ABIONA v. GEICO INDEMNITY COMPANY
Filing
12
OPINION. Signed by Judge Noel L. Hillman on 3/16/2016. (tf, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
OLUGBENGA O. ABIONA,
HONORABLE NOEL L. HILLMAN
Plaintiff,
CIVIL ACTION NO. 15-6013
v.
OPINION
GEICO INDEMNITY COMPANY,
Defendant.
APPEARANCES:
OLUGBENGA O. ABIONA, ESQ., pro se
1433 South 4th Street
Philadelphia, Pennsylvania 19147
Plaintiff
GREEN, LUNDGREN & RYAN, ESQS.
By: Francis X. Ryan, Esq.
20 Brace Road, Suite 200
Cherry Hill, New Jersey 08034
Counsel for Defendant
HILLMAN, United States District Judge:
In this diversity insurance coverage dispute, Plaintiff
Abiona asserts that his car insurance provider, Defendant Geico
Indemnity Company, wrongfully denied him under-insured motorist
(UIM) coverage under the parties’ insurance policy.
Presently before the Court is Geico’s Motion to Dismiss,
which asserts: (1) this Court’s lack of subject matter
jurisdiction for failure to exceed the statutory minimum amount in
controversy; and (2) failure to state claims for common law bad
1
faith denial of insurance coverage, and violation of the New
Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -109.
Alternatively, Geico asks this Court to stay and sever the bad
faith and consumer fraud claims pending the disposition of
Abiona’s claim for breach of the insurance contract.
For the reasons stated below, the jurisdictional motion will
be denied; and the Rule 12(b)(6) motion will be denied as to Count
2 (bad faith), and granted as to Count 3 (the New Jersey statutory
consumer fraud claim).
However, Abiona will be given an
opportunity to attempt to cure the pleading deficiencies of Count
3.
Additionally, Geico’s request to sever and stay Counts 2 and 3
will be granted.
I.
In March, 2014, Abiona was involved in a car accident in
Manhattan, New York.
Allegedly, the driver of the other car
suddenly, and “at a relatively high rate of speed,” pulled out
from the right parking lane, merged into Abiona’s lane, and struck
Abiona’s vehicle. (Compl. ¶ 6)
Abiona alleges he suffered
“severe” injuries to his neck and back as a result of the
accident.
(Compl. ¶ 9)
It is undisputed, at least for purposes of this motion, that
the other driver’s insurance company conceded liability and paid
2
out the policy limit for bodily injury coverage, which was
$25,000.
(Compl. ¶ 10; Geico’s moving brief, p. 9)
Abiona contends that $25,000 does not cover all of the costs
associated with treating his injuries.
He asserts that, in
addition to epidural steroid and facet block injections, he
“require[s] [a] surgical procedure in the future to attempt to
eliminate the cause of [his] constant back pain.” (Compl. ¶¶ 9,
15)
Accordingly, Abiona alleges that he made a claim on his own
underinsured motorist policy with Geico.
Geico allegedly
“completely den[ied] [Abiona] UIM benefits.” (Compl. ¶ 27)
Abiona
further asserts that Geico has acted in bad faith by declining to
participate in non-mandatory binding arbitration (Compl. ¶ 20, and
Ex. D), and “failing to present [Abiona] with a good faith offer
to settle [his] claim,” despite Abiona’s submission of extensive
medical documentation supporting his claim that his injuries are
severe and permanent. (Compl. ¶ 21)
Most notably, such
documentation allegedly “include[s] an IME report by [Geico’s]
chosen medical professional, Dr. Solomon, who opines that [Abiona]
is a surgical candidate from the injuries sustained by this
accident if the epidural injection therapy does not resolve the
significant pain from the herniated lumbar disc caused by this
accident.” (Compl. ¶ 25).
3
II.
A.
A motion to dismiss for lack of subject matter jurisdiction
implicates Federal Rule of Civil Procedure 12(b)(1).
The standard
to be applied when deciding a motion under Rule 12(b)(1) depends
on the nature of the motion.
Where, as here, a party argues that the complaint on its face
is insufficient to invoke the Court’s subject matter jurisdiction,
the Court applies the same standard as utilized in deciding a
motion under Rule 12(b)(6), which is discussed next. Constitution
Party of Pa. v. Aichele, 757 F.3d 347, 358 (3d Cir. 2014) (citing
Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 889-92
(3d Cir. 1977)).
The plaintiff has the benefit of procedural
safeguards, because the court must consider the allegations of the
complaint as true. CNA v. United States, 535 F.3d 132, 140 (3d
Cir. 2008).
B.
Federal Rule of Civil Procedure 12(b)(6) provides that a
court may dismiss a complaint “for failure to state a claim upon
which relief can be granted.”
In order to survive a motion to
dismiss, a complaint must allege facts that raise a right to
relief above the speculative level.
Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007); see also Fed. R. Civ. P.
4
8(a)(2).
While a court must accept as true all factual
allegations in the plaintiff’s complaint, and view them in the
light most favorable to the plaintiff, Phillips v. County of
Allegheny, 515 F.3d 224, 231 (3d Cir. 2008), a court is not
required to accept sweeping legal conclusions cast in the form of
factual allegations, unwarranted inferences, or unsupported
conclusions.
Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906
(3d Cir. 1997).
The complaint must state sufficient facts to show that the
legal allegations are not simply possible, but plausible.
Phillips, 515 F.3d at 234.
“A claim has facial plausibility when
the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
“[I]f a complaint is subject to a Rule 12(b)(6) dismissal, a
district court must permit a curative amendment unless such an
amendment would be inequitable or futile.”
Great Western Mining &
Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 174 (3d Cir.
2010) (internal citation and quotation omitted; emphasis added).
C.
“For convenience, to avoid prejudice, or to expedite and
economize, the court may order a separate trial of one or more
separate issues, claims, crossclaims, counterclaims or third-party
5
claims.”
Fed. R. Civ. P. 42(b). 1
The decision whether to
bifurcate or sever claims is left to the District Court’s
discretion. Edwin, Jr. v. The Robert Packer Hospital, 579 F.2d
819, 824 (3d Cir. 1978); see also O’Malley v. U.S. Fid. & Guar.
Co., 776 F.2d 494, 500 (5th Cir. 1985)(reviewing for abuse of
discretion District Court’s decision to sever first-party
insurance breach of contract claim from bad faith claim).
“[B]ifurcation [should] ‘be encouraged where experience has
demonstrated its worth.’” Edwin, Jr., 776 F.2d at 500 (quoting
Advisory Committee Notes to Rule 42(b)).
III.
In support of its argument to sever the breach of contract claim
from the other two claims, Geico relies upon Fed. R. Civ. P. 21.
While there is authority to support Geico’s position, in this
Court’s view, Rule 21 applies when there has been possible
misjoinder or nonjoinder of parties; an issue not implicated by
this suit.
Moreover, severance under Rule 21 creates two separate and
independent actions. White v. ABCO Eng'g Corp., 199 F.3d 140, 145
(3d Cir. 1999) (“A separation pursuant to Rule 42(b) separates
elements of the complaint for trial, but all the aspects remain
part of one single action which would result in a single judgment.
On the other hand, if claims are severed pursuant to Rule 21 they
become independent actions with separate judgments entered in
each.”)(internal citation and quotation omitted). It is not the
Court’s intention here to create two separate cases under two
separate docket numbers. Rather, the Court intends for this
single action to proceed in two phases.
6
1
The Court addresses Geico’s arguments in favor of dismissal
before addressing Geico’s alternate request to stay and sever
Counts 2 and 3.
A.
Count 1 – Breach of Contract
(1)
Amount in controversy
The diversity statute provides in relevant part, “[t]he
district courts shall have original jurisdiction of all civil
actions where the matter in controversy exceeds the sum or value
of $75,000, exclusive of interest and costs.” 28 U.S.C. § 1332(a).
Geico’s jurisdictional argument is based on relatively simple
arithmetic: Abiona’s policy limit with Geico is undisputedly
$100,000; he has been paid $25,000 from the other driver’s
insurer; therefore the amount in controversy is $75,000.
This
amount, of course, does not “exceed” $75,000; thus, according to
Geico, this Court lacks subject matter jurisdiction over this
suit.
This argument, however, is dependent on Geico successfully
obtaining dismissal of the other two claims asserted.
If Abiona
could possibly recover just one cent in additional damages
associated with those other claims, this Court cannot hold with
“legal certainty,” see Bell v. Preferred Life Assur. Soc. of
Montogmery, Ala., 320 U.S. 238, 240 (1943)(quoting St. Paul
7
Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289 (1938)),
that the amount in controversy does not exceed $75,000.
Accordingly, the Court turns to the next claim asserted.
Count 2 – common law bad faith denial of insurance benefits
(1)
Failure to state a claim
“In a case of denial of [insurance] benefits, bad faith is
established by showing that no debatable grounds existed for the
denial of benefits.” Pickett v. Lloyd’s, 131 N.J. 457, 481 (1993).
“To show a claim for bad faith, a plaintiff must show the absence
of a reasonable basis for denying benefits of the policy and the
defendant’s knowledge or reckless disregard of the lack of a
reasonable basis for denying the claim. . . . [T]he lack of a
reasonable basis may be inferred . . . where there is a reckless
indifference to facts or proofs submitted by the insured.” Id. at
473 (internal citation and quotation omitted).
The Complaint’s allegation that Geico’s own IME opined that
“if [Abiona] fails conservative therapy . . . he could be a
surgical candidate” (Compl. ¶ 17) “nudge[s]” the assertion that
Geico recklessly disregarded the lack of a reasonable basis for
denying Abiona’s claim “‘across the line from conceivable to
plausible.’”
Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009)(quoting
Twombly, 550 U.S. at 570)
8
The Court holds that the Complaint adequately states a bad
faith claim.
(2)
Geico’s motion in this regard will be denied.
Amount in controversy
Consequential and punitive damages 2 are available for bad
faith claims under New Jersey law. Taddei v. State Farm Indemnity
Co., 401 N.J. Super. 449, 461, 463 (App. Div. 2008)(“[plaintiff’s]
measure of damages, if he could prove bad faith, would be any
foreseeable consequential damages.
This might typically include,
for example, costs of litigation, including expenses for experts
and counsel fees, and prejudgment interest. . . . [I]n an
exceptional and particularly egregious case [plaintiff may] even
be permitted to pursue punitive damages.”)(citing Pickett).
Those
potential damages, added to the $75,000 of potential damages
associated with the breach of contract claim (Count 1), carry the
amount in controversy over the statutory threshold of $75,000.
The Court holds that the diversity statute authorizes the
exercise of subject matter jurisdiction over this suit.
Geico’s
jurisdictional motion will be denied.
Geico asks this Court to dismiss the claim for punitive damages,
arguing that Abiona has not pled any facts supporting a conclusion
that Geico acted in a manner that would support an award of
punitive damages. The Court declines to dismiss the claim for
punitive damages at this early stage of the litigation. Such a
fact-sensitive determination is better left for summary judgment.
9
2
Count 3 – New Jersey Consumer Fraud Act violation
(1)
Failure to state a claim
Fed. R. Civ. P. 9, which requires a plaintiff to plead fraud
with particularity, applies to New Jersey Consumer Fraud Act
claims. Frederico v. Home Depot, 507 F.3d 188, 203 (3d Cir. 2007).
Abiona’s complaint, as currently drafted, contains no allegations
whatsoever with regard to any fraud allegedly committed by Geico.
The Complaint fails to answer at least one fundamental question:
what does Abiona allege Geico misrepresented?
The New Jersey Consumer Fraud Act allegations fall far short
of the bar set by Fed. R. Civ. P. 9, and do not even meet the more
basic pleading standards of Fed. R. Civ. P. 8.
Dismiss Count 3 will be granted.
Geico’s Motion to
However, Abiona will be granted
leave to amend his Complaint as to Count 3.
B.
The prevailing practice in both state and federal court is to
sever breach of insurance contract claims from bad faith claims,
and to proceed with the contract claim before turning to the bad
faith claim (if still necessary after adjudicating the contract
claim). See Beachfront N. Condo. Ass’n, Inc. v. Lexington Ins.
Co., No. 14-6706, 2015 U.S. Dist. LEXIS 84074 (D.N.J. June 24,
2015)(Schneider, Magistrate Judge); Riverview Towers Apt. Corp. v.
QBE Ins. Corp., 2015 U.S. Dist. LEXIS 57100 (D.N.J. April 17,
10
2015)(Schneider, Magistrate Judge); Wacker-Ciocco v. GEICO, 439
N.J. Super. 603 (App. Div. 2015)(holding that the trial court
abused its discretion when it did not sever bad faith claim from
underinsured motorist claim); Procopio v. GEICO, 433 N.J. Super.
377, 383 (App. Div. 2013)(“Preserving the insured’s ability to
pursue his or her bad faith claim while deferring discovery
thereon until the resolution of the UM or UIM claim best
accommodates the varying interests involved.”); Taddei v. State
Farm Indemnity Co., 401 N.J. Super. 449, 465-66 (App. Div.
2008)(citing Bartlett v. John Hancock Mut. Life Ins. Co., 538 A.2d
997, 1000-02 (R.I. 1988)). 3
Severance of a bad faith claim will often be desirable
because, as courts have recognized, there is real potential for
prejudice to the insurer should it “‘be required to produce its
claim file prematurely.’” Wacker-Ciocco, 439 N.J. Super. at 608
(quoting Taddei, 401 N.J. Super. at 465-66); see also Procopio,
433 N.J. Super. at 383 (“Such premature discovery may also
jeopardize the insurer’s defense of the UM or UIM claim by the
disclosure of potentially privileged materials.”).
See also Corrente v. Fitchburg Mut. Fire Ins. Co., 557 A.2d 859,
862 (R.I. 1999)(“we are of the opinion that whether or not a
discovery issue is involved, it is inherently prejudicial for a
trial justice to decline to sever [a bad faith claim] from a
breach-of-contract claim.”); see generally 2-16 New Appleman
Insurance Bad Faith Litigation, § 16.05 (“In many cases,
bifurcation or severance of coverage and bad faith claims can
present a sensible procedural approach.”).
11
3
Indeed, in this case Geico asserts that it will suffer
prejudice absent severance.
In response, Abiona merely argues
that interests of judicial economy weigh against severance-- an
argument that is undermined by much of the above-cited case law.
See, e.g., Procopio, 433 N.J. Super. at 383 (“The toll on judicial
economy by allowing full-disclosure up front . . . is obvious.
Requiring simultaneous discovery on both claims will result in a
significant expenditure of time and money, generally rendered
needless if the insurer prevails on plaintiff’s UM or UIM
claim.”).
The Court concludes that the interests of judicial economy,
as well as the avoidance of prejudice to Geico, weigh in favor of
severing Counts 2 and 3 (if Abiona successfully amends Count 3) 4,
from Count 1.
Geico’s Motion to Stay and Sever Counts 2 and 3
pending resolution of Count 1 will be granted.
IV.
In light of the foregoing, Geico’s jurisdictional motion will
be denied.
Geico’s Rule 12(b)(6) motion will be denied as to
Count 2 (bad faith), and granted as to Count 3 (the New Jersey
statutory consumer fraud claim).
However, Abiona will be given an
See Hage v. UnumProvident Corp., 2007 U.S. Dist. LEXIS 97175
(D.N.J. Oct. 22, 2007)(Bongiovani, Magistrate Judge)(bifurcating
Consumer Fraud Act claim from breach of insurance contract claim).
12
4
opportunity to attempt to cure the pleading deficiencies of Count
3 by filing an Amended Complaint within 30 days.
Additionally,
Geico’s request to sever and stay Counts 2 and 3 will be granted.
An appropriate Order accompanies this Opinion.
Dated:
March 16, 2016
At Camden, New Jersey
__s/ Noel L. Hillman______
Noel L. Hillman, U.S.D.J.
13
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?