BROWN v. LM GENERAL INSURANCE COMPANY

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CAROL L. BROWN, :

Plaintiff : CIVIL ACTION

LM GENERAL INSURANCE

COMPANY, et al., : No. 21-2134

Defendant :

MEMORANDUM

PRATTER, J. JUNE 7, 2021

Carol Brown alleges she sustained severe physical injuries when another driver fell asleep

behind the wheel and crossed a lane of traffic before striking Ms. Brown’s car. At the time of the

accident, Ms. Brown received insurance coverage under a policy issued by Liberty Mutual.’ The

other driver, however, was uninsured—in violation of Pennsylvania’s Motor Vehicle Financial

Responsibility Law. For this reason, Ms. Brown could not claim—and has not received—any

compensation based on this other driver’s policy. So, Ms. Brown demanded payment of

underinsured motorist benefits from Liberty Mutual under her own policy. Because Liberty

Mutual disagreed that she was entitled to receive the full stacked limits of UIM coverage and

offered only a fraction of what she believes she is legally entitled to, Ms. Brown is suing for a

declaration that she is entitled to those limits, and for breach of contract and statutory bad faith.

Liberty Mutual moves to dismiss the statutory bad faith claim and also. asks the Court to

strike Ms. Brown’s request for compensatory damages in Count III. It also moves to strike her

request for attorney’s fees and costs in Counts I and II and references in the complaint to its alleged

Ms. Brown has named several Liberty Mutual entities in her complaint. The Court collectively

refers to all defendants as “Liberty Mutual.”

“reckless,” “wanton,” and “willful” conduct. For the reasons that follow, the Court grants the

motion to dismiss Count III without prejudice and denies the motion to strike certain allegations.”

BACKGROUND

In the aftermath of the accident, Ms. Brown had to be nanically extracted from her car.

Doc. No. 1 (Compl.) 9 9. She alleges that she suffered severe physical injuries, including, among

other things, a full thickness rotator cuff tear and neurological impairment. Id q 11.

Ms. Brown alleges that she provided notice to Liberty Mutual of her intent to pursue

underinsured motorist benefits. She contends that, notwithstanding that she had previously waived

underinsured motorist benefits, id. J 45, Liberty Mutual did not later seek additional waivers of

coverage when she added new cars to the policy, including the one involved in the accident, id.

49 47-50. For that reason, she maintains that she is entitled to $200,000, representing the full

stacked coverage limits. Liberty Mutual allegedly offered her only $4,500.

LEGAL STANDARDS

A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint. To provide a

defendant with fair notice, a plaintiff must provide “more than labels and conclusions, and a

formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly,

550 U.S. 544, 555 (2007). The Third Circuit Court of Appeals instructs the reviewing court to

conduct a epee analysis. First, any legal conclusions are separated from the well-pleaded

factual allegations and disregarded. Fowler vy. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir.

2009). Second, the court determines whether the facts alleged establish a plausible claim for relief.

Td. at 211.

2 In her response to the motion, Ms. Brown stipulated to the dismissal of her claims for fees, cost of

suit and compensatory damages in Count I (declaratory judgment) and Count II (breach of contract) and

the request for compensatory damages in Count III. Accordingly, the portion of the motion to dismiss these

requests is deemed moot.

To that end, “courts accept all factual allegations as true, construe the complaint in the light

most favorable to the plaintiff, and determine whether, under any reasonable reading of the

complaint, the plaintiff may be entitled to relief.” Jd. at 210. If the court can only infer “the mere

possibility of misconduct,” the complaint has failed to show an entitlement to relief. Jd. (citing

Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)).

Under Rule 12(f), a court “may strike from a pleading an insufficient defense or any

redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “The purpose of

a motion to strike is to clean up the pleadings, streamline litigation, and avoid unnecessary forays

into immaterial matters.” McInerney v. Moyer Lumber & Hardware, Inc., 244 F. Supp. 2d 393,

402 (E.D. Pa. 2002). Motions to strike are generally disfavored.

DISCUSSION

I. Motion to Dismiss Count III

Liberty Mutual moves to dismiss Count III of the Complaint, in which Ms. Brown alleges

statutory bad faith by an insurer. 42 Pa. C.S. § 8371. It contends that the Complaint lacks the

particularity required to state a claim and contains only conclusory allegations of bad faith. The

Court must agree.

Under Pennsylvania law, to recover on a bad faith action against an insurer, a plaintiff must

establish by clear and convincing evidence both “(1) that the insurer did not have a reasonable

basis for denying benefits under the policy and (2) that the insurer knew or recklessly disregarded

its lack of a reasonable basis.” Rancosky v. Washington Nat’l Ins. Co., 170 A.3d 364, 377 (Pa.

2017); 42 Pa. C.S. § 8371. The Third Circuit Court of Appeals has expressed that “mere

negligence or bad judgment is not bad faith.” Canfield v. Amica Mut. Ins. Co., No. CV 20-2794,

2020 WL 5878261, at *4 (E.D. Pa. Oct. 2, 2020) (quoting Nw. Mut. Life Ins. Co. v. Babayan, 430

F.3d 121, 137 (3d Cir. 2005)). Rather, bad faith in this context means a “frivolous or unfounded

refusal to pay proceeds of a policy . . . a breach of a known duty . . . through some motive of self-

interest or ill will.” Babayan, 430 F.3d at 137.

The complaint, in its current iteration, fails to detail Liberty Mutual’s conduct that would

support a bad faith claim. Ms. Brown alleges that Liberty Mutual “has devised a scheme of

depriving insured of benefits and unreasonably delaying payment of benefits for the purpose of

furthering their financial gains.” Compl. § 102. To be sure, “[d]elay is a relevant factor in

determining whether bad faith has occurred.” Volgrafv. Garrison Prop. & Cas. Ins. Co., No. CV

21-1394, 2021 WL 1427337, at *2 (E.D. Pa. Apr. 15, 2021) (citing Padilla v. State Farm Mut.

Auto. Ins. Co., 31 F. Supp. 3d 671, 676 n.8 (E.D. Pa. 2014)). Although this complaint alleges the

accident took place in January 2020, it does not allege when Ms. Brown noticed her intent to seek

UIM coverage or when Liberty Mutual transmitted its offer. So, the complaint fails to plead the

length of the alleged delay, let alone whether it was unreasonable. See Krantz v. Peerless Indem.

Ins. Co., No. 18-CV-3450, 2019 WL 1123150, at *4 (E.D. Pa. Mar. 12, 2019) (dismissing bad

faith claim without prejudice where plaintiff failed to offer facts to show a delay in payment).

District courts in this Circuit, including this Court, “have routinely dismissed bad faith

claims reciting only ‘bare-bones’ conclusory allegations unsupported by facts sufficient to raise

the claims to a level of plausibility.” Satterfield v. Gov’t Ins. Emps. Co., No. CV 20-1400, 2020

WL 7229763, at *2 (E.D. Pa. Dec. 8, 2020) (collecting cases), There are no allegations that Ms.

Brown timely submitted her demand, that Liberty Mutual unreasonably investigated, or failed to

investigate. At most, the complaint alleges that Ms. Brown sustained severe physical injuries, such

that Liberty Mutual’s offer of only $4,500 was facially unreasonable.

.

But the pleadings must provide sufficient allegations from which the Court can plausibly

infer that Liberty Mutual knew or recklessly disregarded a lack of a reasonable basis to deny

benefits. See Pasqualino v. State Farm Mut. Auto. Ins. Co., No. CIV.A. 15-0077, 2015 WL

3444288, at *5 (E.D. Pa. May 28, 2015). This appears to be a “normal dispute between an insured

and insurer over the value of a UIM claim” which is itself predicated on a dispute over

Ms. Brown’s entitlement to stacked coverage limits. Smith v. State Farm Mut. Auto. Ins. Co., 506

F. App’x 133, 137 Gd Cir. 2012) (citing Johnson v. Progressive Ins. Co., 987 A.2d 781, 785 (Pa.

Super. Ct. 2009) (an insurer’s “failure to immediately accede to a demand for the policy limit

cannot, without more, amount to bad faith”). Indeed, the complaint itself alleges that Ms. Brown

had initially waived coverage of stacked UIM benefits pursuant to Pennsylvania’s Motor Vehicle

Financial Responsibility Law. Compl. § 21; 76 Pa C.S.A. § 1738. The complaint alleges that

Liberty Mutual subsequently failed to request obtain additional waivers of coverage from

Ms. Brown and the other policyholder on the policy. Compl. §§ 23-33. The claim to coverage

thus is a live dispute that motivates both the declaratory judgment and breach of contract claims.

An insurer’s refusal to pay the policy limit when it disputes that the insured is entitled to any such

coverage at all is not evidence of unreasonable conduct that would support a bad faith claim.

Nor, for that matter, is Liberty Mutual’s “low-ball” offer alone necessarily bad faith.

Canfield y. Amica Mut. Ins. Co., No. CV 20-2794, 2020 WL 5878261, at *4 (E.D. Pa. Oct. 2,

2020). The complaint contains no allegations that Ms. Brown submitted documentation of the

extent of her injuries to support her position such that she is entitled to the policy limit. A policy

limit is just that—the ultimate maximum that an insured could theoretically recover. It is not the

de facto value of a claim.

When a complaint is subject to a Rule 12(b)(6) dismissal, the Court must permit a curative

amendment unless to do so would be futile or inequitable. Alston v. Parker, 363 F.3d 229, 235

(3d Cir. 2004). Because it is possible that Ms. Brown can flesh out her pleadings with more than

conclusory statements alleging bad faith, the Court will dismiss Count III but with leave to file an

amended complaint that addresses the deficiencies outlined in this Memorandum.

II. Motion to Strike Allegations of “Reckless,” “Wanton,” and “Willful” Conduct

Finally, Liberty Mutual moves to “dismiss” all references to its conduct as “reckless”,

“wanton” and “willful” in the declaratory judgment and breach of contract claims. It so moves on

the grounds that there are no facts to support these colorful adjectives nor do they supposedly

substantively add to the pleadings. Because Liberty Mutual asks the Court to remove references

to allegations in the complaint rather than to dismiss a claim, the Court construes the request as a

motion to strike.

“Striking a pleading or a portion of a pleading is a drastic remedy to be resorted to only

when required for the purposes of justice.” Champ v. USAA Cas. Ins. Co., No. 5:20-CV-01238,

2020 WL 1694372, at *2 (E.D. Pa. Apr. 7, 2020) (internal citations omitted). To sustain her breach

of contract claim, Ms. Brown must allege (1) the existence of a contract and its essential terms; (2)

a breach of a duty imposed by that contract; and (3) resulting damages. Ms. Brown is not required

to show that Liberty Mutual acted recklessly, willfully, or wantonly. True, such language might

support a claim for punitive damages. But “[t]he law in Pennsylvania has always been that punitive

damages cannot be recovered for breach of contract.” Smith v. Harleysville Ins. Co., 418 A.2d

705, 706 (Pa. Super. Ct. 1980), aff'd, 431 A.2d 974 (1981). So, Liberty Mutual is correct that such

allegations are irrelevant and immaterial to whether Ms. Brown pleads a breach of contract claim.

But, to the extent the complaint incorporates by reference claims of reckless, willful, and

wanton conduct into Count III, evidence of such conduct may be material and relevant there. The

Court has granted leave to amend that claim. Moreover, a motion to strike allegations is not

equivalent to a motion to dismiss for failure to state a claim. The Court discerns no real prejudice

to Liberty Mutual with the inclusion of these modifiers that would warrant the extreme relief

Liberty Mutual requests.

CONCLUSION

For the reasons set out in this Memorandum, the Court grants in part Defendants’ motion:

to dismiss Count III without prejudice. The Court denies Defendants’ motion to strike references

to alleged “reckless,” “willful” and “wanton” conduct in Counts I and II. An appropriate order

follows.

BY he OURTs

AKC PRATTER

UNITED STATES DISTRICT JUDGE