Hedges Jr. v. Allstate Vehicle and Property Insurance Company

Filing 21

MEMORANDUM AND ORDER granting 14 defendant's Motion to Dismiss Counts 2, 3, and 4 of plaintiff's amended complaint and those claims are hereby dismissed. Plaintiff is granted leave to amend those claims, on or before November 10, 2014, to cure the pleading deficiencies noted herein. Signed by District Judge John W. Lungstrum on 10/28/2014. (ses)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

ROBERT C. HEDGES, JR.,

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Plaintiff,
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v.
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ALLSTATE VEHICLE AND PROPERTY
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INSURANCE COMPANY,
)
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Defendant.
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)
_______________________________________)

Case No. 14-1269-JWL

MEMORANDUM AND ORDER
This matter comes before the Court on defendant’s motion to dismiss Counts 2,
3, and 4 of plaintiff’s amended complaint (Doc. # 14). For the reasons set forth below,
the motion is granted, and the Court hereby dismisses those claims. Plaintiff is granted
leave, however, to amend those claims, on or before November 10, 2014, to cure the
pleading deficiencies noted herein.

I.

Background

By this action, plaintiff, a Kansas resident and an insured of defendant insurer,
alleges that he owns property in Kansas that suffered damage after a fire in October
2012, and that defendant has failed to resolve and pay his insurance claim. Plaintiff
initiated this suit in state court in July 2014, and defendant removed the case to this

Court.

By his petition, plaintiff asserted claims of breach of contract, outrage,

“misrepresentation”, and “fraud”; he alleged actual and consequential damages on each
claim in excess of $75,000; and he also sought punitive damages and statutory attorney
fees. After defendant filed a motion to dismiss the tort claims, plaintiff filed a short
response brief, in which he argued that his amended complaint, which he had filed
contemporaneously, rendered the pending motion moot (the Court subsequently agreed
and mooted the first motion). In the amended complaint, plaintiff added a few factual
allegations in the second and third counts, and he increased the amount of his alleged
actual damages for the three tort claims to an amount in excess of $150,000, an amount
in excess of $225,000, and an amount in excess of $300,000, respectively.
In response to the amended complaint, defendant has again moved to dismiss the
three counts asserting tort claims. In response, plaintiff filed the same short brief
(containing approximately one full page of text) that he filed in response to defendant’s
first motion. In that brief, plaintiff argues that the amended complaint, with its additional
facts and damage amounts, sets forth meritorious claims pleaded in sufficient detail, and
that any defects originally argued by defendant have been cured. Plaintiff, however, has
not addressed any of the particular arguments raised by defendant in the motion to
dismiss the amended complaint.

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II.

Governing Standards

The Court’s consideration of a motion to dismiss is governed by the following
standards. The Court will dismiss a cause of action for failure to state a claim only when
the factual allegations fail to “state a claim to relief that is plausible on its face,” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), or when an issue of law is
dispositive, see Neitzke v. Williams, 490 U.S. 319, 326 (1989). The complaint need not
contain detailed factual allegations, but a plaintiff’s obligation to provide the grounds of
entitlement to relief requires more than labels and conclusions; a formulaic recitation of
the elements of a cause of action will not do. See Bell Atlantic, 550 U.S. at 555. The
Court must accept the facts alleged in the complaint as true, even if doubtful in fact, see
id., and view all reasonable inferences from those facts in favor of the plaintiff, see Tal
v. Hogan, 453 F.3d 1244, 1252 (10th Cir. 2006). Viewed as such, the “[f]actual
allegations must be enough to raise a right to relief above the speculative level.” Bell
Atlantic, 550 U.S. at 555. The issue in resolving a motion such as this is “not whether
[the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer
evidence to support the claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002)
(quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

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III.

Analysis

Defendant first argues that plaintiff may not separately maintain his tort
claims—or seek punitive damages as a remedy on those claims—because they are based
on the same conduct that underlies plaintiff’s contract claim, namely, the failure to pay
and investigate properly plaintiff’s insurance claim. In seeking dismissal of plaintiff’s
outrage claim, defendant cites Spencer v. Aetna Life & Casualty Co., 227 Kan. 914
(1980), in which the Kansas Supreme Court held that Kansas1 did not recognize the tort
of bad faith as alleged by an insured against an insurer. See id. Spencer is of limited
relevance, here, however, because plaintiff has not asserted such a claim in this case.
Indeed, the court in Spencer, in reviewing rationales for rejecting such a cause of action,
noted that a claim for the tort of outrage is already available in Kansas. See id. at 91920. Similarly, in Osgood v. State Farm Mutual Automobile Insurance Co., 848 F.2d 141
(10th Cir. 1988)—a case cited by defendant—the Tenth Circuit specifically stated that
Kansas’s failure to recognize the tort of bad faith does not necessarily bar other types of
tort claims against an insurer, such as outrage or misrepresentation claims. See id. at
144. In this case, plaintiff has alleged outrage and misrepresentation claims based, at
least in part, on conduct by defendant separate from its denial of his insurance claim.

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The Court agrees with defendant that Kansas law should govern these claims by
plaintiff, a Kansas resident. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 U.S.
496 (1941) (in diversity action, forum state’s choice-of-law rules govern which state’s
substantive law applies); Ling v. Jan’s Liquors, 237 Kan. 629, 634-35 (1985) (under
Kansas law, tort actions are governed by the law of the state in which the tort occurred).
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Defendant also argues that plaintiff’s amended complaint does not contain
sufficient factual allegations to state claims under Kansas law for outrage or for
misrepresentation. In support of that argument, defendant has noted the particular
elements for those causes of action, but it has not engaged in any analysis of plaintiff’s
particular allegations in each of these three counts. Nor, as noted above, has plaintiff
engaged in any such analysis in his response brief. Nevertheless, the Court will consider
the legal sufficiency of plaintiff’s tort claims.
In his second count, plaintiff asserts a claim of outrage under Kansas law. “In
Kansas, the tort of outrage is the same as the tort of intentional infliction of emotional
distress.” See Valadez v. Emmis Communications, 290 Kan. 472, 476 (2010) (citing
Hallam v. Mercy Health Ctr. of Manhattan, Inc., 278 Kan. 339 (2004)). To recover on
such a claim, the plaintiff must show that the defendant’s conduct was extreme and
outrageous. See id.
Conduct that rises to the level of tortious outrage must transcend a
certain amount of criticism, rough language, and occasional acts and
words that are inconsiderate and unkind. The law will not intervene where
someone’s feelings merely are hurt. In order to provide a sufficient basis
for an action to recover for emotional distress, conduct must be outrageous
to the point that it goes beyond the bounds of decency and is utterly
intolerable in a civilized society.
See id. (citation omitted).
In his outrage claim, plaintiff alleges the following conduct by defendant:
23.
Within forty-five (45) days of the fire Sandy Della Ripa,
agent for Allstate, requested Plaintiff’s cell phone records. Plaintiff
supplied cell phone records. Such records showed Plaintiff was in
Oklahoma at the time of the fire.
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24.
Allstate has repeatedly asked for an authorization for bank
records, even though Plaintiff supplied an authorization to Sandy Della
Ripa, agent for Allstate.
25.
Allstate’s investigator found the cause of the fire to be
undetermined. There was never any evidence of arson.
Paragraphs 23 and 25 of the amended complaint, taken together, suggest that plaintiff
is actually complaining that defendant’s payment of his claim should not be delayed or
precluded by any argument that he caused the fire himself. Plaintiff also alleges that
defendant has repeatedly asked him for records after he has already supplied them. The
Court concludes, however, that such conduct is not extreme or outrageous as a matter of
law. See, e.g., Wilson v. State Farm Mut. Auto. Ins. Co., 934 F.2d 261, 266-67 (10th Cir.
1991) (failure to pay insurance claims and agent’s making ethnic slurs and derogatory
comments about the plaintiff’s gender did not constitute extreme and outrageous conduct
as a matter of law); Southern Star Central Gas Pipeline, Inc. v. Cline, 754 F. Supp. 2d
1257, 1264 (D. Kan. 2010) (failure to make payments did not constitute extreme and
outrageous conduct). Accordingly, this claim is subject to dismissal.
Plaintiff has not requested another opportunity to amend his complaint.
Nevertheless, if plaintiff can allege additional factual bases that would support a valid
claim of outrage under Kansas law, he may amend his complaint accordingly, on or
before November 10, 2014.
The Court will address plaintiff’s third and fourth counts together. In his third
count, plaintiff alleges “intentional misrepresentation, or in the alternative, negligent
misrepresentation,” based on the following alleged misrepresentations:
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32.
. . . Allstate failed to inform Plaintiff of certain exclusions
in Plaintiff’s homeowner’s policy. In fact, Sandy Della Rosa [sic], agent
of Allstate, informed Plaintiff that there would be no trial and that he did
not need an attorney.
In his fourth count, plaintiff alleges “fraud” based on the following allegations of “false
representation or concealment”:
37.
Allstate repeatedly requested financial documents from the
Plaintiff as the last thing Allstate needed before paying on the claim. That
Plaintiff relied upon the request as the last necessary step before Allstate
would pay on the claim. That reliance on the assertions of Allstate were
done to the detriment to the Plaintiff as it has now been nearly two years
and Allstate has failed to pay on the claim.
38.
Allstate misrepresented to the Plaintiff through its adjuster,
Sandy Della Ripa, that Plaintiff’s hiring of an attorney was unnecessary
and that Allstate intended to pay on the claim and that the matter would be
resolved quicker without an attorney.
39.
At no time did Allstate inform the Plaintiff that it did not
intend to pay on the Plaintiff’s claim. Allstate continues to insist, after
two years, that the investigation into the fire continues though Allstate has
done nothing for the majority of the time period to further the
investigation or pay on the claim.
Thus, the alleged misrepresentations and omissions may be summarized as follows: (1)
failing to inform plaintiff of certain exclusions; (2) stating that there would be no trial,
that plaintiff did not need an attorney, and that the matter would be resolved more
quickly without an attorney; and (3) stating that defendant only needed financial
documents before it would pay on the claim, that the investigation continues, and that
it intends to pay on the claim, and failing to inform plaintiff that it did not intend to pay.
Defendant cites Brown v. Chaffee, 612 F.2d 497 (10th Cir. 1979), in which the

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Tenth Circuit noted that a plaintiff “cannot turn an action for breach of contract into an
action for fraud by merely alleging reliance on representations that the contract would
be performed and detriment from its breach.” See id. at 503. Thus, plaintiff may not rest
his misrepresentation claims on an allegation that defendant told him it would pay his
claim, and any such claim is hereby dismissed. Plaintiff has alleged additional
statements and omissions, however, and defendant has not explained how any such
claims are deficient as a matter of law. Accordingly, the Court declines to dismiss
claims based on other alleged misrepresentations pursuant to Fed. R. Civ. P. 12(b)(6).
Defendant also argues that plaintiff’s misrepresentation claims do not satisfy Fed.
R. Civ. P. 9(b), which provides that in alleging fraud, a party must state the
circumstances constituting fraud with particularity. To comply with the rule, a complaint
alleging fraud must “set forth the time, place and contents of the false representation, the
identity of the party making the false statements and the consequences thereof.” See Tal
v. Hogan, 453 F.3d 1244, 1263 (10th Cir. 2006).
The Court agrees that plaintiff’s complaint does not contain the necessary detail
concerning the alleged misrepresentations by defendant. Plaintiff has not alleged when
or where particular statements (or omissions) were made; nor has plaintiff alleged how
he relied on any such statements to his detriment. For instance, plaintiff has alleged that
defendant failed to inform him of exclusions, but it is not clear whether he is alleging
such a failure occurring before he executed the insurance agreement or after the fire; nor
is it clear how he could have justifiably relied on any such omission to his detriment.
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Nor has plaintiff alleged how he justifiably and detrimentally relied on statements about
his need for an attorney or the state of the investigation. Accordingly, plaintiff’s
misrepresentation claims are subject to dismissal. Plaintiff will be permitted, however,
to amend his complaint to allege his misrepresentation claims with particularity in
accordance with Rule 9(b).2
Finally, the Court addresses plaintiff’s claim for punitive damages. Defendant
cites Osgood for the Tenth Circuit’s statement of the rule under Kansas law that “in
actions for breach of contract, damages generally are limited to the pecuniary losses
sustained[, and] exemplary or punitive damages are not recoverable in the absence of an
independent tort which causes additional injury to the complaining party.” See id. at 143
(citing Plains Resources, Inc. v. Gable, 235 Kan. 580, 593-94 (1984)). In response to
this argument, plaintiff has not explained how he suffered an injury separate from his
contract damages, such that he could pursue a claim for punitive damages. Plaintiff does
note in his response that he has changed his alleged damage amounts. The allegations

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Because plaintiff’s negligent misrepresentation claim is based on statements that
are also alleged to support a claim for intentional misrepresentation, plaintiff will
necessarily elaborate on the bases for the former claim in amending the latter.
Accordingly, the Court need not determine whether Rule 9(b) applies to negligent
misrepresentation claims. See Benchmark Electronics, Inc. v. J.M. Huber Corp., 343
F.3d 719, 723 (5th Cir. 2003) (although Rule 9(b) does not apply to negligent
misrepresentation claims by its terms, court applies the rule where the fraud and
negligent misrepresentations claims are based on the same set of alleged facts); D&K
Ventures, LLC v. MGC, LLC, 2009 WL 1505539, at *8 (D. Kan. May 27, 2009)
(Lungstrum, J.) (declining to resolve question where claims were based on same alleged
misrepresentations).
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that contract damages exceed $75,000 and that tort damages exceed a larger figure,
however, do not necessarily equate with an allegation that he suffered any injury in
addition to his contract damages.3 As noted above, plaintiff has not alleged how he
relied to his detriment on any particular misrepresentations by defendant.
Because the Court has ruled that plaintiff’s tort claims are subject to dismissal,
plaintiff’s claim for punitive damages must also be dismissed at this time. As stated
above, plaintiff may amend his complaint once again to attempt to plead sufficient tort
claims. In any such amended complaint, however, a claim for punitive damages must
be supported by an allegation that plaintiff suffered a separate injury in addition to any
injury from the alleged breach of contract.

IT IS THEREFORE ORDERED BY THE COURT THAT defendant’s motion to
dismiss Counts 2, 3, and 4 of plaintiff’s amended complaint is granted, and those claims
are hereby dismissed. Plaintiff is granted leave to amend those claims, on or before
November 10, 2014, to cure the pleading deficiencies noted herein.

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It would appear that, in amending the damage amounts, plaintiff may have been
attempting to make Osgood distinguishable, as in that case, the court, in upholding the
dismissal of a punitive damage claim, noted that the plaintiff in her complaint had
alleged the same amount of actual damages on both her contract and tort claims. See
Osgood, 848 F.2d at 144. Because he has not used specific damage figures, however,
plaintiff has not succeeded in alleging facts to show an additional injury that could
support punitive damages under a tort theory.
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IT IS SO ORDERED.

Dated this 28th day of October, 2014, in Kansas City, Kansas.

s/ John W. Lungstrum
John W. Lungstrum
United States District Judge

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