Atlantis Car Care Inc v. The Travelers Indemnity Company of America

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF OKLAHOMA

ATLANTIS CAR CARE, INC., )

)

Plaintiff, )

)

vs. ) Case No. CIV-19-524-D

)

THE PHOENIX INSURANCE )

COMPANY, )

)

Defendant. )

O R D E R

Before the Court is Defendant’s Motion to Dismiss [Doc. No. 18], filed pursuant to

Fed. R. Civ. P. 12(b)(6). Defendant seeks only a partial dismissal of the Second Amended

Complaint [Doc. No. 12], asserting that Plaintiff fails to state a tort claim under Oklahoma

law for bad faith conduct by Defendant in handling Plaintiff’s insurance claim.1

Plaintiff has responded [Doc. No. 21] in opposition to the Motion, and Defendant

has replied [Doc. No. 22]. Thus, the Motion is fully briefed and ripe for decision.

1 Defendant also purports to seek dismissal of a claim for punitive damages. However,

a request for punitive damages constitutes a prayer for relief, not a separate cause of action. See

Coll v. First Am. Title Ins. Co., 642 F.3d 876, 901 (10th Cir. 2011) (“the prayer for relief is no part

of the cause of action and . . . the parties are entitled to such relief and to such judgment as the

complaint . . . makes out”) (internal quotation omitted); Schoonover v. Schoonover, 172 F.2d 526,

530 (10th Cir. 1949) (same). A Rule 12(b)(6) motion tests the sufficiency of a claim; it is not a

proper mechanism for challenging a request for punitive damages. See Douglas v. Miller, 864

F.Supp.2d 1205, 1220 (W.D. Okla. 2012) (“[W]hether [punitive] damages are recoverable is not a

proper subject for adjudication in a Rule 12(b)(6) motion, as the prayer for relief is not a part of

the cause of action.”); see also Dingxi Longhai Dairy, Ltd. v. Becwood Tech. Grp. L.L.C., 635 F.3d

1106, 1108 (8th Cir. 2011); 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and

Procedure § 1255 at 508-09 (3d ed. 2004); Fed. R. Civ. P. 54(c) (judgment “should grant the relief

to which each party is entitled”).

Factual and Procedural Background

Plaintiff brings this action to recover damages for breach of contract and bad faith

based on allegations that Defendant, as its property insurer, unreasonably failed to timely

investigate, adjust, and pay an insurance claim for covered hail damage to Plaintiff’s

property. By its Motion, Defendant asserts that the Second Amended Complaint fails to

state a plausible claim of insurer’s bad faith under federal pleading standards. Plaintiff

contends the factual allegations of the Second Amended Complaint are sufficient but,

alternatively, requests leave to amend its pleading if the Court finds a deficiency.2

Standard of Decision

“To survive a motion to dismiss [under Rule 12(b)(6)], 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 (2009) (quoting Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 570 (2007)); see Robbins v. Oklahoma, 519 F. 3d 1242, 1247 (10th

Cir. 2008). “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. 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.” See id. at 679. Thus, for example,

“[a] simple negligence action based on an automobile accident may require little more than

the allegation that the defendant negligently struck the plaintiff with his car while crossing

2 Prior amendments of the Complaint were made only to identify the proper defendant.

a particular highway on a specified date and time.” Robbins, 519 F.3d at 1248. The

question to be decided is “whether the complaint sufficiently alleges facts supporting all

the elements necessary to establish an entitlement to relief under the legal theory

proposed.” Lane v. Simon, 495 F.3d 1182, 1186 (10th Cir. 2007) (internal quotation

omitted).

Plaintiff’s Allegations

Accepting the allegations of the Second Amended Complaint as true, Defendant

issued an insurance policy to Plaintiff for a commercial property in Norman, Oklahoma,

that sustained hail damage on June 7, 2018. The damage was a covered loss under the

policy, and Plaintiff timely submitted a claim to Defendant for the loss. However,

Defendant failed to properly investigate and evaluate the claim, and breached the insurance

contract by offering to pay for only a partial roof repair. “Defendant’s own investigation

demonstrated that such a repair could not be completed and that a complete roof

replacement was necessary.” See Second Am. Compl. ¶¶ 15, 17. Plaintiff explains

more specifically as follows:

[T]he evidence gathered during the claim investigation demonstrated that

Defendant’s proposed partial parapet wall repair could not be done due to the

age and condition of the roof. In the face of this evidence, Defendant took

the unreasonable position that it didn’t matter, and stated that Plaintiff should

just find a different roofer that was willing to make the improper repair

anyway.

Id. Further, Defendant “refus[ed] to consider additional information provided by

Plaintiff’s roofing contractor regarding the infeasibility and unreasonableness of

Defendant’s proposed parapet wall repair.” Id.

Discussion

Defendant contends Plaintiff’s allegations are conclusory and provide insufficient

facts to state a claim of insurer’s bad faith. Defendant argues that the Second Amended

Complaint merely “demonstrate[s] a difference of opinion where [Plaintiff’s] roofer and

[Defendant] disagreed on the repairs necessary[;] simply making a conclusory statement

that Defendant’s position is unreasonable does not establish bad faith.” See Def.’s Mot.

Dismiss [Doc. No. 18] at 5.3

To establish a breach of Defendant’s duty of good faith and fair dealing with its

insured, Plaintiff must show that Defendant breached the insurance contract and, in so

doing, acted in a manner constituting bad faith. See Brown v. Patel, 157 P.3d 117, 121

(Okla. 2007); Badillo v. Mid Century Ins. Co., 121 P.3d 1080, 1093 (Okla. 2005).

Although an insurer may reasonably refuse to pay a disputed claim, “a legitimate dispute

as to coverage will not act as an impenetrable shield against a valid claim of bad faith;” for

example, an inadequate investigation of a claim may permit a finding that the insurer acted

unreasonably and in bad faith. See Timberlake Const. Co. v. U.S. Fidelity & Guar. Co.,

3 Defendant relies on two unpublished opinions and submits copies with its Motion [Doc.

Nos. 18-1 and 18-2]. The Court finds neither to be persuasive. In Coonce v. CSAA Fire and

Casualty Insurance Co., 748 F.3d 782, 785 (10th Cir. 2018), the dismissal of a bad faith claim was

affirmed because the plaintiff failed to allege a plausible claim for coverage and “when a court

concludes there was no breach of an insurance policy, it follows a company’s denial of coverage

was not unreasonable.” In Rivera v. Hartford Insurance Co., No. CIV-14-1082-HE, 2014 WL

7335320, *4 (W.D. Okla. Dec. 19, 2014), the plaintiffs made conclusory allegations that the

insurer’s “investigation was ‘outcome oriented’ rather than ‘fair and objective,’ but offer[ed] no

specifics other than their disagreement with the policy benefits they received;” the bad faith claim

was dismissed with leave to amend.

71 F.3d 335, 343, 345 (10th Cir. 1995); see also Bannister v. State Farm Mut. Auto. Ins.

Co., 692 F.3d 1117, 1127-28 (10th Cir. 2012).

Upon examination of the Second Amended Complaint, the Court finds the

sufficiency of Plaintiff’s allegations to state a plausible claim presents a close question.

In the Court’s view, however, the Second Amended Complaint contains factual allegations

that show more than a disagreement between the parties in the adjustment of Plaintiff’s

insurance claim. Plaintiff alleges that Defendant demanded a partial roof repair that could

not actually be completed, and that Defendant refused to consider evidence that a total roof

replacement was necessary. These allegations may be enough, if proven, to establish a

breach of Defendant’s duty to deal fairly and in good faith with its insured.

Under the current application of Rule 12(b)(6), the notice pleading standard of

“Rule 8(a)(2) still lives.” Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir.

2012). “Specific facts are not necessary; the statement need only ‘give the defendant fair

notice of what the . . . claim is and the grounds upon which it rests.’” Erickson v. Pardus,

551 U.S. 89, 93 (quoting Twombly, 550 U.S. at 555). In this case, the Court finds

minimally sufficient factual allegations to state a claim of insurer’s bad faith and, therefore,

dismissal of Plaintiff’s tort claim is not warranted.

IT IS THEREFORE ORDERED that Defendant’s Motion to Dismiss [Doc. No. 18]

is DENIED.

IT IS SO ORDERED this 19" day of August 2019.

\ i 0 Ot

TIMOTHY D. DeGIUSTI

Chief United States District Judge