1009 Clinton Props., LLC v. State Farm Fire & Cas. Co.

1009 CLINTON PROPERTIES, LLC, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.

CIVIL ACTION No. 18-5286

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

March 4, 2019

OPINION

I. INTRODUCTION

This is a breach of insurance contract action alleging that Defendant failed to pay Plaintiff monies owed under an insurance policy. On December 7, 2018, the instant matter was removed from the Court of Common Pleas of Philadelphia County. ECF No. 1. Currently before the Court is Defendant's Motion to Dismiss Count II of Plaintiff's Complaint Pursuant to Federal Rule of Civil Procedure 12(b)(6) (ECF No. 4), Plaintiff's Response thereto (ECF No. 6), and Defendant's Reply (ECF No. 7).

II. BACKGROUND

Defendant issued a rental dwelling insurance policy to Plaintiff covering Plaintiff's property located at 1426 S. Vodges St., Philadelphia, PA 19143 (the "Policy"). ECF No. 1 at 14-15; ECF No. 5 at 2. On January 18, 2018, while the Policy was in effect, Plaintiff suffered physical loss and damage to his insured property. ECF No. 1 at 15. The loss is believed to have been caused by a peril insured against under the Policy. Id. Plaintiff promptly informed Defendant of the loss and fully complied with the terms and conditions required under the Policy. Id. Despite Plaintiff's demands for benefits under the Policy, Defendant has refused, without justification, to pay Plaintiff monies owed for the damages suffered as a result of the loss. Id. Defendant continues to refuse to pay Plaintiff its benefits, as required under the Policy. Id.

As a result of Defendant's refusal to pay Plaintiff benefits under the Policy, Plaintiff initiated the instant action and alleges two causes of action against Defendant. Count I is breach of contract. Id. Count II is a bad faith claim under 42 Pa. C.S.A. § 8371. Id. at 16. Plaintiff alleges that Defendant acted in bad faith for refusal to pay benefits under the Policy by engaging in the following conduct:

a. Sending correspondence falsely representing that Plaintiff's loss caused by a peril insured against under the Policy was not entitled to benefits due and owing under the Policy;

b. In failing to complete a prompt and thorough investigation of Plaintiff's claim before representing that such claim is not covered under the Policy;

c. In failing to pay Plaintiff's covered loss in a prompt and timely manner;

d. In failing to objectively and fairly evaluate Plaintiff's claim;

e. In conducting an unfair and unreasonable investigation of Plaintiff's claim;

f. In asserting Policy defenses without a reasonable basis in fact;g. In flatly misrepresenting pertinent facts or policy provisions relating to coverages at issue and placing unduly restrictive interpretations on the Policy and/or claim forms;

h. In failing to keep Plaintiff or their representatives fairly and adequately advised as to the status of the claim;

i. In unreasonably valuing the loss and failing to fairly negotiate the amount of the loss with Plaintiff and their representatives;

j. In failing to promptly provide a reasonable factual explanation of the basis for the denial of Plaintiff's claim;

k. In unreasonably withholding policy benefits;

l. In acting unreasonably and unfairly in response to Plaintiff's claim;

m. In unnecessarily and unreasonably compelling Plaintiff to institute this lawsuit to obtain policy benefits for a covered loss, that Defendant should have paid promptly and without the necessity of litigation.

Id. at 16-17.

On December 13, 2018, Defendant filed its Motion to Dismiss Count II (bad faith claim) of Plaintiff's Complaint. ECF No. 4. Defendant alleges that Plaintiff's bad faith claim should be dismissed because the Complaint fails to allege the essential elements of a bad faith claim and the Complaint is devoid of any factual allegations to support a cause of action for bad faith. ECF No. 4-2 at 3. Moreover, Defendant contends that Plaintiff's bad faith claim contains only "bare, boiler-plate and conclusory allegations, which lack the factual specificity required by Fed. R. Civ. P. 8, Iqbal, and its progeny." Id. In support of its contention that Plaintiff's bad faith claim lacks factual specificity, Defendant cites eleven (11) district court cases that have dismissed bad faith claims that contained bare-bonesconclusory allegations.¹ Id. at 3-4. In citing those eleven cases, Defendant most heavily relies on Sypeck, 2012 WL 2239730 and PGT Trucking, Inc., 2011 WL 2552531 (Middle District of Pennsylvania and Western District of Pennsylvania cases, respectively). Id. at 4-5.

In its response, which was filed on December 27, 2018, Plaintiff argues that its Complaint, specifically the bad faith claim, informs Defendant of the facts it will need to defend against at trial, making the bad faith claim legally sufficient. ECF No. 5 at 5. Plaintiff argues that it has specifically pled that Defendant has continuously refused, without justification, to pay the benefits owed under the Policy. Id. Plaintiff argues that under Fed. R. Civ. P. 8, it has pled sufficient allegations against Defendant constituting Defendant's inadequate investigation and subsequent unfounded and frivolous refusal to pay Plaintiff's claim. Id. at 7. Plaintiff maintains that these allegations are sufficient to support a bad faith claim. Id. Plaintiff also relies on the thirteen averments in its Complaint pertaining to bad faith against Defendant that are set forth above. Id. at 8. According to Plaintiff, these allegations, when read together, summarize the basis for its bad faith claimand are wholly sufficient under Fed. R. Civ. P. 8. Id. at 9. On January 2, 2019, Defendant filed its Reply brief, relying, again, on the notion that "unsupported [bad faith] allegations have been repeatedly rejected by Federal courts, in granting motions to dismiss." ECF No. 7 at 1-2.

III. DISCUSSION

1. Motion to Dismiss Standard of Review.

A pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2); see also Schuchardt v. President of the United States, 839 F.3d 336, 347 (3d Cir. 2016) ("Federal Rules of Civil Procedure 8(a) continues to require only a 'showing' that the pleader is entitled to relief."). "Each allegation must be simple, concise, and direct." Id. at (d)(1). The purpose of Rule 8 is to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Burtch v. Milberg Factors, Inc., 662 F.3d 212, 220 (3d Cir. 2011) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)).

When reviewing a motion to dismiss, the Court "accept[s] as true all allegations in plaintiff's complaint as well as all reasonable inferences that can be drawn from them, and [the court] construes them in a light most favorable to the non-movant." Tatis v. Allied Interstate, LLC, 882 F.3d 422, 426 (3d Cir. 2018) (quoting Sheridan v. NGK Metals Corp., 609 F.3d 239, 262 n. 27 (3d Cir. 2010))."To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S. Ct. 1955). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (quoting Twombly, 550 U.S. at 557, 127 S. Ct. 1955)). "The plausibility determination is 'a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'" Connelly v. Lane Const. Corp., 809 F.3d 780, 786-87 (3d Cir. 2016) (quoting Iqbal, 550 U.S. at 679, 129 S. Ct. 1937). Twombly and Iqbal, however, do not impose a heightened pleading requirement and the Supreme Court "also expressly disavowed the requirement that a plaintiff plead specific facts." Schuchardt, 839 F.3d at 347 (internal quotations omitted) (citing Boykin v. KeyCorp, 521 F.3d 202, 215 (2d Cir. 2008)).

Finally, courts reviewing the sufficiency of a complaint must engage in a three-step process. First, the court "must 'take note of the elements [the] plaintiff must plead to state a claim.'" Connelly, 809 F.3d at 787 (alterations in original) (quoting Iqbal, 550 U.S. at 675, 129 S. Ct. 1937). "Second, [the court] should identify allegations that, 'because they are no more than conclusions, are not entitled to the assumption of truth.'" Id. (quoting Iqbal, 550 U.S. at 679, 129 S. Ct.1937). Third, "'[w]hen there are well-pleaded factual allegations, [the] court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.'" Id. (alterations in original) (quoting Iqbal, 550 U.S. at 679, 129 S. Ct. 1937). A claim may survive a motion to dismiss if it "pleads sufficient factual allegations to raise a reasonable expectation that discovery will reveal evidence" which supports the claim's elements. Id. at 789.

2. Bad Faith Claim Requirements.

For an action arising under an insurance policy, an insurer/defendant may be liable for interest, punitive damages, court costs, and attorney fees if the insurer acted in bad faith towards the insured/plaintiff. 42 Pa. C.S.A. § 8371. For a plaintiff to succeed on a bad faith claim, two elements must be satisfied by clear and convincing evidence. Klinger v. State Farm Mut. Auto Ins. Co., 115 F.3d 230, 233 (3d Cir. 1997). The plaintiff must demonstrate that 1) "the insurer did not have a reasonable basis for denying benefits under the policy" and 2) "the insurer knew or recklessly disregarded its lack of reasonable basis in denying the claim." Wolfe v. Allstate Property & Cas. Ins. Co., 790 F.3d 487, 498 (3d Cir. 2015) (citing Terletsky v. Prudential Property & Cas. Ins. Co., 437 Pa. Super. 108, 649 A.2d 680, 688 (1994)). The Pennsylvania Superior Court has defined bad...