                             In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 02-2114
CAROLYN SMITH,
                                               Plaintiff-Appellant,
                                 v.

AMERICAN GENERAL LIFE AND
ACCIDENT INSURANCE COMPANY, INC.,
                                              Defendant-Appellee.
                          ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
        No. 99 C 3743—Joan Humphrey Lefkow, Judge.
                          ____________
    ARGUED JANUARY 13, 2003—DECIDED JULY 24, 2003
                    ____________


 Before POSNER, KANNE, and DIANE P. WOOD, Circuit
Judges.
  DIANE P. WOOD, Circuit Judge. Carolyn Smith pur-
chased life insurance policies for her three children from
an agent selling insurance door-to-door for American Gen-
eral Life and Accident Insurance Company. When one of
her children died of complications from sickle cell anemia,
American General refused to issue the full $15,000 benefit
that Smith anticipated receiving on her policy. Instead
Smith received $7,500 (a portion of this amount was
paid directly to the funeral home to which Smith as-
signed her claim) and was told that her original policy had
lapsed and was substituted by a policy that carried higher
2                                             No. 02-2114

premiums and half the benefit. After retaining a lawyer
to help her sort out the problem, Smith was eventually
paid an additional $7,500 plus interest, thereby collecting
the full $15,000 benefit under her original policy. She
then sued American General in state court alleging com-
mon law and statutory fraud in addition to vexatious
delay under the Illinois Insurance Code, hoping to recov-
er $36.54 in excess premium payments, $2,500 that she
paid her lawyer to recover the second half of her benefits,
attorneys fees for her statutory fraud and vexatious delay
claims, and over $1,000,000 in punitive damages.
  American General removed the case to federal court, and
on cross-motions for summary judgment the district court
granted partial summary judgment to American General.
Eager to appeal that decision to this court, Smith passed
up the opportunity to try her surviving fraud claims
and stipulated that she could not establish damages at
trial on what remained of her claims, despite the dis-
trict court’s suggestion to the contrary. The case was then
dismissed on the court’s motion, and Smith brought this
timely appeal.
   At oral argument we expressed concern that Smith’s
claim might not meet the amount in controversy require-
ment that is necessary to support federal jurisdiction
under 28 U.S.C. § 1332 (a) and asked the parties to file
supplemental briefs on this question. After reviewing these
filings we have concluded that the district court lacked
jurisdiction over Smith’s claim. We therefore vacate the
district court’s judgment and remand the case with instruc-
tions to remand the case to state court. See, e.g., Ross v.
Inter-Ocean Ins. Co., 693 F.2d 659, 663 (7th Cir. 1982),
abrogated on other grounds by Hart v. Schering-Plough
Corp., 253 F.3d 272, 274 (7th Cir. 2001).
No. 02-2114                                              3

                            I
  In March 1991, Smith purchased life insurance for her
three children, including her son Isaac J. Smith, from a
door-to-door agent selling policies for American General.
Isaac’s policy required Smith to pay monthly premiums
of $9.85; it promised a $15,000 death benefit, payable to
Carolyn Smith, in the event of his death. Every month
Smith faithfully paid the premium on the policy to an
American General agent who came to her home, collected
the payment, and marked a receipt book that the com-
pany gave her to keep track of her monthly payments.
In September 1992, Smith cancelled the policy for an-
other of her sons, D’Right, but she continued to pay
monthly premiums to insure her daughter Tynisa and
Isaac. The premiums for these two policies together totaled
$18.79 per month. At some time in 1996, American Gen-
eral’s agents stopped marking Smith’s receipt book with
each monthly payment and instead issued a computerized
receipt from a hand-held device that its agents carried.
Smith detected a problem with the first computerized
receipt, which indicated that her total premium was
$23.18 rather than $18.79, and did not include a policy
number. She expressed concern to American General’s
agent, who explained that her original policy on Isaac had
lapsed for non-payment and that the new, higher premium
was for a second policy that Smith supposedly purchased
in August 1994. Smith asked to see a copy of her applica-
tion for the new policy, which a different agent showed
her on a subsequent visit to her home. According to
Smith, that policy contained her forged signature, but she
was not able to get a copy of the policy from American
General. Despite concerns over the accuracy of her
monthly premium charges and which policy was in effect,
Smith dutifully paid the revised monthly premiums on
Isaac’s policy until her son’s death in September 1997.
4                                              No. 02-2114

   When Isaac died Smith tendered a claim to American
General for the $15,000 death benefit that she believed she
was owed under her policy. This is when Smith first learned
that the new policy carried only a $7,500 benefit, despite
the increase in monthly premiums. Smith retained a
lawyer to help her recover the difference, and this lawyer
sent a letter to American General on her behalf. In re-
sponse to Smith’s lawyer’s letter, American General
explained that Smith’s policy on Isaac had lapsed and that
the current benefit was paid out under her new policy.
At that time American General asked for any informa-
tion that would support a different conclusion, but it re-
ceived no response from Smith or her lawyer. Nearly one
year later, a second lawyer retained by Smith (the rec-
ord is silent on why she changed lawyers) responded to
American General’s letter by sending copies of hand-
written and computerized receipts as proof that Smith’s
original policy never lapsed, and seeking full payment of
the $15,000 benefit. In this new round of correspondence
Smith’s lawyer urged American General to settle his client’s
claim or face a lawsuit over its conduct. That letter
and supporting documentation were then referred to the
proper department within American General for inves-
tigation, and handwriting exemplars were requested to
establish that Isaac himself had not applied for the sec-
ond policy. (A second application was produced by Ameri-
can General containing what appears to be Isaac Smith’s
forged signature. That application contains a spelling
mistake in Isaac’s name, as well as a mistake in his social
security number.) Smith’s lawyer supplied American
General with a copy of a car loan application that Isaac
filed shortly before his death, and within four days of
its receipt of this handwriting sample, American General
paid Smith $7,500 plus interest “to reflect the amount [of
insurance] originally applied for.”
  Smith’s claim against American General is not for the
balance of her insurance policy—that much she has al-
No. 02-2114                                                5

ready received. Instead she seeks to recover for the delay
in payment under her original insurance policy, the ex-
cess premiums that were never refunded, and the costs
she incurred in securing complete payment. Beyond these
costs Smith seeks punitive damages for what to her
seems like an inexcusable delay in payment under the
policy, as well as a major scam on American General’s
part to defraud unsophisticated customers out of their
benefits. Since Smith’s complaint seeks relief solely on
the basis of Illinois law, federal jurisdiction exists, if at
all, if the requirements of 28 U.S.C. § 1332 are met.


                             II
  This court has an independent obligation to satisfy it-
self that federal subject matter jurisdiction exists before
proceeding to the merits in any case, even where, as here,
neither the parties nor the district court has questioned
the existence of such jurisdiction. St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 287 n.10 (1938);
Ross, 693 F.2d at 660. To invoke the federal courts’ diver-
sity jurisdiction, the parties must establish both complete
diversity and that the “matter in controversy exceeds
the sum or value of $75,000, exclusive of interest and
costs.” 28 U.S.C. § 1332(a). Complete diversity is not
a problem because Smith is a citizen of Illinois and Ameri-
can General is a Tennessee corporation with its principal
place of business in Tennessee.
   The amount in controversy presents a much more dif-
ficult question. Based on language in the Supreme Court’s
decision in St. Paul Mercury, the federal courts have
adopted what is known as the “legal certainty” test
to assess whether the amount in controversy in cases
originating in federal court satisfies § 1332’s require-
ments. See Gardynski-Leschuck v. Ford Motor Co., 142
F.3d 955, 957 (7th Cir. 1998); 14B Charles A. Wright,
6                                                No. 02-2114

Arthur R. Miller & Edward H. Cooper, FEDERAL PRACTICE
& PROCEDURE § 3702, at 17 (3d ed. 1998). Under the legal
certainty test, courts will find federal jurisdiction on the
basis of the plaintiff’s complaint unless it appears “to a
legal certainty that the claim is really for less than the
jurisdictional amount.” St. Paul Mercury, 303 U.S. at 289.
But a different rule governs cases filed in state court
and subsequently removed to federal court by a defendant.
In removed cases, the amount alleged in the plaintiff’s
complaint, if sufficient to meet the jurisdictional require-
ments of § 1332, is presumed correct on the assumption
that a plaintiff would not fabricate the amount in con-
troversy to meet the federal diversity jurisdiction require-
ments and then file her suit in state court relying on
the defendant to remove the case to federal court. Id.
at 290-91. In keeping with this presumption, our court
has adopted a rule that the removing party must estab-
lish any disputed aspect of diversity jurisdiction by offer-
ing “evidence which proves to a reasonable probability
that jurisdiction exists.” Chase v. Shop ‘N Save Warehouse
Foods, Inc., 110 F.3d 424, 427 (7th Cir. 1997) (citation and
internal quotation marks omitted).
   In this case, at first blush, it looks as if the amount
could not possibly be met: apart from a request for
$1,000,000 in punitive damages, Smith wants $36.54
(excess premium benefits) + $2,500 (legal fees to recover
wrongfully withheld benefits), for a total of $2,536.54. Thus,
whether more than $75,000 is truly in controversy de-
pends on how we must assess the demand for punitive
damages. With this in mind, we ordered the parties to
file supplemental briefs on the question of diversity juris-
diction, specifically asking that they address “whether the
amount in controversy exceeds $75,000.00 in light of
DelVecchio v. Conseco, Inc., 230 F.3d 974 (7th Cir. 2000).”
In DelVecchio, we dismissed a class action lawsuit for lack
of federal jurisdiction where the named plaintiff sought a
No. 02-2114                                                 7

mere $600 in compensatory damages and $75,000 (coinci-
dentally) in punitive damages. Id. at 979-80. Such a
disparate ratio of compensatory to punitive damages
struck this court as “bordering on the farcical,” and we
found it highly unlikely that a state court in Indiana (whose
law applied) would permit such an award. Id. at 980.
   In their supplemental briefs, both Smith and American
General have urged this court to find that diversity juris-
diction was proper. For her part, Smith seeks to avoid
replication of costs already incurred and asks for closure
in what has certainly been an unpleasant chapter in her
life. American General too wishes to remain in federal
court; after all, it is American General that removed this
case in the first place. But the parties must do more
than show why they prefer to remain in federal court. They
must establish that jurisdiction lies in our court for resolu-
tion of their dispute. That they have not done.
  As a technical matter, it is American General’s burden
to show that Smith’s complaint states a claim for more
than $75,000. In re Brand Name Prescription Drugs
Antitrust Litig., 123 F.3d 599, 607 (7th Cir. 1997) (remov-
ing party bears burden of demonstrating that amount
in controversy requirement is satisfied by presenting
“evidence of federal jurisdiction once the existence of
that jurisdiction is fairly cast into doubt”) (emphasis in
original); Chase, 110 F.3d at 427 (same). In considering
this question, however, we do not limit ourselves to Ameri-
can General’s supplemental brief, but instead address
the arguments that both parties have made in support
of federal jurisdiction.
 In its effort to salvage federal jurisdiction, American
General makes every observation but the inevitable—that
without punitive damages, Smith’s complaint seeks
well below the minimum amount in controversy require-
ment of more than $75,000. Among its arguments are
8                                             No. 02-2114

several that we find particularly specious, including that
Smith has herself admitted to seeking in excess of
$75,000, the district court agreed that the complaint
states a claim for in excess of $75,000, and there was
no improper manipulation of the federal court’s jurisdic-
tion because Smith sought punitive damages in state
court and it was American General that removed the case
to federal court. These are all proper observations; how-
ever, they all amount in the end to statements that the
parties have agreed on jurisdiction or that no one ex-
amined the question before—arguments that are not
sufficient to support federal jurisdiction.
  As we have already noted, Smith, American General,
and the district judge may all agree that the complaint
seeks in excess of $75,000, but this court still has an
independent obligation to make sure that they are cor-
rect. Ross, 693 F.2d at 660. Furthermore, the record
below does not indicate that the district court considered
the amount-in-controversy question posed to the parties
by this court, or whether it addressed the question wheth-
er punitive damages in such a large amount were unat-
tainable to a legal certainty. Even if these questions
had been considered by the district judge, it would be
entirely proper for this court to consider the question on
appeal. Id.
  And while federal courts are suspicious of claims filed
in federal court that attempt to circumvent the amount
in controversy requirements for diversity jurisdiction
by seeking excessive and unrealistic punitive damages,
see e.g., Anthony v. Security Pacific Fin. Servs., Inc., 75
F.3d 311, 315 (7th Cir. 1996), this does not prove the
converse. We know of no case that says that when a com-
plaint is filed in state court seeking unrealistic punitive
damages, it may properly be removed to state court be-
cause the plaintiff did not intend an end-run around
the jurisdictional requirements of § 1332(a). In making
No. 02-2114                                             9

this argument, American General misconstrues the hold-
ing of DelVecchio and would have us read that case as
applying only in situations where there was some inten-
tional manipulation of punitive damages by a plaintiff
eager to file her complaint in federal court. But we read
DelVecchio as saying much more: when a federal court
is convinced to a legal certainty that punitive damages
that form a necessary component of the amount-in-con-
troversy requirement cannot be obtained, the court
must dismiss the case for want of jurisdiction. 230 F.3d
at 980. The Supreme Court’s recent decision in State
Farm Mutual Automobile Insurance Co. v. Campbell,
___U.S. ___, 123 S.Ct. 1513, 1526 (2003), reinforces our
view that we must take a realistic look at the size of the
punitive damages demanded.
   Turning to the damages sought in Smith’s complaint,
American General reasons that as the removing party,
it was entitled to read the complaint as easily stating
the requisite $75,000+ in damages based on the relief
Smith sought. In making this argument, American General
calls our attention to the following aspects of Smith’s
complaint: first, she sought compensatory damages as
part of her consumer and statutory fraud claims “in the
amount of the excess premium she paid; in the reduced
benefit originally paid by American General; and by
being forced to retain attorneys to collect the benefit to
which she was entitled”; second, Smith filed her com-
plaint in the Law Division of the Circuit Court of Cook
County, Illinois, which “strongly indicated that she was
seeking compensatory damages of at least $30,000”; third,
Smith sought $25,000 as a statutory penalty under her
vexatious delay claim; and finally, Smith sought in excess
of $1,000,000 in punitive damages. Although American
General points out that the complaint is silent on the
amount of excess premiums that Smith paid and her pre-
litigation attorney’s fees, it acknowledges that the re-
duced benefit was in the amount of $7,500.
10                                             No. 02-2114

   There are several problems with American General’s
argument, starting with its claim that Smith sought no
less than $30,000 in damages because otherwise she
would not have filed in the circuit court’s law division,
which sets a $30,000 floor on damages. We fail to see how
this supports American General’s position that the sig-
nificantly higher amount in controversy required for
federal court was properly alleged. The same problem
(i.e., possible failure to meet the required jurisdictional
amount) appears to have existed in the circuit court, and
we can assume that if the case had stayed in state court,
the circuit court would probably have made its own in-
quiry into its jurisdiction. The other, obvious problem,
is that the circuit court’s $30,000 floor on damages is
well below the $75,000 floor set by § 1332(a).
  The more fundamental problem with American Gen-
eral’s position is that it essentially pleads ignorance with
regard to the refund for overpaid premiums that Smith
sought since her complaint failed to specify an actual
amount. We confronted an identical argument in Ross,
and there this court refused to allow a removing insur-
ance company to argue that it thought the jurisdictional
amount was met where it had actual knowledge that
the amount at issue fell well below the statutory mini-
mum. 693 F.2d at 662. While it is true that Smith’s com-
plaint failed to specify the amount of overpayment she
sought, that figure was within American General’s knowl-
edge. American General’s agents issued receipts for Smith’s
monthly payments (and by this time Smith’s lawyer
had supplied American General with copies of all of those
receipts) and the company knew the original monthly
premium that her first policy carried. With this informa-
tion in hand, the simple arithmetic that American Gen-
eral needed to do in order to calculate how much Smith
sought to recover would not stump an elementary school
student, and comes nowhere near $75,000.
No. 02-2114                                                 11

  We turn now to the remaining damages that Smith’s
complaint sought: a $25,000 statutory penalty for vex-
atious delay in payment of an insurance benefit under
Section 155 of the Illinois Insurance Code, which allows a
party that experienced “unreasonable delay in settling
a claim” to recover attorneys fees and punitive damages
of no more than $25,000 if the court also finds that the
delay was “vexatious and unreasonable,” 215 ILL. COMP.
STAT. 5/515 (2000), and over $1,000,000 in punitive dam-
ages. As a general rule, at the jurisdictional stage, courts
do not conduct an inquiry into the merits beyond verify-
ing that the claim is not brought “solely for the purpose
of obtaining jurisdiction or where such a claim is wholly
insubstantial or frivolous.” Bell v. Hood, 327 U.S. 678, 682-
83 (1946); see also Turner/Ozanne v. Hyman/Power, 111
F.3d 1312, 1317 (7th Cir. 1997) (quoting Bell, 327 U.S.
at 682-83). Here, the statutory claim for $25,000 for vex-
atious delay in payment of an insurance policy was not
raised “solely for the purpose of obtaining jurisdiction,” but
it is hard to see how the claim is not frivolous. As the
district court found, American General did not delay at
all in paying Smith her insurance benefits once it had all
of the information that it needed to verify that she contin-
ued to make payments under her first policy and that
the application that it had for a new policy was filed with
a forged signature. Four days after the company had all
of the information that it needed to reach this conclusion,
American General paid Smith the balance of her benefits
plus interest. Thus the delay in payment occurred be-
cause Smith (through her lawyers) waited nearly one
year between her first contact with American General
and her second effort to secure payment. All but four days
of the time lapse was thus attributable to Smith, and could
in no way be termed either vexatious or otherwise blame-
worthy on American General’s part. See e.g., Citizens First
Nat’l Bank of Princeton v. Cincinnati Ins. Co., 200 F.3d
1102, 1110 (7th Cir. 2000) (citing Green v. Int’l Ins. Co., 605
12                                               No. 02-2114

N.E.2d 1125, 1129 (Ill. App. Ct. 1992) (no vexatious de-
lay where delay in payment results from “bona fide dispute
about coverage”)). So, like the district court, we fail to see
how Smith could prevail on what looks like a frivolous
claim for $25,000 under 215 ILL. COMP. STAT. 5/155 (2000).
We add that even if, giving her every benefit of the doubt,
this claim could be considered for purposes of the juris-
dictional amount, it would still take her only up to
$27,536.54, and she would need to make a non-frivolous
allegation that she was entitled to at least $47,463.47 in
general punitive damages to establish that more than
$75,000 was in controversy.
  Since, however, we see no way that Smith would be
entitled to $25,000 for vexatious delay in payment of her
claim, she must show that she could recover a minimum
of $72,463.47 in punitive damages in order to exceed the
$75,000 floor. This brings us back to the problem that
we tackled in DelVecchio. American General tries to
distinguish DelVecchio by noting that according to the
company’s calculations, the ratio of punitive to compen-
satory damages in this case is “at the very least, 2.31 to 1
and, therefore, not beyond legal certainty” that Smith
could recover in excess of the jurisdictional minimum.
Aside from the fact that we have ruled out an award of
up to $25,000 for vexatious delay under the Insurance
Code, which in essence reduces the ratio of punitive to
compensatory damages in this case to 29 to 1, American
General is wide of the mark in advancing this argument.
In DelVecchio, we were unwilling to find federal jurisdic-
tion in a case where the amount in controversy consisted
of punitive and compensatory damages at a ratio of 121 to 1
because such an award is at the outer limits of what
the Indiana courts permit in terms of damages awards. 230
F.3d at 980.
  This is not to say that in all cases where punitive dam-
ages form a significant part of the jurisdictional amount
No. 02-2114                                               13

in controversy a federal court must assure itself that such
damages are proportional to compensatory damages. The
point of DelVecchio was that the likelihood of an Indiana
court awarding such damages was so slim that we
were satisfied that the jurisdictional amount could not
be met in that case. Id. In reaching that conclusion we
did not intimate that courts must train their sight on
ratios or numbers where punitive damages play a part
of the jurisdictional minimum; the fundamental inquiry,
after all, is whether it appears beyond a legal certainty
that the punitive damages will not be awarded under the
law that governs the case. See Anthony, 75 F.3d at 315;
Cadek v. Great Lakes Dragaway, Inc., 58 F.3d 1209, 1211-
12 (7th Cir. 1995). Where the ratio of punitive to com-
pensatory damages is as imbalanced as it was in
DelVecchio, a court must look closely to see whether federal
jurisdiction exists. Anthony, 75 F.3d at 315. But it is
possible to find jurisdiction lacking for other reasons, and,
as in our case, if it appears to a legal certainty that
the claim for the requisite level of punitive damages
cannot be sustained, then regardless of how much the
plaintiff seeks in punitive damages relative to compensa-
tory damages, she cannot count the punitive damages
towards the jurisdictional minimum. Bell, 327 U.S. at 682-
83. Even evaluating this claim at the time American
General removed the case to federal court—a time when
the state fraud claims were still a part of the case—we
find no basis in Illinois law to support such a large award
of punitive damages.
  Neither party has focused on the possibility that Smith’s
initial fraud claims against American General might
have convinced an Illinois court to award her approxi-
mately $72,500 in punitive damages for the problems
she experienced before she made her first demand for
payment. Instead, in Smith’s supplemental brief address-
ing jurisdiction, she has suggested that we should include
14                                              No. 02-2114

the attorney’s fees that she would receive for her statutory
and common law fraud claims, as well as for her vexatious
delay claim under the Illinois Insurance Code. We have
already explained why her efforts to recover attorney’s
fees and punitive damages for vexatious delay fail; there-
fore we need only consider Smith’s argument that the
running tally of damages in this case includes at least
$25,000 in attorney’s fees for her statutory and common
law fraud counts. Smith readily confesses that this $25,000
figure is merely an approximation of her actual attorney’s
fees to pursue these claims because the parties did not
undertake discovery on this question and the current rec-
ord is silent on how much this case has cost Smith’s lawyer
to pursue. But this is a problem that we could easily cure
by remanding the case for limited discovery on the ques-
tion of attorney’s fees. We would pursue such a route were
there not a more fundamental problem with relying on
attorney’s fees to meet the amount in controversy require-
ment. This case is controlled by Gardynski-Leschuck v.
Ford Motor Co., which held that post-filing attorney’s fees
cannot count toward the amount in controversy require-
ment because federal jurisdiction exists, if at all, at the
time of filing. 142 F.3d 955, 958 (7th Cir. 1998). See also
Hart, 253 F.3d at 273 (“The amount in controversy is
whatever is required to satisfy the plaintiff’s demand, in
full, on the date suit begins.”) (emphasis in original). This
rule is not only controlling in this case, but it makes
good sense. As sympathetic as we are to Carolyn Smith’s
situation, we see no reason to allow a plaintiff bringing
state law claims into federal court on the basis of actual
damages that total a mere $2,534.56 simply because
she has run up a large bill with her lawyer to recover that
sum. To do so would be to defy Congress’s intent to lim-
it federal diversity jurisdiction to cases in which the
amount in controversy exceeds $75,000.
No. 02-2114                                             15

                           III
  Carolyn Smith urges that we find federal jurisdiction
properly lies in her case in part because a remand to state
court will impose significant new costs that may in the
end make pursuit of her claims impossible. While we are
not unsympathetic to her situation, and we cannot under-
stand why American General has not at the very least
voluntarily refunded Smith’s excess premiums of $36.54,
we are simply not in a position to create federal jurisdic-
tion where it is otherwise lacking. American General has
not shown that more than $75,000 was in controversy
in this case at the time of removal, and thus we VACATE the
district court’s order and REMAND the case with instruc-
tions that the district court remand Smith’s case to state
court.

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit




                  USCA-02-C-0072—7-24-03
