McDonough v. State Farm Fire & Cas. Co.

365 F.Supp.3d 552

Richard B. MCDONOUGH, Plaintiff,

v.STATE FARM FIRE AND CASUALTY COMPANY, Defendant.

No. 5:18-cv-02247

United States District Court, E.D. Pennsylvania.

Filed February 7, 2019

Steven F. Marino, Joseph Auddino, Marino Associates, Philadelphia, PA, for Plaintiff.

Lori C. Miller, Goldberg Miller & Rubin PC, Louis E. Bricklin, Bennett Bricklin & Saltzburg LLC, Philadelphia, PA, for Defendant.

OPINION

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

I. INTRODUCTION

The Plaintiff, an injured driver, has brought this action against his automobile insurer based on a dispute regarding payment of underinsured motorist benefits arising from a motor vehicle accident. Claims for breach of contract, statutory and common law bad faith, and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law have been asserted. The insurer has moved to dismiss the bad faith and Unfair Trade Practices and Consumer Protection Law claims under Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth below, the partial motion to dismiss is granted.

II. BACKGROUND¹

On May 22, 2014, at around 6:55 a.m., after running a stop sign, Chad Sweigart's Jeep Cherokee struck Plaintiff Richard McDonough's Pontiac Sunfire as he proceeded through the intersection of Lebanon Road and Elizabeth Town Road in Manheim, Pennsylvania.

As a result of the accident, McDonough suffered serious injuries to his neck and spine. He was taken to Heart of Lancaster Regional Medical Center by ambulance where he underwent conservative treatment involving physical therapy, anti-inflammatory, and pain medication. This initial treatment proved ineffective. McDonough received subsequent medical treatment for his injuries and underwent two surgeries to remedy his spinal injury caused by the accident. Because of his injuries an economist estimated that McDonough lost past and future earnings and past and future fringe benefits equal to $ 620,631.

Donegal Insurance Group insured Sweigart for bodily injury liability with a policy limit of $ 100,000. Donegal offered McDonough the full policy amount of $ 100,000 to settle the claim for personal injury and loss stemming from the accident. McDonough requested consent to this settlement from his own insurer, Defendant State Farm Fire and Casualty Company, as required by the State Farm policy. State Farm provided its consent. The Donegal insurance coverage, however, was allegedly insufficient to compensate McDonough for his losses and damages.

After settling with Sweigart and Donegal, McDonough filed a demand with State Farm to collect underinsured benefits to the extent of the underinsured coverage limits of $ 300,000. State Farm denied McDonough's request for the full $ 300,000 and counter-offered with $ 12,460.76 to settle his claim. Despite repeated requests, State Farm refused to pay McDonough the full amount of the State Farm policy limit.

After McDonough initiated this suit in the Court of Common Pleas of Philadelphia County, State Farm removed this action from state court to the District Court for the Eastern District of Pennsylvania. McDonough asserts the following claims against State Farm: statutory bad faith under 42 Pa. Cons. Stat. § 8371 (Count I); common law bad faith (Count II); breach of contract (Count III); and violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Law (UTPCPL), 73 P.S. §§ 2-201– 201-9.3 (Count IV). State Farm moves pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss the claims for bad faith and violation of the UTPCPL.

III. LEGAL STANDARDS

Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss a complaint for its "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The Rules generally demand "only a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the claim is and the grounds upon which it rests." Connelly v. Lane Constr. Corp. , 809 F.3d 780, 786 (3d Cir. 2016) (citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotations omitted) ).

"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 ). In rendering a decision 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 , 515 F.3d at 233 (quoting Pinker v. Roche Holdings Ltd. , 292 F.3d 361, 374 n.7 (3d Cir. 2002) (internal quotations omitted) ). 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 Twombly , 550 U.S. at 555, 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." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. 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. 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) ).

IV. ANALYSIS²

A. Count I: Statutory Bad Faith

Count I of the complaint alleges a claim for statutory bad faith. McDonough's allegations of bad faith are numerous. They include that State Farm refused to "fairly and equitably determine the value of damages" and that its "refusal to pay to the plaintiff the value of damages ... is without a reasonable basis and in bad faith." However, McDonough has not stated a plausible statutory bad faith claim because his allegations are not supported by specific facts. Therefore, State Farm's motion to dismiss the statutory bad faith claim is granted.

The Pennsylvania Consolidated Statutes provides a cause of action for bad faith against an insurer. 42 Pa. Cons. Stat. § 8371. Courts in the Commonwealth have defined bad faith as "any frivolous or unfounded refusal to pay proceeds of a policy." Grossi v. Travelers Pers. Ins. Co. , 79 A.3d 1141, 1148 (Pa. Super. Ct. 2013) (citing Terletsky v. Prudential Prop. & Cas. Ins. Co. , 437 Pa.Super. 108, 649 A.2d 680, 688 (1994) ). To succeed on a bad faith claim under § 8371, a "plaintiff must present clear and convincing evidence (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis." Rancosky v. Wash. Nat'l Ins. Co. , 642 Pa. 153, 170 A.3d 364, 365 (Pa. 2017) ; see also Zurich Am. Ins. Co. v. FTS USA, LLC , 325 F.Supp.3d 618, 630 (E.D. Pa. 2018). For these fact-specific claims, "[a] plaintiff must plead specific facts as evidence of bad faith and cannot rely on conclusory statements." Toner v. GEICO Ins. Co. , 262 F.Supp.3d 200, 208 (E.D. Pa. 2017) (citing Smith v. State Farm Mut. Auto. Ins. Co. , 506 F. App'x 133, 136 (3d Cir. 2012) (affirming the dismissal of an insurance bad faith claim that pled conclusory statements without facts) ). "A plaintiff cannot merely say that an insurer acted unfairly, but instead must describe with specificity what was unfair." Toner , 262 F.Supp.3d at 208.

Here, McDonough's complaint fails to state a plausible statutory bad faith claim. He alleges no factual content indicating that State Farm lacked a reasonable basis for its tendered offer or that it knew or recklessly disregarded a lack of reasonable basis for the offer. Rather, McDonough makes conclusory statements that State Farm unreasonably withheld the payment of underinsured motorist benefits under the policy, failed to make a reasonable offer of settlement, presented a low offer of settlement, failed to engage in good faith negotiations, presented an offer of less than the amount due in an attempt to compel him to institute litigation, and failed to perform an adequate investigation of the value of his claim for underinsured motorist benefits.

Allegations like those McDonough makes in his complaint must be supported by specific facts illustrating where and how State Farm's conduct indicated bad faith. See Toner , 262 F.Supp.3d at 209 ; Atiyeh v. Nat'l Fire Ins. Co. , 742 F.Supp.2d 591, 600 (E.D. Pa. 2010). That there was a disagreement over the settlement amount is not unusual. See Johnson v. Progressive Ins. Co. , 987 A.2d 781, 785 (Pa. Super. Ct. 2009) ("The underlying facts involve nothing more than a normal dispute between an insured and insurer over the value of an [underinsured motorist] claim. The scenario under consideration occurs routinely in the processing of an insurance claim."). Moreover, State Farm's "failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith." Smith , 506 F. App'x at 137.

For those reasons, McDonough has not presented factual statements that would state a plausible claim of bad faith under § 8371. Accordingly, Count I is dismissed.

B. Count II: Common Law Bad Faith

Count II of the complaint alleges a claim for common law bad faith against State Farm. The basis of this claim is the "common law duty to act with good faith and fair dealing towards its insured ... within [ ] the meaning of the automobile insurance polic[y]." Compl. ¶ 79, ECF No. 1. McDonough's allegations of common law bad faith mirror those...