Rivers v. Liberty Insurance Corporation

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE

MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

ERICA RIVERS, )

)

Plaintiff, )

) CIVIL ACTION NO.

v. ) 2:19cv1092-MHT

) (WO)

LIBERTY MUTUAL INSURANCE, )

)

Defendant. )

OPINION

Plaintiff Erica Rivers filed this case in state

court against defendant Liberty Insurance Corporation

(referred to as Liberty Mutual Insurance by Rivers),

bringing five claims under state law for

misrepresentation, negligent or wanton hiring,

training, or supervision, negligence or wantonness,

breach of contract, and bad faith, all stemming from

Liberty’s denial of a claim under an insurance policy

Rivers had purchased from it. Liberty removed this

lawsuit to this court based on diversity-of-citizenship

jurisdiction. See 28 U.S.C. §§ 1332 and 1441. The

case is now before the court on Liberty’s motion to

dismiss all claims except the one for breach of

contract. For the reasons explained below, the motion

will be granted. However, Rivers will be granted leave

to amend three of the four dismissed claims.

I. MOTION-TO-DISMISS STANDARD

In considering a defendant’s motion to dismiss, the

court accepts the plaintiff’s allegations as true, see

Hishon v. King & Spalding, 467 U.S. 69, 73 (1984), and

construes the complaint in the plaintiff’s favor, see

Duke v. Cleland, 5 F.3d 1399, 1402 (11th Cir. 1993).

“The issue is not whether a plaintiff will ultimately

prevail but whether the claimant is entitled to offer

evidence to support the claims.” Scheuer v. Rhodes,

416 U.S. 232, 236 (1974). To survive a motion to

dismiss, a complaint need not contain “detailed factual

allegations,” Bell Atl. Corp. v. Twombly, 550 U.S. 544,

545 (2007), “only enough facts to state a claim to

relief that is plausible on its face.” Id. at 570. “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.” Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009). “The plausibility standard is not

akin to a ‘probability requirement,’ but it asks for

more than a sheer possibility that a defendant has

acted unlawfully.” Id. (quoting Twombly, 550 U.S. at

556).

II. BACKGROUND

The allegations of the complaint, taken in the

light most favorable to Rivers, are as follows. At

some point before July 2018, she insured a parcel of

real property in Montgomery, Alabama by purchasing a

policy from Liberty. During a conversation leading to

the purchase, a Liberty employee informed Rivers that

the insurance policy would provide $ 40,000.00 of

coverage for certain types of “perils” to her property.

Complaint (doc. no. 1-1) at 3. In reliance on this

representation, Rivers purchased the insurance policy

from Liberty. She received a written copy of the

policy that confirmed the employee’s representations

about the types of perils covered by the policy.

Rivers paid her premiums on the policy. The policy

was effective through July 2018.

On or about July 21, 2018, Rivers’s real property

was damaged. She asserts that the reason for the

damage was one or more of the “perils” covered by the

policy. She made a timely claim for the damage, but

Liberty denied coverage. She contends that Liberty did

so without properly investigating the claim.

III. DISCUSSION

Liberty moves to dismiss Rivers’s claims for

misrepresentation (Count I), negligent or wanton

hiring, training, or supervision (Count II), negligence

or wantonness (Count III), and bad faith (Count V), but

not her breach-of-contract claim (Count IV). The court

will discuss each of the challenged claims in turn.

A. Misrepresentation

Rivers contends, in Count I, that Liberty is liable

for misrepresentation based on the statements of the

employee who spoke with Rivers when she purchased her

policy. The insurance company responds that the

misrepresentation claim should be dismissed because it

was not pled with particularity as required by Federal

Rule of Civil Procedure 9(b). The court agrees.

Under Alabama law, “[t]he elements of fraud are:

(1) a misrepresentation of a material fact, (2) made

willfully to deceive, recklessly, without knowledge, or

mistakenly, (3) that was reasonably relied on by the

plaintiff under the circumstances, and (4) that caused

damage as a proximate consequence.” Brushwitz v.

Ezell, 757 So. 2d 423, 429 (Ala. 2000). Rivers argues

that she has sufficiently pled such a claim under Rule

9(b) of the Alabama Rules of Civil Procedure. However,

this Alabama procedural law is not applicable here.

“It is well established that when a federal court

considers a case that arises under its diversity

jurisdiction, the court is to apply state substantive

law and federal procedural law.” Royalty Network, Inc.

v. Harris, 756 F.3d 1351, 1357 (11th Cir. 2014) (citing

Hanna v. Plumer, 380 U.S. 460, 465 (1965)).

The court, therefore, must apply Federal Rule of

Civil Procedure 9(b) and caselaw interpreting it rather

than Alabama’s rule. See Loreley Financing (Jersey)

No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 182

n.14 (2d Cir. 2015) (“While the substantive elements of

common-law fraud that must be proven are a matter of

state law, what must be pleaded and with what level of

particularity are governed by [federal] Rules 9(b) and

12(b)(6).”); see also Pirelli Armstrong Tire Corp.

Retiree Medical Benefits Trust v. Walgreen Co., 631

F.3d 436, 443 (7th Cir. 2011) (applying federal Rule

9(b) to fraud claim brought under state law); Evans v.

Pearson Enterprises, Inc., 434 F.3d 839 (6th Cir. 2006)

(same).

Rule 9(b) of the Federal Rules of Civil Procedure

provides that, “In alleging fraud or mistake, a party

must state with particularity the circumstances

constituting fraud or mistake. Malice, intent,

knowledge, and other conditions of a person's mind may

be alleged generally.” Fed. R. Civ. P. 9(b). “This

Rule serves an important purpose in fraud actions by

alerting defendants to the precise misconduct with

which they are charged and protecting defendants

against spurious charges of immoral and fraudulent

behavior.” Brooks v. Blue Cross & Blue Shield of Fla.,

Inc., 116 F.3d 1364, 1370–71 (11th Cir. 1997)

(citations and internal quotation marks omitted). To

meet the rule’s requirements, a complaint must “set[]

forth: (1) precisely what statements were made in what

documents or oral representations or what omissions

were made, and (2) the time and place of each such

statement and the person responsible for making (or, in

the case of omissions, not making) same, and (3) the

content of such statements and the manner in which they

misled the plaintiff, and (4) what the defendants

obtained as a consequence of the fraud.” Id. at 1371

(citations and internal quotation marks omitted). Yet

“Rule 9(b) must be read in conjunction with Rule 8(a)

[of the Federal Rules of Civil Procedure], which

requires a plaintiff to plead only a short, plain

statement of the grounds upon which he is entitled to

relief.” Morrow v. Green Tree Servicing, L.L.C., 360

F. Supp. 2d 1246, 1250 (M.D. Ala. 2005) (Thompson, J.)

(quoting Brooks, 116 F.3d at 1371 (internal quotation

marks omitted).

Following these guideposts, the court finds that

Rivers’s pleading of her fraud claim is insufficient.

Her barebones allegations--that Liberty “specifically

represented to Plaintiff the insurance coverage at

issue would provide $ 40,000.00 for perils listed as

covered within the policy,” Complaint (doc. no. 1-1) at

3, and that Liberty did not cover her claim--fall far

short of what is required to plead a viable fraud claim

under Rule 9(b). Some additional detail about exactly

what was said and what made it misleading is necessary.

Furthermore, even if Rivers does not know the name of

the Liberty employee with whom she spoke or where that

employee was located when she spoke to him or her, she

must still must attempt to address those issues in the

complaint and explain why she does not have all of the

required information if she does not have it. See

Morrow, 360 F. Supp. 2d at 1250–51 (“In those cases

where the defendant controls information required for

proper pleading, the complaint must still adduce

specific facts supporting a strong inference of fraud

or it will not satisfy even a relaxed pleading standard

and it must also allege that the necessary information

lies within the defendant's control, and then

allegations must be accompanied by a statement of facts

upon which allegations are based.” (internal quotation

marks and citation omitted)). Because the complaint

lacks specific facts supporting a strong inference of

fraud, the claim will be dismissed.*

* In the motion to dismiss, Liberty also argues that

However, because Rivers has moved the court for

permission to amend her complaint, see Response to

Motion to Dismiss (doc. no. 12) at 5, the court will

grant her an opportunity to file an amended complaint.

See Fed. R. Civ. P. 15(a) (stating that amendments

“shall be freely allowed when justice so requires”).

B. Negligent or Wanton Hiring,

Supervision, or Supervision

In Count II, Rivers brings a claim for negligent or

wanton hiring, supervision, or training of the

employees with whom she had dealings at Liberty.

the misrepresentation claim must fail because it is

impermissibly based on a contractual promise. As the

court is dismissing the claim, it need not resolve this

argument at this time. Nevertheless, the court notes

the following. While Liberty is correct that, under

Alabama law, a “mere breach of a contractual provision

is not sufficient to support a charge of fraud,”

Brown-Marx Assocs., Ltd. v. Emigrant Savs. Bank, 703

F.2d 1361, 1370–71 (11th Cir. 1983), it may be possible

under Alabama law to assert both a breach-of-contract

claim and “a fraud claim that stem[] from the same

general facts,” but “the fraud claim must be based on

representations independent from the promises in the

contract and must independently satisfy the elements of

fraud.” Dickinson v. Land Developers Constr. Co., 882

So. 2d 291, 304 (Ala. 2003) (Houston, J., concurring).

Liberty argues that this claim must fail because it is

insufficiently pleaded under the Twombly/Iqbal

standard. The court agrees.

As the parties agree, “[t]o support a claim of

negligent supervision [or training], the plaintiff must

demonstrate that (1) the employee committed a tort

recognized under Alabama law, Stevenson v. Precision

Standard, Inc., 762 So. 2d 820, 824 (Ala. 1999), (2)

the employer had actual notice of this conduct or would

have gained such notice if it exercised ‘due and proper

diligence,’ Armstrong Bus. Servs. v. AmSouth Bank, 817

So. 2d 665, 682 (Ala. 2001), and (3) the employer

failed to respond to this notice adequately. Id.”

Edwards v. Hyundai Motor Mfg. Alabama, LLC, 603 F.

Supp. 2d 1336, 1357 (M.D. Ala. 2009) (Thompson, J.).

The elements for negligent hiring or retention are

largely the same. See Jones Exp., Inc. v. Jackson, 86

So. 3d 298, 305 (Ala. 2010) (discussing elements). For

wanton hiring, training or supervision, the plaintiff

would have to show the defendant acted with more than

the absence of reasonable care. Wantonness is “the

conscious doing of some act or the omission of some

duty, while knowing of the existing conditions and

being conscious that, from doing or omitting to do an

act, injury will likely or probably result.” Pritchett

v. ICN Med. All., Inc., 938 So. 2d 933, 941 (Ala. 2006)

(quoting Alfa Mut. Ins. Co. v. Roush, 723 So. 2d 1250,

1256 (Ala. 1998)).

The allegations of the complaint are plainly

insufficient to state a plausible claim of negligent or

wanton hiring, supervision, or training. See Iqbal,

556 U.S. at 678. For as discussed in other parts of

the opinion, the complaint does not plausibly plead

that Liberty’s employee committed a tort in denying

Rivers’s claim. Accordingly, this claim will be

dismissed with leave to amend.

C. Negligence or Wantonness

In Count III, Rivers claims that Liberty handled

her insurance claim negligently or wantonly. Liberty

moves to dismiss the claim on the ground that Alabama

law does not recognize such a claim. The Alabama

Supreme Court “has consistently refused to recognize a

cause of action for the negligent handling of insurance

claims, and it will not recognize a cause of action for

alleged wanton handling of insurance claims.” Kervin

v. S. Guar. Ins. Co., 667 So. 2d 704, 706 (Ala. 1995).

Rivers apparently recognized the problem with this

claim: In her response to the motion to dismiss, she

contended that the motion should be denied as to other

challenged claims--Counts I, II, and V--but said

nothing about this one, Count III. This claim will be

dismissed with prejudice.

D. Bad Faith

In Count V, Rivers claims that Liberty refused to

pay her claim in bad faith. Liberty argues that the

bad-faith claim should be dismissed because Rivers has

failed to plead a plausible claim. This claim too will

be dismissed with leave to amend.

“[T]he tort of bad-faith refusal to pay a claim has

four elements--(a) a breach of insurance contract, (b)

the refusal to pay claim, (c) the absence of arguable

reason, (d) the insurer's knowledge of such

absence--with a conditional fifth element: ‘(e) if the

intentional failure to determine the existence of a

lawful basis is relied upon, the plaintiff must prove

the insurer's intentional failure to determine whether

there is a legitimate or arguable reason to refuse to

pay the claim.’” State Farm Fire & Cas. Co. v.

Brechbill, 144 So. 3d 248, 258 (Ala. 2013) (quoting

National Sec. Fire & Cas. Co. v. Bowen, 417 So. 2d 179,

183 (Ala. 1982)). To survive the motion to dismiss,

Rivers must have pleaded sufficient non-conclusory,

factual allegations to make it plausible that she will

be able to prove her claim.

This she has not done. Her complaint states that

Liberty “randomly and unilaterally denied Plaintiff

coverage and has not properly investigated” but

provides no description of the course of events that

occurred after she submitted her claim that led her to

conclude that Liberty did not investigate her claim

properly. “Conclusory allegations are those that

express ‘a factual inference without stating the

underlying facts on which the inference is based.’”

Sanders v. Boutwell, 426 F. Supp. 3d 1235, 1240, 2019

WL 6331206 (M.D. Ala. 2019) (Thompson, J.) (quoting

Conclusory, Black's Law Dictionary (11th ed. 2019)).

These allegations meet that definition. To move

forward with this claim, she must provide more detailed

factual allegations showing that it is plausible that

she could prove a claim. This is not a high burden,

but it requires more than the court is presented with

here.

***

A separate order granting the motion to dismiss

will be entered. Counts I (misrepresentation), II

(negligent or wanton hiring, training, or supervision),

and V (bad faith) of the complaint will be dismissed

without prejudice, and with leave to amend. Count III

(negligence and wantonness) will be dismissed with

prejudice. And Count IV (breach of contract) will

remain pending

DONE, this the 2nd day of November, 2020.

/s/ Myron H. Thompson

UNITED STATES DISTRICT JUDGE