Sanders et al v. Church Mutual Insurance Company
Filing
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ORDER Granting in part and Denying in part 6 Defendant's Motion to Dismiss. IT IS FURTHER ORDERED that Sanders and Houstons request for leave to amend is DENIED as Moot. Signed by Judge Larry R. Hicks on 02/20/2013. (Copies have been distributed pursuant to the NEF - AC)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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ARCHIE SANDERS, an individual; JAMES )
HOUSTON, an individual,
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Plaintiffs,
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v.
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CHURCH MUTUAL INSURANCE
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COMPANY; DOES 1 through 100; and ROE )
CORPORATIONS 101 through 200,
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Defendants.
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2:12-CV-01392-LRH-WGC
ORDER
This is an insurance dispute. Before the court is defendant Church Mutual Insurance
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Company’s (“Church Mutual’s”) Motion to Dismiss (#61). Plaintiffs Archie Sanders and James
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Houston have responded (#11), and Church Mutual has replied (#12).
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I.
Facts and Procedural History2
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Sanders and Houston were involved in a motor vehicle accident on June 11, 2011.
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(Complaint #1, ¶ 4.) They were riding as passengers in a vehicle owned by United Faith Majestic
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Church (“United Faith”), which is insured by Church Mutual (Sanders and Houston’s Response
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#11, p. 2:1-3.). A driver struck United Faith’s vehicle, causing both Sanders and Houston severe
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Refers to the court’s docket entry number.
In reviewing a motion to dismiss, the court accepts facts alleged in the complaint as true.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
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injuries. (Complaint #1 at ¶ 12.)
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Sanders and Houston recovered damages from the at-fault driver, but they were
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unsuccessful in recovering from Church Mutual. (Sanders and Houston’s Response #11, p. 2:3-8.)
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They brought this suit in Nevada state court seeking Church Mutual’s policy limit, $1,000,000.
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(Id.) Church Mutual removed to this court on the basis of diversity jurisdiction. (Notice of Removal
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#1, p. 2.) Church Mutual now moves to dismiss all claims under Federal Rule of Civil Procedure
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12(b)(6).
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II.
Legal Standard
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To survive a motion to dismiss for failure to state a claim, a complaint must satisfy the
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Federal Rule of Civil Procedure 8(a)(2) notice pleading standard. See Mendiondo v. Centinela
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Hospital Medical Center, 521 F.3d 1097, 1103 (9th Cir. 2008). A complaint must contain “a short
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and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
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8(a)(2). The Rule 8(a)(2) pleading standard does not require detailed factual allegations; however, a
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pleading that offers only “labels and conclusions” or “a formulaic recitation of the elements of a
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cause of action” will not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic
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Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
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Furthermore, Rule 8(a)(2) requires a complaint to “contain sufficient factual matter,
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accepted as true, to state a claim to relief that is plausible on its face.” Id. (internal quotation marks
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omitted). A claim has facial plausibility when the pleaded factual content allows the court to draw
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the reasonable inference, based on the court’s judicial experience and common sense, that the
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defendant is liable for the misconduct alleged. See id. at 678-79. “The plausibility standard is not
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akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has
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acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant’s
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liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Id. at
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678 (internal quotation marks and citation omitted).
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In reviewing a motion to dismiss, the court accepts the facts alleged in the complaint as
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true. Id. (citation omitted). However, “bare assertions . . . amount[ing] to nothing more than a
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formulaic recitation of the elements of a . . . claim . . . are not entitled to an assumption of truth.”
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Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (quoting Iqbal, 556 U.S. at
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680) (alteration in original) (internal quotation marks omitted). The court discounts these
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allegations because they do “nothing more than state a legal conclusion – even if that conclusion is
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cast in the form of a factual allegation.” Id. “In sum, for a complaint to survive a motion to dismiss,
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the non-conclusory ‘factual content,’ and reasonable inferences from that content, must be
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plausibly suggestive of a claim entitling the plaintiff to relief.” Id. (quoting Iqbal, 556 U.S. at 678).
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III.
Discussion
Church Mutual moves to dismiss each of Sanders and Houston’s claims. These claims are
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the following: (1) negligence, (2) breach of contract, (3) breach of the implied covenant of good
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faith and fair dealing, and (4) unfair claim practices. Church Mutual also moves to dismiss Sanders
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and Houston’s prayer for punitive damages. Sanders and Houston have not objected to the
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dismissal of the negligence claim, and this failure to object constitutes consent to its dismissal. See
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Local Rule 7-2. Therefore, the court addresses only the remaining claims below.
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First, Church Mutual argues that Sanders and Houston have not successfully alleged the
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existence of a valid contract nor sufficient facts to constitute breach. In Nevada, an enforceable
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contract requires “an offer and acceptance, meeting of the minds, and consideration.” May v.
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Anderson, 119 P.3d 1254, 1257 (2005). Here, Sanders and Houston have not incanted these words,
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but their Complaint provides sufficient factual support for the court to infer, based on the its
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“judicial experience and common sense,” that an enforceable contract existed between United Faith
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and Church Mutual. Sanders and Houston’s Complaint alleges that Church Mutual “supplied an
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insurance policy that was in full force and effect on [the date of the accident.]” (Complaint #1 at ¶
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3.) The Complaint further alleges that the failure to “tender the policy limits as demanded and/or
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properly evaluate Plaintiffs’ claim arising from the automobile accident . . . constitute[s] material
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breach.” (Complaint #1 at ¶ 21.) Since an individual identified as an “insured” in an insurance
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contract may sue for breach as an intended beneficiary of that contract, see, e.g., Pasina v.
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California Casualty Indemnity Exchange, 2008 WL 5083831, *3-4 (D. Nev. Nov. 26, 2008), and
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since judicial experience and common sense suggests that passengers are often “insureds” under
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automobile insurance contracts, these allegations successfully give rise to a breach of contract
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claim.
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While Church Mutual faults Sanders and Houston for failing to point to specific contractual
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provisions, it is undisputed that Sanders and Houston do not presently have access to the insurance
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contract. And Church Mutual has not itself suggested contractual language that would defeat
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Sanders and Houston’s claim. Therefore, Sanders and Houston have sufficiently stated a breach of
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contract claim.
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Second, Church Mutual argues that Sanders and Houston have not pled sufficient facts to
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state a claim for breach of the implied covenant of good faith and fair dealing. Such a covenant is
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implicit in every insurance contract. Bergerud v. Progressive Casualty Insurance, 453 F. Supp. 2d
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1241, 1246 (D. Nev. 2006). This covenant creates a fiduciary-like duty between the insurer and the
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insured, and the insurer’s refusal to compensate the insured “without proper cause” is a breach of
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this duty. Pemberton v. Farmers Insurance Exchange, 858 P.2d 380, 382 (Nev. 1993). The right to
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enforce this covenant extends to parties identified as “insureds” in the insurance policy. Bergerud,
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453 F. Supp. 2d at 1249.
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Here, Sanders and Houston have alleged that Church Mutual “refus[ed] to evaluate properly
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and/or pay Plaintiffs’ claim [without] a reasonable basis for denying such benefits under the
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policy.” (Complaint #1 at ¶ 27.) If true, this claim properly states a breach for the implied covenant
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of good faith and fair dealing. Church Mutual again faults Sanders and Houston for not citing
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contractual language that would entitle them to recovery under the insurance policy. However,
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Sanders and Houston’s inability to access the contract combined with reasonable inferences in their
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favor suggest the “facial plausibility” of this claim. Ashcroft, 556 U.S. at 678.
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Third, Church Mutual contends that Sanders and Houston’s cause of action for unfair
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claims practices fails because Sanders and Houston did not establish that “an officer, director or
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department head of the insurer ha[d] knowingly permitted” an unfair practice. Nev. Rev. Stat.
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(“NRS”) § 686A.270. Church Mutual also argues that this claim fails because Sanders and Houston
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have not alleged damages with sufficient specificity and because Sanders and Houston have merely
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repeated the wording of the statute.
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While “bare assertions . . . amount[ing] to nothing more than a formulaic recitation of the
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elements of a . . . claim . . . are not entitled to an assumption of truth,” Moss, 572 F.3d at 969, the
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court must adopt the interpretation of ambiguous factual allegations that supports a valid claim,
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Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 816, 819 (6th Cir. 1995). Here, Sanders and
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Houston have alleged that Church Mutual itself committed unfair claims practices. (Complaint #1
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at ¶¶ 31-35.) This allegation might give rise to the inference that Church Mutual’s low-level
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employees committed these practices without the knowledge of Church Mutual’s higher-ups.
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Alternatively, it might give rise to the inference that Church Mutual’s higher-ups committed these
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practices or directed lower-level employees to commit these practices. Since the latter inference
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supports a valid claim under NRS § 686A.270, the court adopts this interpretation of Sanders and
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Houston’s allegation.
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Similarly, the court interprets Sanders and Houston’s damage allegations and their
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allegations of specific violations under NRS § 686A.310 to support a valid claim. Church Mutual is
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correct that some of these violations are stated in a conclusory manner. For example, Sanders and
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Houston simply quote the statutory provision when they accuse Church Mutual of “fail[ing] to
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acknowledge and act reasonably promptly upon communications with respect to claims arising
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under the insurance policy.” Compare Complaint #1 at ¶ 32 with NRS § 686A.310(1)(b). However,
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reasonable inferences from the Complaint support a claim under section 686A.310(1)(e) (failing to
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effectuate a prompt settlement of claims once liability of the insurer has become reasonably clear)
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and section 686A.310(1)(a) (misrepresenting to insureds any pertinent policy provisions). If
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Sanders and Houston have stated a valid unfair practices claim, then reasonable inferences from the
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Complaint further support Sanders and Houston’s damage claims. Such damage includes, for
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example, the costs of maintaining this suit, costs which are separate and apart from damage caused
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by the underlying accident. See NRS § 686A.310(2).
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Finally, Church Mutual asks the court to dismiss the punitive damages prayer for relief on
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the grounds that the Complaint does not allege facts supporting such damages. However, Sanders
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and Houston’s claim for breach of the implied covenant of good faith and fair dealing allows
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punitive damages, and Sanders and Houston have alleged a willful breach of this covenant.
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Therefore, in light of “judicial experience and common sense,” Iqbal, 556 U.S. at 679, Sanders and
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Houston have successfully pled the requirements for punitive damages.
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IV.
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Conclusion
IT IS THEREFORE ORDERED that Church Mutual’s Motion to Dismiss (#6) is
GRANTED in part and DENIED in part.
IT IS FURTHER ORDERED that Sanders and Houston’s request for leave to amend is
DENIED as moot.
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IT IS SO ORDERED.
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DATED this 20th of February, 2013.
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__________________________________
LARRY R. HICKS
UNITED STATES DISTRICT JUDGE
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