Garrison Prop. & Cas. Ins. Co. v. Cothran, C.A. No.: 2:15-cv-4379-PMD

Garrison Property and Casualty Insurance Company, Plaintiff, v. Alexander C. Cothran and Candace Rickborn, Defendants.

C.A. No.: 2:15-cv-4379-PMD

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA CHARLESTON DIVISION

July 14, 2016

ORDER

This matter is before the Court on Defendant Alexander Cothran's renewed motion to dismiss Defendant Candace Rickborn's cross-claim pursuant to Federal Rule of Civil Procedure 12(b)(6) (ECF No. 29). The Court grants Cothran's motion.

BACKGROUND

This case arises from a 2012 automobile collision between Cothran and Rickborn, who was at fault. The case's primary issue is whether an insurance policy that Plaintiff Garrison Property and Casualty Insurance Company issued to Cothran provides liability benefits to Rickborn. Garrison argues the policy provides no coverage, while Rickborn contends just the opposite. The current motion, however, involves Rickborn's allegations that Cothran has breached a contract between them relating to the collision.

The collision occurred while Cothran was driving his employer's truck. Accordingly, in 2013, Rickborn sued Cothran and his employer in South Carolina state court for negligence. State Farm Mutual Automobile Insurance Company, the employer's insurer, undertook the defense of both defendants. Meanwhile, Rickborn made a claim to Garrison seeking additional liability benefits under the policy it issued to Cothran for his personal vehicle.

State Farm later offered Rickborn its policy's limit, $25,000, in exchange for Rickborn agreeing not to execute against Cothran or State Farm any judgment she might obtain in her negligence suit. In addition to such forbearance, Rickborn would also have to promise that, "upon a final determination of whether any additional or secondary liability coverage and/ or underinsured motorist benefits will be paid," she would file a satisfaction of judgment in state court. (Am. Cross-cl., Ex. C., ECF No. 10-3, Covenant Not to Execute, at ¶ 5.)

Having received the $25,000 from State Farm and another $7,000 from Cothran's employer, in April 2015, Rickborn signed a covenant not to execute (the "Covenant") containing the above-mentioned obligations. Three months later, she obtained a judgment against Cothran in the amount of $208,122.22. As Garrison's filing of this lawsuit demonstrates, Rickborn has not yet succeeded in getting Garrison to pay her any of the outstanding amount of that judgment. In her cross-claim, Rickborn alleges Cothran has refused to cooperate in her pursuit of benefits from Garrison and has instead unduly interfered with that process. She further alleges Cothran's recalcitrance has prevented her from getting her claim with Garrison resolved and from filing a satisfaction of her judgment against him. According to Rickborn, Cothran is therefore liable for breaching the Covenant's implied covenant of good faith and fair dealing.

PROCEDURAL HISTORY

Garrison filed its declaratory judgment complaint against Rickborn and Cothran in October 2015. In response, Rickborn filed an answer and the breach of contract cross-claim now at issue.¹ Garrison failed to serve Cothran, and it has since voluntarily dismissed the portion of its claim seeking declaratory relief against him.

In March 2016, Cothran moved to dismiss the cross-claim for failure to state a claim and for insufficient service of process. Rickborn filed a memorandum opposing the motion, to which Cothran replied. In May, the Court denied the motion without prejudice because the time for Rickborn to serve Cothran had not yet expired. Shortly thereafter, Cothran waived service of the cross-claim and then renewed the portion of his motion to dismiss based on Rule 12(b)(6).² This matter is now ripe for consideration.

LEGAL STANDARD

A motion to dismiss pursuant Rule 12(b)(6) for failure to state a claim "challenges the legal sufficiency" of a pleading. Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Glynn v. EDO Corp., 641 F. Supp. 2d 476, 482 n.5 (D. Md. 2009) (noting that Rule 12(b)(6) applies to cross-claims). To be legally sufficient, 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).

Our courts use a "two-pronged approach" to assess a claim's legal sufficiency. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). First, the court identifies all of the pleading's factual allegations, assumes they are true, and construes all of their reasonable inferences in favor of the pleader. E.g., E.I. du Pont de Nemours & Co. v. Kolon Indus., 637 F.3d 435, 440 (4th Cir. 2011); see also Iqbal, 556 U.S. at 678 ("[T]he tenet that a court must accept as true all of the allegations . . . is inapplicable to legal conclusions."). Then, it determines whether those presumed-true allegations "contain sufficient factual matter . . . to 'state a claim to relief that isplausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when" it contains "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). The pleading must demonstrate that the pleader's right to relief is more than a mere possibility, but it need not rise to the level of evincing a probability of success. Id. Accordingly, "[d]etermining whether a [pleading] states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679.

DISCUSSION

Rickborn and Cothran appear to agree that South Carolina law governs Rickborn's cross-claim. In South Carolina, "[t]he elements for breach of contract are the existence of the contract, its breach, and the damages caused by such breach." Branche Builders, Inc. v. Coggins, 686 S.E.2d 200, 202 (S.C. Ct. App. 2009) (citing Fuller v. E. Fire & Cas. Ins. Co., 124 S.E.2d 602, 610 (S.C. 1962)).

Rickborn's cross-claim is rooted in the Covenant's implied covenant of good faith and fair dealing.³ Rickborn alleges the Covenant "anticipated" that "Cothran would operate in good faith . . . during Rickborn's pursuit of all available secondary liability and/or underinsured motorist benefits." (Am. Cross-cl., ECF No. 10, at ¶ 34.) She further alleges Cothran "refusedto cooperate" with her⁴ and "unduly interfered" with her efforts "to obtain a final determination" on the availability of other liability insurance benefits. (Id. at ¶¶ 36, 37.) In so doing, Rickborn contends, Cothran breached his implicit contractual duty to treat her fairly and act in good faith.

Although Rickborn does not identify in her pleading how Cothran hindered her pursuit of liability benefits, she does so in her opposition brief: "Cothran has unduly interfered with Rickborn's efforts to pursue liability benefits against Garrison by refusing to make an assignment of his claim to Rickborn." (Mem. Opp'n Mot. Dismiss Cross-cl., ECF No. 21, at 1-2.) Normally, this Court would disregard such an attempt to use briefing to supplement a challenged pleading. See Sadler v. Pella Corp., 146 F. Supp. 3d 734, 759 n.13 (D.S.C. 2015) ("[I]t is axiomatic that the complaint may not be amended by the briefs in opposition to a motion to dismiss . . . ." (citation and internal quotation marks omitted)). Here, however, Rickborn's brief undercuts, rather than supplements, her pleading. As Rickborn states in her brief, the purpose of the Covenant is "to reserve Rickborn's right to make further claims against other policies for uncovered damages while protecting the personal assets of Cothran." (Mem. Opp'n Mot. Dismiss Cross-cl., ECF No. 21, at 5.) One of those personal assets is Cothran's right to sue Garrison if it acts in bad faith toward him in its handling of Rickborn's demand for liability benefits. See, e.g., Nichols v. State Farm Mut. Auto. Ins. Co., 306 S.E.2d 616, 619 (S.C. 1983); Miles v. State Farm Mut. Ins. Co., 120 S.E.2d 217, 220 (S.C. 1961); Tyger River Pine Co. v. Md. Cas. Co., 170 S.E. 346, 348 (S.C. 1933). In the context of third-party liability insurance, such as the policy at issue in this case, the injured third party's entitlement to benefits under the policy isseparate from the at-fault insured right to be treated fairly by his insurer.⁵ See Kleckley v. Nw. Nat. Cas. Co., 526 S.E.2d 218, 220 (2000) ("In South Carolina, our courts have repeatedly held that you must be the named insured to recover for bad faith refusal to pay benefits."). Because Rickborn's benefit of the bargain in the Covenant is her ability to pursue claims for liability and underinsured motorist benefits, Cothran could not have acted in bad faith by refusing to give her an additional, theoretically distinct means of obtaining money from Garrison.

The cross-claim is also problematic in its theory of causation and damages. As mentioned above, Rickborn alleges Cothran

foreseeably caused Rickborn to suffer damages—namely by precluding a final determination of other applicable insurance coverage providing benefits to Rickborn arising out of the injuries and damages sustained in the October 4, 2012 motor vehicle collision and preventing any judgment obtained against Defendant Cothran to be marked and entered as satisfied.

(Am. Cross-cl., ECF No. 10, at ¶ 38.) Neither of those two alleged injuries could plausibly entitle Rickborn to relief. As to the first, Garrison filed this declaratory judgment action for the specific purpose of obtaining a final determination on whether it must pay Rickborn liability benefits. Rickborn has answered Garrison's complaint by alleging "that she is entitled to a declaration that the automobile policy at issue covers her claims and injuries" and asking this Court to make such a declaration. (Am. Cross-cl., ECF No. 10, at ¶ 19 & Prayer for Relief.) The very existence of this declaratory judgment action renders...