Williams et al v. The Travelers Home and Marine Insurance Company et al

Filing 12

ORDER that 5 Defendants' Motion to Dismiss is GRANTED. The Williamses' breach of contract claim against defendant The Travelers Home and Marine Insurance Company remains pending. Signed by Judge Andrew P. Gordon on 3/8/17. (Copies have been distributed pursuant to the NEF - MMM)

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1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 *** 4 5 MAXWELL B. WILLIAMS and CLAIR N. WILLIAMS, Plaintiffs, 6 7 8 9 10 11 v. THE TRAVELERS HOME AND MARINE INSURANCE COMPANY and THE TRAVELERS INDEMNITY COMPANY, Case No. 2:16-cv-01856-APG-CWH ORDER GRANTING MOTION TO DISMISS (ECF No. 5) Defendants. Plaintiffs Maxwell Williams and Claire Williams filed this lawsuit in Nevada state court 12 on June 17, 2016. Defendants The Travelers Home and Marine Insurance Company (THMIC) 13 and The Travelers Indemnity Company (TIC) removed it to this court on August 5, 2016. ECF 14 No. 1. The defendants now move to dismiss most of the Williamses’ claims. They argue that 15 TIC should be dismissed because it is not a party to the insurance policy at issue. They also argue 16 the claims for vicarious liability and punitive damages are remedies, not causes of action. 17 According to the defendants, all of the Williamses’ other claims, except for their breach of 18 contract claim, are time-barred. Finally, they contend the Williamses cannot bring negligence 19 and intentional infliction of emotional distress claims against their insurance carrier. 20 I convert the motion into one for summary judgment because the parties have attached 21 evidence to the motion and response. I grant summary judgment in favor of TIC because it is not 22 a party to the insurance contract out of which the Williamses’ claims arise. I dismiss the asserted 23 claims for vicarious liability and punitive damages because these are theories of recovery, not 24 causes of action. I grant summary judgment in THMIC’s favor on all of the Williamses’ 25 remaining claims, except for their breach of contract and negligence claims, as time-barred. 26 Finally, I grant summary judgment in THMIC’s favor on the negligence claim because an insured 27 cannot sue his or her insurer for negligence where that claim would be duplicative of a breach of 28 1 contract or bad faith claim. As a result, the Williamses’ only remaining claim is a breach of 2 contract claim against THMIC. 3 I. BACKGROUND 4 The Williamses purchased homeowners’ insurance from THMIC to cover their residence. 5 ECF Nos. 1-1 at 5; 5-1. In June 2010, they suffered a water loss at their home and they submitted 6 a claim under the policy. ECF No. 1-1 at 5. According to the complaint, THMIC inspected the 7 property but refused to pay benefits for the reasonable repair of the residence or for replacement 8 of damaged contents. Id. at 6. The complaint alleges that THMIC “ultimately closed the 9 Plaintiffs’ outstanding claims without arriving at a fair and equitable settlement . . . .” Id. On 10 October 5, 2011, THMIC sent a letter to the Williamses stating that it was “closing this file” 11 because the Williamses allegedly had not cooperated with THMIC. ECF No. 5-3. 12 Based on THMIC’s alleged acts and omissions in its handling of the Williamses’ claim, 13 the complaint asserts the following: (1) vicarious liability for the alleged actions or inactions of 14 the defendants’ employees; (2) breach of contract for failing to pay benefits due under the policy; 15 (3) breach of the implied covenant of good faith and fair dealing for failing to make repairs or 16 replace the contents and for “closing the Plaintiffs’ outstanding claims without arriving at a fair 17 and equitable settlement resolution;” (4) statutory violations for unfair claims practices; (5) 18 common law bad faith; (6) negligence; (7) intentional infliction of emotional distress; and (8) 19 punitive damages. Id. at 6-13. 20 II. ANALYSIS 21 Although styled a motion to dismiss, the parties attach evidence to the motion and the 22 response, which I have considered. I therefore convert the motion into one for summary 23 judgment. See In re Rothery, 143 F.3d 546, 549 (9th Cir. 1998); Fed R. Civ. P. 12(d). 24 Summary judgment is appropriate if the pleadings, discovery responses, and affidavits 25 demonstrate “there is no genuine dispute as to any material fact and the movant is entitled to 26 judgment as a matter of law.” Fed. R. Civ. P. 56(a), (c). A fact is material if it “might affect the 27 outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 28 Page 2 of 7 1 (1986). An issue is genuine if “the evidence is such that a reasonable jury could return a verdict 2 for the nonmoving party.” Id. 3 The party seeking summary judgment bears the initial burden of informing the court of the 4 basis for its motion and identifying those portions of the record that demonstrate the absence of a 5 genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden 6 then shifts to the nonmoving party to set forth specific facts demonstrating there is a genuine 7 issue of material fact for trial. Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 531 (9th Cir. 8 2000). I view the evidence and make reasonable inferences in the light most favorable to the 9 nonmoving party. James River Ins. Co. v. Hebert Schenk, P.C., 523 F.3d 915, 920 (9th Cir. 2008). 10 A. Defendant TIC 11 TIC contends it is not a party to the contract out of which the plaintiffs’ claims arise. The 12 Williamses respond that TIC is mentioned on page 11 of the policy, TIC sent them a pamphlet, 13 and TIC sent correspondence in July 2012 regarding an uncashed check made out to the 14 Williamses. They thus argue there are questions of fact regarding whether TIC is in privity of 15 contract with the Williamses. 16 The complaint does not allege facts supporting TIC’s liability. It groups the two 17 defendants together and identifies them collectively as “Travelers.” ECF No. 1-1 at 4-5. But it 18 contains no factual allegations about why TIC is liable. The insurance policy identifies the 19 insurer as THMIC. ECF No. 5-1 at 2. TIC is not listed as an insurer or a party to the contract. 20 The October 5, 2011 letter closing the claim file was issued by THMIC. ECF No. 5-3. 21 The Williamses rely on three exhibits to raise an inference that TIC was a party to the 22 insurance contract. The first is a privacy notice “given by Travelers Indemnity Company, and its 23 property and casualty insurance affiliates, members of the Travelers group of companies.” ECF 24 No. 8-2 at 11-12. THMIC identifies itself in the policy as “One of The Travelers Property 25 Casualty Companies.” Id. at 5. Consequently, THMIC’s use of the form does not indicate that 26 TIC is a party to the insurance contract. 27 28 Page 3 of 7 1 The second exhibit is a pamphlet about calculating depreciation issued by TIC “and its 2 property casualty affiliates.” ECF No. 8-6. at 5. For the same reasons, this pamphlet does not 3 indicate TIC is a party to the insurance contract. 4 Finally, the Williamses rely on a July 7, 2012 letter sent to them from TIC. That letter 5 references the date of the loss and the claim number for their claim. ECF Nos. 8-5 at 2; see also 6 8-4 (October 2011 letter from THMIC listing same claim number and date of loss). The July 7 2012 letter states that “[o]ur records indicate the check number listed above has not been returned 8 to us as a cashed item by our bank.” Id. It is unclear why TIC, as opposed THMIC, sent this letter 9 to the Williamses. However, the letter does not raise an issue of fact that TIC was a party to the 10 insurance policy or had any obligations under it. Accordingly, I grant summary judgment in 11 TIC’s favor. 12 B. Vicarious Liability and Punitive Damages 13 THMIC argues vicarious liability and punitive damages are theories of recovery, not 14 causes of action. THMIC admits it is vicariously liable for its employees’ actions taken within 15 the scope of their employment. ECF No. 5 at 5. The Williamses do not oppose dismissal given 16 this admission by THMIC. ECF No. 8 at 3. They also agree that punitive damages are a remedy. 17 Id. at 6. The parties agree these are not independent claims. I therefore grant this portion of 18 THMIC’s motion. 19 C. Statute of Limitations 20 21 1. Breach of the Implied Covenant of Good Faith and Fair Dealing/Bad Faith THMIC argues these claims are governed by a four-year limitations period, and because it 22 closed the case file and notified the Williamses of that fact on October 5, 2011, the Williamses’ 23 bad faith claims are time-barred. The Williamses respond that this case is in the early stages and 24 it is unclear when THMIC breached the covenant.1 The Williamses note that TIC sent a letter on 25 July 7, 2012. They thus argue the file was open in July 2012, which was less than four years 26 27 28 1 The plaintiffs did not request I defer ruling on the motion under Federal Rule of Civil Procedure 56(d), nor did they comply with that Rule’s requirements. Page 4 of 7 1 before they filed this lawsuit. Alternatively, the Williamses argue that the statute of limitations 2 does not begin to run until THMIC refuses payment, and there is no evidence THMIC ever made 3 a final decision not to pay. 4 The Williamses’ duplicative2 bad faith claims are governed by a four-year limitations 5 period. Nev. Rev. Stat. § 11.190(2)(c) (four-year period for “[a]n action upon a contract, 6 obligation or liability not founded upon an instrument in writing”); see also Schumacher v. State 7 Farm Fire & Cas. Co., 467 F. Supp. 2d 1090, 1094-95 (D. Nev. 2006). The complaint alleges 8 that THMIC acted in bad faith because it closed the file without reaching a fair settlement. ECF 9 No. 1-1 at 6. THMIC sent a letter to the Williamses stating that the file was closed as of October 10 2011. The Williamses thus had until October 2015 to bring suit. They did not file their 11 complaint until June 2016. Their bad faith claims are therefore time-barred. 12 The Williamses’ reliance on the July 2012 letter is misplaced. The fact that TIC inquired 13 about an uncashed check does not suggest that the claims file was still open or that THMIC was 14 still mulling whether to pay more benefits. THMIC stated in its October 2011 letter that it was 15 closing the file due to a purported lack of cooperation by the Williamses. Regardless of whether 16 that allegation was true, there is no genuine dispute that at that moment, THMIC was refusing to 17 pay anything further. The Williamses thus were aware as of that date that no additional benefits 18 would be forthcoming. They do not identify anything that occurred after October 2011, other 19 than the July 2012 letter, to suggest the closing of the file was not a final decision. I therefore 20 grant summary judgment in THMIC’s favor on the Williamses’ bad faith claims. 21 22 23 2. Unfair Claims Practices This claim is governed by a three-year limitations period. Nev. Rev. Stat. § 11.190(3)(a) (three-year period for “[a]n action upon a liability created by statute, other than a penalty or 24 25 26 27 28 2 An insurer’s breach of the covenant of good faith and fair dealing is the same as bad faith. See Tracey v. Am. Family Mut. Ins. Co., No. 2:09-CV-01257-GMN-PAL, 2010 WL 3613875, at *2 (D. Nev. Sept. 8, 2010) (“A claim of breach of the covenant of good faith and fair dealing is, in essence, a claim for bad faith.”); Drennan v. Maryland Cas. Co., 366 F. Supp. 2d 1002, 1005 (D. Nev. 2005) (stating a “breach of the good faith and fair dealing covenant constitutes bad faith when the relationship of the parties is that of insurer and insured”). Page 5 of 7 1 forfeiture”). This claim is time-barred for the same reasons as the bad faith claims. I therefore 2 grant summary judgment in THMIC’s favor on the Williamses’ claim for unfair claims practices. 3 3. Intentional Infliction of Emotional Distress 4 This claim is governed by a two-year limitations period. Nev. Rev. Stat. § 11.190(4)(e) 5 (two-year period for “an action to recover damages for injuries to a person”). This claim is time- 6 barred for the same reasons as the bad faith claims. There is no allegation of outrageous conduct 7 after the October 2011 closing of the file. I therefore grant summary judgment in THMIC’s favor 8 on the Williamses’ intentional infliction of emotional distress claim. 9 10 D. Negligence THMIC argues Nevada law does not recognize a claim for negligence by an insured 11 against his or her insurer. It argues insurers do not owe insureds duties beyond what are owed 12 under the contract and the duty of good faith. The Williamses respond that THMIC is vicariously 13 liable for the negligence of its employees who ignored communications from the Williamses, 14 ignored evidence of damage to the house, claimed that the parties had reached agreements that 15 were not made, and did not fairly resolve the Williamses’ insurance claim. 16 The Williamses do not respond to THMIC’s citations to case law holding that Nevada 17 does not recognize a negligence claim by an insured against his or her insurer that is duplicative 18 of a breach of contract or bad faith claim. See Phillips v. Clark Cnty. Sch. Dist., 903 F. Supp. 2d 19 1094, 1104 (D. Nev. 2012) (“Defendant argues that summary adjudication is appropriate because 20 Defendant does not owe a duty of care beyond the duties imposed by the insurance contract and 21 the corresponding duty of good faith . . . . The Court agrees.”); Sierzega v. Country Preferred 22 Ins. Co., No. 2:13-CV-1267-JCM-NJK, 2014 WL 1668630, at *5 (D. Nev. Apr. 25, 2014) 23 (“Nevada does not recognize a negligence cause of action against an insurer who has wrongfully 24 denied or delayed payment . . . .”). There may be circumstances under which an insurer could be 25 liable to its insured for negligence. But I agree that cannot be the case when the claim is 26 duplicative of a breach of contract or bad faith claim because the insured’s duties in those 27 situations are defined by the contract and by the law on insurance bad faith, not by the law of 28 Page 6 of 7 1 negligence. A negligence claim is particularly inappropriate when it is duplicative of a bad faith 2 claim. As explained by Judge Mahan, “[i]f a plaintiff could succeed against an insurer under a 3 theory of ordinary negligence, it would be absurd for courts to impose a stricter standard for 4 identical claims arising under the covenant of good faith.” Sierzega, 2014 WL 1668630, at *5. 5 The Williamses’ negligence claim rests on allegations that THMIC’s employees did not 6 respond to the Williamses, ignored evidence supporting their claim, claimed the parties had 7 reached agreements that were not made, and failed to resolve the Williamses’ claim. These acts 8 were taken as part of the claims handling process and are part of the alleged bad faith denial of 9 benefits. THMIC’s duties thus are governed by the contract and the law on bad faith. I therefore 10 grant summary judgment in THMIC’s favor on the Williamses’ negligence claim.3 11 III. CONCLUSION 12 IT IS THEREFORE ORDERED that defendants’ motion to dismiss (ECF No. 5) is 13 GRANTED. Summary judgment is granted in favor of defendant The Travelers Indemnity 14 Company on all of the Williamses’ claims against it. The Williamses’ claims for vicarious 15 liability and punitive damages are dismissed because they are remedies, not independent causes 16 of action. Summary judgment is granted in favor of defendant The Travelers Home and Marine 17 Insurance Company on the Williamses’ claims for bad faith, breach of the covenant of good faith 18 and fair dealing, unfair claims practices, intentional infliction of emotional distress, and 19 negligence. The Williamses’ breach of contract claim against defendant The Travelers Home and 20 Marine Insurance Company remains pending. 21 DATED this 8th day of March, 2017. 22 ANDREW P. GORDON UNITED STATES DISTRICT JUDGE 23 24 3 25 26 27 28 I assume without deciding that the negligence claim is timely. The plaintiffs argue this claim is subject to a six-year limitations period under Job’s Peak Ranch Cmty. Ass’n, Inc. v. Douglas Cnty., No. 55572, 2015 WL 5056232, at *4 (Nev. Aug. 25, 2015) (stating that “claims for negligence based on breach of a written contract expire after six years, NRS 11.190(1)(b)”). The defendants did not respond to this contention. I decline to consider the defendants’ argument, raised for the first time in the reply brief, that the negligence claim is barred by the policy’s two-year limitation. See Vasquez v. Rackauckas, 734 F.3d 1025, 1054 (9th Cir. 2013). Page 7 of 7

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