Velazquez v. State Farm Fire & Cas. Co.

JUDITH VELAZQUEZ, et al., Plaintiffs, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.

CIVIL ACTION NO. 19-cv-3128

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

March 27, 2020

REPORT AND RECOMMENDATION

LYNNE A. SITARSKI UNITED STATES MAGISTRATE JUDGE

Plaintiffs Judith and Fernando Velazquez ("Plaintiffs"), on behalf of themselves and all others similarly situated, filed the instant action against Defendant State Farm Fire and Casualty Company ("Defendant" or "State Farm") for failing to pay certain costs associated with accessing a plumbing line that caused water damage to Plaintiffs' insured property. Presently before the Court is Defendant's Motion to Dismiss. For the following reasons, I respectfully recommend the Motion to Dismiss be granted, the Amended Complaint be dismissed without prejudice, and Plaintiffs be granted leave to amend.

I. BACKGROUND

Plaintiffs purchased a homeowners insurance policy ("the Policy") from Defendant to insure their home. (Am. Compl., ECF No. 14, at ¶¶ 14; Def.'s Mot. Dismiss, Ex. 1, ECF No. 19-2).¹ The Policy covers "accidental direct physical loss to the property . . . except as provided inSection 1 - Losses Not Insured." (Id. at 24). Included in the "Losses Not Insured" were losses caused by "continuous or repeated seepage or leakage of water or steam from a: (1) heating, air condition or automatic fire protective sprinkler system; (2) household appliance; or (3) plumbing system, including from, within or around any shower stall, shower bath, tub installation, or other plumbing fixture, including their walls, ceiling or floors; which occurs over a period of time. If loss to covered property is caused by water or steam not otherwise excluded, we will cover the cost of tearing out and replacing any part of the building necessary to repair the system or appliance." (Id. at 26) (emphasis added).

In August 2015, Defendant notified Plaintiffs of an Endorsement to the Policy that would be effective September 27, 2015. (Def.'s Mot., ECF No. 19-3, at 6). The Endorsement notice summarized the changes providing for a "Potential Reduction in Coverage," explaining that "[a]lthough not intended to change coverage, this change could potentially reduce or eliminate coverage depending on how it is interpreted and, in that regard, should be viewed as either an actual or potential reduction in or elimination of coverage." (Id. at 8). The Endorsement deleted the above-italicized Tear Out provision and added the following: "Tear Out. If a Loss Insured to Coverage A property is caused by water or steam escaping from a system or appliance, we will also pay the reasonable cost you incur to tear out and replace only that particular part of the building or condominium unit owned by you necessary to gain access to the specific point of that system or appliance from which the water or steam escaped. We will not cover the cost of repairing or replacing the system or appliance itself." (Id. at 8).

On September 22, 2018, Plaintiffs suffered an "escape of water from within the Property's plumbing system, resulting in damage to the insured premises which required access to the plumbing line to properly repair the system." (Pls.' Am. Compl., ECF No. 14, at ¶ 30). Plaintiffs timely reported the loss to Defendant and retained a plumber to access and repair the plumbing line. (Id. at ¶¶ 32-35). The plumber's invoice indicated access to repair the broken line cost $6,450. (Id.; see also Ex. C). Plaintiffs allege "State Farm did not pay for the entire access bill." (Am. Compl., ECF No. 14, at ¶ 35).

In their Amended Complaint,² Plaintiffs assert twelve counts against Defendant—six individual counts and six class action counts. (Am. Compl., ECF No. 14, at ¶¶ 47-140). Plaintiffs allege that Defendant engaged in "fraudulent or deceptive conduct" by including the Endorsement in the Policy, in violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. §§ 201-2, et seq. (Counts I and VII); Pennsylvania's Unfair Insurance Practices Act ("UIPA"), 40 P.S. §§ 1171.1, et seq. (Counts II and VIII); and Pennsylvania's Unfair Claims Settlement Practices Administrative Code, 31 Pa. Code §§ 146.1, et seq. (Counts VI and XII). Plaintiffs also bring breach of contract claims (Counts IV and X); and bad faith claims, 42 Pa.C.S. § 8371 (Counts V and XI) related to the Endorsement and Defendant's alleged failure to pay the entire access bill. Plaintiffs lastly request a declaratory judgment under 28 U.S.C. § 2201 that the Endorsement to the Policy is void due to its alleged unconscionability (Counts III and IX).

On November 1, 2019, Defendant filed a Motion to Dismiss the Amended Complaint.(Mot., ECF No. 19). Plaintiffs responded in opposition on November 29, 2019, and Defendant filed a Reply in further Support. (Pls.' Resp., ECF No. 22; Def.'s Reply, ECF No. 23). By Order dated February 5, 2020, the Honorable Nitza I. Quiñones-Alejandro referred this matter to me for a Report and Recommendation. (Order, ECF No. 24).

II. LEGAL STANDARDS

A. Rule 12(b)(6)

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) is governed by the well-established standard set forth in Ashcroft v. Iqbal, 556 U.S. 662 (2009). See Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). "[W]e accept as true all allegations in the plaintiff's complaint as well as all reasonable inferences that can be drawn from them, and we construe them in a light most favorable to the non-movant." Sheridan v. NGK Metals Corp., 609 F.3d 239, 262 n.27 (3d Cir. 2010). "To survive dismissal, 'a complaint must contain sufficient factual matter, accepted as true, to state a claim that is plausible on its face.'" Tatis v. Allied Interstate, LLC, 882 F.3d 422, 426 (3d Cir. 2018) (quoting Iqbal, 556 U.S. at 678). Facial plausibility is "more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Iqbal, 556 U.S. at 678). Rather, "[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." Id. (quoting Iqbal, 556 U.S. at 678).

B. Rule 12(b)(2)

Under Federal Rule of Civil Procedure 12(b)(2), a party may move to dismiss a complaint for lack of personal jurisdiction. Fed. R. Civ. P. 12(b)(2). The court accepts allegations in the complaint as true and draws reasonable inferences in support of the plaintiff.Pinker v. Roche Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002). "A district court sitting in diversity may assert personal jurisdiction over a nonresident party to the extent allowed under the law of the forum state." Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009); Fed. R. Civ. P. 4(k). Pennsylvania's long-arm statute allows courts to exercise personal jurisdiction "to the full extent allowed under the Constitution of the United States." 42 Pa.C.S. § 5322(b). The Constitution's Due Process Clause requires that "minimum contacts" exist between the non-resident and forum state, "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotation marks and citations omitted). Generally, the plaintiff bears the burden of proving personal jurisdiction by a preponderance of the evidence. Control Screening LLC v. Tech. Application & Prod. Co., 687 F.3d 163, 167 (3d Cir. 2012) (quoting Carteret Sav. Bank v. Shushan, 954 F.2d 141, 146 (3d Cir. 1992)).

Two forms of personal jurisdiction exist: general and specific. Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414 (1984). General jurisdiction exists where the defendant's contacts with the forum are "continuous and systematic," even if the cause of action is unrelated to the defendant's activities in the forum state. See id. at 414-16. "Specific jurisdiction is established when a non-resident defendant has 'purposefully directed' his activities at a resident of the forum and the injury arises from or is related to those activities." General Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir. 2001) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)); see also World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980) (discussing personal jurisdiction where "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.").

III. DISCUSSION

In its Motion to Dismiss, Defendant first contends that many of Plaintiffs' individual claims should be dismissed for failure to state a plausible claim. (Mem. Law, ECF No. 19-5, at 2). Defendant also argues that Plaintiffs' request for declaratory judgment should be dismissed because it is duplicative of their breach of contract claim. (Id.). Defendant lastly asserts that Plaintiffs' putative class action claim for breach of contract should be dismissed because the Court lacks personal jurisdiction over non-Pennsylvania residents in the putative class. (Id.). I will address Defendant's arguments in turn.³ For the following reasons, I respectfully recommend that Defendant's Motion to Dismiss be granted, the Amended Complaint be dismissed without prejudice, and Plaintiffs be afforded leave to amend their complaint.

A. Pennsylvania's Unfair Trade Practices and Consumer Protection Law

Defendants first argue that Plaintiffs fail to state a claim under Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 Pa. Cons. Stat. § 201-2. (Def.'s Mem. Law, ECF No. 19-5, at 5). Specifically, Defendant assert (1) Plaintiffs fail to plead the elements under the UTPCPL's catch-all provision; (2) Plaintiffs fail to allege malfeasance as required; and (3) the economic loss doctrine bars Plaintiffs' claim. (Id. at 5-12). Plaintiffs respond that the UTPCPL claim should not be dismissed because they have alleged sufficient facts...