GRANTS the 

motion and DISMISSES WITHOUT PREJUDICE Sentry’s claims.

I. Factual Background

On December 7, 2020, a storm substantially damaged two of Morgan’s 

properties in Grand Prairie, Texas.1 Sentry insured those two properties. After 

inspecting the properties, Sentry paid Morgan $61,026.93. On August 25, 2022, 

1

 As it must, the Court presents the facts as alleged in Plaintiff’s complaint.

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Morgan sent a letter to Sentry demanding an additional $349,657.22. But Sentry 

didn’t agree to pay that amount.

Instead, the parties resorted to their contract. Their contract stated that if the 

parties couldn’t “[]agree on the amount of loss, either may make written demand for 

an appraisal of the loss.”2 So that’s what Morgan did. And when one party demands 

an appraisal, the contract specifies that “each party will select a competent and 

impartial appraiser and notify the other of the appraiser selected.”3 Accordingly, 

Morgan named Fred Lupfer as his appraiser, and Sentry named Brett Lochridge as 

its appraiser. So far, the parties had tracked the contract swimmingly.

But that’s where things broke down. The contract next required “[t]he two 

appraisers [to] select an umpire.”4 In the event that the dueling appraisers “cannot 

agree within 15 days upon such umpire, either may request that selection be made 

by a judge of a court having jurisdiction.”5 Here, the appraisers couldn’t agree upon 

an umpire within 15 days. But apparently neither appraiser requested that a judge 

pick an umpire.

That left the parties in contractual limbo. The appraisers couldn’t agree on an 

umpire. And yet no new “appraisal has [] been completed” by either appraiser.6 

2

 Doc. 9 at 3.

3 Id.

4 Id.

5 Id. Based on this language, Morgan claims that only the appraisers—and not Sentry—can 

sue to appoint an umpire. Because his argument doesn’t clarify whether that’s a standing issue or a 

defect in Sentry’s prima facie case, the Court declines to reach that argument.

6 Id. at 3.

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Accordingly, Sentry short-circuited the process by filing the instant suit, asking the 

Court to appoint an umpire. Morgan now moves to dismiss.

II. Legal Standard

“If the court determines at any time that it lacks subject-matter jurisdiction, 

the court must dismiss the action.”7 “[D]istrict courts [] have original jurisdiction of 

all civil actions where the matter in controversy exceeds the sum or value of $75,000, 

exclusive of interest and costs, and is between . . . citizens of different States.”8 “The 

burden of proof on a Rule 12(b)(1) motion to dismiss is on the party asserting 

jurisdiction.”9

III. Analysis

Morgan asserts that the Court lacks diversity jurisdiction because Sentry 

hasn’t pled an amount in controversy greater than $75,000. Calculating the amount 

in controversy in this case is tricky because Sentry only asks the Court to “appoint a 

competent and impartial umpire”—it doesn’t seek damages.10 But that doesn’t mean 

Sentry is out of luck. When an action is for “declaratory or injunctive relief” only, 

7

 FED. R. CIV. P. 12(h)(3).

8

 28 U.S.C. § 1332(a)(1). Morgan doesn’t contest that the parties are diverse.

9 Church Mut. Ins. Co. v. Household of Faith Church, No. 06-3839, 2007 WL 1537629, at *1 

(E.D. La. May 23, 2007). Some courts have erroneously claimed that a court can dismiss for failure to 

plead a sufficient amount in controversy only if it “appear[s] to a legal certainty that the claim is really 

for less than the jurisdictional amount.” Ear, Nose & Throat Consultants of N. Miss., PLLC v. State 

Auto Ins., No. 3:05-CV-18-B-B, 2006 WL 1071834, at *1 (N.D. Miss. Apr. 21, 2006) (cleaned up). But 

that rule doesn’t apply here. The Fifth Circuit has made clear that “this legal certainty test . . . is 

inapplicable [] when the plaintiff has alleged an indeterminate amount of damages.” St. Paul 

Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998) (cleaned up).

10 Doc. 9 at 4.

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“[t]he amount in controversy . . . is the value of the right to be protected or the extent 

of the injury to be prevented.”11

Here, the contractual “right to be protected” is the right to have an umpire 

examine the “differences” between two appraisers’ estimates and reach a “decision” 

in accord with one of the appraisers as to the amount of loss.12 Accordingly, the value 

of the right to be protected is the difference between the appraisers’ estimates. But 

Sentry doesn’t provide those estimates because neither “appraisal has [] been 

completed.”13 Sans such estimates, the Court cannot determine the difference 

between the two estimates and therefore cannot determine the value of the 

contractual right to be protected. Thus, Sentry fails to allege facts from which the 

Court can infer that the amount in controversy exceeds $75,000 and thus fails to show 

that the Court has subject-matter jurisdiction over its claim.14

Sentry lodges one counterargument. Although the Fifth Circuit hasn’t 

addressed the amount-in-controversy requirement in umpire-appointment cases, it 

has determined that the amount in controversy in arbitrator-appointment cases is 

“the amount of the underlying claim.”15 Despite the Fifth Circuit’s warning that 

11 Webb v. Investacorp, Inc., 89 F.3d 252, 256 (5th Cir. 1996) (cleaned up).

12 Doc. 9 at 3.

13 Id.

14 Sentry is not entirely out of luck. Sentry may still be able to sue in state court to obtain a 

declaratory judgment concerning an umpire. But Sentry cannot do so in federal court without 

providing proof that the appraisal delta exceeds $75,000.

15 Webb, 89 F.3d at 256 (“[T]he amount in controversy . . . is the amount of the potential award 

in the underlying arbitration proceeding.”); see, e.g., Ear, Nose & Throat, 2006 WL 1071834, at *2 

(“[T]he court finds that the amount in controversy is determinable through the logic set forth in . . .

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“[i]nsurance appraisals are generally distinguished from arbitrations,”16 some 

courts—tellingly, sans any substantial analysis—have decided that, like arbitratorappointment suits, “the underlying dispute [in umpire-appointment cases] 

determine[s] the value of the amount in controversy.”17 Because Morgan has 

demanded $349,657.22, Sentry contends that the “underlying dispute” involves 

significantly more than $75,000.18 That flimsy rationale falters for two reasons.

First, arbitration “encompass[es] the entire controversy between parties.”19 

Here’s why that matters for the amount in controversy: Arbitration necessarily 

involves an underlying “dispute.”20 When that underlying dispute involves liability, 

arbitration necessarily involves a “difference”—which the Court refers to as a 

“delta”—between what the defendant wants to pay and what the plaintiff wants to be 

paid, and the arbitrator gets to pick a number in the parties’ delta.21 In sum, because 

arbitration resolves “the entire controversy between parties” by the arbitrator’s 

Webb . . . . [T]he court looks to the underlying dispute to determine the value of the amount in 

controversy[.]”).

16 Hartford Lloyd’s Ins. Co. v. Teachworth, 898 F.2d 1058, 1061–62 (5th Cir. 1990).

17 Ear, Nose & Throat, 2006 WL 1071834, at *2.

18 Doc. 18 at 7; see also Doc. 9 at 2 (contending that Morgan’s demanded $349,657.22 is the 

“amount . . . in dispute” for this claim).

19 Hartford, 898 F.2d at 1061–62; see also Mi Realty, LLC v. Atl. Casulaty Ins. Co., No. 3:21-

CV-00368-L, 2022 WL 705861, at *3 (N.D. Tex. Mar. 8, 2022) (Lindsay, J.) (distinguishing Webb

because “the appointment of an arbitrator, who is expected to preside over an arbitration, is distinct 

from the appointment of an umpire, who is tasked only with determining the amount of a loss, which 

the parties still may legally object”).

20 Webb, 89 F.3d at 258 (requiring courts to determine “whether the dispute in question falls 

within the scope of that arbitration agreement” (emphasis added)).

21 See, e.g., id. at 257 n.1 (“[T]he difference to the Webbs between winning and losing the 

underlying arbitration will be $75,000[.]”).

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decision about the parties’ delta, it makes sense for a court to use that delta to 

ascertain the amount in controversy.22

Not so with an umpire. An umpire’s decision concerning “appraisal determines 

only the amount of loss”—not “whether the insurer is liable under the policy.”23 

Here, for instance, the parties’ contract specifies that the umpire picks not between 

the parties’ two numbers—$0 for Sentry and $349,657.22 for Morgan—but instead 

between the appraisers’ two numbers—whatever those might be. Because the 

umpire operates in the appraisers’ delta, it makes little sense to assess the amount 

in controversy in an umpire-appointment suit by using the parties’ delta.

Second, in arbitrator-appointment cases, the “eventual dispute is [] the basis 

of the action before the court.”24 Unsurprisingly, then, when a party seeks 

arbitration, the parties can readily point to the amount in controversy in the 

underlying dispute.25 Not so with an umpire. When a party seeks umpire 

appointment, the “eventual dispute is not the basis of the action before the court.”26 

Here, for instance, the eventual dispute is embryonic at best. To develop the 

dispute, the appraisers must complete their initial estimates.27 If those estimates 

22 Hartford, 898 F.2d at 1061–62.

23 Id. at 1062.

24 Mi Realty, 2022 WL 705861, at *3.

25 See, e.g., Webb, 89 F.3d at 255 (specifying that a company had a “debit balance of [] $75,000” 

and contended that its adversary was “contractually obligated to indemnify it for [that] loss”).

26 Mi Realty, 2022 WL 705861, at *3.

27 Doc. 9 at 3.

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don’t match, then the appraisers must “submit their differences to the umpire.”28 

Once the umpire renders a decision, Sentry must decide whether “to deny the 

claim.”29 Lastly, Morgan must decide whether “to bring a legal action against 

[Sentry].”30

Importantly, many of those steps could derail the amount of the underlying 

dispute from the $349,657.22 Morgan demanded. For example, once the umpire 

decides on a loss amount, that number is “binding as to the amount of loss.”31 So if 

the umpire decides on any number less than Morgan’s demanded number, Morgan 

will be contractually bound to a lower amount in controversy.

Similarly, some of the steps could render any umpire’s appointment nugatory. 

For instance, if the appraisers happen to agree on the amount of the loss, the umpire 

never gets involved.32 Because it’s not even clear at this stage whether an umpire 

will be necessary, Sentry has failed to show that “the right to be protected”—

appointment of an umpire—has any value at all.33

28 Id.

29 Id.

30 Id.

31 Id.

32 Id.

33 Webb, 89 F.3d at 256; see also Mi Realty, 2022 WL 705861, at *3 (“[T]he umpire’s anticipated 

valuation cannot be the measure of the amount in controversy because there is no present right to be 

protected or injury to be prevented.” (cleaned up)). Some courts also note that the Fifth Circuit 

determines the amount in controversy in insurance-coverage declaratory-judgment actions based on 

“the value of the underlying claim.” Hartford, 293 F.3d at 910. But similarly, in those cases, the 

parties can point to a concrete sum that represents the underlying dispute. See id. at 912 (“Lou–Con 

seeks $261.42 in defense costs from Hartford”).

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IV. Conclusion

For the foregoing reasons, the Court GRANTS Morgan’s motion and 

DISMISSES WITHOUT PREJUDICE Sentry’s claims for lack of subject-matter 

jurisdiction.

IT IS SO ORDERED this 21st day of July, 2023.

___________________________________

BRANTLEY STARR

UNITED STATES DISTRICT JUDGE

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