Mrs. Yvonne Buras, Widow of Oliver v. Adolph, Appellant, v. Birmingham Fire Insurance Company of Pennsylvania, Appellee, 327 F.2d 238 (5th Cir. 1964)

The narrow question presented here is whether the exaction provided for by LSA-R.S. 22:656¹  is interest, or is not interest, in determining whether the amount involved is sufficient to hold federal jurisdiction over this case.

The district court determined, upon appellant's declaration, that the exaction was in the nature of a penalty, not interest. We think this holding is correct.

The State of Louisiana has a statutory interest rate of 5%, which is in derogation of deciding this 6% exaction interest also. Moreover, the 6% is not due if the insurance contract is settled within 60 days. The federal statute²  sets the minimum in removals at $10,000.00, exclusive of interest and costs. We hold that this exaction is intended to be in the nature of a coercive penalty towards prompt settlement. The statutory amount here sued for is, therefore, sufficient. The appellant's complaint states, according to LSA-R.S. 22:656, that the

"* * * defendant has refused and/or neglected to pay petitioner under said policy [for more than 60 days], and said refusal on the part of the defendant is arbitrary, capricious, unwarranted and without probable cause and therefore the Petitioner is entitled to an award of penalties as provided for in the Insurance Code of the State of Louisiana."

The Supreme Court and this Court has uniformly, in resolving such questions, looked to the amount the plaintiff in good faith demands and, here, it exceeds $10,000.00.

Affirmed.