Kurtz v. Westfield Ins.

610 F.Supp.3d 703

Jay M. KURTZ, Plaintiff,

v.WESTFIELD INSURANCE, Defendant.

No. 5:22-cv-1526

United States District Court, E.D. Pennsylvania.

Signed July 8, 2022

William Richard Allen Rush, Rush Law Group, Reading, PA, for Plaintiff.

Joseph F. McNulty, Jr., Fowler Hirtzel McNulty & Spaulding, LLP, Allentown, PA, Matthew Vodzak, Fowler Hirtzel McNulty, Philadelphia, PA, for Defendant.

OPINION

Defendant's Motion to Dismiss, ECF No. 8 – Granted

Joseph F. Leeson, Jr., United States District Judge

I. INTRODUCTION

This case involves an underinsured motorist claim brought by Jay M. Kurtz. Specifically, Kurtz alleges his insurer, Westfield Insurance, committed a breach of contract (UIM Claim) and violated the covenant of good faith and fair dealing (Bad Faith Claim) when it denied his request for underinsured motorist (UIM) benefits.

Kurtz suffered severe injuries in a car accident caused by Becker, another driver. Kurtz brought a lawsuit against Becker and agreed to a high/low arbitration with Becker's insurer, Allstate Insurance Company. Kurtz received an arbitration award of $40,000, which was below Becker's policy limit of $50,000.

Kurtz alleges now that he suffered damages that exceed what was determined in arbitration. Thus, Kurtz argues that he is entitled to recover UIM benefits from his own insurer, Westfield. Westfield, however, rejected his request for UIM benefits.

The motion before this Court is a motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Rule 12(b)(6). See Mot., ECF No. 8. The Court grants the Motion because the arbitration award estops Kurtz from relitigating the amount of his damages from the accident with Becker under the doctrine of issue preclusion.

II. BACKGROUND¹

Kurtz is a resident of Pennsylvania, and his insurer, Westfield, is an insurance company with its principal place of business in Ohio. See Am. Compl. ¶¶ 2–3, ECF No. 6. Kurtz operated a motor vehicle owned by him and insured pursuant to an automobile policy with Westfield. See id. ¶ 6. The automobile insurance policy includes a UIM provision.

Kurtz was involved in a car accident with Becker. See id. ¶ 10. As a result, Kurtz sustained serious injuries. See id. ¶ 14. To treat these injuries, Kurtz has received medical attention and incurred various expenses. See id. ¶ 16. He has also suffered a loss of earning capacity. See id. ¶ 17.

Kurtz brought suit against Becker in the Court of Common Pleas of Berks County (the Becker suit). See Mot., Ex. B. During the litigation against Becker, Kurtz repeatedly requested that Westfield treat the matter as a UIM case pursuant to its policy because he believed Becker's insurance policy with Allstate was insufficient to compensate him for his injuries. See Am. Compl. ¶ 19. However, Westfield denied Kurtz's request and eventually notified Kurtz that it would not be renewing his policy. See id. ¶ 21.

By the time the Becker suit was ready for trial, Becker had been deemed mentally incompetent to provide deposition or trial testimony. See id. ¶ 23. Kurtz therefore agreed to a high/low arbitration with Becker's insurer, Allstate, where the high figure equaled the limits of the Becker/Allstate policy. See id. Becker acknowledged that he was at fault. Therefore, the only issue to determine in arbitration was the amount of Kurtz's damages. Ultimately, Kurtz received an arbitral award in the amount of $40,000, which was below Becker's policy limit of $50,000. See id. ¶ 24. Pursuant to the high/low agreement, Kurtz did not appeal the award. See id.

Following the Becker suit, Kurtz demanded the full underinsured limits from Westfield. See id. ¶ 27. Kurtz provided all his medical records, other documentation, and information requested by Westfield. See id. ¶ 28. However, Westfield denied Kurtz's claim for UIM benefits. See id. ¶ 29.

Kurtz filed a complaint in this Court against Westfield, alleging both Breach of Contract and Violation of Good Faith and Fair Dealing. See Compl., ECF No. 1. Westfield filed a motion to dismiss for failure to state a claim. See ECF No. 5. Kurtz then filed the Amended Complaint against Westfield, again alleging that he is entitled to UIM benefits under his policy with Westfield and that Westfield denied his request in bad faith. See Am. Compl. Westfield filed a second Motion to Dismiss for failure to state a claim in response to Kurtz's Amended Complaint. See Mot. Kurtz filed a Response in opposition to the Motion. See Resp., ECF No. 9. Finally, Westfield filed a Reply Brief in support of its Motion to Dismiss. See Reply, ECF No. 10.

III. LEGAL STANDARD

Under Rule 12(b)(6), a defendant may make a motion to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). When ruling on a motion to dismiss, this Court must "accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff." Phillips v. County of Allegheny , 515 F.3d 224, 233 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd. , 292 F.3d 361, 374 n.7 (3d Cir. 2002) ) (cleaned up). Only if "the ‘[f]actual allegations ... raise a right to relief above the speculative level’ " has the plaintiff stated a plausible claim. Id. at 234 (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 540, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "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." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. (explaining that determining "whether a complaint states a plausible claim for relief ... [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense"). The defendant bears the burden of demonstrating that a plaintiff has failed to state a claim upon which relief can be granted. See Hedges v. United States , 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc. , 926 F.2d 1406, 1409 (3d Cir. 1991) ). Additionally, when ruling on a motion to dismiss, the Court may "consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputed authentic documents if the complainant's claims are based upon these documents." Mayer v. Belichick , 605 F. 3d 223, 230 (3d Cir. 2010).

IV. ANALYSIS

Westfield argues that the arbitral award from the Becker suit has a preclusive effect to estop Kurtz from claiming before this Court that his damages exceed $40,000. Westfield argues further that since Kurtz's damages do not exceed $40,000, he is not entitled to UIM benefits under the policy because Becker's policy limits were $50,000. Westfield argues therefore that Kurtz's claim of bad faith should be dismissed because it is not bad faith to deny a claim that Kurtz is not entitled to. Kurtz argues that the Becker suit does not preclude him from relitigating the issue of his damages in this case and that he has sufficiently pled a bad faith claim.

The Court first addresses whether the Becker suit estops Kurtz from bringing his UIM Claim, concluding that the issue of damages is precluded by the Becker suit. The Court then briefly addresses Kurtz's Bad Faith Claim, concluding that it fails as a matter of law because Kurtz was not entitled to UIM benefits. Finally, the Court discusses why it dismisses the Amended Complaint with prejudice instead of without prejudice.

a. The Becker suit estops Kurtz from relitigating the issue of damages.

"Under Pennsylvania law, the following conditions must be satisfied for collateral estoppel to bar a subsequent claim: (1) the issue decided in the prior case must be identical to the one presented in the later case; (2) there was a final judgment on the merits in the prior action; (3) the party against whom collateral estoppel is asserted was a party to the prior action, or is in privity with a party to the prior action; and (4) the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior action." Nationwide Mut. Fire Ins. Co. v. George V. Hamilton, Inc. , 571 F.3d 299, 310 (3d Cir. 2009) (cleaned up). Sometimes, Pennsylvania courts "add a fifth element, namely, that resolution of the issue in the prior proceeding was essential to the judgment." In re Appeal of Coatesville Area Sch. Dist., ––– Pa. ––––, 244 A.3d 373, 379 (2021) (citing Off. of Disciplinary Couns. v. Kiesewetter , 585 Pa. 477, 889 A.2d 47, 50–51 (2021) ).

The Court applies each of the five factors below, concluding that each of them are met. It then discusses case law that applies issue preclusion to similar cases and distinguishes this case from several cases that Kurtz cites to in support.

i. Kurtz had a full and fair opportunity to litigate the issue of damages.

Since Kurtz concedes that "the first three elements of collateral estoppel have been met," Resp. 6, the Court first discusses the fourth element—that Kurtz had a full and fair opportunity to litigate the issue of damages in the Becker suit.

It is presumed that parties have a full and fair opportunity to litigate an issue whenever proceedings satisfy the minimum procedural requirements of the Fourteenth Amendment's Due Process Clause. See Kremer v. Chem. Const. Corp. , 456 U.S. 461, 481, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982) The Third Circuit has identified the following as elements essential to due process: "(1) notice; (2) a neutral arbiter; (3) an opportunity to make an oral presentation; (4) a means of presenting evidence; (5) an opportunity to cross-examine witnesses or to respond to written evidence; (6) the right to be represented by counsel; and (7) a decision based on the record with a statement of reasons for the result." Di Loreto v. Costigan , ...