Dubose et al v. State Farm Mutual Automobile Insurance Company et al

Filing 117

RULING denying 68 Motion for Judgment on the Pleadings. Signed by Judge Shelly D. Dick on 09/21/2017. (ELW)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

RENEE PIPKINS, ET AL.

CIVIL ACTION

VERSUS

16-83-SDD-EWD

STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY, ET AL.
RULING
The motion before the Court is a Motion for Judgment on the Pleadings filed by the
Defendants, State Farm Mutual Automobile Insurance Company, et al. (“State Farm”).1
Plaintiffs, Renee Pipkins, et al. (“Plaintiffs”) have filed an Opposition,2 to which
Defendants have filed a Reply.3 For the following reasons, State Farm’s motion will be
DENIED.
I.

FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs, Shermecka Dubose (“Dubose”) and Renee Pipkins (“Pipkins”), are both

third-party claimants in an action with State Farm.4 Plaintiffs argue that State Farm
violated La. R.S. § 22:1973(B)(1) when it failed to disclose the existence of its Excess
Assurance Protection program (“EAP program”) when they each negotiated Receipt and
Releases (“Releases”) with State Farm.5 According to Plaintiffs:
The EAP program provides for an increase in the policy limits
available to a claimant, it does not create any new category of
1

Rec. Doc. 68.
Rec. Doc. 73.
3
Rec. Doc. 76.
4
Rec. Doc. 63, p. 1.
5
Id. at p. 2.
2

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coverage like earthquake or flood insurance which must be
triggered in any way independent of State Farm’s unilateral,
subjective decision. EAP is automatically applicable to any
and all third party claims, including those of Plaintiffs and the
class members.6
Plaintiffs contend that the existence of the EAP program is a pertinent fact concerning the
amount of policy coverage for a State Farm insured which must be disclosed in settlement
negotiations.7
State Farm now moves for a judgment on the pleadings alleging that the Complaint
lacked “allegations of fact plausibly establishing a nexus between the EAP program and
either of the named Plaintiffs’ claims.”8 State Farm avers that the Amended Complaint
“attempts to cure the original Complaint by conclusory alleging that the existence of the
EAP program is a ‘pertinent fact’ that must be disclosed by State Farm ‘to all third party
claimants,’ regardless of whether State Farm’s EAP program applies to that underlying
case.”9 State Farm additionally argues that the Plaintiffs waived their claims under La.
R.S. § 22:1973(B)(1) when they executed Releases to settle their underlying claims
against State Farm’s insureds.10
II.

LAW AND ANALYSIS
A. Motion for Judgment on the Pleadings Standard
State Farm moves for Judgment under Rule 12(c) of the Federal Rules of Civil

Procedure. A motion for judgment on the pleadings under Rule 12(c) of the Federal Rules
of Civil Procedure is evaluated on the same basis as a motion to dismiss under Rule

6

Rec. Doc. 63, p. 2.
Rec. Doc. 63, pp. 3-4.
8
Rec. Doc. 68-1, p. 2.
9
Id. at p. 3.
10
Id. at p. 7.
7

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12(b)(6).11
In deciding a Rule 12(b)(6) motion to dismiss, “[t]he ‘court accepts all well-pleaded
facts as true, viewing them in the light most favorable to the plaintiff.’”12 The Court may
consider “the complaint, its proper attachments, documents incorporated into the
complaint by reference, and matters of which a court may take judicial notice.”13 “To
survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough facts to state
a claim to relief that is plausible on its face.’”14 In Twombly, the United States Supreme
Court set forth the basic criteria necessary for a complaint to survive a Rule 12(b)(6)
motion to dismiss. “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations, a plaintiff’s obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do.”15 A complaint is also insufficient if it
merely “tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’”16 However,
“[a] claim has facial plausibility when the plaintiff pleads the factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.”17 In order to satisfy the plausibility standard, the plaintiff must show “more than

11

Gentilello v. Rege, 627 F.3d 540, 543-44 (5th Cir. 2010)(citing Doe v. MySpace, Inc., 528 F.3d 413, 418
(5 Cir. 2008)).
12
In re Katrina Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir. 2007)(quoting Martin K. Eby Constr.
Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)).
13
Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011)(quoting Dorsey v. Portfolio
Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2008)).
14
In re Katrina Canal Breaches Litigation, 495 F.3d at 205 (5th Cir. 2007)(quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929(2007)).
15
Bell Atl. Corp. v. Twombly, 550 U.S. at 555 (internal citations and brackets omitted)(hereinafter Twombly).
16
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)(internal citations
omitted)(hereinafter “Iqbal”).
17
Id.
th

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a sheer possibility that the defendant has acted unlawfully.”18 “Furthermore, while the
court must accept well-pleaded facts as true, it will not ‘strain to find inferences favorable
to the plaintiff.’”19 On a motion to dismiss, courts “are not bound to accept as true a legal
conclusion couched as a factual allegation.”20
B. Plaintiffs’ EAP Claims
In a certified question from the Fifth Circuit Court of Appeals, the Louisiana
Supreme Court in Kelly v. State Farm Fire & Casualty Company held:
An insurer can be found liable under La. R.S. 22:1973(B)(1) for
misrepresenting or failing to disclose facts that are not related to the
insurance policy’s coverage; the statute prohibits the misrepresentation of
“pertinent facts,” without restriction to facts “relating to any coverages.”21
The Court in Kelly further held: “We must, therefore, apply the word “or” disjunctively,
meaning that an insurer can be liable for misrepresenting22 either: 1) pertinent facts, or 2)
insurance policy provisions relating to any coverages at issue.”23 In order to survive State
Farm’s 12(c) motion, Plaintiffs must allege that State Farm’s failure to disclose the EAP
program was a misrepresentation of a pertinent fact or a misrepresentation of insurance
policy provisions relating to any coverages at issue. Here, Plaintiffs allege that State
Farm’s failure to disclose EAP was a misrepresentation of pertinent fact. In Paragraph 1
of their Amended Compliant,24 the Plaintiffs explicitly plead:
The existence and availability of State Farm’s EAP program
as well as the terms and conditions of its EAP program are
18

Id.
Taha v. William Marsh Rice Univ., 2012 WL 1576099 at *2 (S.D. Tex. May 3, 2012)(quoting Southland
Sec. Corp. v. Inspire Ins. Solutions, Inc., 365 F.3d 353, 361 (5th Cir. 2004)).
20
Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d
209 (1986)).
21
14-1921 (La. 5/5/15); 169 So.3d 328, 343-44.
22
Per the Kelly Court, under 22:1973(B) a misrepresentation includes an omission.
23
Id. at 343-44.
24
Rec. Doc. 61, p. 2.
19

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“pertinent facts” that State Fam is obligated to disclose to all
third party claimants per the mandates of [La. R.S. ¶
22:1973(B)(1)] and the Louisiana Supreme Court’s ruling in
Kelly. By failing to disclose to third party claimants the
existence of the EAP program and the terms and conditions
of the EAP program, State Farm gains an improper advantage
in the negotiation of disputed claims asserted by third-party
claimants.25
The Defendants contend, “[a]t most, Kelly can aid Plaintiffs in establishing that the
EAP program could give rise to liability if EAP had actually been presented to an insured
and if, under the facts and circumstances of that individual case, EAP became a pertinent
fact.”26 Defendants further aver that, “Kelly does not impose a requirement that insures
disclose immaterial facts that have no application to the claim at hand.”27 Here, Plaintiffs
have clearly alleged “that the EAP program increased the available policy limits applicable
to the claim[s] made by [Plaintiffs], [and] gave State Farm an unfair advantage in its
settlement negotiations with [Plaintiffs].”28 The Court cannot grant State Farm’s 12(c)
motion merely on its assertion that the EAP program is not a pertinent fact in the present
case.
Furthermore, Plaintiffs plead that EAP operates to increase the policy limits of
State Farm insureds available to third party claimants. According to the Amended
Complaint, the named Plaintiffs, settled their claims against State Farm and its insureds
for the policy limits.29 The allegations that the named Plaintiffs settled for policy limits
together with the allegation that EAP operates to increase available policy limits, plausibly

25

Id. at ¶ 1.
Rec. Doc. 68-1, p. 6 (emphasis original).
27
Id.
28
Rec. Doc. 61, p. 4, ¶ 5, ¶ 6.
29
Plaintiff Pipkins settled for the policy limits of $100,000.00 Plaintiff Dubose settled for $15,629.22 on a
policy limits of $15,000.00. See Rec. Doc. 63, p. 3, ¶ 5 p. 4, ¶ 6.
26

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states a nexus between the EAP and the named Plaintiffs under Twombly. Accordingly,
the Court finds that Plaintiffs have satisfied the plausibility pleading requirement for their
claims under La. R.S. 22:1973 as interpreted by the Louisiana Supreme Court in Kelly.
C. Plaintiffs’ Waivers
State Farm argues that the Releases30 executed by the Plaintiffs bar their present
claims.31 In the Release executed by Pipkins, she waived “any and all claims for bad faith
claims in handling under LSA-RS 22:1892 and LSA-RS 22:1973”32 for a settlement of
$100,000. Dubose also released State Farm “from any further claims, demands, actions
or causes of action” including “any and all claims for statutory penalties” for a settlement
of $15, 629.22.33 State Farm was a party to both Releases signed by Pipkins and Dubose
and may, as a matter of Louisiana law, assert res judicata based upon the compromise
agreement.34 Given that the agreement between the two parties provided that State Farm
would be released from any claims for bad faith handling of claims, and the current case
is based on such a claim, on its face, the Releases would bar the present case.
Plaintiffs counter that the Releases do not bar their current claims “[b]ecause
information about EAP program coverages is unavailable to third-party claimants – indeed
it is concealed from them by State Farm – third party claimants cannot form the requisite
intent to waive their Section 22:1973(B)(1) claims premised on those same State Farm
misrepresentations.”35 Plaintiffs further aver that “these releases are insufficient in scope
30

Rec. Doc. 68-3, Rec. Doc. 68-2.
Rec. Doc. 68-1, p. 7.
32
Rec. Doc. 68-3, p. 4.
33
Rec. Doc. 68-2, p. 2.
34
Ortego v. State, Dep’t of Transp. and Dev., 96-1322 (La. 2/25/97), 689 So.2d 1358, 1363. See Garrison
v. James Const. Group, LLC., 14-0761 (La. App. 1. Cir. 5/6/15), 174 So.3d 15, 20. See also La. C.C. Art.
1948.
35
Rec. Doc. 73, p. 8.
31

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to apply to the claims here related to the EAP program because State Farm made
affirmative misrepresentations to third-party claimants concerning the available coverage
and knowingly concealed the actual coverage available.”36
As the Louisiana Fifth Circuit Court of Appeal noted in Silva v. State Farm Mutual
Automobile Insurance Company, “a release executed in exchange for consideration is a
compromise,”37 and “is governed by the same general rules of construction applicable to
contracts.”38 As a matter of Louisiana law, consent, a necessary element to the formation
of a contract, “may be vitiated by error, fraud, or duress.”39 The Louisiana Fifth Circuit
Court of Appeals in Smith v. Remodeling Service, Inc., held: “Error vitiates consent only
when it concerns a cause without which the obligation would not have been incurred and
that cause was known or should have been known to the other party.”40 Here, the
Plaintiffs argue that they were “entitled to rely on [the disclosure of the EAP program] in
executing any release.”41 Because Plaintiffs’ Amended Complaint alleges that necessary
information, the EAP program, was withheld when the Releases were executed, and such
information was essential to their consent to the Releases, the Court finds that Plaintiffs
have plead sufficient facts to survive a Rule 12(c) challenge.

36

Id.
09-686 (La. App. 5 Cir. 3/23/10), 38 So.3d 934, 937.
38
Id.
39
Smith v. Remodeling Service, Inc., 94-589 (La. App. 5 Cir. 12/14/94), 648 So.2d 995, 998.
40
Id.
41
Rec. Doc. 73, p. 8.
37

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III.

CONCLUSION
For the reasons stated above, State Farm’s Motion for Judgment on the Pleadings

is DENIED.42
IT IS SO ORDERED.
Signed in Baton Rouge, Louisiana on September 21, 2017.

S

JUDGE SHELLY D. DICK
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

42

Rec. Doc. 68.

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