Beaman v. Pacific Mutual Life Insurance Co.

Joseph H. Beaman (plaintiff) had a health and accident policy issued by Pacific Mutual Life Insurance Co. (Pacific) (defendant). Under the policy, if Beaman became totally disabled, he would receive $200 per month for as long as he was totally disabled. If Beaman became partially disabled, he would receive $100 per month as long as he was partially disabled. In 1962 Beaman was injured in a workplace accident. Beaman was totally disabled and received benefits of $200 per month from Pacific for 24 months. In 1964 Pacific obtained a report from one of Beaman’s doctors indicating that Beaman was no longer totally disabled. Pacific discontinued its disability payments to Beaman in January 1965. Beaman filed a lawsuit in federal district court against Pacific seeking almost $70,000, the amount of disability benefits that Beaman believed he would receive by being totally disabled for the remainder of his life. Beaman filed the lawsuit in federal district court, believing that the court had diversity jurisdiction over the case because he and Pacific held diverse citizenship and he was seeking damages in excess of the $10,000 amount-in-controversy requirement. The district court dismissed Beaman’s case for lack of jurisdiction, holding that the amount in controversy was below $10,000. The court reasoned that even if Beaman was totally disabled, he was not entitled to receive benefits exceeding $10,000 because the disability benefits were conditioned on his being continually disabled. Therefore, Beaman could only recover any benefits that had already been wrongfully withheld. Beaman appealed.