Stacey et al v. Mercury Casualty Company

Filing 15

ORDER that 6 Motion to Dismiss is GRANTED in part and DENIED in part. FURTHER ORDERED that claims four and five of plaintiffs' complaint (doc. 1-1) are DISMISSED without prejudice. Signed by Judge James C. Mahan on 8/4/14. (Copies have been distributed pursuant to the NEF - MMM)

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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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DOUGLAS STACEY, et al.,

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2:14-CV-814 JCM (GWF)

Plaintiff(s),

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v.

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MERCURY CASUALTY COMPANY,

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Defendant(s).

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ORDER

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Presently before the court is defendant Mercury Casualty Co.’s motion to dismiss. (Doc. #

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6). Plaintiffs Douglas and Shellie Stacey have filed a response (doc. # 9)1 to which defendant replied

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(doc. # 11).

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I.

Background

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Plaintiffs originally filed this action in state court, alleging the following claims: (1) breach

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of contract; (2) breach of fiduciary duty/bad faith; (3) breach of the covenant of good faith; (4)

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violation of the Unfair Claims Practices Act; and (5) negligent and/or intentional misrepresentation.

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(Doc. # 1-2). Defendant removed this action on May 22, 2014. (Doc. # 1-1).

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The case arises out of an automobile accident that occurred on December 12, 2010, from

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which plaintiffs suffered injuries caused by a non-party tortfeasor, Srinivasa Senapathi. (Doc. # 1-2

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at 6). Plaintiffs allege that prior to the accident, they had underinsured motorist (“UIM”) coverage

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James C. Mahan
U.S. District Judge

Pursuant to District of Nevada Special Order 109(III)(F)(4), a separate document must be filed on the docket
for each purpose. The court cannot consider plaintiffs’ request for leave to amend unless it is filed separately, as a
motion.

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for $250,000 per person under an automobile policy (“policy”) issued by defendant. (Id.). Plaintiffs

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further allege, inter alia, that defendant undervalued their claims and withheld the full extent of their

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entitled policy benefits. (Id. at 7).

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In the instant motion, defendant seeks dismissal of plaintiffs’ second, fourth, and fifth claims.

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(Doc. # 6). The court will address each in turn.

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II.

Legal Standard

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A court may dismiss a complaint for “failure to state a claim upon which relief can be

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granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide “[a] short and plain

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statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); Bell

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Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual

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allegations, it demands “more than labels and conclusions” or a “formulaic recitation of the elements

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of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).

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“Factual allegations must be enough to rise above the speculative level.” Twombly, 550 U.S.

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at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to

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“state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. 662, 678 (citation omitted).

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In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when

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considering motions to dismiss. First, the court must accept as true all well-pled factual allegations

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in the complaint; however, legal conclusions are not entitled to the assumption of truth. Id. at 678-

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79. Mere recitals of the elements of a cause of action, supported only by conclusory statements, do

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not suffice. Id. at 678.

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Second, the court must consider whether the factual allegations in the complaint allege a

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plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff’s complaint

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alleges facts that allow the court to draw a reasonable inference that the defendant is liable for the

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alleged misconduct. Id. at 678.

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Where the complaint does not permit the court to infer more than the mere possibility of

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misconduct, the complaint has “alleged–but not shown–that the pleader is entitled to relief.” Id.

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James C. Mahan
U.S. District Judge

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(internal quotations omitted). When the allegations in a complaint have not crossed the line from

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conceivable to plausible, plaintiff's claim must be dismissed. Twombly, 550 U.S. at 570.

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The Ninth Circuit addressed post-Iqbal pleading standards in Starr v. Baca, 652 F.3d 1202,

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1216 (9th Cir. 2011). The Starr court stated, “First, to be entitled to the presumption of truth,

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allegations in a complaint or counterclaim may not simply recite the elements of a cause of action,

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but must contain sufficient allegations of underlying facts to give fair notice and to enable the

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opposing party to defend itself effectively. Second, the factual allegations that are taken as true must

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plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to

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be subjected to the expense of discovery and continued litigation.” Id.

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III.

Analysis

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A.

Breach of fiduciary duty/bad faith (claim two)

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Defendant argues that dismissal is appropriate because plaintiffs’ breach of fiduciary

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duty/bad faith claim is duplicative of their breach of the covenant of good faith claim. In support,

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defendant asserts that Nevada law recognizes a “special relationship” between an insurer and

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insured, not a “fiduciary duty.” Defendant contends that failure to perform in accordance with such

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relationship gives rise to a breach of the covenant of good faith and fair dealing claim, not a breach

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of fiduciary duty claim.

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In response, plaintiffs concede that no fiduciary duty exists and acknowledge that claim two

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is mistitled. Instead, plaintiffs argue that claim two is a claim for tortious bad faith as related to

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defendant’s breaches of its “fiduciary-like” duties and, thus, not duplicative of claim three. The

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court agrees.

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To state a claim for bad-faith refusal to pay an insurance claim, “plaintiff[s] must establish

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that the insurer had no reasonable basis for disputing coverage, and that the insurer knew or

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recklessly disregarded the fact that there was no reasonable basis for disputing coverage.” Powers

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v. United Servs. Auto. Ass’n, 962 P.2d 596, 604 (Nev. 1998).

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Plaintiffs allege that they made a timely claim pursuant to their UIM policy and submitted

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all relevant documentation. Plaintiffs allege that defendant in bad faith failed to reasonably,

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James C. Mahan
U.S. District Judge

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properly, fairly, and timely evaluate and tender the benefits due to them pursuant to the UIM policy.

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Plaintiffs further allege that defendant undervalued their claims and withheld the full extent of their

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entitled benefits under the UIM policy, violating the “special relationship duty.”

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Although the title is poorly worded, plaintiffs’ second claim is a claim for tortious bad faith

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and will be construed as such. Thus, defendant’s contention regarding a breach of fiduciary claim

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being duplicative is irrelevant. Accordingly, defendant’s motion to dismiss will be denied as to

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claim two.

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B.

Claim four: Unfair Claims Practices Act under NRS 686A.310

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Nevada’s laws regarding unfair trade practice are detailed in NRS 686A.310. This statute

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lists sixteen activities that constitute unfair practice in the insurance context and allows for a private

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right of action by an insured against the insurer for a violation of the statute.

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686A.310(1)(a)-(p); Hart v. Prudential Prop. & Cas. Ins. Co., 848 F. Supp. 900, 903 (D. Nev. 1974).

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“The provisions of NRS 686.A310 address the manner in which an insurer handles an insured’s

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claim [even if] the claim is denied.” Zurich Am. Ins. Co. v. Coeur Rochester, Inc., 720 F. Supp. 2d

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1223, 1236 (D. Nev. 2010).

See NRS

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Defendant argues that plaintiffs failed to identify the subsections of NRS 686A.310 that it

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allegedly violated and such failure does not meet the standard of Iqbal or Twombly. The court

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agrees. The allegations set forth in plaintiffs’ complaint fail to state a claim under NRS 686A.310

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as it merely recites various unidentified subsections of NRS 686A.310. This is insufficient as a

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matter of law as it pleads no facts whatsoever.

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In response, plaintiffs argue that, in Starr v. Baca, 633 F.3d 1191 (9th Cir. 2011), the Ninth

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Circuit concluded that the heightened pleading standards of Iqbal and Twombly do not apply to non-

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complex cases, such as the instant case. Plaintiffs’ argument is without merit as their argument is

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based on a case that was superseded by Starr v. Baca, 652 F.3d 1202 (9th Cir. 2011). Importantly,

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the controlling case does not support such a contention.

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Therefore, defendant’s motion to dismiss will be granted as to claim four.
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James C. Mahan
U.S. District Judge

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C.

Claim five: negligent and/or intentional misrepresentation

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Defendant argues that plaintiffs’ claim for negligent and/or intentional misrepresentation is

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insufficiently pled. In response, plaintiffs contend that such pleading standards did not bind them

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when the complaint was drafted and filed in state court and, thus, defendant’s argument is

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ineffective.

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The court disagrees. “It is well-settled that the Federal Rules of Civil Procedure apply in

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federal court, irrespective of the source of the subject matter jurisdiction. . . .” Kearns v. Ford Motor

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Co., 567 F.3d 1120, 1126 (9th Cir. 2009) (internal citations omitted). Although the complaint was

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originally filed in state court, it is still subject to the federal pleading standards.

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To state a claim for misrepresentation, plaintiffs must allege facts demonstrating that: (1)

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defendant made a false misrepresentation of a material fact; (2) defendant knew or believed the

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representation to be false, or had an insufficient basis for making the representation; (3) defendant

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intended to induce plaintiffs to act or refrain from acting in reliance upon the misrepresentation; (4)

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plaintiffs justifiably relied upon the misrepresentation; and (5) plaintiffs were damaged from such

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reliance. Bulbman, Inc. v. Nev. Bell, 825 P.2d 588, 592 (Nev. 1992).

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In addition, any claim for fraud must be pled with particularity under Federal Rule of Civil

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Procedure 9(b). Yourish v. Cal. Amplifier, 191 F.3d 983, 993 (9th Cir. 1999). To meet this standard,

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plaintiffs must present details regarding the “time, place, and manner of each act of fraud, plus the

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role of each defendant in each scheme.” Lancaster Com. Hosp. v. Antelope Valley Hosp. Dist., 940

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F.2d 397, 405 (9th Cir. 1991).

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Plaintiffs’ complaint merely recites the elements for a misrepresentation claim and fails to

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allege any facts whatsoever as to the time, place, and manner of defendant’s alleged acts of fraud.

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This fails to meet the standard set forth by Iqbal and comes woefully short of meeting the heightened

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pleading requirement for fraud under Rule 9(b).

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Thus, defendant’s motion to dismiss will be granted as to claim five.

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...

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James C. Mahan
U.S. District Judge

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IV.

Conclusion

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In sum, defendant’s motion to dismiss plaintiffs’ second claim for bad faith is denied without

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prejudice as it is not duplicative of a claim for breach of the covenant of good faith. Further, the

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court grants defendant’s motion to dismiss plaintiffs’ fourth claim under NRS 686A.310 and fifth

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claim for negligent and/or intentional misrepresentation as plaintiffs failed to meet the requisite

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pleading standards.

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Accordingly,

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IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that defendant’s motion to

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dismiss (doc. # 6), be, and the same hereby is, GRANTED in part and DENIED in part, consistent

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with the foregoing.
IT IS FURTHER ORDERED that claims four and five of plaintiffs’ complaint (doc. 1-1) are

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DISMISSED without prejudice.

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DATED August 4, 2014.

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UNITED STATES DISTRICT JUDGE
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James C. Mahan
U.S. District Judge

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