The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
PITTSBURGH
DUBBS DRED, INC., DUBBS DRED II, )
INC., )
) 2:23-CV-01659-MJH
Plaintiffs, )
)
vs. )
)
)
AUTO-OWNERS INSURANCE
)
COMPANY,
Defendant,
OPINION AND ORDER
Plaintiffs, Dubbs Dred, Inc. and Dubbs Dred II, Inc. (collectively “Dubbs Dred”), bring
the within action against Defendant, Auto-Owners Insurance Company, concerning its alleged
refusal to fully compensate Plaintiffs for weather-related damage under Defendant’s insurance
policy. (ECF No. 10). Dubbs Dred avers claims for Breach of Contract (Count I) and Statutory
Bad Faith under 42 Pa.C.S. § 8371 (Count II). Pursuant to Fed. R. Civ. P. 12(b)(6), Auto-
Owners moves to dismiss Dubbs Dred’s Bad Faith claim. (ECF No. 12).
Upon consideration of Dubbs Dred’s Amended Complaint (ECF No. 10), Auto-Owners’
Motion to Dismiss (ECF No. 12), the respective briefs (ECF Nos. 13, 17, and 18), and for the
following reasons, Auto-Owners’ Motion will be denied.
I. Background
Dubbs Dred avers it owns a golf course located within Butler County, Pennsylvania and
it maintains an insurance policy through Auto-Owners. (ECF No. 10 at ¶ 7). On October 21,
2021, Dubbs Dred alleges a severe windstorm, including a tornado, caused the following
damages:
damage to the roof of the Club House, including but not limited to the attached
silo storage structure; damage to the Tea House and pavilion located on the
Property; damage to the bridges, golf cart paths, and golf carts on the Property;
loss of income; substantial debris; and damage to the golf course grounds,
including but not limited to the greens, tees, and fairways.
Id. at ¶¶ 8, 15. The following day, Dubbs Dredd notified Auto-Owners, who sent a representative
a few days later to inspect the damage. Id. at ¶¶ 9-10.
During Auto-Owners’s inspection, Dubbs Dred alleges the representative did not inspect
the roof, other than from the ground, and concluded: (1) that it should simply be “patched up,”
(2) there was no need to match the green shingles, saying “put anything up there, ‘AO’ is not
responsible to match shingles” and (3) that the Plaintiffs should “wait until it leaks” to report it.
Id. at ¶ 10. Dubbs Dred avers that, contrary to Auto-Owners’s preliminary estimates of damage
to the roof, nearly every shingle tab was broken, and, during the first rainfall following the
October 21, 2021, the roof leaked. Id. Thereafter, Dubbs Dred alleges it obtained six quotes for
the damaged Club House roof, and the quoting contractors would not guarantee the roof unless it
was fully replaced due the damaged shingle tabs dislodged from the tornado. Id. at ¶ 11. Auto-
Owners allegedly offered One Thousand and Three Hundred dollars ($1,300) to repair the Club
House Roof. Id. Eventually, Dubbs Dred expended Sixty-Two Thousand dollars ($62,000.00)
for repairs to the Clubhouse Roof. Id.
With regard to tree damages, Dubbs Dred alleges that Auto-Owners waited five months
to send an “arborist” to assess the damage to 81 trees on the property. Id. at ¶ 12. Auto-
Owners alleges said “arborist” lacked the requisite credentials. Id. Dubbs Dred avers that Auto-
Owners rejected offers to have a local “arborist” review the property to expedite the assessment.
Id. Auto-Owners allegedly paid Seventy-Five Thousand Dollars ($75,000.00) on the claim, but
Dubbs Dred alleges that it accrued Two Hundred and Two Thousand and Five Hundred Dollars
($202,500.00) in tree damage. Id.
For Auto-Owners alleged failure to refuse to compensate Dubbs Dred, the Amended
Complaint asserts claims for Breach of Contract and Bad Faith. Auto-Owners moves to dismiss
the Bad Faith claim.
II. Relevant Standard
When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), the court must “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.” Eid v. Thompson, 740 F.3d 118, 122 (3d Cir.
2014) (quoting Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008)). “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 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “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 (citing Twombly,
550 U.S. at 556); see also Thompson v. Real Estate Mortg. Network, 748 F.3d 142, 147 (3d Cir.
2014). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Iqbal, 556 U.S. at 678. “Factual allegations of a complaint must be
enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. A
pleading party need not establish the elements of a prima facie case at this stage; the party must
only “put forth allegations that ‘raise a reasonable expectation that discovery will reveal
evidence of the necessary element[s].’” Fowler v. UPMC Shadyside, 578 F.3d 203, 213 (3d
Cir.2009) (quoting Graff v. Subbiah Cardiology Associates, Ltd., 2008 WL 2312671 (W.D. Pa.
June 4, 2008)); see also Connelly v. Lane Const. Corp., 809 F.3d 780, 790 (3d Cir.2016)
(“Although a reviewing court now affirmatively disregards a pleading’s legal conclusions, it
must still . . . assume all remaining factual allegations to be true, construe those truths in the light
most favorable to the plaintiff, and then draw all reasonable inferences from them.”) (citing
Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 154 n. 1 (3d Cir.2014)).
Nonetheless, a court need not credit bald assertions, unwarranted inferences, or legal
conclusions cast in the form of factual averments. Morse v. Lower Merion School District, 132
F.3d 902, 906, n. 8 (3d Cir.1997). The primary question in deciding a motion to dismiss is not
whether the Plaintiff will ultimately prevail, but rather whether he or she is entitled to offer
evidence to establish the facts alleged in the complaint. Maio v. Aetna, 221 F.3d 472, 482 (3d
Cir.2000). The purpose of a motion to dismiss is to “streamline [ ] litigation by dispensing with
needless discovery and factfinding.” Neitzke v. Williams, 490 U.S. 319, 326–327, (1989).
III. Discussion
Auto-Owners argues that Dubbs Dred insufficiently pleads a bad faith claim because the
Amended Complaint contains boilerplate allegations regarding its alleged failure to investigate
and adequately compensate for damages. Further, Auto-Owners maintains that the only factual
allegation to support Dubbs Dred’s bad faith claim is a mere disagreement on claim value,
which, in and of itself, cannot constitute bad faith. In response, Dubbs Dred contends that it has
sufficiently alleged that Auto-Owners failed to conduct a reasonable investigation and made a
bad faith “lowball” offer.
The Pennsylvania bad faith statute provides in its entirety:
In an action arising under an insurance policy, if the court finds that the insurer has acted
in bad faith toward the insured, the court may take all of the following actions:
(1) Award interest on the amount of the claim from the date the claim was made by the
insured in an amount equal to the prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.
42 Pa.C.S.A. § 8371. To succeed on a bad faith claim, a plaintiff-insured must prove, by 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 in denying the claim.” Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 137 (3d
Cir.2005); Terletsky v. Prudential Prop. & Cas. Ins. Co., 437 Pa.Super. 108, 649 A.2d 680, 688
(1994). Although the term “bad faith” is not defined in the statute, courts have subsequently
determined that a variety of carrier actions can constitute bad faith, including “a frivolous or
unfounded refusal to pay, lack of investigation into the facts, or a failure to communicate with
the insured.” Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d 742, 751 n. 9 (3d Cir.
1999); see also Terletsky, 649 A.2d at 688.
Where a plaintiff asserts a bad faith claim based upon a failure to investigate, “[a]
plaintiff […] must show that the outcome of the case would have been different if the insurer had
done what the insured wanted done.” Blaylock v. Allstate Ins. Co., 2008 WL 80056, *13
(M.D.Pa. Jan.7, 2008) (citing Zappile v. AMEX Assurance Co., 928 A.2d 251, 262
(Pa.Super.2007)). As to a lowball offer, “[g]enerally, Pennsylvania law does not treat as bad
faith an insurer’s low but reasonable estimate of an insured’s losses.” Seto v. State Farm Ins. Co.,
855 F. Supp. 2d 424, 430 (W.D. Pa. 2012) (citing Brown v. Progressive Ins. Co., 860 A.2d 493,
501 (Pa. Super. Ct. 2004)). However, “low-ball offers which bear no reasonable relationship to
an insured’s actual losses can constitute bad faith within the meaning of § 8371.” Seto, 855 F.
Supp. 2d at 430 (citing Brown, 860 A.2d at 501).
Here, as to both the failure to investigate and lowball components to Dubbs Dred’s bad
faith claim, the Amended Complaint sufficiently pleads plausible facts to support a bad faith
claim at this stage. Dubbs Dred has adequately pleaded that, had Auto-Owner’s representative
fully inspected the Club House roof, Auto-Owners would have valued the claim differently.
And as to tree damage, Dubbs Dred has sufficiently pleaded that Auto-Owners utilized an
uncredentialed arborist to assess the property damage and thereafter, Auto-Owners’ offer did not
compensate for the actual value of the loss. Therefore, the Amended Complaint sufficiently
supports a factual basis for bad faith based upon Auto-Owners’s investigation and offers. Thus,
as this stage, the Court cannot conclude that the Amended Complaint does not support a bad
faith claim.
Accordingly, Auto-Owners’s Motion to Dismiss will be denied.
ORDER
Following consideration of Dubbs Dred’s Amended Complaint (ECF No. 10), Auto-
Owners’ Motion to Dismiss (ECF No. 12), the respective briefs (ECF Nos. 13, 17, and 18), and
for the foregoing reasons, Auto-Owners’ Motion is denied. Auto-Owners shall file its Answer
on or before December 22, 2023.
DATED this 8" day of December, 2023.
BY THE COURT:
United States District Judge