Reddick v. Allstate New Jersey Ins. Co.

OLIVIA REDDICK, Plaintiff, v. ALLSTATE NEW JERSEY INSURANCE COMPANY, Defendant

Civ. Action No. 11-365 (KSH)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

Dated: December 16, 2011

NOT FOR PUBLICATION

OPINION

Katharine S. Hayden, U.S.D.J.

I. Introduction

Plaintiff Olivia Reddick ("Plaintiff") filed a class action complaint alleging that defendant Allstate New Jersey Insurance Company ("defendant") has engaged in a practice of refusing to pay replacement costs if an insured party has not completed repairs on or replaced damaged property within 180 days of actual cash value payment. Plaintiff contends that this practice violates the terms of defendant's standard contract with its customers and also runs afoul New Jersey insurance law. Defendant filed a motion to dismiss, asserting that plaintiff's seven counts all fail to state a claim on which relief can be granted.

II. Facts and Procedural History

A. The Pleaded Facts

Plaintiff alleges that in the mid-1990s, defendant implemented a new business model designed to reduce the number of homeowner claims resulting in payment. (Compl. ¶¶ 19-26.)To that end, defendant uses a standard form "throughout the State of New Jersey for insuring dwellings and other structures against loss by fire and other perils." (Id. ¶ 27.) The policy provides that if the insured "do[es] not repair or replace the damaged, destroyed or stolen property, payment will be on an actual cash value basis." (Id. ¶ 32.) However, the policy further provides: "You may make claim for additional payment as described in paragraph c, and paragraph d if applicable, if you repair or replace the damaged, destroyed or stolen covered property within 180 days of the actual cash value payment." (Id.) In paragraph c, the policy provides:

We will make additional payment to reimburse you for cost in excess of actual cash value if you repair, rebuild or replace damaged, destroyed or stolen covered property within 180 days of the actual cash value payment. This additional payment includes the reasonable and necessary expense for treatment or removal and disposal of contaminates, toxins or pollutants as required to complete repair or replacement of that part of a building structure(s) damaged by a covered loss.

(Id.)

Paragraph d provides: "[W]e will make additional payment to reimburse you for cost in excess of actual cash value if you repair, rebuild or replace damaged, destroyed or stolen covered personal property or wall-to-wall carpeting within 180 days of the actual cash value payment." (Id.)

Plaintiff holds property insurance through defendant under this policy. (Id. ¶ 11.) At some unspecified point, her home and some personal property were damaged. (Id.) Defendant paid her the actual cash value of the loss, but because she only undertook and did not complete repair and replacement within 180 days of receiving the actual cash value payment, defendant did not pay her the full replacement value. (Id.)

B. Procedural History

Plaintiff filed a complaint against defendant on January 20, 2011. [D.E. 1.] The complaint contains seven counts: (1) breach of contract (Compl. ¶¶ 40-56); (2) demand for declaratory judgment that defendant's policy only requires repairs or replacements to be initiated, not completed, within 180 days of payment of actual cash value (id. ¶¶ 57-61); (3) breach of a separate and distinct contract formed upon defendant's agreement to pay the actual cash value of the damaged property (id. ¶¶ 62-65); (4) fraud (id. ¶¶ 66-81); (5) breach of fiduciary duty (id. ¶¶ 82-87); (6) violation of the New Jersey Consumer Fraud Act (id. ¶¶ 88-93); and (7) rescission, (id. ¶¶ 94-99).

On March 31, 2011, defendant filed a motion to dismiss. [D.E. 16.]

III. Standard of Review

Federal Rule of Civil Procedure 8(a)(2) provides that a claim for relief must include "a short and plain statement of the claim showing that the pleader is entitled to relief." The Rule "does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Consequently, mere "'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do'" unless the complaint contains "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 556-57, 570).

When deciding whether plaintiff has stated a claim on which relief can be granted, the Court "must accept as true all of the allegations contained in a complaint," provided that they are genuine factual allegations and not masked legal conclusions. Iqbal, 129 S. Ct. at 1949-50. Alegal conclusion "can provide the framework of a complaint," but only if it is "supported by factual allegations." Id. at 1950.

Under Federal Rule of Civil Procedure 9(b), a heightened standard applies to an allegation of fraud. A plaintiff bringing a fraud claim "must state with particularity the circumstances constituting fraud," though "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." A properly-pleaded fraud claim should "ensure that defendants are placed on notice of the 'precise misconduct with which they are charged'" and should "safeguard defendants against spurious charges." Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 645 (3d Cir. 1989) (quoting Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984)).

IV. Discussion

Defendant asserts that the complaint fails to state a claim for relief in each of its seven counts. This Court will address each count individually, but the parties' arguments consistently return to two issues regarding plaintiff's insurance policy with defendant: (1) whether a claimant seeking replacement costs must only begin repairs or replacement within 180 days of receiving actual cash value payment, or whether the claimant must complete those repairs within 180 days; and (2) whether the policy falls short of the minimum requirements for an insurance policy under New Jersey law.

A. Breach of Contract

Defendant argues that for a claimant to obtain replacement payments, the contract requires that she completely repair or replace the property, in whole, within 180 days. Under this interpretation, defendant fully performed its contractual obligations.

1. The Policy Language

Under New Jersey law, the first step in interpreting an insurance contract is to "examine the plain language of the policy," and "if the terms are clear, they 'are to be given their plain, ordinary meaning.'" Pizzulo v. N.J. Manuf. Ins. Co., 196 N.J. 251, 270 (2008) (quoting Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001)). The emphasis on the plain language of the statute is an acknowledgement that "courts should interpret the policy as written and avoid writing a better insurance policy than the one purchased." Id. (quoting President v. Jenkins, 180 N.J. 550, 562 (2004)). If the contract contains an ambiguity, then it should be interpreted "to comport with the reasonable expectations of the insured, even if a close reading of the written text reveals a contrary meaning." Id. at 270-71 (quoting Zacarias, 168 N.J. at 595).

Plaintiff's policy with defendant provides that she is entitled only to actual cash value payment, except that: "You may make claim for additional payment . . . if you repair or replace the damaged, destroyed or stolen covered property within 180 days of the actual cash value payment." (Compl. ¶ 32.) It is undisputed that plaintiff initiated repair and replacement within 180 days, but that she did not finish the repairs and replacements within that timeframe. Defendant argues that plaintiff has failed to state a claim for breach of contract because the contract's plain language indicates that a claimant is not entitled to the "additional payment" unless she fully repairs or replaces the covered property within 180 days of the actual cash value payment.

The complaint alleges that "[a]t the least, said language is ambiguous" and that plaintiff should be permitted to enforce her "reasonable interpretation that repair or replacement must only be undertaken within 180 days of the payment of the actual cash value in order to qualify." (Compl. ¶ 47; see also Pl.'s Br. Opp. Mot. Dismiss 14 ("[I]n the absence of the word 'complete,'the policy language should be interpreted in favor of the insured as required under New Jersey law.")) This allegation, however, is a legal conclusion masquerading as fact, and thus is not entitled to any special deference simply because plaintiff included it in the pleadings. See Iqbal, 129 S. Ct. at 1949.

The policy requires a claimant to "repair or replace the damaged, destroyed or stolen covered property within 180 days of the actual cash value payment." (Compl. ¶ 32.) Plaintiff's interpretation would require this Court to read content into the contract that is not there. The policy does not say that plaintiff must "begin to repair" or "start to repair" within 180 days; the policy says the insured must "repair" or "replace" within that timeframe. The relevant dictionary definition of the word "repair" is "to restore by replacing a part or putting together what is torn or broken," Webster's Third New International Dictionary 1923 (1993), and the relevant dictionary definition of the word "replace" is "to take the place of' or to "serve as a substitute for or successor of," id. at 1925. Accordingly, to attain the replacement costs, plaintiff must "restore" the damaged property within 180 days or find a new item "to take the place of" the old property within 180 days. See Woodhams v. Allstate Fire & Cas. Co., 748 F. Supp. 2d 211, 219 (S.D.N.Y. 2010) (interpreting same policy language in same way).

Plaintiff asserts that in the absence of the word "complete," the policy is ambiguous and should be read in her favor. But...