Insurance: Court lacks jurisdiction over declaratory judgment

Where an insurance carrier sought a declaration that its policy did not respond to an underlying suit, but the amount in controversy was less than $75,000, the suit was dismissed.

Background

Agency Insurance Company of Maryland Inc., or AIC, brought this action to determine the extent of uninsured and underinsured motorist coverage under its policy for an accident where a golf cart in which A.R., a minor, was riding was struck by Terry Taylor.

AIC alleges that Camela Gathercole, A.R.’s mother, filed suit in South Carolina individually and as next friend of A.R., seeking both compensatory and punitive damages for A.R.’s injuries. She seeks $25,000 underinsured motorist coverage for her personal injury claim and payment of $25,000 under the under the underinsured motorist property coverage for her punitive damages claim.

Gathercole, individually and as next friend of A.R., has also filed a direct action in South Carolina against AIC alleging a claim for breach of contract for failure to pay the property damage underinsured motorist coverage and also that AIC’s failure to pay its coverage “was without just cause and bad faith.”

AIC asks that the court declare “that the Policy does not provide property damage UM/UIM Coverage for bodily injury claims – and specifically not for [A.R.’s] bodily injury/punitive damages claim seeking the property damage portion of the UM/UIM Coverage – and that coverage maybe properly denied on that basis.”

Analysis

In a declaratory judgment action, “the amount in controversy is measured by the value of the object of the litigation.” The coverage at issue in this lawsuit is $25,000 for A.R.’s personal injury claim and $25,000 under the property coverage. Those coverages alone are not sufficient to confer diversity jurisdiction, which requires an amount in controversy of more than $75,000.

AIC asks the court to determine the applicable coverage, not any bad faith claim. That means the amount in controversy here is at most $50,000–$25,000 under the uninsured motorist coverage for personal injury claims and $25,000 under the uninsured motorist coverage for property damage claims.

AIC attempts to create jurisdiction by grafting the value of the bad faith claim in South Carolina to its declaratory judgment action here, but that bad faith claim is not before this court. The amended petition asks the court to “declare specifically that the [insurance p]olicy does not provide property damage UM/UIM Coverage for bodily injury claims–and specifically not for Respondent’s bodily injury/punitive damages claim seeking the property damage portion of the UM/UIM Coverage–and that coverage may be properly denied on that basis.” That is not a request to rule on the issue of bad faith, it is a request to rule on the issue of coverage under the policy.

AIC reiterates this position in its response in opposition to the motion to dismiss stating that “the issue and amount of bad faith damages are not part of the relief requested in the Amended Complaint and are not before the Court.” AIC states clearly that “[t]he only issue before the Court is the request for a judicial declaration as to coverage under the Policy.” Thus, the amount of any bad faith claim against AIC is not relevant to the amount in controversy in this insurance coverage action.

Case dismissed.

Agency Insurance Company of Maryland Inc. v. Gathercole, Case No. 7:25-cv-363, Oct. 20, 2025. WDVA at Roanoke (Ballou). VLW 025-3-437. 5 pp.