GUSSMAN v. GOVERNMENT EMPLOYEES INSURANCE COMPANY

Filing 8

OPINION FILED. Signed by Judge Joseph H. Rodriguez on 9/12/17. (js)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
_________________
BETH GUSSMAN,

____
:
:
Plaintiff,
:
:
v.
:
GOVERNMENT EMPLOYEES
:
INSURANCE COMPANY
:
:
:
Defendant. :
_______________________ :

Hon. Joseph H. Rodriguez
Civil Action No. 16-8563

OPINION

Plaintiff Beth Gussman asserts that her car insurance provider, Defendant
Government Insurance Company (“Geico”), denied her under-insured motorist (UIM)
coverage under the parties’ insurance policy in bad faith. Presently before the Court is
Geico’s motion to dismiss pursuant to Federal Rules of Civil Procedure 12 (b) (1) and 12
(b) (6). Specifically, Geico claims that diversity jurisdiction is wanting because
Plaintiff’s claim does not exceed the statutory minimum amount in controversy,
meriting dismissal under Rule 12 (b) (1), and because Plaintiff fails to state a claim for
common law bad faith denial of insurance coverage, pursuant to Fed. R. Civ. P. 12 (b)
(6). Alternatively, Geico asks this Court to stay and sever the bad faith claim pending
the disposition of Gussman’s claim for breach of the insurance contract.
The Court has reviewed the written submissions of the parties and decides the
matter pursuant to Fed. R. Civ. P. 78 (b). For the reasons stated here, Defendant’s
motion to dismiss on jurisdictional grounds is denied. In the interest of judicial
economy and without objection from Plaintiff, Defendant’s request to sever and stay
Paragraphs 24-29, is granted. Fed. R. Civ. P. 42 (b); Edwin, Jr. v. The Robert Packer
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Hospital, 579 F.2d 819, 824 (3d Cir. 1978) (The decision whether to bifurcate or sever
claims is left to the District Court's discretion.)
I. Factual Background and Procedural History
The following facts are taken as true as alleged in the Complaint. On May 20,
2014, Plaintiff asserts she was stopped at the exit of a shopping center and was hit in the
rear by another motorist Robert Snyder. As a result of the accident, Plaintiff alleges she
sustained serious bodily injuries. The vehicle driven by Robert Snyder on the date of the
collision had an inadequate insurance policy coverage of $25,000. This amount did not
fully compensate Plaintiffs’ injuries, and on the date of the accident she had an UIM
policy limit of $100,000 per person and $300,000 per accident.
The Plaintiff on June 1, 2016, requested that the Defendant, consent to a
settlement between her and the underinsured driver Robert Snyder. Additionally, she
filed a claim for UIM benefits. On June 22, 2016, Defendant consented to the requested
settlement with the underinsured motorist Snyder. Later, on June 24, 2016, Plaintiff,
forwarded to the assigned underinsured motorist adjuster for Geico, all documentation
supporting her injuries, and on August 2, 2016, the underinsured motorist adjuster was
given permission by Plaintiff to review the first party file. However, Plaintiff asserts that
Defendant, has ignored or acted with reckless indifference to the proofs submitted by
plaintiff which establish her entitlement to underinsured motorist benefits.
Plaintiff asserts a claim for the remaining $75,000 limit on her underinsured
motorist policy and for damages resulting from her bad faith claim. Defendant, filed a
motion to dismiss both claims.

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II. Standards of Review
a. Motion to Dismiss Standard
A motion to dismiss for lack of subject matter jurisdiction under Fed. R. Civ. P. 12
(b) (1) must be granted if the court lacks subject matter jurisdiction to hear a claim. In re
Schering Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235, 243 (3d
Cir. 2012). When a defendant files a motion under Rule 12 (b) (1), the plaintiff bears the
burden of establishing subject matter jurisdiction for the sake of remaining in federal
court. Gould Elec., Inc. v. United States, 220 F.3d 169, 178 (3d Cir. 2000).
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12 (b) (1) may
involve either a facial challenge to subject matter jurisdiction or a factual challenge to
the jurisdictional allegations. Gould Elec., 220 F.3d at 176. If the defendant’s attack is
facial—i.e., “asserting that the complaint, on its face, does not allege sufficient grounds
to establish subject matter jurisdiction”—a court must accept all allegations in the
complaint as true. Taliaferro v. Darby Twp. Zoning Bd., 458 F.3d 181, 188 (3d Cir.
2006). Alternatively, a defendant may “challenge a federal court’s jurisdiction by
factually attacking the plaintiff's jurisdictional allegations as set forth in the complaint.”
Mortensen v. First Fed. Sav. & Loan Ass’n, 549 F.2d 884, 891 (3d Cir. 1977). A factual
challenge attacks the existence of a court’s subject matter jurisdiction apart from any of
the pleadings and, when considering such a challenge, a presumption of truthfulness
does not attach to a plaintiff's allegations.” Id.; see also Martinez v. U.S. Post Office, 875
F. Supp. 1067, 1070 (D.N.J. 1995).
Alternatively, Federal Rule of Civil Procedure 12 (b) (6) allows a party to move for
dismissal of a claim based on “failure to state a claim upon which relief can be granted.”

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Fed. R. Civ. P. 12 (b) (6). A complaint should be dismissed pursuant to Rule 12(b)(6) if
the alleged facts, taken as true, fail to state a claim. Fed. R. Civ. P. 12 (b) (6). When
deciding a motion to dismiss pursuant to Rule 12 (b) (6), ordinarily only the allegations
in the complaint, matters of public record, orders, and exhibits attached to the
complaint, are taken into consideration. See Chester County Intermediate Unit v. Pa.
Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990). It is not necessary for the plaintiff to
plead evidence. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir. 1977). The
question before the Court is not whether the plaintiff will ultimately prevail. Watson v.
Abington Twp., 478 F.3d 144, 150 (2007). Instead, the Court simply asks whether the
plaintiff has articulated “enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
The Court need not accept “‘unsupported conclusions and unwarranted
inferences,’” Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 2007) (citation omitted),
however, and “[l]egal conclusions made in the guise of factual allegations . . . are given
no presumption of truthfulness.” Wyeth v. Ranbaxy Labs., Ltd., 448 F. Supp. 2d 607,
609 (D.N.J. 2006) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)); see also Kanter
v. Barella, 489 F.3d 170, 177 (3d Cir. 2007) (quoting Evancho v. Fisher, 423 F.3d 347,
351 (3d Cir. 2005) (“[A] court need not credit either ‘bald assertions’ or ‘legal
conclusions’ in a complaint when deciding a motion to dismiss.”)). Accord Iqbal, 556
U.S. at 678-80 (finding that pleadings that are no more than conclusions are not
entitled to the assumption of truth). Further, although “detailed factual allegations” are
not necessary, “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to
relief’ requires more than labels and conclusions, and a formulaic recitation of a cause of
action’s elements will not do.” Twombly, 550 U.S. at 555 (internal citations omitted).
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See also Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.”).
Thus, a motion to dismiss should be granted unless the plaintiff’s factual
allegations are “enough to raise a right to relief above the speculative level on the
assumption that all of the complaint’s allegations are true (even if doubtful in fact).”
Twombly, 550 U.S. at 556. “[W]here the well-pleaded facts do not permit the court to
infer more than the mere possibility of misconduct, the complaint has alleged-but it has
not ‘shown’-‘that the pleader is entitled to relief.’” Iqbal, 556 U.S. at 679.
III.

Analysis

Defendant’s arguments in favor of dismissal are intertwined. Essentially, if
Plaintiff’s claim as plead in Paragraphs 24-29 fails under Rule 12 (b) (6), the Court must
determine whether the damages sought in Plaintiff’s breach of contract claim satisfy 28
U.S.C. § 1332 (a), which requires that “the matter in controversy exceeds the sum or
value of $75,000, exclusive of interest and costs.” 28 U.S.C. § 1332 (a). Paragraphs 2429 allege a claim against Geico for breach of the implied duty of good faith and fair
dealing. This claim alleges a breach of fiduciary duty in the handling of Plaintiff’s claim
under the insurance contract; such claims are often described as a claim for “bad faith.”
See Pickett v. Lloyd’s, 621 A.2d 445, 451 (N.J. 1993) (“Most jurisdictions have
characterized a cause of action for bad-faith failure to pay an insured’s claim as a tort
that arises out of the implied duty of an insurance company to deal fairly and act in good
faith in processing the claims of its policyholder.”).
At the heart of Defendant’s challenge pursuant to Rule 12 (b) (1) is that, absent
the bad faith claim, Plaintiff’s remaining recovery under the insurance policy on the

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breach of contract claim is limited to $75,000, which does not “exceed” $75,000. As a
result, Geico is correct that, in the event Plaintiff’s bad claim fails under Rule 12 (b) (6),
this Court lacks subject matter jurisdiction because the amount in controversy fails to
vault the jurisdictional threshold. See 28 U.S.C. § 1332(a).
Plaintiff’s bad faith claim alleges that Defendant breached the duty of good faith
and fair dealing in processing Plaintiffs’ claim for UIM coverage and demands punitive
damages. “In a case of denial of [insurance] benefits, bad faith is established by showing
that no debatable grounds existed for the denial of benefits.” Id. at 481. “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); see also Ketzner v. John
Hancock Mut. Life Ins. Co., 118 Fed. Appx. 594, 599 (3d Cir. 2004) (Plaintiff must
satisfy two elements to support a bad faith claim “(1) the insurer lacked a ‘fairly
debatable’ reason for its failure to pay a claim, and (2) the insurer knew or recklessly
disregarded the lack of a reasonable basis for denying the claim.”).
The Complaint sets forth numerous examples of bad faith conduct that
sufficiently allege a “reckless disregard” for Plaintiff’s rights.1 Compl. ¶ 25(a)-(q).
Plaintiff’s allegations include engaging in delay tactics, misusing the investigation of
Plaintiff’s first party underinsured, and failing to reasonably evaluate the medical

1

 Geico also attacks Plaintiff’s bad faith claim as an attempt to improperly manufacture federal jurisdiction under 
the diversity statute.  The Court will not address whether Plaintiff is compelled to bring the bad faith claim at this 
time under New Jersey’s entire controversy doctrine because Defendant agrees that there is no preclusion to 
bringing the claim now and the Court finds no indication that pretext exists.  The bad faith claim satisfies Rule 12 
(b) (6) scrutiny and Defendant’s motion is denied. 

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records in the record. Compl., ¶ 25 (b), (q) and (i). Geico’s Rule 12 (b) (6) motion is
denied.
In addition, Geico’s motion to dismiss pursuant to Fed. R. Civ. P. 12 (b) (1) is
denied because Plaintiff’s bad faith claim, if successful, includes the potential for an
award of consequential damages and punitive damages. Taddei v. State Farm Indemnity
Co., 401 N.J. Super. 449, 461, 463 (App. Div. 2008). When coupled with the potential
recovery on the bad faith claim, Plaintiff’s damages on the breach of contract claim vault
the statutory jurisdictional threshold of a claim in excess of $75, 000. See 28 U.S.C. §
1332(a). As a result, the amount in controversy exceeds the jurisdictional requirement
and Geico’s Rule 12 (b) (1) motion is denied.
IV.

Conclusion

For these reasons, Defendant’s motion to dismiss Paragraphs 24-29 of the
Complaint under Federal Rules of Civil Procedure 12 (b) (1) and (6) is denied. In the
interest of judicial economy and to avoid any potential prejudice to Geico, the Court will
grant Geico’s motion to sever and stay Paragraphs 24-29.
An appropriate Order shall issue.

Dated: September 12, 2017
s/ Joseph H. Rodriguez
Hon. Joseph H. Rodriguez,
UNITED STATES DISTRICT JUDGE

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