Nguti v. Safeco Insurance Company

Filing 28

MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 1/13/2016. (c/m 01/14/2016 bus, Deputy Clerk)

UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND

CHARLES NGUTl,
Plaintiff,

v.

Civil Action No. IDC-15-0742

SAFECO INSURANCE COMPAJ'IY,
Defendant.

MEMORANDUM

OPINION

On December 18, 2014, Plaintiff Charles Nguti filed his Complaint against Defendant
Safeeo Insurance
Maryland.

Company ("Safeeo")

ECF NO.2.

in the Circuit Court for Prince George's

County,

On March 16,2015, Safeco filed its Notice of Removal to this Court.

ECF No. 1. Presently pending is Safeeo's Motion to Dismiss Counts II and IV of Nguti's
Complaint.

ECF No. 13. The Motion is fully briefed and ripe for disposition.

No hearing is

necessary to resolve the issues. See D. Md. Local R. 105.6. For the reasons that follow, the
Motion is GRANTED IN PART and DENIED IN PART.
BACKGROUND
The following facts are presented as alleged in the Complaint.

On January 26, 2012, a

fire at Nguti's home in Hyattsville, Maryland destroyed or damaged Nguti's personal belongings,
including furniture, televisions, computers, books, pictures and, clothing. That same day, Nguti
notified Safeeo of the fire, and Safeco issued him a claim number. For the following seven days,
Nguti was homeless.

Then, on February 1,2012, CRS Temporary Housing ("CRS"), on behalf

of Safeco, began to provide temporary housing for Nguti and his family. After several months of

investigating the fIre, which included deposing Nguti and collecting documents from him, Safeco
terminated Nguti's insurance on July 29, 2012 without notice or "justifiable reason."

CampI. at

4. Nguti's mortgage lender thus arranged for force-placed insurance on the property, at Nguti's
expense, during the months of uninsured status. Nguti then fIled a complaint with the Maryland
Insurance Administration ("MIA") to dispute the cancellation.

Following an MIA investigation,

Safeco reinstated "the same home insurance policy." ld. at 5.
On August 3, 2012, a CRS agent notified Nguti that his temporary housing would come
to an end on September 2, 2012. On September 25, 2012, a Safeco representative sent him a
letter denying his insurance claim relating to the fire.
On December 18, 2014, Nguti fIled a four-count Complaint against Safeco in the Circuit
In Count I, Nguti alleges a breach of contract

Court for Prince George's County, Maryland.
claim based on Safeco's
reimbursement

failure to pay his insurance claim, and in Count III he seeks

for living expenses incurred since his temporary housing was terminated

in

September 2012. Counts II and IV, which are the target of Safeco's pending Motion to Dismiss,
respectively assert a gross negligence claim and a breach of contract claim.

Specifically, in

Count II, Nguti alleges that Safeco acted with gross negligence when it subjected his family and
him to "unbearable conductions during a cold season" in the week following the fIre because it
did not immediately provide him with temporary housing. ld. at 4. In Count IV, Nguti alleges
that Safeco wrongfully terminated his insurance policy on July 29, 2012 "without any notices
and without a justifiable reason."

ld. Nguti therefore seeks reimbursement for the costs of the

force-placed insurance coverage he had to pay following the cancellation and before Safeco
reinstated his insurance policy.

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DISCUSSION
I.

Legal Standard
To defeat a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6), the

complaint must allege enough facts to state a plausible claim for relief. Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). A claim is plausible when the facts pleaded allow "the Court to draw the
reasonable

inference that the defendant is liable for the misconduct

alleged."

Id.

Legal

conclusions or conclusory statements do not suffice. ld. The Court must examine the complaint
as a whole, consider the factual allegations in the complaint as true, and construe the factual
allegations in the light most favorable to the plaintiff.
(1994); Lambeth v. Bd. ofComm'rs

II.

Albright v. Oliver, 510 U.S. 266, 268

of Davidson Cnty., 407 F.3d 266, 268 (4th Cir. 2005).

Count II: Gross Negligence
In its Motion to Dismiss, Safeca argues that Count 11, alleging gross negligence for

failure to provide Nguti and his family with temporary housing for a week following the fire,
should be dismissed because Safeco does not owe an independent, non-contractual duty to Nguti.
Safeco is correct. Under Maryland law, from which Nguti's gross negligence claim arises, "[t]he
mere negligent breach of a contract, absent a duty or obligation imposed by law independent of
that arising out of the contract itself, is not enough to sustain an action sounding in tort."
Heekrotte v. Riddle, 168 A.2d 879, 882 (Md. 1961). A contractual obligation, including one
contained in an insurance policy, does not create a tort duty by itself. Mesmer v. Md. Automobile
Ins. Fund, 725 A.2d 1053, 1058 (Md. 1999). Thus, "when the dispute is over the existence of
any valid contractual obligation covering a particular matter, or where the defendant has failed to
recognize or undertake any contractual obligation whatsoever, the plaintiff is ordinarily limited
to a breach of contract remedy." Id. at 1059.

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Nguti claims that Safeco was grossly negligent when it "failed to recognize or undertake
any contractual obligation whatsoever" in the seven days following the fire. See id. This is
precisely the sort of claim that can only be remedied in a breach of contract action, which Nguti
has asserted in Count I. Therefore, Count II is dismissed.
III.

Count IV: Termination of Insurance
Safeco argues that Count IV, in which Nguti asserts that Safeco improperly terminated

his insurance policy for a period of time, should be dismissed because this Court does not have
jurisdiction over claims challenging "underwriting practices" and because the claim is moot as a
result of the policy's reinstatement.

See Md. Code Ann., Ins. ~ 2-202(a) (2014). Nguti responds

that although Safeco did in fact reinstate his insurance after the MIA investigation, he still had to
pay for the force-placed insurance and seeks damages for those costs.

Safeco's arguments on

Count IV are less convincing.
The Court turns first to Safeco's jurisdictional argument. Under Maryland administrative
law, there are three forms of jurisdiction when both judicial and administrative remedies are
potentially available: exclusive, primary, and concurrent. Zappone v. Liberty Life Ins., 706 A.2d
1060, I067-{j8 (Md. 1998); Carter v. Huntington Title & Escrow, LLC, 24 A.3d 722, 728-29
(Md. 2011).

If the MIA has exclusive jurisdiction over a type of insurance claim, the matter

cannot be brought to court, either initially or following administrative action; under primary
jurisdiction,

the matter must first be brought to the MIA, but may be brought to court for a

judicial remedy once administrative remedies are exhausted; under concurrent jurisdiction, the
matter may be brought initially to court without having exhausted administrative remedies.
Carter, 24 A.3d at 728-29.

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See

Safeco correctly states that the Maryland General Assembly, in a subsection of the
Insurance Code entitled "Discrimination in underwriting and rate-setting practices prohibited,"
granted the MIA "exclusive jurisdiction to enforce by administrative action the laws of the State
that relate to the underwriting or rate-setting practices of an insurer." Md. Code Ann., Ins. ~ 2202(a)(1). Thus, litigants seeking to challenge the underwriting practices of their insurers must
file their complaint with the MIA, as "there simply is no alternative cause of action" in state or
federal courts. See Zappone, 706 A.2d at 1067.
The question Safeco raises in the Motion to Dismiss is whether its July 29, 2012
termination of Nguti's home insurance "without any notices and without a justifiable reason,"
Compl. at 4, constitutes "underwriting practices" that would preclude this Court's jurisdiction
under section 2-202(a)(I).

Although the Maryland Court of Appeals has not interpreted the

limits of this definition, its discussion of the term indicates that "underwriting practices" refers to
broader policies and procedures set by insurance companies, rather than a specific decision to
terminate an insurance plan. For instance, the Court of Appeals has noted that the Insurance
Code's prohibition on discriminatory underwriting practices, the jurisdiction of which is d~fined
by section 2-202, originates from the General Assembly's concerns with "the practice of what it
called 'redlining,' whereby insurers would refuse to renew or write policies based on the
geographic area in which the insureds or applicants lived." See Travelers Indemnity Co. v.
MerZing, 605 A.2d 83, 88 (Md. 1992).
Nguti's claim in Count IV is a more limited challenge. It challenges the "failure to
provide coverage under this policy" for a period of time and the lack of notice, which left the
property "uninsured for months" and required Nguti to pay for the force-placed insurance.
CampI. at 5--6. Rather than challenging Safeco's underwriting or rate-setting practices, Nguti's

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claim is essentially a breach of contract claim for failure to provide coverage. Arguably, the
claim could be a construed as a challenge under section 27-602 of the Insurance Code, Which
sets out the requirements for insurers to give notice of cancellation of personal insurance
policies. See Md. Code Ann., Ins.

S 27-602;

id.

S 27-601 (c)(I)

(defining "personal insurance" as

including "property or casualty insurance" issued to an individual for noncommercial activities);
id. ~ 1-IOI(gg) (defining "property insurance" as including homeowners insurance). Because

this section does not contain a jurisdictional provision for an insurer's failure to provide notice as
it does for an insurer's unlawful underwriting or rate-setting practices, there is a rebuttable
presumption that the MIA has primary jurisdiction over such a claim. See Carter, 24 A.2d at
729. Thus, to the extent that Count IV challenges the lack of required notice, the Court would
have jurisdiction ifNguti had first presented the matter to the MIA and exhausted administrative
remedies. See Zappone, 706 A.2d at 1068. Although the Complaint does not provide specific
details regarding Nguti's administrative claims, it asserts that Nguti filed a complaint with the
MIA to challenge the cancellation, and that as a result, his insurance policy was reinstated.
Because it can be inferred from this allegation, under the motion-to-dismiss standard, that Nguti
exhausted any applicable administrative remedies, Safeco's claim that the Court .lacks
jurisdiction fails.
Safeco's argument that Count IV should be dismissed because it is moot is also
unpersuasive. Although Nguti's insurance policy was reinstated after the MIA investigation,
Nguti is seeking damages for the costs of the force-placed insurance coverage. Safeco does not
claim that Nguti has been reimbursed for those charges as a result of the MIA proceedings.
Because there remains a "live" issue for which Nguti has a "legally cognizable interest in the

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outcome," Count IV is not moot. See Simmons v. United Mortg. & Loan Inv., LLe, 634 F.3d
754,763 (4th Cir. 2011). Safeeo's Motion to Dismiss Count IV is therefore denied.
CONCLUSION
For the foregoing reasons, Safeeo's Motion to Dismiss is GRANTED IN PART and
DENIED IN PART. The Motion is GRANTED as to Count II, which is DISMISSED. The
Motion is DENIED as to Count IV. Safeeo is directed to file its Answer within 14 days of this
Order. See Fed. R. Civ. P. 12(a)(4)(A). A separate Order shall issue.

Date: January 13,2016

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