IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF INDIANA

HAMMOND DIVISION

THE CONTINENTAL INSURANCE )

COMPANY, )

)

Plaintiff, )

)

vs. ) NO. 2:15-CV-70

)

MORRISON CONSTRUCTION CO., )

)

Defendant. )

OPINION AND ORDER

This matter is before the Court on the Defendant’s 12(b)(1)

Motion to Dismiss for Lack of Subject Matter Jurisdiction, filed on

June 11, 2015. For the reasons set forth below, the motion is

DENIED. 

BACKGROUND

On February 25, 2015, The Continental Insurance Company

(“Continental”) filed this declaratory judgment action against

Morrison Construction Co. (“Morrison”). Continental requested a

declaratory judgment that an employer liability insurance policy

issued by Continental to Morrison does not provide coverage for a

suit brought against Morrison by Kenneth G. Wilkening and Betty Jo

Wilkening (“the Wilkenings”). Continental alleged that this Court

had diversity jurisdiction over the suit pursuant to 28 U.S.C.

section 1332. 
According to Continental’s declaratory judgment complaint, the

Wilkenings’ complaint arose from Kenneth Wilkening’s alleged

exposure to asbestos while working for Morrison between 1966 and

1967. Kenneth Wilkening alleged that he suffered “severe, painful

and disabling injuries and illnesses to his lungs and body and

other injuries and illnesses.” (DE #1 at 2). Continental’s

complaint stated that it believed that the Wilkenings were seeking

damages in excess of $50,000. Continental asked for a ruling

declaring that Continental has no obligations to defend or

indemnify Morrison against the Wilkening complaint and for

attorney’s fees and costs. (DE #1 at 8). 

Morrison filed a motion to dismiss Continental’s declaratory

judgment suit for lack of subject matter jurisdiction, but that

motion became moot when Continental was granted leave to file an

amended complaint. Continental’s amended complaint is similar to

its first complaint, except that it seeks reimbursement for certain

defense costs which Continental inadvertently paid to Morrison due

to a clerical error. (DE ##9-10). The amended complaint also

notes that, after the filing of the first complaint, Continental

advanced Morrison $214,000 to settle the Wilkenings’ claims,

contingent upon its return upon the Court’s determination that

Continental did not have an obligation to defend and indemnify

Morrison against the Wilkenings’ claims. (DE #10 at 4). 

In response to the amended complaint, Morrison filed the

instant motion to dismiss. Morrison contends that this Court lacks

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subject matter jurisdiction because Continental cannot demonstrate

that the amount in controversy exceeds $75,000. More specifically,

Morrison notes that the amount discussed in settlement negotiations

in the underlying claim, together with Morrison’s defense costs,

fell below the jurisdictional amount at the time Continental filed

this action. The motion is fully briefed and ripe for

adjudication. 

DISCUSSION

Pursuant to Federal Rule of Civil Procedure 12(b)(1)1, a

defendant may move to dismiss claims over which the federal court

lacks subject matter jurisdiction. Federal courts are courts of

limited jurisdiction. Hart v. FedEx Ground Package System Inc.,

457 F.3d 675, 679 (7th Cir. 2006). The party asserting

jurisdiction has the burden of establishing that the cause lies

within the federal court’s limited jurisdiction. Id. Furthermore,

this Court has an obligation to ensure that it has proper subject

matter jurisdiction over each lawsuit that is brought in this

Court. See Wernsing v. Thompson, 423 F.3d 732, 743 (7th Cir.

2005). 

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Defendant’s motion, although titled as a “12(b)(1) Motion

to Dismiss for Lack of Subject Matter Jurisdiction,” references

12(b)(6) and requests dismissal with prejudice. This Court will

presume this was a mere typographical error, and Morrison,

consistent with its memorandum, seeks a without prejudice

dismissal based on Rule 12(b)(1). 

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In order to avoid dismissal for lack of subject matter

jurisdiction, a plaintiff must demonstrate that either diversity

jurisdiction or federal question jurisdiction exists. Bovee v.

Broom, 732 F.3d 743, 744 (7th Cir. 2013). Continental alleges this

Court has diversity jurisdiction over its suit. Diversity

jurisdiction, pursuant to 28 U.S.C. section 1332, requires complete

diversity of citizenship between the plaintiffs and the defendants

and the proper amount in controversy (more than $75,000). Neuma,

Inc. v. AMP, Inc., 259 F.3d 864, 881 (7th Cir. 2001). The parties

agree that the diversity of citizenship requirement is met, but

dispute whether the amount in controversy requirement is met. 

In the Seventh Circuit: 

[t]he amount in controversy is the

amount required to satisfy the

plaintiff's demands in full on the

day the suit begins, Hart v.

Schering-Plough Corp., 253 F.3d 272,

273 (7th Cir. 2001), or in the event

of removal, on day the suit was

removed, BEM I, L.L.C. v.

Anthropologie, Inc., 301 F.3d 548,

552 (7th Cir. 2002). 

Oshana v. Coca-Cola Co., 472 F.3d 506, 510-11 (7th Cir. 2006). 

This Court’s inquiry will be limited to the amount in controversy

on the day the suit was initially filed. Because this is a

declaratory judgment action, “the amount in controversy is

determined by the value of the object of the litigation.” 

America’s Moneyline Inc. v. Coleman, 360 F.3d 782, 786 (7th Cir.

2004).

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The Wilkenings filed suit against Morrison and others on

December 31, 2013. (DE #5-1). The complaint alleged multiple

claims against Morrison, including unseaworthiness, negligence,

willful failure to conduct maintenance, and loss of consortium. 

(Id.). For each count, the Wilkenings represented that they sought

compensatory damages in an amount to be proved at trial, but

believed to exceed $50,000. (Id.). 

In January 2014, Morrison notified Continental of the suit and

demanded defense and indemnity coverage. (DE #12 at ¶9). In late

January, Continental denied the requested coverage. (DE #12 at

¶10). Prior to August 8, 2014, Morrison filed a summary judgment

motion claiming that the Wilkenings’ only viable claim against

Morrison was through worker’s compensation. (DE #5-2). According

to a letter drafted by one of Morrison’s attorneys on August 8,

2014, prior to the hearing on the summary judgment motion,

Wilkenings’ attorney made a demand of $214,000. (DE #5-2). This

number was arrived upon by assessing the value of the potential

recovery under the worker’s compensation system. (Id.). 

Morrison’s attorney speculated that the Wilkenings would accept a

considerably lower number. (Id.). 

On August 18, 2014, Donald Rutz (Morrison’s broker) sent an

email to Jenny Vanacker (Continental’s representative) and Ken

Novak (a Morrison employee) relaying the Wilkenings’ settlement

demand and requesting that Continental defend against the claim and

contact Morrison’s defense attorney to further discuss the

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resolution of the Wilkenings’ claim. (DE #16-4 at 5). Morrison

also indicated that, if Continental continued to deny the claim,

they would be forced to proceed with a declaratory judgment action. 

(Id.). 

On January 23, 2015, Morrison again demanded that Continental

defend against the Wilkenings’ claims. (DE #16-5). Morrison’s

attorneys represented that they had been authorized to file a

declaratory judgment action against Continental seeking defense,

indemnity, and all other available damages, including damages for

bad faith. (Id.). 

On February 6, 2015, Morrison’s attorneys provided an update

of the status of pending claims they were defending Morrison

against, including the Wilkenings’ claims. That update provided

the following:

Morrison has filed a Summary Judgment Motion

which remains pending. We have been engaging

with Plaintiff’s counsel concerning a

resolution of this case. We are awaiting a

response from Plaintiff’s counsel concerning

whether or not his client intends to dismiss

Morrison and perhaps file a claim under

Indiana’s Workers Compensation or Occupational

Disease laws, or may request that Morrison

make a relatively small settlement offer. 

(DE #5-4 at 3). 

Jenny Vanacker, a Continental representative, was included in

this email. In its reply brief, Morrison summarizes the above

statement as “stating that after Morrison filed its motion for

summary judgment, Plaintiff would either dismiss Morrison from the

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case or settle with Morrison for a nominal amount.” (DE #17 at 9). 

That is, at best, a favorable interpretation of the above quote. 

Matthew Vena, Safety Manager at Morrison, indicates that one

of Morrison’s attorneys (Attorney Smith) advised him sometime

before February 24, 2015 that the Wilkenings’ claims could be

settled for nuisance value. (DE #5-5 at ¶¶1-5). He further

indicates that, before February 24, 2015, he authorized Smith to

settle the Wilkenings’ claims for up to $20,000. (Id. at ¶6). 

After February 24, 2015, the Wilkenings responded to Morrison’s

initial settlement offer of $4,000 with a demand of $20,000. (Id.

at ¶7). 

This declaratory judgment suit was initially filed on February

25, 2015. (DE #1). At or near that time, Continental also

advanced Morrison $214,000 to settle the Wilkenings’ claims, under

a reservation of rights continent upon the return of the money if

the Court determines Continental was not obligated to provide any

defense or indemnity coverage for the Wilkenings’ claims. (DE #16-

6).

On April 24, 2015, the Wilkening action settled for $10,000. 

(DE #5-5). Based on these facts, Morrison contends that

Continental’s potential liability at the time this action was filed

was no more than $20,000, and that its legal fees at the time were

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approximately $32,940.942, for a combined total of $52,940.94. 

Because Morrison has called Continental’s allegations

regarding the amount in controversy into question, Continental must

prove its jurisdictional facts by a preponderance of the evidence. 

Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir.

2006). If Continental succeeds, then Morrison must demonstrate to

a legal certainty that the claim is really for less than the

jurisdictional amount to prevail on the instant motion. Id. at

541; see also Back Doctors Ltd. v. Metro. Prop. & Cas. Ins., 637

F.3d 827, 830 (7th Cir. 2011) (“[U]nless recovery of an amount

exceeding the jurisdictional minimum is legally impossible, the

case belongs in federal court.”). 

Morrison claims that Continental cannot meet its burden of

demonstrating that the jurisdictional amount is satisfied because

“it was aware the value of the underlying case was far below the

jurisdictional amount.” (DE #15 at 4). Based on the facts

presented, this Court respectfully disagrees. The Wilkenings’

complaint indicated they sought damages in excess of $50,000. The

Wilkenings had made a demand of $214,000 shortly before this suit

was filed. And, prior to the suit being filed, Morrison and its

attorney valued the case at no more than $20,000. The status

update provided to Jenny Vanacker by Morrison’s attorneys does not

2

Morrison submitted a portion of these fees to Continental

for payment despite Continental’s indication that defense costs

would not be paid. Due to a clerical error, they were paid, and

Continental now seeks reimbursement of those amounts. 

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demonstrate that this case would, with any certainly, either be

dismissed or settle for nuisance value. At best, the notes

establish that Morrison’s attorneys were hopeful they could

convince the Wilkenings to either dismiss their claims or settle

for nuisance value. 

What Continental knew at the time this suit was filed was that

the Wilkenings were seeking in excess of $50,000, that the

Wilkenings had made a demand of $214,000, that Morrison and its

attorneys felt confident it would settle for a good deal less than

$214,000, and that substantial defense costs had been incurred and

would likely continue to accrue in the months to come. This is

enough to satisfy Continental’s burden of demonstrating by a

preponderance of the evidence that the amount in controversy at the

time the suit was filed exceeded $75,000. 

Morrison argues that the Court should nonetheless find subject

matter jurisdiction lacking because, as a matter of legal

certainty, the amount in controversy could not exceed $75,000. 

According to Morrison, the amount in controversy was, at most,

$52,940.94 ($32,940.94 in defense costs and a maximum $20,000

settlement amount). This argument is wholly unfounded - at the

time this suit was filed, Continental did not (so far as this Court

can determine) have information establishing that the settlement

value of the case was no more than $20,000 or even that Morrison’s

attorneys had so valued the case. And, Morrison’s valuation of the

case is only one factor to consider in determining the amount in

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controversy at the time this suit was filed. It must be considered

together with the complaint itself, the Wilkenings’ settlement

demand, and Continental’s decision to advance $214,000 to Morrison

to settle the claim. Neither continental nor Morrison knew with

any certainty that the case would settle in April, preventing

additional defense costs from accruing. Accordingly, Morrison’s

argument fails.

 Continental made other arguments to support its claim that the

amount in controversy is satisfied. Namely, Continental argued

that the amount in controversy requirement is met because Morrison

placed the validity of certain policies in issue, and the amount in

controversy should be measured by the limits of the policy rather

than the value of the underlying claim. Similarly, Continental

noted that Morrison threatened to bring a bad faith claim, and that

their declaratory judgment action would resolve any issues of bad

faith, so damages for bad faith are properly considered as part of

the amount in controversy. Because the amount in controversy

requirement is satisfied even without considering either the limits

of the policy or damages associated with a possible bad faith

claim, this Court need not address these arguments. A case filed

in federal court should remain there “unless it is legally certain

that the controversy is worth less than the jurisdictional

minimum.” See Meridian, 441 F.3d at 542. Accordingly, Morrison’s

motion fails. 

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CONCLUSION

For the reasons set forth above, the motion to dismiss is 

DENIED.

DATED: March 8, 2016 /s/RUDY LOZANO, Judge

United States District Court

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