MODERN AUTOMOTIVE NETWORK, LLC v. EASTERN ALLIANCE INSURANCE GROUP et al
Filing
18
MEMORANDUM OPINION AND ORDER signed by JUDGE LORETTA C. BIGGS on 03/26/2018, that Defendants' Motion to Dismiss Plaintiff's Complaint is GRANTED IN PART AND DENIED IN PART. The motion is GRANTED in that all claims brought against EAIG ar e hereby DISMISSED and in that the breach of contract claim is DISMISSED as to EAAC and AEIC to the extent that the claim arises under the Policy. The motion is DENIED in all other respects. FURTHER that the Clerk of Court is directed to amend the caption in this matter so that the Defendants are listed as follows: "Eastern Alliance Insurance Company d/b/a Eastern Alliance Insurance Group, Eastern Advantage Assurance Company d/b/a Eastern Alliance Insurance Group, and Allied Eastern Indemnity Company d/b/a Eastern Alliance Insurance Group."(Taylor, Abby)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
MODERN AUTOMOTIVE NETWORK,
LLC,
Plaintiff,
v.
EASTERN ALLIANCE INSURANCE
GROUP, EASTERN ALLIANCE
INSURANCE COMPANY, EASTERN
ADVANTAGE ASSURANCE
COMPANY, and ALLIED EASTERN
INDEMNITY COMPANY,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
1:17CV152
MEMORANDUM OPINION AND ORDER
LORETTA C. BIGGS, District Judge.
This matter is before the Court on Defendant’s Motion to Dismiss Plaintiff’s
Complaint. (ECF No. 9.) Plaintiff, Modern Automotive Network, LLC, initiated this action
on January 20, 2017, in the Superior Court of Forsyth County, North Carolina, alleging statelaw claims of breach of contract, negligent claims handling, and two claims of unfair and
deceptive trade practices. (ECF No. 4.) Defendants, Eastern Alliance Insurance Group
(“EAIG”), Eastern Alliance Insurance Company (“EAIC”), Eastern Advantage Assurance
Company (“EAAC”), and Allied Eastern Indemnity Company (“AEIC”), removed the action
to this Court. (ECF No. 1.) The Court has jurisdiction to hear this matter pursuant to 28
U.S.C. § 1332. (Id. ¶ 3.) For the reasons stated below, the motion to dismiss presently before
the Court will be granted in part and denied in part.
I.
BACKGROUND
This action concerns an insurance dispute arising out of two agreements between these
parties.1 (See generally ECF No. 4.) Defendants, whom Plaintiff discusses collectively as a single
entity in the Complaint, issued Plaintiff “a Workers Compensation and Employers Liability
Insurance Policy” (the “Policy”); and the parties “entered into a Deductible Reimbursement
and Security Agreement Workers’ Compensation Large Deductible Plan” (the “Deductible
Agreement”). (Id. ¶¶ 7, 8.) The Policy “had a deductible of $250,000 per accident and [a]
$425,000 annual aggregate.” (Id. ¶ 9.) “To insure that [Plaintiff] could pay for the high
deductible,” Plaintiff provided Defendants with “an Irrevocable Standby Letter of Credit . . .
in the amount of $225,000 for the benefit of” EAIC, AEIC, and EAAC. (Id. ¶ 10.) During
all times relevant to this dispute, Defendants were “responsible for adjusting [Plaintiff’s]
workers’ compensation claims.” (Id. ¶ 11.)
Plaintiff alleges that Defendants mishandled claims made by three of Plaintiff’s
employees: Mr. G, Mr. H, and Mr. S.2 (Id. ¶¶ 20–79.) Mr. G was injured in April 2015, and
brought a claim that Defendants settled. (Id. ¶¶ 20–22.) Prior to settlement, Plaintiff
instructed [Defendants] to obtain a “release and resignation” as part of the settlement, but
Defendants failed to do so. (Id. ¶¶ 23, 27.) Defendants also failed to discuss “the specific
1
The Court accepts as true all well-pleaded allegations in the Complaint. See Mylan Labs., Inc. v.
Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993).
2
Plaintiff redacts the identity of these employees in the Complaint. (ECF No. 4 ¶ 19.)
2
terms or figures of proposed settlements” with Plaintiff prior to settling, and after settlement,
Defendants failed to inform Plaintiff “that the case had settled or the terms of the settlement.”
(Id. ¶¶ 24, 25.) Further, Defendants have refused to provide its file and Plaintiff’s file to
Plaintiff on Mr. G’s claim. (Id. ¶ 30.) Plaintiff alleges that it “bears a heightened risk of future
claims from Mr. G” because of “Mr. G’s age and health.” (Id. ¶ 29.)
Mr. H was injured in October 2015. (Id. ¶ 31.) After this injury, Plaintiff communicated
to Defendants that Plaintiff “was not interested in settling Mr. H’s claim.” (Id. ¶ 33.)
Defendants’ adjuster on Mr. H’s claim, Jeff Berger (“Mr. Berger”), nevertheless suggested
Plaintiff settle the claim for an amount between $200,000 and $225,000. (Id. ¶¶ 34, 35.)
Plaintiff’s counsel “expressly stated that [Plaintiff] would not be interested in a settlement of
that amount” and further “stated that [Plaintiff] would only be interested in a settlement of
well below $200,000 for Mr. H’s claim, in the range of $75,000.” (Id. ¶ 36.) Mr. Berger
subsequently informed Plaintiff that he had settled Mr. H’s claim for $200,000, over Plaintiff’s
objections. (Id. ¶¶ 41, 45.) Plaintiff contends that Defendants’ “settling Mr. H’s claim for
$200,000 was an excessive payment, against [Plaintiff’s] instructions and interests, and was
solely for the benefit of [Defendants] at the expense of [Plaintiff].” (Id. ¶ 43.) Defendants
and their attorneys have refused to provide Plaintiff with Plaintiff’s files regarding Mr. H’s
claim, and Plaintiff alleges that Defendants have instructed their attorneys to not communicate
with Plaintiff about Mr. H’s case. (Id. ¶¶ 47, 50–54.)
Mr. S was injured in February 2015 and was subsequently treated for his injuries. (Id.
¶ 58.) Later, Defendants informed Plaintiff that Defendants had reached a settlement with
Mr. S, “for $11,699 of money in addition to the amounts paid for treatments to date,” pending
3
the approval of the North Carolina Industrial Commission (“Industrial Commission”). (Id.
¶¶ 58, 59.) As part of the settlement, Defendants’ counsel told Plaintiff that there was “a side
deal whereby Mr. S would pay back to [Plaintiff] the $11,699 of additional money that
[Plaintiff] was to advance after the Industrial Commission approved the settlement.” (Id. ¶ 59.)
Defendants later informed Plaintiff that the “side deal” did not “work out” because “Mr. S’s
attorney did not understand the side deal or had backed out of the side deal, and that therefore
[Defendants] had reached a resolution whereby [Plaintiff] and/or [Defendants] would pay
$5,849.50 of additional money to Mr. S.” (Id. ¶¶ 64–67.) Defendants have charged or intend
to charge Plaintiff “for the $5,849.50 that is a result of the failed side deal.” (Id. ¶ 68.)
Defendants and their attorneys have refused to provide Plaintiff with Plaintiff’s files regarding
Mr. S’s claim, and Plaintiff alleges that Defendants have instructed their attorneys to not
communicate with Plaintiff about Mr. S’s case. (Id. ¶¶ 71–76.)
In September 2016, Plaintiff’s counsel “wrote to [Defendants] . . . instruct[ing]
[Defendants] that [a] payment [owed] of $200,000 was disputed and that [Defendants were]
not to make a claim on the Letter of Credit.” (Id. ¶ 77.) Defendants nevertheless “made a
claim on the Letter of Credit on December 29, 2016 in the amount of $202,374.80, plus a draw
fee of $535.94.” (Id. ¶ 79.) Plaintiff brought suit in January 2017, (ECF No. 4), and following
removal, Defendants have filed a motion to dismiss the Complaint, (ECF No. 9).
II.
LEGAL STANDARD
A motion made under Rule 12(b)(6) challenges the legal sufficiency of the facts in the
complaint, specifically whether the Complaint satisfies the pleading standard under Rule
8(a)(2). Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009). Rule 8(a)(2) requires a “short
4
and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). While a complaint need not contain detailed factual allegations, “a plaintiff’s obligation
to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007). Rather, the “[f]actual allegations must be enough to raise a right to relief
above the speculative level.” Id. In other words, “a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). A claim is plausible when the
complaint alleges sufficient facts to allow “the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Johnson v. Am. Towers, LLC, 781 F.3d 693, 709
(4th Cir. 2015) (quoting Iqbal, 556 U.S. at 678).
When considering a motion to dismiss, “a [district] court evaluates the complaint in its
entirety, as well as documents attached [to] or incorporated into the complaint.” E.I. du Pont
de Nemours and Co. v. Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011). A district court
evaluating a motion brought under Rule 12(b)(6) can also “consider a document submitted by
the movant that was not attached to or expressly incorporated in a complaint, so long as the
document was integral to the complaint and there is no dispute about the document’s
authenticity.” Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 166 (4th Cir. 2016). Going
“beyond these documents on a Rule 12(b)(6) motion . . . converts the motion into one for
summary judgment,” and “[s]uch conversion is not appropriate where the parties have not
had an opportunity for reasonable discovery.” E.I. du Pont de Nemours and Co., 637 F.3d at 448.
5
III.
DISCUSSION
Defendants make four arguments in their motion. First, Defendants argue that:
“Plaintiff has failed to state a plausible claim for any relief against EAIG, EAAC, or AEIC.”
(ECF No. 9 ¶ 5.) Second, Defendants contend that: “Plaintiff has failed to state a plausible
claim for negligent claims handling because such claim is barred by the economic loss rule.”
(Id. ¶ 6.) Third, Defendants state that: “Plaintiff has failed to state a plausible claim under the
UDTPA, whether based on alleged violations of § 58-63-15(11) or general allegations of unfair
or deceptive practices.” (Id. ¶ 7.) Fourth, according to Defendants: “Plaintiff’s claims based
on EAIC’s alleged handling of Mr. G’s claim, to the extent such claims are based on a
‘heightened risk’ of ‘future’ damages, are not ripe or are legally insufficient and, therefore,
should be dismissed.” (Id. ¶ 8.)
A. Whether Plaintiff Has Stated a Plausible Claim Against EAIG, EAAC, or AEIC
The Court first turns to Defendants’ argument that Plaintiff cannot state a claim for
relief against EAIG, EAAC, or AEIC. Defendants, in their supporting brief, state that:
“Plaintiff cannot state any plausible claim against EAIG because EAIG is not a legal entity,
but a fictitious name under which EAIC, EAAC, and AEIC conduct business. This Court
may properly take judicial notice of EAIG’s fictitious name status, which is a matter of public
record.” (ECF No. 10 at 11 (citation omitted).) Additionally, Defendants contend that:
“Plaintiff cannot state a plausible claim against EAIG, EAAC, and AEIC for breach of
contract. . . . Neither EAIG, EAAC, nor AEIC is a party to the Policy.” (Id.) Defendants also
argue that: “To the extent that Plaintiff’s contract claim can be reasonably construed as arising
under the Deductible Agreement, Plaintiff still fails to state a plausible claim against EAIG,
6
EAAC, and AEIC. Although all Defendants are identified as parties to the Deductible
Agreement, the purpose of the Deductible Agreement was to evidence and secure Plaintiff’s
obligation under the Policy to reimburse EAIC for amounts paid by EAIC, up to the
deductible amount, pursuant to the Endorsement to the Policy.” (Id. at 11–12 (emphasis
removed).) “Indeed,” Defendants state, “it was EAIC that drew on the [Letter of Credit] for
reimbursement of the amount paid to settle Mr. H’s claim . . . and it is this draw by EAIC that
Plaintiff alleges was a breach of contract.” (Id. at 12 (citation omitted).)
Plaintiff responds by contending that “[a]t this pleading phase, it is proper for [Plaintiff]
to maintain claims against all named defendants.” (ECF No. 16 at 3.) Plaintiff argues: “The
Policy in many places purports to be in the name of EAIG, not EAIC,” and that the
Deductible Agreement “is expressly between [Plaintiff] and ‘Eastern Alliance Insurance Group
and its member companies.’” (Id.) Plaintiff accordingly argues that it “needs discovery to
ferret the relationships between the parties.” (Id. at 4.)
1. EAIG’s Capacity to Be Sued
The Court begins by considering Defendants’ argument that Plaintiff cannot state a
claim to relief against EAIG on the ground that EAIG is not a legal entity. The Fourth Circuit
considered the issue whether a corporation could be named as a defendant using both its legal
name and its trade name in Snowden v. CheckPoint Check Cashing, 290 F.3d 631 (4th Cir. 2002).
In Snowden, the plaintiffs, in their complaint, named as defendants “Elite Financial Services,
Inc.” and “CheckPoint Check Cashing.” Snowden, 290 F.3d at 633 & n.1, 634 n.2. The court
observed that “Elite operated . . . stores under the trade name ‘CheckPoint Check Cashing.’”
Id. at 633 n.1. The Fourth Circuit concluded that “Check Point is not a separate legal entity
7
capable of being sued,” and, for the purposes of its opinion, the court “treat[ed] Elite as the
sole defendant.” Id. at 634 n.2. In this case, Plaintiff has named EAIG and the companies
that conduct business under that fictitious name as separate Defendants in the Complaint, just
as the plaintiff did in Snowden. Compare id., with (ECF No. 1). Further, this Court takes judicial
notice of the fact that EAIG is a fictitious name under which EAIC, EAAC, and AEIC
conduct business. See Fed. R. Evid. 201. Therefore, applying Snowden, this Court concludes
that EAIG is not a legal entity that is capable of being sued separately from EAIC, EAAC,
and AEIC. See Snowden, 290 F.3d at 634 n.2. The Court will, therefore, dismiss EAIG as a
party to this suit. See Fournil v. Turbeville Ins. Agency, Inc., No. 3:07-3836-JFA-PJG, 2008 WL
11349821, at *2 (D.S.C. Dec. 30, 2008) (concluding that an entity may not “be sued separately
under both its trade name and its legal or corporate name”). The Court will also direct the
Clerk of Court to amend the caption in this matter so that EAIG is properly reflected as a
fictitious name under which EAIC, EAAC, and AEIC conduct business.
2. Whether Plaintiff Can State a Breach of Contract Claim Against EAAC and AEIC
The court next turns to Defendants’ argument that Plaintiff cannot state a claim against
EAAC and AEIC for breach of contract.3 As a federal court sitting in diversity, this Court
applies North Carolina substantive law and federal procedural law “[u]nder the familiar Erie
doctrine.” Anand v. Ocwen Loan Servicing, LLC, 754 F.3d 195, 198 (4th Cir. 2014). This Court
“must look first and foremost to the law of the state’s highest court, giving appropriate effect
3
The Complaint does not make clear whether “the contract” that has allegedly been breached is
the Policy or the Deductible Agreement.
8
to all its implications.” Assicurazioni Generali, S.p.A. v. Neil, 160 F.3d 997, 1002 (4th Cir. 1998).4
The North Carolina Supreme Court has held that “an insurance policy is a contract and its
provisions govern the rights and duties of the parties thereto.” N.C. Farm Bureau Mut. Ins. Co.
v. Sadler, 711 S.E.2d 114, 117 (N.C. 2011) (citation omitted). The court has further stated: “It
is a fundamental principle of contract law that parties to a contract may bind only themselves
and that the parties to the contract may not bind a third person who is not a party to the
contract in absence of his consent to be bound.” Nationwide Mut. Ins. Co. v. Chantos, 238 S.E.2d
597, 602–03 (N.C. 1977). Thus, where a defendant “was not a party to [a] contract, as a matter
of law [the defendant] cannot be held liable for any breach that may have occurred.” Canady
v. Mann, 419 S.E.2d 597, 601 (N.C. Ct. App. 1992). Neither EAAC nor AEIC is a party to the
Policy, however, and to the extent that the breach claim arises out of the Policy, the Court will
dismiss the claim as to EAAC and AEIC.
The Court further concludes that, to the extent that the breach of contract claim arises
out of the Deductible Agreement, Plaintiff has stated a plausible claim to relief against EAAC
and AEIC. The Deductible Agreement states that it “is by and between [Plaintiff] . . . and
Eastern Alliance Insurance Group and its member companies, Eastern Alliance Insurance
Company . . . Allied Eastern Indemnity Company and Eastern Advantage Assurance
Company.” (ECF No. 4-2 at 1.) Thus, all Defendants are parties to the Deductible
Agreement. Further, the Complaint alleges that all Defendants “breached the contract,
4
Further, this Court looks to decisions of North Carolina’s intermediate courts, including the
North Carolina Court of Appeals, when lacking guidance from the state’s highest court, see Stoner v.
N.Y. Life Ins. Co., 311 U.S. 464, 467 (1940) (“[F]ederal courts, under the [Erie] doctrine . . . must follow
the decisions of intermediate state courts in the absence of convincing evidence that the highest court
of the state would decide differently” (citation omitted).).
9
including the covenant of good faith and fair dealing.” (ECF No. 4 ¶ 84.) To the extent that
Plaintiff’s breach of contract claim arises under the Deductible Agreement, the Court cannot,
therefore, dismiss the claim as to EAAC or AEIC at this stage of the litigation.
B. Whether Plaintiff’s Claim for Negligent Claims Handling is Barred by the
Economic Loss Rule
The Court next considers Defendants’ argument that the economic loss rule bars
Plaintiff’s claim for negligent claims handling. The North Carolina Supreme Court’s leading
case on the economic loss rule is N.C. State Ports Auth. v. Lloyd A. Fry Roofing Co., 240 S.E.2d
345 (1978), abrogated in part on other grounds by Trs. of Rowan Tech. Coll. v. J. Hyatt Hammond Assocs.,
Inc., 328 S.E.2d 274 (N.C. 1985). See Kelly v. Georgia-Pacific LLC, 671 F. Supp. 2d 785, 791
(E.D.N.C. 2009) (recognizing Ports Authority as the North Carolina Supreme Court’s “seminal
opinion on the economic loss rule”). Under the economic loss rule as articulated in Ports
Authority: “Ordinarily, a breach of contract does not give rise to a tort action by the promisee
against the promisor.” Ports Authority, 240 S.E.2d at 350. Ports Authority provides four
exceptions to this general rule:
(1) The injury, proximately caused by the promisor’s negligent act or omission
in the performance of his contract, was an injury to the person or property of
someone other than the promisee. (2) The injury, proximately caused by the
promisor’s negligent, or wilful, act or omission in the performance of his
contract, was to property of the promisee other than the property which was
the subject of the contract, or was a personal injury to the promisee. (3) The
injury, proximately caused by the promisor’s negligent, or wilful, act or omission
in the performance of his contract, was loss of or damage to the promisee's
property, which was the subject of the contract, the promisor being charged by
law, as a matter of public policy, with the duty to use care in the safeguarding
of the property from harm, as in the case of a common carrier, an innkeeper or
other bailee. (4) The injury so caused was a wilful injury to or a conversion of
the property of the promisee, which was the subject of the contract, by the
promisor.
10
Id. at 350–51 (citations omitted). Plaintiff argues that the economic loss rule does not bar its
negligence claim because the claim falls into the second, third, and fourth exceptions set forth
in Ports Authority. (ECF No. 16 at 6–7.)
The Court concludes that neither the second nor the third Ports Authority exception to
the economic loss rule applies in this case because the Complaint does not allege that
Defendants caused an injury to any person or to any property. The Court nevertheless
concludes that Plaintiff has alleged a plausible claim to relief under the fourth exception.
According to the Complaint, Plaintiff’s negligence claim arises, in part, from the allegation that
Defendants “[r]efus[ed] to provide its insured with a copy of its file.” (ECF No. 4 ¶ 89(e).)
This allegation, if true, would constitute conversion of Plaintiff’s property under North
Carolina law. See Variety Wholesalers, Inc. v. Salem Logistics Traffic Servs., LLC, 723 S.E.2d 744,
747 (N.C. 2012) (“There are, in effect, two essential elements of a conversion claim: ownership
in the plaintiff and wrongful possession or conversion by the defendant.”). Plaintiff has
therefore alleged a plausible claim to relief for negligent claims handling, and the Court will
deny Defendants’ motion to dismiss this claim.
C. Whether Plaintiff Has Alleged Plausible Unfair and Deceptive Trade Practices
Claims
Defendants next contest Plaintiff’s claims for unfair and deceptive trade practices.
Plaintiff has alleged two causes of action for unfair and deceptive trade practices, pursuant to
separate provisions of the North Carolina General Statutes. Plaintiff brings one cause of
action arising from allegations that Defendants committed certain “unfair and deceptive acts
and practices” enumerated in N.C. Gen. Stat. § 58-63-15(11). (ECF No. 4 ¶¶ 91–100.)
Plaintiff brings a second cause of action arising from allegations that Defendants violated N.C.
11
Gen. Stat. § 75-1.1, which prohibits unfair and deceptive trade practices as a general matter,
see N.C. Gen. Stat. § 75-1.1. (ECF No. 4 ¶¶ 101–107.) The Court will now consider whether
each of these two claims should be dismissed.
1. Plaintiff’s Claim Arising from Enumerated Unfair and Deceptive Trade Practices
In the Complaint, Plaintiff alleges that Defendants have committed five prohibited
practices enumerated in § 58-63-15(11). Compare (ECF No. 4 ¶¶ 96(a)–(e)), with N.C. Gen.
Stat. §§ 58-63-15(11)(a),(b),(f),(m),(n). Specifically, the Complaint alleges that Defendants
have committed the following unfair claim settlement practices: “(a) Misrepresenting pertinent
facts or insurance policy provisions relating to coverages at issue”; “(b) Failing to acknowledge
and act reasonably promptly upon communications with respect to claims arising under
insurance policies”; “(c) Not attempting in good faith to effectuate prompt, fair and equitable
settlements of claims in which liability has become reasonably clear”; “(d) Failing to promptly
settle claims where liability has become reasonably clear under one portion of the insurance
policy coverage in order to influence settlements under other portions of the insurance policy
coverage”; and “(e) Failing to promptly provide a reasonable explanation of the basis in the
insurance policy in relation to the facts or applicable law for denial of a claim or for the offer
of a compromise settlement.” (ECF No. 4 ¶¶ 96(a)–(e).)5
Defendants contend that Plaintiff has failed to state a plausible claim arising under any
of these enumerated unfair claim settlement practices. (ECF No. 10 at 16.) Specifically,
Defendants challenge the factual sufficiency of the allegations supporting practices (c) and (d);
5
The Complaint does not identify which specific, factual allegations support each enumerated
unfair claim settlement practice, but rather, in pleading this cause of action, the Complaint
incorporates the factual allegations set forth earlier in the Complaint. (ECF No. 4 ¶¶ 91–100.)
12
Defendants challenge practice (a) on the ground that Plaintiff has failed to allege that it
“detrimentally relied” on the prohibited practice; and Defendants challenge practices (b) and
(e) on the grounds that they are unsupported by plausible factual allegations and that Plaintiff
has failed to allege that it sustained actual damages as the proximate result of these prohibited
practices. (Id. at 16–18.)
The North Carolina General Statutes provide that: “Unfair methods of competition in
or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are
declared unlawful.” N.C. Gen. Stat. § 75-1.1(a). Further, a separate statute creates a private
right of action that “allows any individual who has been ‘injured by reason of any act or thing
done by any other person, firm or corporation in violation of the provisions of this Chapter’
to bring a civil action.” Bumpers v. Cmty. Bank of N. Va., 747 S.E.2d 220, 226 (N.C. 2013)
(quoting N.C. Gen. Stat. § 75-16). To state a prima facie claim for unfair or deceptive trade
practices under North Carolina law, “a plaintiff must show: (1) [the] defendant committed an
unfair or deceptive act or practice, (2) the action in question was in or affecting commerce,
and (3) the act proximately caused injury to plaintiff.” Id. (alteration in original) (quoting Dalton
v. Camp, 548 S.E.2d 704, 711 (N.C. 2001)). Section 58-63-15(11) of the North Carolina
General Statutes enumerates certain practices “as unfair methods of competition and unfair
and deceptive acts or practices in the business of insurance.” Id. § 58-63-15. The North
Carolina Supreme Court has held that these practices enumerated in § 58-63-15(11) are “unfair
or deceptive acts or practices,” which are prohibited under § 75-1.1(a). Gray v. N.C. Ins.
Underwriting Ass’n, 529 S.E.2d 676, 683 (N.C. 2000). Thus, North Carolina law extends a
13
private right of action to an insured whose insurer has committed a prohibited practice
enumerated in § 58-63-15(11). See id.
The Court concludes that Plaintiff has stated a plausible claim to relief on its unfair and
deceptive trade practices claim arising from Defendants’ alleged violation of certain offenses
enumerated in § 58-63-15(11). Section 58-63-15(11)(f) defines one unfair claim settlement
practice as “[n]ot attempting in good faith to effectuate prompt, fair and equitable settlements
of claims in which liability has become reasonably clear.” § 58-63-15(11)(f). Plaintiff alleges
that Defendants settled Mr. H’s claim for an “excessive” amount, and Plaintiff further
contends that Defendants’ choice to settle for this “excessive” amount “was solely for the
benefit of [Defendants] at the expense of [Plaintiff].” (ECF No. 4 ¶ 43.) This allegation is
sufficient to plausibly allege that Defendants committed an unfair claim settlement practice by
“[n]ot attempting in good faith to effectuate prompt, fair and equitable settlements of claims
in which liability has become reasonably clear” as set forth in § 58-63-15(11)(f). The Court,
therefore, will deny Defendants’ motion to dismiss Plaintiff’s first claim for unfair and
deceptive trade practices.
2.
Plaintiff’s General Unfair and Deceptive Trade Practices Claim
Defendants argue that Plaintiff has failed to state a plausible claim to relief for its fourth
cause of action, a general unfair and deceptive trade practices claim arising under N.C. Gen.
Stat. § 75-1.1. (ECF No. 10 at 18–20.) Defendants contend that “the Complaint does not
allege ‘substantial aggravating circumstances,’ such as forgery, ongoing deception, or
fraudulent inducement, to sustain a UDTPA claim. . . . Moreover, EAIC’s exercise of its
14
contractual rights to settle worker’s compensation claims and draw on the [Letter of Credit]
cannot form the basis of a UDTPA claim.” (Id. at 18–19 (citation omitted).)
The Court concludes that Plaintiff has stated a claim to relief with respect to its fourth
cause of action, the general unfair and deceptive trade practices claim. Under North Carolina
law, a plaintiff may state a claim for unfair and deceptive trade practices under § 75-1.1 by
alleging that a defendant committed an unfair claim settlement practice enumerated in § 5863-15(11). See Gray, 529 S.E.2d at 683. As the North Carolina Supreme Court has explained:
“An insurance company that engages in the act or practice of ‘[n]ot attempting in good faith
to effectuate prompt, fair and equitable settlements of claims in which liability has become
reasonably clear,’ also engages in conduct that embodies the broader standards of . . . § 75-1.1
because such conduct is inherently unfair, unscrupulous, immoral, and injurious to
consumers.” Id. (quoting N.C. Gen. Stat. § 58-63-15(11)(f)). “Thus, such conduct that violates
subsection (f) of . . . § 58-63-15(11) constitutes a violation of . . . § 75-1.1, as a matter of law.”
Id. The Court has previously concluded that Plaintiff has stated a claim to relief arising from
its allegation that Defendants have committed the unfair claims settlement practice
enumerated in § 58-63-15(11)(f). Therefore, the Court concludes that Plaintiff has also stated
a claim under § 75-1.1.
Defendants argue that Plaintiff cannot state a claim for unfair and deceptive trade
practices under § 75-1.1 because “the Complaint’s allegations reveal . . . at most, a potential
breach of contract . . . [h]owever, the Complaint does not allege ‘substantial aggravating
circumstances,’ . . . to sustain a UDTPA claim.” (ECF No. 10 at 18–19 (citing Griffith v. Glen
Wood Co., 646 S.E.2d 550, 558–59 (N.C. Ct. App. 2007).) The case Defendants cite in support
15
of this argument makes clear that “substantial aggravating circumstances” are required to state
a claim for unfair and deceptive trade practices when the basis for this claim is merely a breach
of contract. See Griffith, 646 S.E.2d at 558. The Court, however, has concluded that Plaintiff
has stated a claim for unfair and deceptive trade practices under § 75-1.1 on the basis of its
allegation that Defendants committed a prohibited practice enumerated in § 58-63-15(11)(f),
not on the basis of a breach of contract. Therefore, the Court is unpersuaded by Defendants’
argument that “substantial aggravating circumstances” must be present for Plaintiff to state a
claim to relief. The Court will, accordingly, deny the motion to dismiss Plaintiff’s second claim
for unfair and deceptive trade practices.
D. Whether Plaintiff’s Claims Related to Mr. G. are Ripe
Defendants argue that Plaintiff’s claims arising from the handling of Mr. G’s claims are
“not ripe or are legally insufficient.” (ECF No. 10 at 20.) Defendants argue that Plaintiff’s
claims “based on EAIC’s handling of Mr. G’s claim are dependent on future contingencies
and are not ripe for review.” (Id.) Further, Defendants state: “Even if such claims were ripe,
they are legally insufficient because any alleged injury is hypothetical or speculative.” (Id.)
The Court cannot conclude that Plaintiff’s claims arising from the handling of Mr. G’s
claim are unripe. In the Complaint, Plaintiff alleges that Defendants “failed to obtain a release
and resignation from Mr. G.” (ECF No. 4 ¶ 27.) This failure to obtain a release and
resignation from Mr. G supplies the basis, at least in part, of all four causes of action in the
Complaint. (Id. ¶¶ 86, 90, 99, 106.) Defendants contend that Plaintiff’s claims related to Mr.
G are unripe because, in the Complaint, Plaintiff alleges that “[d]ue to Mr. G’s age and health,
[Plaintiff] bears a heightened risk of future claims from Mr. G.” (ECF No. 10 at 20 (quoting
16
ECF No. 4 ¶ 29) (emphasis removed).) The Complaint, however, also alleges that Plaintiff
has “sustained damages . . . due to . . . compensation paid to Mr. G as a result of [Defendants]
not getting a release and resignation.” (ECF No. 4 ¶¶ 86, 90, 99, 106.) Thus, Plaintiff alleges
that it has already suffered harm resulting from Defendants’ failure to obtain a release and
resignation from Mr. G. The Court, therefore, cannot conclude that Plaintiff’s claims related
to Mr. G are unripe because the harm suffered by Plaintiff is dependent on future
contingencies. For the same reasons, nor can the Court agree with Defendants that Plaintiff’s
claims related to Mr. G are legally insufficient because “any alleged injury is hypothetical or
speculative,” (ECF No. 10 at 20). Accordingly, the Court will deny the motion to dismiss
Plaintiff’s claims related to Mr. G.
IV.
CONCLUSION
The Court will (1) grant the motion to dismiss in part in that the Court will dismiss
EAIG as a Defendant in this action, (2) direct the Clerk of Court to restyle the caption in this
matter so that EAIG is properly reflected as a fictitious name under which EAIC, EAAC, and
AEIC conducts business, and (3) dismiss the breach of contract claim as against EAAC and
AEIC to the extent that the claim arises under the Policy. The Court will deny the motion in
all other respects.
ORDER
For the reasons discussed herein:
IT IS THEREFORE ORDERED that Defendants’ Motion to Dismiss Plaintiff’s
Complaint is GRANTED IN PART AND DENIED IN PART. The motion is GRANTED
17
in that all claims brought against EAIG are hereby DISMISSED and in that the breach of
contract claim is DISMISSED as to EAAC and AEIC to the extent that the claim arises under
the Policy. The motion is DENIED in all other respects.
IT IS FURTHER ORDERED that the Clerk of Court is directed to amend the caption
in this matter so that the Defendants are listed as follows: “Eastern Alliance Insurance
Company d/b/a Eastern Alliance Insurance Group, Eastern Advantage Assurance Company
d/b/a Eastern Alliance Insurance Group, and Allied Eastern Indemnity Company d/b/a
Eastern Alliance Insurance Group.”
This, the 26th day of March, 2018.
/s/ Loretta C. Biggs
United States District Judge
18
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?