Haney v. ACE American Insurance Company et al

Filing 27

ORDER granting in part and denying in part 13 Motion to Dismiss Party; granting in part and denying in part 14 Motion to Dismiss Counts/Claims. Signed by Judge David G Campbell on 3/25/2014.(DGC, nvo)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Jane Haney,

No. CV-13-02429-PHX-DGC
Plaintiff,

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v.

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ORDER

ACE American Insurance Company, et al.,

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Defendants.

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Defendant ACE American Insurance Company (“ACE”) has filed a motion to

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dismiss plaintiff’s fourth claim. Doc. 14. The motion has been fully briefed. Docs. 16,

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18. Defendant Sedgwick Claims Management Services, Inc. (“Sedgwick”) has filed a

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motion to dismiss Plaintiff’s second, fourth, and fifth claims. Doc. 13. Defendant Lori

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Hasty has joined in Sedgwick’s motion. Doc. 21. That motion has been fully briefed.

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Docs. 17, 19. The Court will grant the motions in part and deny them in part.1

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I.

Background.

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Plaintiff Jane Haney suffered a head injury when she tripped and fell in the course

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of her employment with The Boeing Company on or about March 13, 2012. Doc. 1,

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¶ 11. Haney made a claim for worker’s compensation, and the claim was received by

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ACE, Boeing’s worker’s compensation insurance carrier, and Sedgwick, ACE’s claims

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adjustor. Id., ¶ 12. Lori Hasty, a Sedgwick employee, was assigned to process Haney’s

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The requests for oral argument are denied because the issues have been fully
briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b);
Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).

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claim. Id.

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Plaintiff alleges that Hasty, Sedgwick, and ACE failed to investigate her claim

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properly, delayed payment on her claim, and finally forced Plaintiff to hire an attorney to

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enforce her claim. Id., ¶ 13. Plaintiff sought a determination in front of the Industrial

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Commission. Id. After Defendants failed to attend the hearing, the Commission issued

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an award in Plaintiff’s favor, ordering Defendants to pay Plaintiff’s claim immediately.

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Id.

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Plaintiff’s claim. Id.

Plaintiff alleges that Defendants, despite this ruling, still failed to timely pay

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Plaintiff claims breach of the duty of good faith and fair dealing by ACE

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(Count I), aiding and abetting this breach by Sedgwick (Count II) and Hasty (Count III),

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and intentional infliction of emotional distress by ACE, Sedgwick and Hasty (Count IV).

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Id. at 7-12. Plaintiff also seeks punitive damages (Count V). Id. at 13. Plaintiff attached

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the favorable decision of the Industrial Commission to her complaint. Doc. 1-1.

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II.

Legal Standard.

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When analyzing a complaint for failure to state a claim to relief under

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Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light

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most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th

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Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the

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assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are

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insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec.

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Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the

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complaint must plead enough facts to state a claim to relief that is plausible on its face.

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard “is not

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akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a

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defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at

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556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere

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possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the

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pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).

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In analyzing a motion to dismiss under Rule 12(b)(6), a court may “consider

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certain materials – documents attached to the complaint, documents incorporated by

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reference in the complaint, or matters of judicial notice – without converting the motion

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to dismiss into a motion for summary judgment.” Ritchie, 343 F.3d at 908 (citations

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omitted); see also Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (noting that the

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court may take into account documents “whose contents are alleged in a complaint and

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whose authenticity no party questions, but which are not physically attached to the

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[plaintiff’s] pleading.”); Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322

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(2007) (“courts must consider the complaint in its entirety, as well as other sources courts

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ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular,

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documents incorporated into the complaint by reference, and matters of which a court

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may take judicial notice.”). Notably, “[o]n a Rule 12(b)(6) motion to dismiss, when a

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court takes judicial notice of another court’s opinion, it may do so ‘not for the truth of the

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facts recited therein, but for the existence of the opinion, which is not subject to

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reasonable dispute over its authenticity.” Lee v. City of L.A., 250 F.3d 668, 689-90 (9th

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Cir. 2001) (quoting S. Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Grp. Ltd.,

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181 F.3d 410, 426-27 (3d. Cir. 1999)).

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III.

Analysis.

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A.

Count Four against ACE, Sedgwick and Hasty.

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All three defendants seek dismissal of Plaintiff’s claim for intentional infliction of

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emotional distress (“IIED”). In this claim, Plaintiff asserts that Defendants knew Plaintiff

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was owed benefits, but repeatedly underpaid, delayed, and refused to correct their

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underpayment of benefits. Doc. 1, ¶ 37.

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Arizona has adopted the Restatement’s standard for claims of IIED. Savage v.

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Boies, 272 P.2d 349 (Ariz. 1954). To assert such a claim under Arizona law, “first, the

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conduct by the defendant must be “extreme” and “outrageous”; second, the defendant

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must either intend to cause emotional distress or recklessly disregard the near certainty

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that such distress will result from his conduct; and third, severe emotional distress must

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indeed occur as a result of defendant's conduct.” Ford v. Revlon, Inc., 734 P.2d 580, 585

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(Ariz. 1987).

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defendant’s acts were “so outrageous in character and so extreme in degree, as to go

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beyond all possible bounds of decency, and to be regarded as atrocious and utterly

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intolerable in a civilized community.” Mintz v. Bell Atl. Sys. Leasing Int’l, Inc., 905 P.2d

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559, 563 (Ariz. Ct. App. 1995) (citing Cluff v. Farmers Ins. Exchange, 460 P.2d 666, 668

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(1969)). “Only when reasonable minds could differ in determining whether conduct is

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sufficiently extreme or outrageous does the issue go to the jury.” Mintz, 905 P.2d at 563.

In order to meet the first element, the plaintiff must show that the

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Plaintiff argues that her allegations meet this standard because there is a special

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relationship between insurer and insured that “lessens the required outrageousness

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necessary for an IIED.” Doc. 16 at 4. Plaintiff asserts that ACE abused its position of

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authority over Plaintiff by failing to timely and properly process her claim and that its

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conduct was outrageous because ACE knew Plaintiff was susceptible to physical harm

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and mental distress. Id. Plaintiff also argues that it is improper for the court to decide this

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issue on a motion to dismiss. Id.

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First, it is not improper for the Court to determine whether Plaintiff has

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sufficiently stated a claim for outrageous conduct on a motion to dismiss. See, e.g.,

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Mintz, 905 P.2d at 563 (affirming the trial court’s dismissal of a claim for IIED under

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Rule 12(b)(6)). The Court is tasked with the legal obligation to determine whether

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Plaintiff has alleged facts which, when viewed in the light most favorable to her, entitle

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her to relief. Patton v. First Fed. Sav. & Loan Ass’n of Phoenix, 578 P.2d 152, 155 (Ariz.

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1978) (“It is the duty of the court as society’s conscience to determine whether the acts

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complained of can be considered sufficiently extreme and outrageous to state a claim for

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relief.”) (citing Cluff , 460 P.2d at 666.

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Second, the conduct alleged by Plaintiff to be extreme and outrageous, while

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objectionable, cannot be said to “go beyond all possible bounds of decency.”

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Plaintiff’s complaint asserts only that Defendants knew Plaintiff was owed benefits but

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repeatedly underpaid and delayed those benefits, forcing Plaintiff to file suit, and that

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Id.

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Defendant knew or recklessly disregarded Plaintiff’s vulnerable state, acting with the

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knowledge that denial of her full benefits would have significant detrimental impact on

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her health. Doc. 1 at 11-12. “Cases where there has been a sufficient finding of

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outrageousness contain stark and repulsive facts that strike at very personal matters, such

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as willful ignorance of rampant sexual harassment.” Demetrulias v. Wal-Mart Stores

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Inc., 917 F. Supp. 2d 993, 1012 (D. Ariz. 2013). Plaintiff’s complaint states no such

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facts, and no conduct that “falls at the very extreme edge of the spectrum of possible

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conduct.” Helfond v. Stamper, 716 P.2d 70, 72 (Ariz. Ct. App. 1986). Instead, Plaintiff

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appears to rely on the finding by the Industrial Commission to assert that she was

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improperly denied benefits. And while the Court may take into account that opinion, “it

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may do so not for the truth of the facts recited therein, but for the existence of the

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opinion.” Lee, 250 F.3d at 689-90 (emphasis added). In other words, the facts as recited

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by the Industrial Commission are not factual allegations for purposes of Plaintiff’s

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complaint that the Court may construe on a motion to dismiss.

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Plaintiff relies on Demetrulias to argue that the existence of a special relationship

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between insurers and insureds diminishes her need to allege extreme or outrageous

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behavior. But Plaintiff has alleged no facts that, if taken as true, evidence anything more

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than bad faith dealings and could be construed to state a claim for IIED. Without more

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than allegations that Defendants delayed and underpaid Plaintiff, and that Defendants

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knew Plaintiff was injured and vulnerable, Plaintiff has failed to allege facts that show

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extreme and outrageous behavior. The motion to dismiss count four is granted as to all

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defendants.

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B.

Count Two against Sedgwick.

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Defendant Sedgwick has moved to dismiss Count Two in which Plaintiff alleges

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that Hasty and Sedgwick aided and abetted ACE in breaching its duty of good faith and

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fair dealing. Sedgwick argues that (1) Sedgwick’s employee, Hasty, cannot aid and abet

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the tort of her corporate employer, and (2) ACE’s duty of good faith and fair dealing is a

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non-delegable duty and Sedgwick, as the agent of ACE, cannot be liable for aiding and

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abetting because ACE and Sedgwick were acting as one entity. Doc. 13 at 5-7.

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Under Arizona law, “[c]laims of aiding and abetting tortious conduct require proof

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of three elements: (1) the primary tortfeasor must commit a tort that causes injury to the

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plaintiff; (2) the defendant must know that the primary tortfeasor’s conduct constitutes a

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breach of duty; and (3) the defendant must substantially assist or encourage the primary

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tortfeasor in the achievement of the breach.” Wells Fargo Bank v. Ariz. Laborers,

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Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 38 P.3d 12, 23 (Ariz.

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2002).

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Sedgwick’s argument that the adjuster and the insurance company act as one entity

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in processing a claim, and that the adjuster therefore cannot be liable for aiding and

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abetting bad faith, has been rejected repeatedly by courts in this district. Miller v. York

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Risk Servs. Grp., 2:13-CV-1419 JWS, 2013 WL 6442764 (D. Ariz. Dec. 9, 2013)

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(holding that an insurance adjuster could be held liable for aiding and abetting an

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insurer's violations of the duty of good faith and faith dealing); Inman v. Wesco Ins.

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Co., No. cv-12-02518, 2013 WL 2635603, at *4 (D. Ariz. June 12, 2013) (same);

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Morrow v. Boston Mut. Life Ins. Co., No. CV-06-2635, 2007 WL 3287585 (D. Ariz. Nov.

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5, 2007) (same). It is “possible for [an adjuster] to aid and abet [an insurance company]

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through the actions of a common employee.” Pimal Prop., Inc. v. Capital Ins. Grp., Inc.,

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CV11-02323-PHX-DGC, 2012 WL 608392 (D. Ariz. Feb. 27, 2012). And in Arizona, “it

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is well-established law that an agent will not be excused from responsibility for tortious

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conduct [merely] because he is acting for his principal.” Warner v. Sw. Desert Images,

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LLC, 180 P.3d 986, 992 (Ariz. Ct. App. 2008).

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Sedgwick also errs in arguing that it cannot be liable because ACE’s duty of good

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faith and fair dealing is non-delegable. Doc. 13 at 5. Plaintiff has not accused Sedgwick

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of violating the non-delegable duty of good faith, but rather of the separate tort of aiding

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and abetting that violation. See Inman, CV-12-02518-PHX-GMS, 2013 WL 2635603 (D.

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Ariz. June 12, 2013) (Defendant’s argument “misses the point. [Plaintiff] is asserting a

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separate tort, aiding and abetting, against [the adjuster]. He is not asserting the tort of

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bad faith.”).

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Although an adjuster may be liable for aiding and abetting a violation of the duty

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of good faith and fair dealing, Plaintiff must still show the elements of a separate tort by

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the adjuster. Wells Fargo Bank, 38 P.3d at 23(noting that the third element of aiding and

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abetting is that a second tortfeasor “substantially assist or encourage” a breach of duty by

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a primary tortfeasor). Sedgwick argues that Plaintiff has not pled a separate tortious act

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against it, but rather that “plaintiff’s bad faith and aiding and abetting claims rely upon

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exactly the same conduct.” Doc. 19 at 6.

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The factual allegations include failing to conduct a reasonable investigation into

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Plaintiff’s claim and unreasonably delaying and denying Plaintiff’s claim. Doc. 1, ¶¶ 14,

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20. In her claim for aiding abetting, Plaintiff also alleges that “SEDGWICK substantially

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assisted or encouraged ACE AMERICAN in delaying or denying the claim without a

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reasonable basis.” Id., ¶ 26. The Court concludes that this allegation sufficiently pleads

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separate action by Sedgwick which could amount to aiding and abetting. The Court will

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not dismiss Plaintiff’s second claim.

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C.

Defendant Hasty’s Request to Join.

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Ms. Hasty has joined Sedgwick’s motion to dismiss. Doc. 21. Hasty argues that

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there is no distinction between her actions and those of Sedgwick, and that the claims

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against her should therefore be dismissed. Id. at 1. Sedgwick’s motion did not seek

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dismissal of Count Three, which alleged aiding and abetting against Hasty, and Hasty has

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not independently moved to dismiss this claim. She does, however, argue that the claims

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against her should be dismissed, presumably including Count Three. Doc. 21 at 2.

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Hasty argues that the complaint is clear that she was acting on behalf of Sedgwick,

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her employer, in all actions described therein, and that if the aiding and abetting claim

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against Sedgwick is dismissed, so must the aiding and abetting claim against her be

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dismissed. Doc. 1 at 1. Under Arizona law, an employee’s actions are within the scope

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of her employment when she “is doing any reasonable thing which [her] employment

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expressly or impliedly authorizes [her] to do or which may reasonably be said to have

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been contemplated by that employment as necessarily or probably incidental to the

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employment.” Smith v. Am. Exp. Travel Related Servs. Co., Inc., 876 P.2d 1166, 1170-71

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(Ariz. Ct. App. 1994). Whether an employee’s allegedly tortious actions are within the

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scope of employment is generally a question of fact. Id. at 136.

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Plaintiff alleges that Hasty’s acts and omissions “were performed by her in her

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individual capacity and as an agent.” Doc. 1, ¶ 28. She argues that Hasty is subject to

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individual liability for her failure to accurately assess Plaintiff’s worker’s compensation

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claim in light of her licensure as an adjuster. Id., ¶ 29. Hasty’s only argument in her

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request for joinder is that, just as Sedgwick cannot be liable for aiding abetting ACE

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because it was acting as its agent, Hasty cannot be liable for aiding and abetting because

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she was an employee-agent of Sedgwick. As noted above, however, “an agent will not be

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excused from responsibility for tortious conduct [merely] because he is acting for his

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principal.” Warner, 180 P.3d at 992. Just as Sedgwick’s argument on this point failed,

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Hasty is not immune from liability simply because she was an agent of ACE.

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D.

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Sedgwick seeks dismissal of Plaintiff’s request for punitive damages because

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“plaintiff has not even alleged a tort against Sedgwick” and therefore cannot allege facts

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showing an “evil mind.” Doc. 13 at 10. As noted above, the Court concludes that Count

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Two states a claim against Sedgwick for aiding and abetting breach of fiduciary duty.

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The premise for Sedgwick’s punitive damages argument – that no claim against

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Sedgwick exists – is therefore incorrect.

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Punitive Damages.

IT IS ORDERED that the motions to dismiss (Docs. 13, 14, 21) are granted in

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part and denied in part. Count Four is dismissed.

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Dated this 25th day of March, 2014.

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