Skach v. AAA Northern California, Nevada & Utah Insurance Exchange

Filing 42

ORDERED that # 31 Motion to Dismiss is DENIED. FURTHER ORD that # 32 Motion to Stay is DENIED. Signed by Chief Judge Robert C. Jones on 5/28/2013. (Copies have been distributed pursuant to the NEF - DRM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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JUDITH T. SKACH,
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Plaintiff,
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vs.
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AAA NORTHERN CALIFORNIA, NEVADA & )
UTAH INSURANCE EXCHANGE,
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Defendant.
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3:12-cv-00464-RCJ-VPC
ORDER

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This is a first-party insurance action arising out of an automobile accident. Before the

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Court is Defendant’s Motion to Dismiss (ECF No. 31). For the reasons given herein, the Court

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denies the motion.

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I.

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FACTS AND PROCEDURAL HISTORY
On or about September 16, 2010, Plaintiff Judith Skach was involved in a car accident

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caused by a non-party who was found to be at fault. (Am. Compl. ¶ 5, Aug. 29, 2012, ECF No. 1,

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at 6). Plaintiff sustained permanent injuries; her medical expenses exceed $27,000, and

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treatment is ongoing. (Id.). The non-party tortfeasor’s insurance company tendered the policy

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limits of $50,000. (Id.). Plaintiff, believing that her eventual expenses would exceed $50,000,

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tendered a claim for an unspecified amount of Underinsured Motorist (“UIM”) benefits to

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Defendant AAA Northern California, Nevada & Utah Insurance Exchange (“AAA”) under a

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policy she had with AAA. (See id. ¶¶ 4–5). Defendant rejected the claim. (Id. ¶ 7).

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Plaintiff sued Defendant in state court on three causes of action: (1) breach of contract;

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(2) insurance bad faith; and (3) violations of Chapter 686A of the Nevada Revised Statutes

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(“NRS”) and Chapter 686A of the Nevada Administrative Code (“NAC”). Defendant removed

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the Amended Complaint (“AC”) and has now moved for summary judgment as to the bad faith

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claim.

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II.

LEGAL STANDARDS

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Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the

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claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of

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what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47

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(1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action

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that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule

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12(b)(6) tests the complaint’s sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n, 720

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F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for

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failure to state a claim, dismissal is appropriate only when the complaint does not give the

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defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell

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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is

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sufficient to state a claim, the court will take all material allegations as true and construe them in

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the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th

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Cir. 1986). The court, however, is not required to accept as true allegations that are merely

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conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden

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State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). A formulaic recitation of a cause of action

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with conclusory allegations is not sufficient; a plaintiff must plead facts showing that a violation

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is plausible, not just possible. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Twombly,

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550 U.S. at 555).

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“Generally, a district court may not consider any material beyond the pleadings in ruling
on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the
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complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner

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& Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents

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whose contents are alleged in a complaint and whose authenticity no party questions, but which

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are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6)

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motion to dismiss” without converting the motion to dismiss into a motion for summary

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judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule

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of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay

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Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court

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considers materials outside of the pleadings, the motion to dismiss is converted into a motion for

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summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir.

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2001).

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III.

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ANALYSIS
Defendant previously moved for summary judgment on the bad faith claim, but the Court

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treated the motion as a motion to dismiss for failure to state a claim and granted it, because

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Plaintiff had alleged the claim only in conclusory fashion and had not alleged the amount of her

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damages in excess of $50,000 or any facts supporting the conclusion that Defendant’s rejection

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of her demand for an (unspecified) amount under the UIM policy was made without any

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reasonable investigation. The Court noted that after amendment it would defer any summary

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adjudication until after the close of discovery on July 1, 2013, assuming Plaintiff sufficiently

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amended the claim.

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The Court also noted that because the present dispute centered upon the measure of

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Plaintiff’s pain and suffering, which type of damages have no objective measure, the bad faith

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claim premised purely upon a failure to reimburse Plaintiff for this measure of damages would

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not be not ripe until those damages were proved. See Pemberton v. Farmers Ins. Exch., 858 P.2d

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380, 384 (Nev. 1993) (“We agree that an insured must demonstrate fault by the tortfeasor and the
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extent of damages before a claim for bad faith will lie. But, an insured is not required to obtain a

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judgment against the tortfeasor before he or she is entitled to receive proceeds under a UM

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policy.”). That is, in order to bring a bad faith claim against an insurer, an insured need not

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receive a judgment against the tortfeasor, but must “demonstrate fault by the tortfeasor and the

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extent of damages.” Id.

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The Court disagreed with Defendant, however, that the Pemberton rule made the present

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bad faith claim unripe in federal court. See Fed. R. Civ. P. 18(b) (“A party may join two claims

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even though one of them is contingent on the disposition of the other . . . .”). But the Court noted

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that Rule 18 requires that an otherwise unripe claim be contingent upon another claim joined

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therewith, and Plaintiff had brought no negligence claim against the non-party tortfeasor and no

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declaratory judgment claim against Defendant as to the tortfeasor’s fault and the extent of

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damages caused by the tortfeasor. The Court therefore gave Plaintiff leave to amend not only the

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bad faith claim but also leave to add a claim for declaratory judgment as to the liability of the

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tortfeasor and the extent of the damages he or she caused.1

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Defendant argues the Second Amended Compliant (“SAC”) filed in response to the

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Court’s order did not cure the deficiencies. The same three claims are pled, with no claim

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directly against the tortfeasor and no claim for declaratory judgment against Defendant as to

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causation and the extent of Plaintiff’s damages. Plaintiff argues that the tortfeasor’s fault has

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been admitted by the simple fact that the tortfeasor tendered his own policy limits. The Court

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rejects this argument. It was not the tortfeasor but the tortfeasor’s insurance company that made

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the decision to tender the policy limits. That has nothing to do with the tortfeasor himself

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admitting fault, or even the insurance company. If Plaintiff has some evidence that the tortfeasor

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Apparently, Plaintiff does not wish to join the tortfeasor as a defendant, although such a
claim would of course also be a sufficient predicate for the bad faith claim against Defendant
under Rule 18.
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has in fact admitted fault via some release or other statement, it will be simple to provide that

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evidence in support of a declaratory judgment claim on the issue. But the tortfeasor’s insurance

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company’s decision to tender the policy limits rather than face a lawsuit does not in-and-of-itself

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translate into an admission of fault by anyone. Plaintiff also notes that causation and damages

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will have to be proved under the breach of contract claim, so there is no point in requiring

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Plaintiff to prove these things via a separate declaratory judgment claim. This is true, but to

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recover under the UIM provision, Plaintiff will also have to prove fault by the tortfeasor, and that

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issue has simply never been determined against or admitted by Defendant.

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In summary, the bad faith claim is sufficiently pled as a general matter in the SAC.

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Particularly, paragraph 18 indicates that counsel for Plaintiff contacted Defendant to report

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Plaintiff’s medical treatment and made Plaintiff’s records and bills available. It is also clear at

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this stage that Plaintiff does not wish to add a separate claim for declaratory judgment as to the

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tortfeasor’s fault. Rather than dismiss the breach and bad faith claims, the Court will simply

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require Plaintiff to prove, as part of both the breach and bad faith claims, that the tortfeasor was

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at fault.2

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Next, Defendant asks the Court to dismiss the third claim for failure to state a claim. The
Court denies the motion in this respect.

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A closer examination of Pemberton makes it clear that even a simple breach claim, if
based upon failure to pay under a UIM provision, requires a showing of the tortfeasor’s fault. See
Pemberton, 858 P.2d at 384. That is a commonsense rule, because underinsuredness implies that
the underinsured party has a reason to invoke his liability insurance to pay a third party in the
first instance, i.e., because he is at fault. In other words, liability of the tortfeasor is an inherent
element of a first-party claim of breach of a UIM provision as those provisions are typically
written. Plaintiff also argues that the Nevada Supreme Court has rejected the “directed verdict
rule,” under which a first-party insurance plaintiff has no bad faith claim unless he is entitled to a
directed verdict on the breach claim. That Nevada has rejected the directed verdict rule is clear,
see Albert H. Wohlers & Co. v. Bartgis, 969 P.2d 949 (Nev. 1998), but the present controversy
does not concern the directed verdict rule. It concerns a different principal, i.e., that a plaintiff
must show legal entitlement against the tortfeasor (though he need not obtain a judgment against
the tortfeasor) before any claim based upon the breach of a UIM policy will lie.
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CONCLUSION

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IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 31) is DENIED.

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IT IS FURTHER ORDERED that the Motion to Stay (ECF No. 32) is DENIED.

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IT IS SO ORDERED.

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Dated this 30th day of of May, 2013.
Dated this 28th day April, 2013.

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_____________________________________
ROBERT C. JONES
United States District Judge

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