Watts et al v. Farmers Insurance Exchange et al
Filing
41
MEMORANDUM OPINION AND ORDER GRANTING IN PART and DENYING IN PART 25 MOTION to Dismiss, DENYING 26 MOTION to Strike, DENYING 24 MOTION to Dismiss. The Motion To Dismiss based on the Filed-Rate Doctrine is DENIED. Also, the Motion To Dismiss the fraud claims against the Exchange as being insufficiently pled is DENIED. The Group's Fraud Motion is GRANTED, and the Court DISMISSES Count I (fraud) against the Group. Count I remains against Mid-Century and the Exchange. Addi tionally, Counts II (breach of contract) and III (bad faith) are DISMISSED WITHOUT PREJUDICE based on ripeness grounds against the Group, Exchange, and Mid-Century.The STAY entered on January 18 (Doc. 37) is hereby LIFTED. The Plaintiffs aregiven 30 days to amend their complaint if they so choose. Signed by Judge Virginia Emerson Hopkins on 4/27/2018. (JLC)
FILED
2018 Apr-27 PM 03:42
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
EASTERN DIVISION
RODNEY WATTS, personal
representative of the estate of
LEIAH WATTS; C.W., by and
through his father and next best
friend, RODNEY WATTS; J.W., by
and through his father and next best
friend RODNEY WATTS; CURTIS
WATTS, personal representative of
the estate of EVELYN WATTS;
BARRY MCBURNETT, personal
representative of the estates of FAYE
HOWARD and MARY ADAIR;
RENEE STONE, individually and as
mother and next best friend of V.S.;
and TAMMY MCBURNETT,
individually,
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Plaintiffs,
)
)
v.
) Case No.: 1:17-CV-1454-VEH
)
FARMERS INSURANCE
)
EXCHANGE; FARMERS GROUP, )
INC.; MID-CENTURY
)
INSURANCE CO.; and Fictitious
)
Parties 1, 2, 3, and 4,
)
)
Defendants.
)
MEMORANDUM OPINION AND ORDER
I.
INTRODUCTION AND PROCEDURAL HISTORY1
Plaintiffs bring this case against Defendants Farmers Insurance Exchange (the
“Exchange”), Farmers Group Inc. (the “Group”), and Mid-Century Insurance Co.
(“Mid-Century”) (collectively the “Defendants”) (Doc. 23). It was originally filed in
the Circuit Court of Talledega County, Alabama. (Doc. 1-1 at 15). It was
subsequently removed to the Northern District of Alabama on August 28, 2017. (Doc.
1). Following oral argument on previously filed motions to dismiss, Watts filed his
Amended Complaint on November 30, 2017. (Doc. 23).
The Defendants then filed two motions to dismiss and one motion to strike on
December 14, 2017. (Docs. 24, 25, 26). First, the Defendants filed a Motion To
Dismiss Watts’s claims based on fraud. (Doc. 24). Second, the Defendants filed a
Motion To Dismiss Watts’s claims based on breach of contract and bad faith. (Doc.
25). Third, the Defendants filed a Motion To Strike one of the exhibits attached to the
Amended Complaint. (Doc. 26). The parties have responded (Docs. 30, 31, 32) and
replied (Docs. 34, 35, 36). The Court held oral argument on these issues on October
18, 2017, and on April 25, 2018. Accordingly, the motions are ripe for review.
1
To protect their privacy, the parties must abbreviate the names of minors in all future
documents filed with the Court.
2
II.
RELEVANT BACKGROUND
The following relevant background is copied verbatim from the Amended
Complaint:
STATEMENT OF FACTS; THE UNDERLYING ACCIDENT
16. On or about July 16, 2016, Leiah Watts was driving a 2014 Ford
Expedition Truck on Alabama Highway 21 in Winterboro in Talladega,
County, Alabama. Traveling with her as passengers were the following
family members: M. Faye Howard, Mary Adair, Evelyn Foshee Watts,
Tammy McBurnett, Renee Stone, [C.W.], [J.W.] and [V.S.].
17. In the afternoon, while the Watts family was traveling on Alabama
Highway 21 in Winterboro in Talladega County, Alabama around 1:40
in the afternoon, the Expedition in which they were riding was struck by
a vehicle driven by Wiley Marsh “Pete” Whitworth.
18. Wiley Mash “Pete” Whitworth was the “at fault” driver in the
accident; that is, Mr. Whitworth was the sole cause of the accident. The
Alabama Uniform Traffic Crash Report, attached hereto as Exhibit B,
states that Mr. Whitworth’s vehicle was the “primary contributing unit.”
See, Exh. B., p. 1. Mr. Whitworth’s liability insurance, State Farm, has
offered its policy limits in this case, tacitly recognizing that Mr.
Whitworth is at fault in the accident. See, Exh. C. In addition,
representatives of the Defendants have stated that, with respect to the
UM coverage at issue in this lawsuit, this case is a policy limits case.
See, Exh. D.
19. Liability in this case is, therefore not contested.
20. As a result of this accident, the plaintiffs and/or their decedents
suffered the following injuries:
a) Leiah Gatlin Watts was killed;
3
b) M. Faye Howard was killed;
c) Mary Adair was killed;
d) Evelyn Foshee Watts was killed;
e) Tammy McBurnett suffered severe injuries that have required,
to date, over twenty separate surgeries;
f) Renee Stone suffered serious injuries to her collarbone and arm
as well as soft tissue injuries all over her body and nerve damage;
g) [C.W.] suffered serious injuries including a broken arm and
lacerations to his head;
h) [V.S.] suffered serious psychological injuries as a result of
being within the zone of danger at the time of the collision and watching
the deaths and injuries of family members that included her
grandmother, aunts and mother;
i) [J.W.] suffered serious psychological injuries as a result of
being within the zone of danger at the time of the collision and watching
the deaths and injuries of family members that included his
grandmother, aunts and mother.
STATEMENT OF FACTS: UNDERINSURED MOTORIST
COVERAGE UNDER THE FARMERS/MID-CENURY POLICY
21. At the time of the accident, Rodney Watts and Leiah Watts had in
full force and effect an automobile insurance policy issued and
underwritten by Mid-Century Insurance Company, policy number
19292-84-84. The policy included UM/UIM coverage and insured a
total of five vehicles. The policy was issued on June 18, 2016.
22. Under an intercompany insurance pooling agreement, Farmer’s
Exchange agreed to assume 51.75% of all premiums, risks and liabilities
accrued by Mid-Century Insurance Company, while Mid-Century
4
Insurance Company assumed 16% of all premiums, risks and liabilities
accrued under its policies, including the policy issued to Rodney and
Leiah Watts.
23. Upon information and belief, Farmer’s Group, Inc. provided all
administrative services in reference to the Watts’ policy, including but
not limited to the writing of the insurance policy, collection of premiums
and evaluation of claims.
24. Rodney Watts purchased the automobile insurance policy from
Farmers’ agent, Nicole Ponder, in Oxford, Alabama. The purchase was
done over the phone before the policy was issued on June 16, 2018.
Rodney Watts talked to the agent about the policy. Rodney Watts told
the agent that because the Watts’ owned the Expedition, which was one
of the vehicles he was getting insurance on, they often had a lot of
extended family members riding with them on family trips, and he
wanted to be sure they were protected in the event of an accident.
25. The agent went over the amount of liability and collision and other
coverages and the terms of the policy that Rodney Watts was
purchasing. When the agent got to the UIM section of the policy, she
told Rodney Watts that he had five cars insured and that he had UIM
coverage for all five cars and for all people in the vehicle. She assured
him that all persons riding in any of the insured vehicles, including the
Expedition, would have UM coverage up to $150,000 per person in the
event of an accident.
26. When Rodney Watts received the policy, he read the policy,
including endorsements. Based upon his attempt to read the policy and
the wording of the policy written by Farmers Group, Inc. employees for
Mid-Century Insurance Company, it looked like what the agent told him
was the truth.
27. In the Alabama endorsement to the policy that sets forth the
applicable uninsured motorist limits, the policy explains the following:
(1) The limit of liability for Uninsured Motorist coverage
5
stated in the Declarations for each person for the occupied
insured car, plus the sum of the highest limits of liability
for Uninsured Motorists coverage stated in the
Declarations for each person applicable to any other
insured car on the policy, up to a maximum of two
additional limits, is our maximum limit of liability for all
damages.
While the policy does list a maximum limit of liability per accident in
the amount of $100,000 plus two additional coverages for a total of
$300,000, the policy also explains that that maximum limit is “subject
to the limit for each person” which means the $150,000 per injured
person limit trumps the maximum liability language.
28. The Alabama Uninsured Motorist Statute also provides that an
insurance company may only legally restrict stacking under a single
policy covering multiple vehicles to two coverages per injured person.
§ 32-7-23(c), Code of Alabama (1975).
29. After the terrible accident on July 16, 2016, Rodney Watts was told
for the first time that he only had coverage for three vehicles for
everyone in the vehicle rather than five and that the Defendants refused
to pay $150,000 per death or injury but rather insisted that the most they
owed for all of the deaths and injuries in the accident combined was
$300.000.00.
30. Had Rodney Watts known that the Defendants would only pay on
three coverages, he would have obtained different insurance coverages
in different amounts.
31. The deaths and injuries listed above were caused by an underinsured
motorist as that term is defined in § 32-7-23(b)(4), Code of Alabama
(1975). Accordingly, each person injured, or each estate of an individual
killed in the accident is entitled to receive up to $150,000 under the
Farmers Insurance automobile policy. By unlawfully restricting the
amount offered to the injured individuals and the decedents’ estates to
a total of $300,000, the Defendants are breaching the duty of good faith
6
and fair dealing they owe to their insureds.
(Doc. 23 at 5-9).
III.
STANDARD
A.
Rule 12(b)(6)
A Rule 12(b)(6) motion attacks the legal sufficiency of the complaint. See FED.
R. CIV. P. 12(b)(6) (“[A] party may assert the following defenses by motion: (6)
failure to state a claim upon which relief can be granted[.]”). The Federal Rules of
Civil Procedure require only that the complaint provide “‘a short and plain statement
of the claim’ that will give the defendant fair notice of what the plaintiff’s claim is
and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99,
103, 2 L. Ed. 2d 80 (1957) (footnote omitted) (quoting FED. R. CIV. P. 8(a)(2)),
abrogated by Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955,
1965, 167 L. Ed. 2d 929 (2007); see also FED. R. CIV. P. 8(a) (setting forth general
pleading requirements for a complaint including providing “a short and plain
statement of the claim showing that the pleader is entitled to relief”).
While a plaintiff must provide the grounds of his entitlement to relief, Rule 8
does not mandate the inclusion of “detailed factual allegations” within a complaint.
Twombly, 550 U.S. at 555, 127 S. Ct. at 1964 (quoting Conley, 355 U.S. at 47, 78 S.
Ct. at 103). However, at the same time, “it demands more than an unadorned, the7
defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678,
129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). “[O]nce a claim has been stated
adequately, it may be supported by showing any set of facts consistent with the
allegations in the complaint.” Twombly, 550 U.S. at 563, 127 S. Ct. at 1969.
“[A] court considering a motion to dismiss can choose to begin by identifying
pleadings that, because they are no more than conclusions, are not entitled to the
assumption of truth.” Iqbal, 556 U.S. at 679, 129 S. Ct. at 1950. “While legal
conclusions can provide the framework of a complaint, they must be supported by
factual allegations.” Id. “When there are well-pleaded factual allegations, a court
should assume their veracity and then determine whether they plausibly give rise to
an entitlement to relief.” Id. (emphasis added). “Under Twombly’s construction of
Rule 8 . . . [a plaintiff’s] complaint [must] ‘nudge[] [any] claims’ . . . ‘across the line
from conceivable to plausible.’ Ibid.” Iqbal, 556 U.S. at 680, 129 S. Ct. at 1950-51.
A claim is plausible on its face “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, 129 S. Ct. at 1949. “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, 127 S. Ct. at 1965).
8
B.
Rule 12(b)(1)
Here is the relevant 12(b)(1) standard in the Eleventh Circuit:
Attacks on subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1)
come in two forms. “Facial attacks” on the complaint “require[ ] the
court merely to look and see if [the] plaintiff has sufficiently alleged a
basis of subject matter jurisdiction, and the allegations in his complaint
are taken as true for the purposes of the motion.” Menchaca v. Chrysler
Credit Corp., 613 F.2d 507, 511 (5th Cir.), cert. denied, 449 U.S. 953,
101 S.Ct. 358, 66 L.Ed.2d 217 (1980) (citing Mortensen v. First Fed.
Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir.1977)). “Factual attacks,”
on the other hand, challenge “the existence of subject matter jurisdiction
in fact, irrespective of the pleadings, and matters outside the pleadings,
such as testimony and affidavits, are considered.” Id.
These two forms of attack differ substantially. On a facial attack,
a plaintiff is afforded safeguards similar to those provided in opposing
a Rule 12(b)(6) motion—the court must consider the allegations of the
complaint to be true. Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir.),
cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981). But
when the attack is factual,
the trial court may proceed as it never could under 12(b)(6)
or Fed.R.Civ.P. 56. Because at issue in a factual 12(b)(1)
motion is the trial court's jurisdiction—its very power to
hear the case—there is substantial authority that the trial
court is free to weigh the evidence and satisfy itself as to
the existence of its power to hear the case. In short, no
presumptive truthfulness attaches to plaintiff's allegations,
and the existence of disputed material facts will not
preclude the trial court from evaluating for itself the merits
of jurisdictional claims.
Id. at 412–13 (quoting Mortensen, 549 F.2d at 891).
Lawrence v. Dunbar, 919 F.2d 1525, 1528-29 (11th Cir. 1990).
9
IV.
ANALYSIS
A.
Motion To Strike
The Defendants moved to strike the accident report attached to the Amended
Complaint and “Paragraph 18 of the First Amended Complaint.” (See Doc. 26 at 1-3).
They argue that “any reference or comment regarding the accident report is improper
and prejudicial.” (Id. at 2) (citing Plenkers v. Chappell, 420 So. 2d 41 (Ala. 1982)).
In response, the Plaintiffs note that this case is just at the pleading stage, not trial.
(See Doc. 32 at 1). They argue that the Motion To Strike is due to be denied. (See id.
at 2). The Court agrees.
Here is the relevant rule regarding motions to strike:
Federal Rule of Civil Procedure 12(f) provides that a Court can order
“any redundant, immaterial, impertinent, or scandalous matter” to be
stricken from a pleading. See also Ala.R.Civ.P. 12(f) (“Upon motion
made by a party before responding to a pleading ... the court may order
stricken from any pleading any insufficient defense or any redundant,
immaterial, impertinent, or scandalous matter.”). District courts have
been bestowed a wide range of discretion in disposing of motions to
strike. Resolution Trust Corp. v. Youngblood, 807 F.Supp. 765, 769
(N.D.Ga.1992) (citations omitted). Moreover, motions to strike “are not
favored in the federal rules,” and should not be granted unless clearly
warranted. Id. (citations omitted). Indeed, “ ‘motions to strike cannot be
used to determine disputed fact questions, nor can they be used to decide
disputed and substantial questions of law, particularly where there is no
showing of prejudice to the movant.’ “ Id. (citations omitted); cf.
William Z. Salcer, Panfeld, Edelman v. Envicon Equities Corp., 744
F.2d 935, 939 (2nd Cir.1984) (“[E]ven when the defense presents a
purely legal question, the courts are very reluctant to determine disputed
10
or substantial questions of law on a motion to strike; these questions
quite properly are viewed as determinable only after discovery and a
hearing on the merits. To do otherwise would be to run the risk of
offering an advisory opinion on an abstract and hypothetical set of
facts.”), vacated on other grounds, 478 U.S. 1015, 106 S.Ct. 3324, 92
L.Ed.2d 731 (1986). Therefore, a motion to strike “will usually be
denied unless the allegations have no possible relation to the
controversy and may cause prejudice to one of the parties.” Beaulieu v.
Board of Trustees of University of West Florida, 2007 WL 2900332, *5
(N.D.Fla.2007) (citation omitted).
Miller v. Southeast Supply Header, LLC, No. CA 09-0067-KD-C, 2010 WL 55637,
*8 (S.D. Ala. Jan. 4, 2010) (DuBose, J.).
In this case, Defendants have not made the requisite showings described above.
Their citation to Plenkers is not instructive because that case did not say that it is
improper to attach an accident report to a pleading. See Plenkers, 420 So. 2d at 45.
Their citation to the statute similarly does not control this situation because the statute
refers to trials, not pleadings. See Ala. Code § 32-10-11 (“No such report shall be
used as evidence in any trial, civil or criminal, arising out of an accident.”). Further,
the Defendants have not cited a single case where a district court has granted such
requested relief. The Court declines to do so here. Accordingly, the Motion To Strike
is DENIED.
11
B.
Motion To Dismiss Watts’s Fraud-Based Claims
1.
The Filed-Rate Doctrine Does Not Apply
The Defendants claim that the Filed-Rate Doctrine bars the Plaintiffs’ fraud
claims against them. (Doc. 24 at 13). They argue that “[t]he filed-rate doctrine is
activated when one challenges a matter within the purview of a state regulatory
agency.” (Id.) (emphasis omitted). With that in mind, they state that “[t]he regulatory
scheme of the [Alabama Department of Insurance] governs any issue relating to
insurance policy forms and rates upon which premiums are based.” (Id. at 14)
(emphasis omitted). Then, Plaintiffs’ “alleged fraud-based claims present a challenge
to the rates and policy forms approved by the commissioner.” (Id. at 19) (emphasis
omitted). In support, they cite Ex parte Cincinnati Ins. Co. (See Doc. 24 at 22) (citing
Ex parte Cincinnati Ins. Co., 51 So.3d 298, 311 (Ala. 2010)).
The Supreme Court of Alabama has defined the Filed-Rate Doctrine:
The filed-rate doctrine limits judicial review of rates that have
been approved by regulatory agencies. Describing the doctrine in a case
involving an insurance rate approved by the commissioner, this Court
has stated: “The filed-rate doctrine provides that once a filed rate is
approved by the appropriate governing regulatory agency, it is per se
reasonable and is unassailable in judicial proceedings.” Birmingham
Hockey Club, Inc. v. National Council on Compensation Ins., Inc., 827
So.2d 73, 78 n. 4 (Ala.2002) (emphasis added).
Ex parte Cincinnati, 51 So. 3d at 305-306.
12
As an initial matter, the Court must first determine whether to analyze this
argument under Rule 12(b)(6) or 12(b)(1). Defendants note that Alabama courts treat
it as a matter of subject matter jurisdiction, but argue that federal courts tackle it
under Rule 12(b)(6). (See Doc. 24 at 22, n. 8). However, the case cited by the
Defendants, Allen, gives no indication why it approached the case under 12(b)(6) (as
opposed to 12(b)(1)). See Allen v. State Farm Fire & Cas. Co., 59 F.Supp.2d 1217,
1221 (S.D. Ala. 1999) (Cassady, M.J.). For that reason, the case is of very limited
utility to this Court. The Court notes that the Supreme Court of Alabama has spoken
on this issue. See Ex parte Cincinnati Ins. Co., 51 So. 3d at 306. The Supreme Court
of Alabama stated very clearly that “[t]he bar of the filed-rate doctrine goes to the
court's jurisdiction over the subject matter.” See id. (citing other sources). The Court
made that clear, even while citing the Allen court. See id. Since this Court believes
that an Alabama state court would approach this as a question of subject matter
jurisdiction, this Court will do so as well.
The Court notes that the Defendants have not cited a single federal decision
applying the Filed-Rate Doctrine in the manner that they urge upon this Court. (See
Doc. 24 at 13-24).2 The Court’s independent research also has found not such
2
The Allen case was a filed-rate case, but it was not a fraud case. See generally Allen, 59
F.Supp. 2d at 1221 (“Plaintiffs have asserted causes of action for breach of contract, interference
with contractual business relations, conspiracy, inadequate notice, restraint of trade and unjust
13
authority. The Court imagines that, if such a doctrine was truly a viable defense
against fraud, it would come up time and time again under analogous circumstances.
However, without a citation to another federal court applying the doctrine in the
requested manner, and having reviewed relevant Alabama court decisions, this Court
declines to stretch the doctrine so far. Importantly, “[u]nder the Erie doctrine, a
federal court adjudicating state law claims applies the substantive law of the state.”
Ungaro-Benages v. Dresdner Bank AG, 379 F.3d 1227 (11th Cir. 2004) (citing Erie
R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Klaxon Co.
v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477(1941)).
The Court now examines Ex parte Cincinnati Ins. Co., which Defendants rely
on to support their filed-rate arguments. (See Doc. 24 at 22-24) (citing Ex parte
Cincinnati Ins. Co., 51 So. 3d at 311). In that case, the “[plaintiff] asserted claims of
breach of contract, fraudulent misrepresentation, fraudulent suppression, and unjust
enrichment.” See Ex parte Cincinnati, 51 So. 3d at 301. It is important to understand
that plaintiff’s theory of the case. See id. at 308. The court explained:
The first sentence of Peacock's complaint states: “This action challenges
[Cincinnati's] systematic and ongoing practice of improperly imposing
and collecting premiums for certain [UM] insurance coverage when
issuing multi-vehicle auto insurance policies in the State of Alabama.”
(Emphasis added.) Peacock also alleges repeatedly that Cincinnati
enrichment.”) (citation omitted).
14
“overcharg[es] for UM coverage ” and “charg[es] more than is
necessary to provide maximum UM coverage under the contract.”
(Emphasis added.) Peacock contends that Cincinnati receives “improper
gains ... at the expense of insureds and premium payors.” As noted
above, Peacock seeks damages only in the form of restitution of
premiums paid for the allegedly illusory UM coverage.
Id. Importantly, on his fraud-based claims, the plaintiff only sought restitution and
other similar remedies. See id.
While the Court is fully willing to apply the Filed-Rate Doctrine in the
appropriate circumstances, the Defendants have not convinced this Court that this is
a filed-rate case.3 To understand why, it is important to understand the Plaintiffs’
theory of this case. (See generally Doc. 30). These Plaintiffs’ “fraud claims do not
center on a claim that their insurance premiums were too high; [they] center on the
Defendants misrepresenting key terms in the insurance policy itself.” (Id. at 7). This
fraud was allegedly perpetrated through the representations of the Defendants’ agent
to Rodney Watts when he bought the policy. (See Doc. 23 at ¶¶ 24-25). The Plaintiffs
are not alleging that the rates were too high; rather they are arguing that the
Defendants said they were selling Watts one policy (that gave him a certain amount
of coverage), but they were really selling him another policy (with far less coverage
3
The Plaintiffs cite to the Supreme Court of Alabama in Peachtree, but that case is of
limited use. (See Doc. 30 at 6-7) (citing Peachtree Cas. Ins. Co., Inc. v. Sharpton, 768 So.2d 368
(Ala. 2000)). There the Court not surprisingly noted that when the “case is not a rate case; the
filed-rate doctrine is inapplicable.” See Peachtree, 768 So.2d at 373.
15
than promised). (See id. at 26-30). This case is unlike Ex parte Cincinnati because
here the Plaintiffs are not arguing they were overcharged for illusory coverage; they
argue that the Defendants misrepresented the policy they were selling. (See id. at 914). Additionally, the Plaintiffs here seek compensatory and punitive damages, not
restitution, disgorgement, or a constructive trust. (See id. at 14).
For that reason, the Motion To Dismiss the fraud-based claims based on the
Filed-Rate Doctrine is DENIED.
2.
Plaintiffs Have Plausibly Pled Fraud Against the Exchange
but Not the Group4
The Defendants also argue that, even without the Filed-Rate Doctrine, the
Amended Complaint should still be dismissed against the Exchange and the Group.
(See Doc. 24 at 24). The Defendants argue that Nicole Ponder was an agent for MidCentury alone, and for that reason the Exchange and the Group should be dismissed.
(See id. at 24-26) (citing Doc. 20 at 34). The Plaintiffs reject the premise of the
Defendants’ argument. (See Doc. 30 at 12). They argue that “Ponder was a Farmers’
agent.” (See id.) (citing Doc. 23 at ¶24) (emphasis omitted).5
4
The Defendants note that Mid-Century is only arguing on the filed-rate grounds. (See
Doc. 35 at 10).
5
Plaintiffs also rely on the Supreme Court of Alabama in Alfa Mutual Ins. Co. (See Doc.
30 at 13-15) (citing Alfa Mutual Ins. Co. v. Roush, 723 So. 2d 1250 (Ala. 1998)). The Alfa case
was about the scheme perpetrated by an insurance agent where he pocketed premiums and did
not actually sell the insurance he purported to sell. See Alfa, 723 So.2d at 1252-55. The facts of
16
At this stage, it would be improper for the Court to make factual determinations
in favor of the Exchange, i.e. that Ponder was not their agent.6 The Amended
Complaint clearly states that “Watts purchased the automobile insurance policy from
Farmers’ agent, Nicole Ponder, in Oxford, Alabama.” (Doc. 23 at 7).7 It is possible
for an agent to have two principals. See RESTATEMENT (3D) OF AGENCY § 3.14 to
3.16 (2006). The Amended Complaint sufficiently pleads Ponder’s alleged fraud and
pleads that Ponder acted as the Exchange’s agent. For that reason, the Motion To
Dismiss the fraud claims against the Exchange as being insufficiently pled is
DENIED.
However, the Court also notes that the Amended Complaint insufficiently
pleads fraud against the Group. (See Doc. 23 at 6-14). The Plaintiffs argue that it is
enough that they allege that:
Farmer’s Group, Inc. handles the administrative details required in the
issuing of policies, premium payments and claim evaluations for both
Farmers Insurance Exchange and Mid-Century Insurance Company.
Alfa are obviously very different from the present case, and, as the Defendants point out, the case
does not directly tackle the issue of whether a pool insurer could be liable. (See Doc. 35 at 8-10).
For that reason, this case warrants no further discussion.
6
Also, the Court will not conclude that the policy was not the Exchange’s policy as well.
There are arguments to support the idea that it was the Exchange’s policy in addition to being
Mid-Century’s policy.
7
Having two entities with the word “Farmer” can be confusing at times. However, the
Court understands “Farmers’” refers to the Exchange in this context. (See Doc. 23 at ¶ 14).
17
Doc. 23, ¶ 13. These duties included the drafting of the language in the
policy at issue in this case. Doc. 23, ¶ 26.
(Doc. 30 at 13). However, the Amended Complaint does not specify what the Group
did to further the fraud, especially when the crux of that fraud appears to be based
upon the oral representations from Ponder. (See Doc. 23 at 6-9); (see also id. at 7
¶25). Rule 9(b) states that:
(b) Fraud or Mistake; Conditions of Mind. 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). On this pleading, this Court cannot say that the Plaintiffs have
pled fraud against the Group with any sort of “particularity.” The pleading does not
give a solid indication of what the Group did in this fraud, other than generally allege
that they do administrative activities, like writing the policy. (See Doc. 23 at ¶¶13, 23,
26). Further, the Amended Complaint is unclear whether it alleges that Ponder acted
as an agent for the Group. (See Doc. 23 at ¶¶ 21, 24). The Court does not understand
Plaintiffs to be arguing that Ponder worked for the Group; here, Plaintiffs seem to be
alleging that Ponder committed fraud in selling the Exchange’s and Mid-Century’s
policy (not a Group policy). (See id. at 6-9); (cf. Doc. 22 at 7). The Court is
unpersuaded by Plaintiffs’ argument that the Group should be held liable for fraud
merely because they earned “management fees” through its business relationships
18
with the other two entities. The Plaintiffs’ theory of liability for roping in the Group
is too undefined to pass Rule 9(b). Accordingly, the fraud claim is DISMISSED
against the Group.
C.
Motion To Dismiss the Breach of Contract and Bad Faith Claims
1.
The Breach of Contract Claim Is Not Ripe
There are several arguments raised in the motion based on arguments over what
entities were parties to the Policy. (See Doc. 25 at 4-10). The Court does not need to
reach these arguments because of Mid-Century’s arguments that go to ripeness. The
Court sees no reason why Mid-Century’s arguments would not be equally applicable
to the Exchange or Group, so the Court addresses ripeness as to all three defendants
together. Mid-Century argues that “[t]he first amended complaint fails to include all
of the elemental requirements for [a breach of contract] claim” i.e. “fault on the part
of the tortfeasor . . . extent of their damages.” (See Doc. 25 at 20-21) (emphasis
omitted).
In response, the Plaintiffs cite to two cases. (See Doc. 31 at 5-9) (citing
Progressive Specialty Insurance Co. v. Smith, No. CA 14-00320-KD-C, 2014 WL
7204875, *5 (S.D. Ala. Dec. 17, 2014); Ex Parte Safeway Ins. Co. of Alabama, Inc.,
148 So.3d 39, 40 (Ala. 2013) (hereinafter “Safeway II”). However, the Progressive
case does not apply here because that case was not an uninsured motorist case. See
19
Progressive, 2014 WL 7204875 at *5.8 Additionally, the Safeway II case does not
control the outcome here because that case involved an unknown tortfeasor; here, the
tortfeasor is known. See Safeway II, 148 So.3d at 40.
First, the Court must address is whether this challenge is under Rule 12(b)(6)
or 12(b)(1). Mid-Century would have the Court believe that it is under Rule 12(b)(6).
(See Doc. 34 at 9) (citing Safeway II). It is unclear what the Plaintiffs’ position is on
this, but, either way, they argue that the claims are not premature. (See Doc. 31 at 58). The Court will not let the parties’ characterizations of the Motions upend the true
nature of what is going on. See Andersen v. Omni Ins. Co., No. 1:13-CV-2163-VEH,
2014 WL 838811, *1 n. 3 (N.D. Ala. Mar. 4, 2014) (Hopkins, J.) (disregarding how
the movant labeled the motion under 12(b)(6) and proceeding with a 12(b)(1)
analysis). This case is controlled by Safeway I because the tortfeasor is known. See
Broadway v. State Farm Mut. Auto. Ins. Co., 4 F.Supp.3d 1271, 1280 (M.D. Ala.
2014). For that reason, the proper standard is under 12(b)(1). See id. (“If the Alabama
Supreme Court had intended to change the holdings of Pontius and Safeway I that
courts lack subject matter jurisdiction over breach of contract and bad faith claims
involving UIM benefits where liability and damages are not established, then the
Safeway II court would have overruled those cases.”) (citing Andersen, 2014 WL
8
Plaintiffs concede that this case is not directly applicable. (See Doc. 31 at 7).
20
838811).
Next, the Court will discuss the relevant law. This Court’s previous discussion
in Andersen is instructive:
[E]ven though [the plaintiff] has already settled with the tortfeasor who
caused the collision, the undisputed fluidity and still speculative nature
of [the plaintiff’s] medical damages means that her bad faith claim is
due to be dismissed without prejudice consistent with Pontius and
Safeway I.
We agree with State Farm that Pontius's breach-of-contract
and bad-faith claims were not ripe for adjudication.
Without a determination of whether liability exists on the
part of the underinsured motorist and the extent of the
plaintiff's damages, a claim of bad-faith failure to pay or
breach of contract is premature . The trial court properly
dismissed the claims because the claims were not ripe for
adjudication. However, as discussed earlier, State Farm's
motion challenges the subject-matter jurisdiction of the
court. A dismissal for lack of subject-matter jurisdiction
does not operate as an adjudication on the merits. See Ex
parte Capstone Dev. Corp., 779 So.2d 1216 (Ala.2000) (a
dismissal for lack of subject-matter jurisdiction is treated
as a dismissal without prejudice to the plaintiff's right to
reinstitute the action). Therefore, the trial court should
have dismissed Pontius's breach-of-contract and bad-faith
claims without prejudice. See also Stringfellow v. State
Farm Life Ins. Co., 743 So.2d 439 (Ala .1999) (insured's
unripe fraud action should properly have been dismissed
without prejudice in order to allow the insured to bring the
action when it presented a justiciable controversy).
Therefore, the judgment of dismissal is modified to provide
that the dismissal of Pontius's breach-of-contract and
bad-faith claims is without prejudice to Pontius's right to
refile those claims.
21
We recognize that Pontius has now resolved her underlying
lawsuit against the Martins. Based on LeFevre, there can
be no bad-faith action based on conduct arising before the
uninsured motorist's liability is established and damages
are fixed; therefore, “there can be no action based on the
tort of bad faith based on conduct arising prior to that time,
only for subsequent bad faith conduct.” 590 So.2d at 159.
Accordingly, any claims alleging bad-faith failure to pay an
insurance claim or breach of contract based on State Farm's
failure to pay UIM benefits must be based on conduct
arising after the Martins ['] liability was established and
damages fixed.
Pontius, 915 So.2d at 564–65 (emphasis added); see also Safeway I, 990
So.2d at 352 (“Safeway has established a clear legal right to a writ of
mandamus because Safeway presented unrefuted evidence indicating
that the damages are in dispute and, in accordance with Pontius, Galvin's
bad-faith claim, as a matter of law, is not ripe; consequently, the trial
court does not have subject-matter jurisdiction over the claim.”). But see
Ex parte Safeway Ins. Co., No. 1120439, ––– So.3d ––––, 2013 WL
5506557, at *4 (Ala. Oct. 4, 2013) (Moore, C.J.) (hereinafter “Safeway
II ”) (denying petition for writ of mandamus filed by insurer and
questioning, declining to apply, and distinguishing, but not expressly
overruling, holding in Pontius with respect to insured's uninsured
motorist benefits claim involving phantom driver).
Andersen, 2014 WL 838811, *3 (internal footnote omitted).
The Court must determine whether the Plaintiffs’ claims are premature. Since
the Court concludes that Plaintiffs’ damages are not established, the Court does not
need to reach the question of whether liability is established.
The Amended Complaint notes that four Plaintiffs died in the accident. (Doc.
23 at ¶20). The Defendants note that “the only damages recoverable for a wrongful
22
death are punitive damages.” (See Doc. 25 at 21) (citing another source). They go on
to say that “[b]y their very nature, such damages are uncertain in their extent and
calculation until such time as a finder of fact determines them.” (See id.) (emphasis
omitted). The Supreme Court of Alabama has noted the difficulty in proving damages
in these cases:
With only punitive damages recoverable in wrongful death cases and
with no standards for determining excessiveness or inadequacy (if such
damages can be inadequate in wrongful death cases, Louisville & N.R.R.
v. Street, supra) except what trial or appellate courts consider to be
awards of amounts that indicate prejudice or passion, Trahan v. Cook,
288 Ala. 704, 265 So.2d 125 (1972); it is doubtful that an insured could
ever prove the amount of an insurer's liability under uninsured motorist
coverage in a wrongful death case with the specificity necessary to
recover against an insurer for bad faith in failing to negotiate or pay a
wrongful death claim under uninsured motorist coverage.
Aetna Cas. & Sur. Co., Inc. v. Beggs, 525 So. 2d 1350 (Ala. 1988) (emphasis added);
see also Mutual Assur., Inc. v. Madden, 627 So. 2d 865, 866 (Ala. 1993) (Houston,
J., concurring in the result) (“Because of the peculiar nature of damages for wrongful
death in Alabama, ‘such damages as the jury may assess,’ ranging from nothing to
$7,500,000 . . . may be recoverable. . . . We have established no minimum limit, even
where the defendant's action is intentional; the jury still has the right to award
nothing.”). The parties can only guess at what a jury would award in the form of
punitive damages. The deceased Plaintiffs’ damages are not established. Accordingly,
23
the deceased Plaintiffs' breach of contract claims are DISMISSED without
prejudice as unripe.
Additionally, the living Plaintiffs’ damages are not fixed. See Andersen, 2014
WL 838811, *3; see also May v. Victoria Fire & Cas. Co., No. 5:14-CV-924-HGD,
2015 WL 12978621, *2 (N.D. Ala. Mar. 23, 2015) (Kallon, J.) (“Plaintiff never
actually alleges the exact amount of her damages or whether the damages are
undisputed. Rather, Plaintiff merely alleges that her damages are ‘in excess of the
$25,000 settlement she reached with the at-fault party's insurance.’”); Hall v. State
Farm Mutual Automobile Ins. Co., 2011 WL 13229633, *2-4 (N.D. Ala. Aug. 2,
2011) (finding that the “[plaintiff] conversely has failed to establish which damages
he is entitled to recover from the accident”). None of the Plaintiffs’ arguments
overcome the fact that the damages are not conclusively established. (See Doc. 31 at
5-6).
Plaintiffs argue that Defendants will not pay more than $300,000 total and that
the $300,000 will be exhausted. (See Doc. 31 at 6) (citing Doc. 9-2, 9-3). However,
an attorney’s statements evaluating his client’s legal liability and case valuation do
not establish damages. Those letters do not tell the Court how much each Plaintiff
was injured. The Plaintiffs also argue that they were given permission to settle with
the tortfeasor. (See id.). However, that settlement still does not tell the Court how
24
much each Plaintiff was damaged, it just tells the Court that there was a settlement.
Here, the Plaintiffs plead that damages are somewhere in excess of $300,000.
(See Doc. 23 at 16 ¶57); (see also id. at 5-6 ¶20) (failing to list the amount of
damages sustained by each plaintiff). The Court is left to speculate how much in
excess of $300,000. The Court also notes that the letter attached to the Amended
Complaint, dated August 24, 2016, indicates that Plaintiffs have not submitted “their
medical bills and records.” (See Doc. 23-4 at 1); (see also Doc. 25 at 23 n.10)
(arguing that the “Plaintiffs fail to (and cannot) plead that they provided the requested
information necessary to evaluate the UIM claim”). Additionally, it is unclear if the
Plaintiffs are still receiving treatment. (See Doc. 23 at 5-6 ¶20). Once the living
Plaintiffs submit evidence indicating that the damages are fixed, then they might have
a claim. However, until that time, the living Plaintiffs’ breach of contract claims are
DISMISSED without prejudice on ripeness grounds.
ii.
The Bad Faith Claim Is Not Ripe
The Supreme Court of Alabama has stated the elements of a bad faith claim:
[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.” Bowen, 417 So.2d at 183.
25
Thus, for the tort of bad-faith refusal to pay, “[r]equirements (a) through
(d) represent the ‘normal’ case. Requirement (e) represents the
‘abnormal’ case.” Grissett, 732 So.2d at 976.
State Farm Fire & Cas. Co. v. Brechbill, 144 So.3d 248, 258 (Ala. 2013).
Since the breach of contract claims are not ripe, the bad faith claims are not
ripe. Accordingly, Count III is DISMISSED without prejudice.
D.
Leave To Amend the Pleading
Finally, the Court notes that Plaintiffs will be granted one more chance to
clearly state an underinsured motorist (UIM) claim. As it stands, the Amended
Complaint has three counts (fraud, breach of contract, bad faith). (See Doc. 23 at 9,
15). Contrary to Plaintiffs’ arguments, the Court does not read the Amended
Complaint to clearly raise a claim for UIM. (See Doc. 31 at 8-9). Plaintiffs’ citations
to the Amended Complaint in their response go to the breach of contract count. (See
id.). If the Plaintiffs wish to add a claim for UIM, then that would be a fourth count.
The elements to this claim are enumerated in the Alabama Pattern Jury Instructions.
See 1 ALA. PATTERN JURY INSTR. CIV. 20.52 (3d ed.). The elements of a UIM claim
are different from the elements of a breach of insurance contract claim. See id. at
20.17. The Court GRANTS the Plaintiffs 30 days to amend their complaint, if they
so choose.
26
V.
CONCLUSION
In conclusion, the motions are GRANTED in part and DENIED in part. The
Motion To Strike is DENIED. The Motion To Dismiss based on the Filed-Rate
Doctrine is DENIED. Also, the Motion To Dismiss the fraud claims against the
Exchange as being insufficiently pled is DENIED. The Group’s Fraud Motion is
GRANTED, and the Court DISMISSES Count I (fraud) against the Group. Count
I remains against Mid-Century and the Exchange.
Additionally, Counts II (breach of contract) and III (bad faith) are
DISMISSED without prejudice based on ripeness grounds against the Group,
Exchange, and Mid-Century.
The stay entered on January 18 (Doc. 37) is hereby LIFTED. The Plaintiffs are
given 30 days to amend their complaint if they so choose.
DONE and ORDERED this the 27th day of April, 2018.
VIRGINIA EMERSON HOPKINS
United States District Judge
27
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?