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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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Jane Haney, No. CV-13-02429-PHX-DGC Plaintiff, 10 11 v. 12 ORDER ACE American Insurance Company, et al., 13 Defendants. 14 15 Defendant ACE American Insurance Company (“ACE”) has filed a motion to 16 dismiss plaintiff’s fourth claim. Doc. 14. The motion has been fully briefed. Docs. 16, 17 18. Defendant Sedgwick Claims Management Services, Inc. (“Sedgwick”) has filed a 18 motion to dismiss Plaintiff’s second, fourth, and fifth claims. Doc. 13. Defendant Lori 19 Hasty has joined in Sedgwick’s motion. Doc. 21. That motion has been fully briefed. 20 Docs. 17, 19. The Court will grant the motions in part and deny them in part.1 21 I. Background. 22 Plaintiff Jane Haney suffered a head injury when she tripped and fell in the course 23 of her employment with The Boeing Company on or about March 13, 2012. Doc. 1, 24 ¶ 11. Haney made a claim for worker’s compensation, and the claim was received by 25 ACE, Boeing’s worker’s compensation insurance carrier, and Sedgwick, ACE’s claims 26 adjustor. Id., ¶ 12. Lori Hasty, a Sedgwick employee, was assigned to process Haney’s 27 1 28 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). 1 claim. Id. 2 Plaintiff alleges that Hasty, Sedgwick, and ACE failed to investigate her claim 3 properly, delayed payment on her claim, and finally forced Plaintiff to hire an attorney to 4 enforce her claim. Id., ¶ 13. Plaintiff sought a determination in front of the Industrial 5 Commission. Id. After Defendants failed to attend the hearing, the Commission issued 6 an award in Plaintiff’s favor, ordering Defendants to pay Plaintiff’s claim immediately. 7 Id. 8 Plaintiff’s claim. Id. Plaintiff alleges that Defendants, despite this ruling, still failed to timely pay 9 Plaintiff claims breach of the duty of good faith and fair dealing by ACE 10 (Count I), aiding and abetting this breach by Sedgwick (Count II) and Hasty (Count III), 11 and intentional infliction of emotional distress by ACE, Sedgwick and Hasty (Count IV). 12 Id. at 7-12. Plaintiff also seeks punitive damages (Count V). Id. at 13. Plaintiff attached 13 the favorable decision of the Industrial Commission to her complaint. Doc. 1-1. 14 II. Legal Standard. 15 When analyzing a complaint for failure to state a claim to relief under 16 Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light 17 most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th 18 Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the 19 assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are 20 insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec. 21 Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the 22 complaint must plead enough facts to state a claim to relief that is plausible on its face. 23 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard “is not 24 akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a 25 defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 26 556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere 27 possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the 28 pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)). -2- 1 In analyzing a motion to dismiss under Rule 12(b)(6), a court may “consider 2 certain materials – documents attached to the complaint, documents incorporated by 3 reference in the complaint, or matters of judicial notice – without converting the motion 4 to dismiss into a motion for summary judgment.” Ritchie, 343 F.3d at 908 (citations 5 omitted); see also Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (noting that the 6 court may take into account documents “whose contents are alleged in a complaint and 7 whose authenticity no party questions, but which are not physically attached to the 8 [plaintiff’s] pleading.”); Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 9 (2007) (“courts must consider the complaint in its entirety, as well as other sources courts 10 ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular, 11 documents incorporated into the complaint by reference, and matters of which a court 12 may take judicial notice.”). Notably, “[o]n a Rule 12(b)(6) motion to dismiss, when a 13 court takes judicial notice of another court’s opinion, it may do so ‘not for the truth of the 14 facts recited therein, but for the existence of the opinion, which is not subject to 15 reasonable dispute over its authenticity.” Lee v. City of L.A., 250 F.3d 668, 689-90 (9th 16 Cir. 2001) (quoting S. Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Grp. Ltd., 17 181 F.3d 410, 426-27 (3d. Cir. 1999)). 18 III. Analysis. 19 A. Count Four against ACE, Sedgwick and Hasty. 20 All three defendants seek dismissal of Plaintiff’s claim for intentional infliction of 21 emotional distress (“IIED”). In this claim, Plaintiff asserts that Defendants knew Plaintiff 22 was owed benefits, but repeatedly underpaid, delayed, and refused to correct their 23 underpayment of benefits. Doc. 1, ¶ 37. 24 Arizona has adopted the Restatement’s standard for claims of IIED. Savage v. 25 Boies, 272 P.2d 349 (Ariz. 1954). To assert such a claim under Arizona law, “first, the 26 conduct by the defendant must be “extreme” and “outrageous”; second, the defendant 27 must either intend to cause emotional distress or recklessly disregard the near certainty 28 that such distress will result from his conduct; and third, severe emotional distress must -3- 1 indeed occur as a result of defendant's conduct.” Ford v. Revlon, Inc., 734 P.2d 580, 585 2 (Ariz. 1987). 3 defendant’s acts were “so outrageous in character and so extreme in degree, as to go 4 beyond all possible bounds of decency, and to be regarded as atrocious and utterly 5 intolerable in a civilized community.” Mintz v. Bell Atl. Sys. Leasing Int’l, Inc., 905 P.2d 6 559, 563 (Ariz. Ct. App. 1995) (citing Cluff v. Farmers Ins. Exchange, 460 P.2d 666, 668 7 (1969)). “Only when reasonable minds could differ in determining whether conduct is 8 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 9 Plaintiff argues that her allegations meet this standard because there is a special 10 relationship between insurer and insured that “lessens the required outrageousness 11 necessary for an IIED.” Doc. 16 at 4. Plaintiff asserts that ACE abused its position of 12 authority over Plaintiff by failing to timely and properly process her claim and that its 13 conduct was outrageous because ACE knew Plaintiff was susceptible to physical harm 14 and mental distress. Id. Plaintiff also argues that it is improper for the court to decide this 15 issue on a motion to dismiss. Id. 16 First, it is not improper for the Court to determine whether Plaintiff has 17 sufficiently stated a claim for outrageous conduct on a motion to dismiss. See, e.g., 18 Mintz, 905 P.2d at 563 (affirming the trial court’s dismissal of a claim for IIED under 19 Rule 12(b)(6)). The Court is tasked with the legal obligation to determine whether 20 Plaintiff has alleged facts which, when viewed in the light most favorable to her, entitle 21 her to relief. Patton v. First Fed. Sav. & Loan Ass’n of Phoenix, 578 P.2d 152, 155 (Ariz. 22 1978) (“It is the duty of the court as society’s conscience to determine whether the acts 23 complained of can be considered sufficiently extreme and outrageous to state a claim for 24 relief.”) (citing Cluff , 460 P.2d at 666. 25 Second, the conduct alleged by Plaintiff to be extreme and outrageous, while 26 objectionable, cannot be said to “go beyond all possible bounds of decency.” 27 Plaintiff’s complaint asserts only that Defendants knew Plaintiff was owed benefits but 28 repeatedly underpaid and delayed those benefits, forcing Plaintiff to file suit, and that -4- Id. 1 Defendant knew or recklessly disregarded Plaintiff’s vulnerable state, acting with the 2 knowledge that denial of her full benefits would have significant detrimental impact on 3 her health. Doc. 1 at 11-12. “Cases where there has been a sufficient finding of 4 outrageousness contain stark and repulsive facts that strike at very personal matters, such 5 as willful ignorance of rampant sexual harassment.” Demetrulias v. Wal-Mart Stores 6 Inc., 917 F. Supp. 2d 993, 1012 (D. Ariz. 2013). Plaintiff’s complaint states no such 7 facts, and no conduct that “falls at the very extreme edge of the spectrum of possible 8 conduct.” Helfond v. Stamper, 716 P.2d 70, 72 (Ariz. Ct. App. 1986). Instead, Plaintiff 9 appears to rely on the finding by the Industrial Commission to assert that she was 10 improperly denied benefits. And while the Court may take into account that opinion, “it 11 may do so not for the truth of the facts recited therein, but for the existence of the 12 opinion.” Lee, 250 F.3d at 689-90 (emphasis added). In other words, the facts as recited 13 by the Industrial Commission are not factual allegations for purposes of Plaintiff’s 14 complaint that the Court may construe on a motion to dismiss. 15 Plaintiff relies on Demetrulias to argue that the existence of a special relationship 16 between insurers and insureds diminishes her need to allege extreme or outrageous 17 behavior. But Plaintiff has alleged no facts that, if taken as true, evidence anything more 18 than bad faith dealings and could be construed to state a claim for IIED. Without more 19 than allegations that Defendants delayed and underpaid Plaintiff, and that Defendants 20 knew Plaintiff was injured and vulnerable, Plaintiff has failed to allege facts that show 21 extreme and outrageous behavior. The motion to dismiss count four is granted as to all 22 defendants. 23 B. Count Two against Sedgwick. 24 Defendant Sedgwick has moved to dismiss Count Two in which Plaintiff alleges 25 that Hasty and Sedgwick aided and abetted ACE in breaching its duty of good faith and 26 fair dealing. Sedgwick argues that (1) Sedgwick’s employee, Hasty, cannot aid and abet 27 the tort of her corporate employer, and (2) ACE’s duty of good faith and fair dealing is a 28 non-delegable duty and Sedgwick, as the agent of ACE, cannot be liable for aiding and -5- 1 abetting because ACE and Sedgwick were acting as one entity. Doc. 13 at 5-7. 2 Under Arizona law, “[c]laims of aiding and abetting tortious conduct require proof 3 of three elements: (1) the primary tortfeasor must commit a tort that causes injury to the 4 plaintiff; (2) the defendant must know that the primary tortfeasor’s conduct constitutes a 5 breach of duty; and (3) the defendant must substantially assist or encourage the primary 6 tortfeasor in the achievement of the breach.” Wells Fargo Bank v. Ariz. Laborers, 7 Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 38 P.3d 12, 23 (Ariz. 8 2002). 9 Sedgwick’s argument that the adjuster and the insurance company act as one entity 10 in processing a claim, and that the adjuster therefore cannot be liable for aiding and 11 abetting bad faith, has been rejected repeatedly by courts in this district. Miller v. York 12 Risk Servs. Grp., 2:13-CV-1419 JWS, 2013 WL 6442764 (D. Ariz. Dec. 9, 2013) 13 (holding that an insurance adjuster could be held liable for aiding and abetting an 14 insurer's violations of the duty of good faith and faith dealing); Inman v. Wesco Ins. 15 Co., No. cv-12-02518, 2013 WL 2635603, at *4 (D. Ariz. June 12, 2013) (same); 16 Morrow v. Boston Mut. Life Ins. Co., No. CV-06-2635, 2007 WL 3287585 (D. Ariz. Nov. 17 5, 2007) (same). It is “possible for [an adjuster] to aid and abet [an insurance company] 18 through the actions of a common employee.” Pimal Prop., Inc. v. Capital Ins. Grp., Inc., 19 CV11-02323-PHX-DGC, 2012 WL 608392 (D. Ariz. Feb. 27, 2012). And in Arizona, “it 20 is well-established law that an agent will not be excused from responsibility for tortious 21 conduct [merely] because he is acting for his principal.” Warner v. Sw. Desert Images, 22 LLC, 180 P.3d 986, 992 (Ariz. Ct. App. 2008). 23 Sedgwick also errs in arguing that it cannot be liable because ACE’s duty of good 24 faith and fair dealing is non-delegable. Doc. 13 at 5. Plaintiff has not accused Sedgwick 25 of violating the non-delegable duty of good faith, but rather of the separate tort of aiding 26 and abetting that violation. See Inman, CV-12-02518-PHX-GMS, 2013 WL 2635603 (D. 27 Ariz. June 12, 2013) (Defendant’s argument “misses the point. [Plaintiff] is asserting a 28 separate tort, aiding and abetting, against [the adjuster]. He is not asserting the tort of -6- 1 bad faith.”). 2 Although an adjuster may be liable for aiding and abetting a violation of the duty 3 of good faith and fair dealing, Plaintiff must still show the elements of a separate tort by 4 the adjuster. Wells Fargo Bank, 38 P.3d at 23(noting that the third element of aiding and 5 abetting is that a second tortfeasor “substantially assist or encourage” a breach of duty by 6 a primary tortfeasor). Sedgwick argues that Plaintiff has not pled a separate tortious act 7 against it, but rather that “plaintiff’s bad faith and aiding and abetting claims rely upon 8 exactly the same conduct.” Doc. 19 at 6. 9 The factual allegations include failing to conduct a reasonable investigation into 10 Plaintiff’s claim and unreasonably delaying and denying Plaintiff’s claim. Doc. 1, ¶¶ 14, 11 20. In her claim for aiding abetting, Plaintiff also alleges that “SEDGWICK substantially 12 assisted or encouraged ACE AMERICAN in delaying or denying the claim without a 13 reasonable basis.” Id., ¶ 26. The Court concludes that this allegation sufficiently pleads 14 separate action by Sedgwick which could amount to aiding and abetting. The Court will 15 not dismiss Plaintiff’s second claim. 16 C. Defendant Hasty’s Request to Join. 17 Ms. Hasty has joined Sedgwick’s motion to dismiss. Doc. 21. Hasty argues that 18 there is no distinction between her actions and those of Sedgwick, and that the claims 19 against her should therefore be dismissed. Id. at 1. Sedgwick’s motion did not seek 20 dismissal of Count Three, which alleged aiding and abetting against Hasty, and Hasty has 21 not independently moved to dismiss this claim. She does, however, argue that the claims 22 against her should be dismissed, presumably including Count Three. Doc. 21 at 2. 23 Hasty argues that the complaint is clear that she was acting on behalf of Sedgwick, 24 her employer, in all actions described therein, and that if the aiding and abetting claim 25 against Sedgwick is dismissed, so must the aiding and abetting claim against her be 26 dismissed. Doc. 1 at 1. Under Arizona law, an employee’s actions are within the scope 27 of her employment when she “is doing any reasonable thing which [her] employment 28 expressly or impliedly authorizes [her] to do or which may reasonably be said to have -7- 1 been contemplated by that employment as necessarily or probably incidental to the 2 employment.” Smith v. Am. Exp. Travel Related Servs. Co., Inc., 876 P.2d 1166, 1170-71 3 (Ariz. Ct. App. 1994). Whether an employee’s allegedly tortious actions are within the 4 scope of employment is generally a question of fact. Id. at 136. 5 Plaintiff alleges that Hasty’s acts and omissions “were performed by her in her 6 individual capacity and as an agent.” Doc. 1, ¶ 28. She argues that Hasty is subject to 7 individual liability for her failure to accurately assess Plaintiff’s worker’s compensation 8 claim in light of her licensure as an adjuster. Id., ¶ 29. Hasty’s only argument in her 9 request for joinder is that, just as Sedgwick cannot be liable for aiding abetting ACE 10 because it was acting as its agent, Hasty cannot be liable for aiding and abetting because 11 she was an employee-agent of Sedgwick. As noted above, however, “an agent will not be 12 excused from responsibility for tortious conduct [merely] because he is acting for his 13 principal.” Warner, 180 P.3d at 992. Just as Sedgwick’s argument on this point failed, 14 Hasty is not immune from liability simply because she was an agent of ACE. 15 D. 16 Sedgwick seeks dismissal of Plaintiff’s request for punitive damages because 17 “plaintiff has not even alleged a tort against Sedgwick” and therefore cannot allege facts 18 showing an “evil mind.” Doc. 13 at 10. As noted above, the Court concludes that Count 19 Two states a claim against Sedgwick for aiding and abetting breach of fiduciary duty. 20 The premise for Sedgwick’s punitive damages argument – that no claim against 21 Sedgwick exists – is therefore incorrect. 22 Punitive Damages. IT IS ORDERED that the motions to dismiss (Docs. 13, 14, 21) are granted in 23 part and denied in part. Count Four is dismissed. 24 Dated this 25th day of March, 2014. 25 26 27 28 -8-

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