Creasman v. Farmers Cas. Ins. Co.

681 F.Supp.3d 1051

Charles CREASMAN, Plaintiff, v. FARMERS CASUALTY INSURANCE COMPANY, Defendant.

No. CV-22-01820-PHX-DJH

United States District Court, D. Arizona

Filed July 13, 2023

Signed July 12, 2023

Brett Lawrence Slavicek, Michael Justin Henry, Slavicek Law Firm, Phoenix, AZ, for Plaintiff.

Jared Lynn Sutton, Jennifer Soo Jung Lee-Cota, Papetti Samuels Weiss McKirgan LLP, Scottsdale, AZ, for Defendant.

ORDER

Diane J. Humetewa, United States District Judge

In this insurance action, Defendant Farmers Casualty Insurance Company, f/k/a Metropolitan Casualty Insurance Company ("Farmers Insurance") filed a Motion to Dismiss (Doc. 10)¹ with respect to Plaintiff Charles Creasman's First Amended Class Action Complaint ("FAC") (Doc. 1-3 at 4-25).² The FAC brought claims for breach of contract, bad faith, and declaratory relief. The Court must determine whether the FAC states a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the Court will grant Farmers Insurance's Motion but allow Plaintiff to amend his bad faith claim and claim for declaratory relief. Consequently, the Court will also lift its previous order staying the case. (Doc. 27).

I. Background³

Plaintiff Charles Creasman ("Plaintiff") seeks to lead a class action against Farmers Insurance to enforce its policies regarding uninsured motorist ("UM") and underinsured motorists ("UIM"). (Doc. 1-3 at 5 ¶¶ 3-5).

A. Plaintiff's Accident

On August 20, 2016, a nonparty UIM driver caused Plaintiff to sustain injuries while he was walking in a crosswalk. (Id. at 6 ¶ 7). The nonparty driver was solely at fault; thus, Plaintiff received $100,000 under the bodily injury liability coverage of the nonparty driver's insurance policy.⁴ (Id. ¶¶ 10-12). However, Plaintiff incurred "reasonable and necessary medical expenses in excess of $100,000" and the nonparty driver did not have any other insurance coverage to pay for Plaintiff's remaining damages. (Id. ¶ 9, 13). Plaintiff thus turned to his policy with Farmers Insurance for additional coverage.

B. Plaintiff's Policy

At the time of the accident, Plaintiff held Policy No. 7674506760 with Farmers Insurance. (Id. at 27-65) (the "Policy"). The Policy insured four of Plaintiff's vehicles: a 2014 Infiniti Q50; a 2000 Dodge Ram, a 2005 Mini Cooper; and a 2007 Bentley Contine. (Id. at 28). Plaintiff's policy included the following coverages for bodily injury: (1) UM coverage for up to $500,000 per person and $500,000 per collision; and (2) UIM coverage for up to $500,000 per person and $500,000 per collision. (Id.) Plaintiff claimed UIM coverage benefits because, under the terms of the Policy, he is an "insured" and the nonparty driver's vehicle is an "underinsured motor vehicle." (Id. at 7, ¶¶ 19-20).

C. Plaintiff's UIM Claim

On January 8, 2019, Plaintiff submitted to Farmers Insurance a notice to pursue a UIM claim in accordance with A.R.S. § 12-555.⁵ (Doc. 17-1 at 11-21) (the "January 2019 Notice"). Plaintiff sought UIM coverage benefits on all vehicles insured on the Policy. (Docs. 1-3 at 8, ¶ 21.) In response to Plaintiff's UIM claim, Farmers Insurance paid Plaintiff $500,000 under one of the four vehicles insured by the Policy. (Docs. 1-3, 8 ¶ 25; 10 at 3). Farmers Insurance represents it assumed this payment resolved Plaintiff's UIM claim. (Docs. 10 at 3; 17 at 7).

Over three years later, on July 5, 2022, Plaintiff sent a letter regarding his initial January 2019 Notice that demanded "stacked" UIM coverage because the Policy insures four vehicles. (Doc. 1-3 at 12 ¶ 45, 67) (the "July 2022 Demand"). In other words, Plaintiff sought an additional $1,500,000—$500,000 for each of the three other insured vehicles under the Policy. (Doc. 10 at 3). Farmers Insurance responded with a letter on July 21, 2022, asking for more information on Plaintiff's UIM claim. (Doc. 1-3 at 67-69) (the "July 2022 Letter"). Farmers Insurance relied on the Policy's "Limit of Liability" clause when handling Plaintiff's request for additional coverage, which stated the following:

A. The limit of liability shown in the Declarations for "each person" is the most we will pay for all damages, including prejudgment and post-judgment interest, due to [bodily injury] to any one person as a result of any one accident. This includes all damages sustained by any other person as a result of that [bodily injury]. Subject to this limit for "each person", the limit shown in the Declarations for "each accident" is the most we will pay for all damages, including prejudgment and post-judgment interest, arising out of [bodily injury] sustained by two or more persons resulting from any one accident.

If a single limit is shown in the Declarations for "each accident" this is the most we will pay for any one accident, including prejudgment and post-judgment interest.

The limit of liability includes damages for care, loss of consortium, emotional distress, and loss of services or death.

This is the most we will pay regardless of the number of:

1. insureds;

2. claims made;

3. vehicles shown in the Declarations;

4. premiums shown in the Declarations; or

5. vehicles involved in the accident.

(Id. at 9 ¶ 33, 38-39). Under this language, Farmers Insurance ultimately concluded that Plaintiff was not entitled to additional UIM coverage under the remaining three vehicles. (Id. at 9 ¶¶ 32-33, 12 ¶ 46).

D. Procedural History

On September 28, 2022, Plaintiff filed a class action suit in Arizona Superior Court and Farmers Insurance subsequently removed the action to this Court. (See Doc. 1); see also Creasman v. Farmers Cas. Ins. Co. f/k/a Metropolitan Cas. Ins. Co., No. CV2022-012824 (Ariz. Super. Ct. Sept. 28, 2022). Plaintiff sought to represent two putative classes of insured that were similarly denied coverage under Farmers Insurance's UM and UIM policies. (Doc. 1-3 at 15-17). Plaintiff brought the following three claims in the FAC:

(1) Farmers Insurance committed breach of contract when it refused to pay stacked UIM benefits under its policies. (Doc. 1-3 at 13 ¶ 51-52) (Plaintiff's breach of contract claim);

(2) Farmers Insurance breached the covenant of good faith and fair dealing when it failed to conduct a reasonable investigation as to whether stacked UIM coverage is available under its policies. (Id. at 13-14 ¶ 53-63) (Plaintiff's bad faith claim);

(3) Plaintiff is entitled to declaratory judgment stating, "he is entitled to Stacked [UIM] Coverage on the Farmers policy." (Id. at 13 ¶ 49). (Plaintiff's claim for declaratory relief).

Plaintiff also claimed punitive damages. (Id. at 15 ¶¶ 64-65). Farmers Insurance filed a Motion to Dismiss the FAC in its entirety. (See Doc. 10).

Farmers Insurance later filed an Expedited Motion to Stay Proceedings (Doc. 16) pending a decision from the Arizona Supreme Court on the following certified questions:

(1) Does A.R.S. § 20-259.01 mandate that a single policy insuring multiple vehicles provides different [UIM] coverages for each vehicle, or a single UIM coverage that applies to multiple vehicles?

(2) Does A.R.S. § 20-259.01(B) bar an insured from receiving UIM coverage from the policy in an amount greater than the bodily injury liability limits of the policy?

(the "Certified Questions"). Franklin v. CSAA Gen. Ins. Co., No. 2:22-cv-00540-JJT (D. Ariz. Nov. 2, 2022), at Doc. 47 (certifying questions); see also Franklin v. CSAA Gen. Ins. Co., CV-22-0266-CQ (Ariz.). The Court found good cause to stay proceedings in the present matter because the Certified Questions relate to the FAC and resolution of those Questions could narrow the issues raised in Plaintiff's claims. (Doc. 16 at 3). However, the Court agreed with Plaintiff that some of the issues in Farmers Insurance's Motion to Dismiss did not turn on the Arizona Supreme Court's resolution of the stacking issue under A.R.S. § 20-259.01. The Court now considers Farmers Insurance's Motion.

II. Federal Rule of Civil Procedure 12(b)(6)

A motion to dismiss pursuant to Rule 12(b)(6)⁶ challenges the legal sufficiency of a complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). A complaint need not contain detailed factual allegations to avoid a Rule 12(b)(6) dismissal; it simply must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A complaint 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." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that defendant has acted unlawfully." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted). "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.' " Id. (citation omitted).

Ordinarily, a court may look only at the face of the complaint to rule on a motion to dismiss. Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002). If a district court considers evidence outside the pleadings when ruling on a Rule 12(b)(6) motion, it must normally convert the motion into a Rule 56 motion for summary judgment and give the nonmoving party an opportunity to respond. Fed. R. Civ. P. (12)(d); United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003); S.F. Patrol Special Police Officers v. City & Cnty. of San Francisco, 13 F. App'x 670, 675 (9th Cir. 2001). However, there are two exceptions to the above conversion requirement. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). First, a court may take judicial notice of matters of public record under Federal Rule of Evidence 201. See S.F. Patrol Special Police...