alleged that the defendant could not establish that he was disabled and entitled to
benefits. /d, at 841-2, That being the case, the jurisdictional threshold amount was not
satisfied and the district court’s granting of the motion to dismiss was affirmed. /d. at
842. However, the Court’s holding made it clear that if the policy had been under attack,
the converse result would have been reached. Jd. at 841,

Most recently, in Hawkins v. AID Association for Lutherans, the Court of Appeals
for the Seventh Circuit held that “when the validity of a policy (as opposed to the
insurer’s obligation to pay) is in dispute, the face value of that policy is a proper measure
of the amount-in-controversy.” 338 F.3d 801, 806 (7th Cir. 2003) (citing Keck, 359 F.2d
at 841). In that case, where the plaintiffs attempted to nullify the insurance policy’s
arbitration clause, the court reasoned that plaintiffs were attacking the policy’s validity,
and because the face value of the policy exceeded $75,000, the court concluded it had
jurisdiction, Td.

The case before this Court bears a strong resemblance to Provident Life &
Accident Insurance Co. v. Grganto. No. 97- C4021, 1997 WL 711432, at *1 (NLD. II,
Nov. 7, 1997). In that suit, the defendant, like Randazzo, applied for disability insurance
coverage and was asked certain questions regarding prior illicit drug use. Jd. Similar to
Randazzo, Grganto allegedly failed to disclose information, and the insurer sought
rescission of the contract and reimbursement of bencfits already paid to Grganto. Id,
Grganto moved to dismiss pursuant to Rule 12(b)(1), and the court denied the motion and
held that the amount in controversy had been met because the face value of the contract
was well beyond the amount-in-controversy requirement. fd, at 2.

For the same reason, Randazzo’s motion is denied. In the case at issue,

4


DISCUSSION

Randazzo argues that the Court lacks diversity jurisdiction because the threshold
amount is not satisfied. 28 U.S.C. § 1332 (a) (2003). He contends that the complaint
should be dismissed pursuant to Rule 12 (b)(1). A Rule 12 (b)(1) motion requires a court
to dismiss any action for which it lacks subject matter jurisdiction. Manos v. Caira, 162
F, Supp. 2d 979, 986 (N.D, Ill. 2001) (citing Fed. R. Civ. P. 12(b)(1)). In deciding such a
motion, all well-pleaded allegations must be taken as true and all reasonable inferences
therefrom drawn in favor of the plaintiff. Rueth v. U.S. Envil. Prot. Agency, 13 F.3d 227,
229 (7th Cir. 1993), Diversity jurisdiction is governed by 28 U.S.C. § 1332.

28 U.S.C. § 1332 provides in pertinent part: “The district courts shall have origina!
jurisdiction of all civil actions where the matter in controversy exceeds the sum or value
of $75,000...”

The parties differ on what number represents the amount in controversy. If it is
determined that the benefits that Randazzo received under the policy ($55,255.00) is the
correct number to be applied, then the Court lacks jurisdiction. If, on the other hand, the
face value of the policy (over $75,000.00) is deemed the amount in controversy, then the
Court has jurisdiction to hear Pennsylvania Life’s claims.

In Keck v. Fidelity & Casualty Co., the Court of Appeals for the Seventh Circuit
held that “future benefits payable under a contract of insurance may be used to compute
the sum in controversy for jurisdictional purposes only when the validity of the insurance
policy itself, and not merely the presence or absence of conditions measuring the
insurer’s liability thereunder, is the matter in dispute.” 359 F.2d 840, 841 (7th Cir, 1966)
(emphasis added). In that case, the validity of the policy was not in dispute, rather it was

3


Pennsylvania Life brings a claim for rescission arguing that had Randazzo disclosed
information regarding his prior disability and the benefits he was receiving from Social
Security and Medicare, it would not have issued the same policy. Pennsylvama Life docs
not contest whether Randazzo has suffered a disability, rather it is attacking the validity
of the policy, According to Pennsylvania Life, the policy was void at its inception due to
Randazzo’s failure to disclose pertinent information. It is clear that when a policy’s
validity is being attacked, the face value of the policy becomes the proper amount in
controversy. Keck, 359 F.2d at 841; Hawkins, 338 F.3d 801, 806. Grounds for
rescission is an attack on the policy. Provident Life, 1997 WL 711432, at *1.

Accordingly, the Court denies Randazzo’s Motion to Dismiss.

CONCLUSION
For the reasons provided above, the Court denies Randazzo’s Motion to Dismiss

[doc. no. 11-1].
SO ORDERED ENTERED: ifae)?2

HON. RONALD A. GUZI
United States Judge



Ming Oreor Farm (06/97)

United States District Court, Northern District of Minois

Name of Assigned Judge
or Magistrate Judge

Ronald A. Guzman

Sitting Judge if Other
than Assigned Judge

CASE NUMBER 03 C 3829 DATE 11/26/2003
CASE PENNSYLVANIA LIFE INSURANCE COMPANY vs. VINCENZO RANDAZZO
TITLE
[ln the following box (a) indieate the party filing the motion, ¢.g., plaintiff, defendant, 3rd purty plaintiff, and (b) state briefly the nature
MOTION: of the motion heing presented.)

DOCKET ENTRY:

(0) Qo Filed motion of [ use listing in “Motion” box above.)

(2) o Brief in support of motion due

(3) im} Answer brief to motion due___. Reply to answer briefdue___.

(4) Q Ruling/Hearingon set for__ ats

(5) a Status hearing set for 12/12/2003 at 9:30 A.M..

(6) go Pretrial conference[held/continued to] [sct for/re-set for] on setfor at

(7) oO Trial[set for/re-sct for]on at

(8) a) [BenclyJury trial] [Hearing} held/continued to. at

(9) oO This casc is dismissed [with/without] prejudice and without cosis[by/agreement/pursuant to]
COPRCP4(m) CLocal Rule 41.1 OFRCP41(a\(1) OO FRCP41(a)(2).

(lo) si [Other docket entry) © ENTER MEMORANDUM OPINION AND ORDER: The Court denies

Randazzo’s motion to dismiss [doc, no. 11-1].

al) @

[For further detail see order attached to the original minute order,]

No notices required, advised in open court

Na notices required, umber uf nvtices

Notices muiled by judge’s staf

DEC 9 1 2003

alate docketed

Notified counsel by telephone.

oY | Dockering to mail notices wreneg

Mail AO 450 form. dlacketing deputy initia

Copy to judge/magistrate judge.

"28 Pd De MED
courtroom .
ca deputy's wad GI
initials: js

Date/time received in
central Clerk's Office

mailing deputy initials



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
PENNSYLVANIA LIFE INSURANCE ) vt)
COMPANY, ) ayer -
. ) A\\) qd
Plaintiff, ) 5 o\
) ye
v. ) 03 C 3829
)
VINCENZO RANDAZZO, y Judge Ronald A. Guzman
)
Defendant. )

MEMORANDUM ORDER AND OPINION
Pennsylvania Life Insurance Company (“Pennsylvania Life”) has sued Vincenzo
Randazzo (“Randazzo”) for rescission of Randazzo’s accident benefit insurance contract
and for restitution stemming from the benefits received under said contract. Before the
Court is Randazzo’s motion to dismiss the complaint pursuant to Federal Rule of Civil
Procedure (“Rule”) 12(6)(1). For the reasons provided in this Memorandum Opinion and

Order, the Court denies the Motion.

FACTS
On June 4, 1998, Randazzo applied for an accidental benefit insurance policy to
be issued by Pennsylvania Life. (Compl. 4/5.) The total value of the policy was over
$75,000. (/d. | 3.) The policy provided a monthly benefit of $2,200 per month, for life,
if an accident occurred which was covered by the contract. (/d. 4) 3.)
Randazzo completed and signed an application that contained questions regarding

his personal habits, health history, and prior disabilities. (Ie. 4] 5, 6.) The application


provided space for Randazzo to explain any affirmative answers. (Id. J 6.) Randazzo
answered “no” to questions regarding any past disabilities thereby disclosing no
information. (/d., Ex. 1.)

Based on the information provided in the application, Pennsylvania Life issued
the policy. Ud. 17.) Subsequently, Randazzo filed a claim for benefits based on an
injury that he allegedly suffered. (/d. 78.) In accordance with the policy, Pennsylvania
Life paid benefits totaling $55,225.00 for the period between March 2001 and April
2003. (Id. 48.)

While Pennsylvania Life performed a routine claim investigation, it discovered
that Randazzo, at the time of completing the application, was receiving Social Security
DisabiJity Insurance benefits and Medicare benefits for a back injury dating back to
1990. (/d. 4.9.) Randazzo failed to disclose this disability and the benefits he was
receiving in his application. (fd. {{] 6, 9.) Pennsylvania Life alleges that, due to
Randazzo’s failure to provide complete information on his application, it was deprived of
a proper opportunity to evaluate him as an insurance risk. (/d. 11.) Pennsylvania Life
contends that it would not have issued the policy as applied for had it known about the
pre-existing disability and the benefits received therefrom. (/d.)

Accordingly, Pennsylvania Life filed a complaint in this Court. Pennsylvania
Life asks this Court to find that the policy was void from its inception and to order

Randazzo to pay Pennsylvania Life all benefits received under the policy.