Golden v. State Farm Mutual Automobile Insurance Company
Filing
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OPINION AND ORDER GRANTING 11 MOTION to Dismiss for Failure to State a Claim by Defendant State Farm Mutual Automobile Insurance Company; DENYING 28 MOTION To Certify Questions of State Law by Plaintiff Cindy Golden. Clerk DIRECTED to ENTER FINAL JUDGMENT in favor of Defendant State Farm Mutual Automobile Insurance Company and against Plaintiff Cindy Golden. Signed by Senior Judge James T Moody on 11/29/12. (cer)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
CINDY GOLDEN,
Plaintiff,
v.
STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY,
Defendant.
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No. 1:11 CV 399
OPINION and ORDER
I.
BACKGROUND
Plaintiff asserts that some time before April 24, 2009, she purchased an auto
insurance policy from defendant. (DE # 1 ¶ 4.) In the policy, defendant promised to pay
“attorneys fees for attorneys chosen by us to defend an insured who is sued for such
damages.” (DE # 11-1 at 10; Policy at 6, emphasis in original.) The policy also stated that
defendant had “the right to: . . . defend an insured in any claim or lawsuit, with
attorneys chosen by us.” (Id., emphasis in original.)
In October of 2009, a lawsuit was filed against plaintiff following an auto
accident involving plaintiff. (Id. ¶ 26.) Defendant’s staff counsel entered an appearance
in the lawsuit as counsel for plaintiff, and defended plaintiff in the suit. (Id. ¶¶ 26, 29.)
Plaintiff admits that the staff counsel appropriately advised her of his status as an
employee of defendant. (Id. ¶ 28.) Following a bench trial, judgment was entered
against plaintiff. (Id. ¶ 29.)
Plaintiff objects to defendant’s use of staff counsel to defend its policyholders,
rather than “private, independent attorneys.” (Id. ¶¶ 9-10.) Plaintiff claims that
defendant owes a duty to its insureds to reveal the possibility that defendant-employed
attorneys might be used to defend them in lawsuits. (Id. ¶¶ 11-12.) Plaintiff sued
defendant for breach of this duty, breach of the duty of good faith and fair dealing, and
unjust enrichment. (DE # 1.)
Defendant moved to dismiss the complaint under FEDERAL RULE OF CIVIL
PROCEDURE 12(b)(6), arguing that it owed plaintiff no duty to disclose the possibility
that staff counsel might represent her in litigation. (DE # 11.) In addition to responding
to the motion, plaintiff also filed a motion to certify this question of law to the Indiana
Supreme Court. (DE # 28.) Both motions are fully briefed and ripe for ruling.
II.
LEGAL STANDARD
Defendant has moved to dismiss plaintiff’s claims under RULE 12(b)(6) of the
FEDERAL RULES OF CIVIL PROCEDURE for failure to state a claim upon which relief may be
granted. RULE 8 of the FEDERAL RULES OF CIVIL PROCEDURE sets forth the pleading
standard for complaints filed in federal court; specifically, that rule requires that a
complaint contain “a short and plain statement of the claim showing that the pleader is
entitled to relief.” FED. R. CIV. P. 8. “The RULE reflects a liberal notice pleading regime,
which is intended to focus litigation on the merits of a claim rather than on
technicalities that might keep plaintiffs out of court.” Brooks v. Ross, 578 F.3d 574, 580
(7th Cir. 2009) (internal quotation marks omitted).
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“While the federal pleading standard is quite forgiving, . . . the complaint must
contain sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face.” Ray v. City of Chicago, 629 F.3d 660, 662-63 (7th Cir. 2011); Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). When evaluating the sufficiency of a
complaint, the court must construe it in the light most favorable to the non-moving
party, accept well-pleaded facts as true, and draw all inferences in the non-movant’s
favor. Reger Development, LLC v. Nat’l City Bank, 595 F.3d 759, 763 (7th Cir. 2010).
III.
DISCUSSION
Defendant argues that it owed plaintiff no duty under Indiana law to disclose the
possibility that staff counsel might represent her in litigation. Plaintiff counters that the
Indiana Supreme Court explicitly permits aggrieved insureds to file suit against
insurers for failing to properly disclose the possibility that staff attorneys will be used to
defend them.
Both parties rely almost exclusively on one paragraph of one opinion of the
Indiana Supreme Court, Cincinnati Ins. Co. v. Wills, 717 N.E.2d 151 (1999). In Wills, the
Indiana Supreme Court determined that insurers do not engage in the unauthorized
practice of law when they employ staff attorneys to represent insureds. Id. at 160. The
court further held that using staff attorneys to represent insureds does not create a
conflict of interest. Id. at 161-63.
In a relatively short paragraph, the court also addressed the third-party
claimants’ contention that they were not given notice that staff counsel might represent
the insured rather than an outside attorney. Id. at 155-56. The court ultimately declined
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to rule on the issue, because the insured himself had not even complained about the
issue. Id. at 156. However, the court did comment that “[a]s a general proposition,
adequate disclosure is a matter in the first instance properly addressed through
administrative regulation. The insurance commissioner [of the Indiana Department of
Insurance] may choose to require more explicit notice to the insured at the time the
policy is taken out that ‘counsel of our choice’ could or will include house counsel. And
a policyholder aggrieved by nondisclosure of this arrangement at the time of issuance is
free to assert whatever claim is thought to arise from that circumstance.” Id.
It is this court’s task, sitting in diversity, to predict how the Indiana Supreme
Court would decide the issue presented by defendant in its motion to dismiss. Lexington
Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir. 1999). It is important to note
that because the Wills court did not actually rule on the issue of disclosure, all of the
court’s comments on this issue are merely dicta. Nonetheless, to the extent that they can
guide the court in determining how the Indiana Supreme Court would actually rule on
the issue, they are valuable comments.
The court agrees with defendant that current Indiana law does not require
insurers to disclose to insureds that the insurer’s choice of counsel may be staff counsel.
The Wills court suggests this by explaining that the insurance commissioner might
consider this issue and some day impose such a duty. For now, however, no such duty
exists. To read Wills any other way would be to strain the text of the opinion beyond
reason. The Wills court clearly placed the responsibility for articulating a duty of
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disclosure in the hands of the insurance commissioner, and plaintiff does not dispute
that no such duty has yet been set forth by the Indiana Department of Insurance.
Plaintiff complains that defendant had a “special” duty of disclosure in this
instance, but this argument is without merit. If some type of special relationship existed
between plaintiff and her insurance agent, then perhaps some duty to advise could be
inferred. Filip v. Block, 879 N.E.2d 1076, 1085 (Ind. 2008). But defendant was not her
insurance agent, and even if it could be so considered, “something more than the
standard insurer-insured relationship is required to create a special relationship
obligating the agent to advise the insured about coverage.” Myers v. Yoder, 921 N.E.2d
880, 885 (Ind. Ct. App. 2010).
Plaintiff’s argument that the Wills court explicitly permits aggrieved insureds to
file suit against insured for failing to properly disclose possible use of staff attorneys
also does not get plaintiff very far. Even if plaintiff is correct (and this court does not
find that she is), the ability to file a law suit is not the same as guaranteed success in the
lawsuit.
Finally, plaintiff’s request to certify this question to the Indiana Supreme Court is
denied. The Seventh Circuit advises that federal courts should not shy away from
deciding issues of state law. Diginet, Inc. v. Western Union ATS, Inc., 958 F.2d 1388, 1395
(7th Cir. 1992) (“Some federal judges are timid about deciding issues of state law,
because they fear that by doing so they will confuse that law. The fear is groundless.”);
Erie Ins. Group v. Sear Corp., 102 F.3d 889, 892 (7th Cir. 1996) (holding that absence of
state supreme court precedent did not justify certification of a question to that state’s
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supreme court where the court could forge a holding out of general principles of
contract interpretation and other persuasive caselaw). This court is not “genuinely
uncertain” about the issue presented, nor does it present a “matter of vital public
concern,” either of which might convince this court to certify the question to the Indiana
Supreme Court. Craig v. FedEx Ground Package Syst., Inc., 686 F.3d 423, 429-30 (7th Cir.
2012).
In sum, defendant had no duty to disclose to plaintiff the possibility that staff
counsel might be employed to defend her in lawsuits related to her auto insurance
policy. Each of plaintiff’s claims necessarily depended on the existence of such a duty.
Accordingly, plaintiff fails to state any claim in her complaint, and defendant’s RULE
12(b)(6) motion is granted.
IV.
CONCLUSION
For the foregoing reasons, defendant’s motion to dismiss (DE # 11) is
GRANTED. Plaintiff’s motion to certify questions of state law (DE # 28) is DENIED.
There being no claims remaining against any defendant in this case, the clerk is directed
to ENTER FINAL JUDGMENT as follows:
Judgment is entered in favor of defendant State Farm Mutual
Automobile Insurance Company, and against plaintiff Cindy
Golden, who shall take nothing by way of her complaint.
SO ORDERED.
Date: November 29, 2012
s/ James T. Moody
________
JUDGE JAMES T. MOODY
UNITED STATES DISTRICT COURT
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