Scott v. Estate of James Hershel et al
Filing
74
OPINION AND ORDER by Magistrate Judge Kimberly E. West denying 64 Motion to Dismiss Case for Failure to State a Claim. (adw, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF OKLAHOMA
JASON BLAINE SCOTT, as
Special Administrator of
the Estate of Roger Blaine
Scott, Deceased,
Plaintiff,
v.
THE ESTATE OF JAMES HERSHEL;
and STATE AUTO INSURANCE
COMPANY d/b/a STATE AUTO
INSURANCE COMPANIES, a Foreign
Corporation,
Defendants.
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Case No. CIV-15-014-KEW
OPINION AND ORDER
This matter comes before the Court on Defendant State Auto
Property & Casualty Insurance Company’s Motion to Dismiss (Docket
Entry #64).
Plaintiff initiated this action in the District Court
in and for McCurtain County, Oklahoma on November 25, 2014.
Action was removed to this Court on January 9, 2015.
The
The parties
consented to the jurisdiction of the undersigned on September 17,
2015.
Plaintiff amended the Complaint on January 18, 2017.
In this action, Plaintiff alleges that on March 22, 2013,
James Hershel negligently and recklessly operated his vehicle to
cause an employee of Shawn Gibson Logging, who was operating a
semi-tractor trailer, to negligently strike the vehicle operated by
Roger Blaine Scott.
The accident resulted in Mr. Scott’s and Mr.
Hershel’s death.
Plaintiff contends that, at the time of the collision, Mr.
Scott was insured by an uninsured/underinsured motorist (“UM/UIM”)
and personal injury protection (“PIP”) policy issued by Defendant
State Auto Property & Casualty Insurance Company d/b/a State Auto
Insurance Companies (“State Auto”).
Plaintiff asserts State Auto
failed to tender Mr. Scott’s UM/UIM or PIP coverage benefits,
despite being notified of the accident and death of Mr. Scott.
In this action, Plaintiff asserts a claim against State Auto
for breach of contract, alleging State Auto refused or unreasonably
neglected to pay the UM/UIM or PIP coverage owed under the policy
it issued.
Plaintiff also asserts a claim for breach of the duty
of good faith and fair dealing against State Auto, alleging some 13
separate bases for bad faith, including that it failed to pay under
the policy when it knew Plaintiff was entitled to the policy’s
benefits, unreasonably delaying payment, shifting the obligation to
investigate the claim to Plaintiff, failing to investigate the
claim, failing to properly evaluate the claim, and failing to act
in good faith to settle the claim.
State Auto requests that this action be dismissed, alleging
that the action is governed by Texas law.
Under Texas law, State
Auto alleges it owed not contractual duty to tender UM/UIM benefits
to
Plaintiff
until
he
tortfeasor’s liability.
obtained
judgment
establishing
the
State Auto states it follows that bad
faith cannot exist without a breach of an insurance contract so
2
this action should be dismissed in toto for the failure to state a
claim for which relief can be granted.
A plaintiff’s claims are required to meet the plausibility
standard enunciated in United States Supreme Court cases of Bell
Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v.
Iqbal, 556 U.S. 662 (2009).
Clearly, Bell Atlantic changed the
legal analysis applicable to dismissal motions filed under Fed. R.
Civ. P. 12(b)(6), creating a “refined standard” on such motions.
Khalik
v.
United
Airlines,
2012)(citation omitted).
671
F.3d
1188,
1191
(10th
Cir.
Bell Atlantic stands for the summarized
proposition that “[t]o survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to ‘state
a claim for relief that is plausible on its face.’”
Ashcroft v.
Iqbal, 129 S.Ct. 1937, 1949 (2009) quoting Bell Atlantic, 550 U.S.
at 570.
The Supreme Court did not parse words when it stated in
relation to the previous standard that “a complaint should not be
dismissed for failure to state a claim unless it appears beyond
doubt that the plaintiff can prove no set of facts in support of
his claim which would entitle him to relief” is “best forgotten as
an incomplete, negative gloss on an accepted pleading standard.”
Bell Atlantic,
550 U.S. at 546.
The Tenth Circuit has interpreted the plausibility standard as
referring “to the scope of the allegations in the complaint:
3
if
they are so general that they encompass a wide swath of conduct,
much of it innocent, then the plaintiffs ‘have not nudged their
claims across the line from conceivable to plausible.’” Robbins v.
Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008).
The Bell Atlantic
case, however, did not intend the end of the more lenient pleading
requirements of Fed. R. Civ. P. 8(a)(2). Khalik, 671 F.3d at 1191.
Rather, in Khalik, the Tenth Circuit recognized the United States
Supreme Court’s continued endorsement of Rule 8's “short and plain
statement” requirement in the case of Erickson v. Pardus, 551 U.S.
89 (2007) wherein the Supreme Court found “[s]pecific facts are not
necessary; the statement need only ‘give the defendant fair notice
of what the . . . claim is and the grounds upon which it rests.’”
Id. at 93.
As an initial matter, Plaintiff does not appear to challenge
State Auto’s assertion that Texas law governs the interpretation of
the insurance contract at issue and any claim for breach of the
contract in this case since Oklahoma’s choice-of-law rules require
that the laws of the state where the motor vehicle is registered or
principally garaged be applied.
See Bernal v. Charter County
Mutual Ins., 209 P.3d 309, 316 (Okla. 2009).
Moreover, Plaintiff
does not contest State Auto’s position that Texas law would control
on Plaintiff’s claim for breach of the implied duty of good faith
and
fair
dealing
since
that
state
4
has
the
most
significant
relationship to the breach.
(Okla. 2016).
See Martin v. Gray, 385 P.3d 64, 67
As a result, this Court will apply Texas law on both
claims against State Auto.
On the breach of insurance contract claim, State Auto contends
that the policy terms and Texas law only requires the payment of
UM/UIM coverage after the insured obtains a judgment establishing
liability and the underinsured status of the tortfeasor since
Plaintiff’s recovery on the UM/UIM policy is limited to the amount
he is “legally entitled to recover” from the tortfeasor.
State
Auto cites to case authority in Texas which indicates that neither
a settlement nor an admission of liability from the tortfeasor will
establish UIM coverage, “because a jury could find that the other
motorist was not at fault or award damages that do not exceed the
tortfeasor’s liability insurance.”
Brainard v. Trinity Universal,
Ins. Co., 216 S.W.3d 809, 818 (Tex. 2006).
The same case prefaces
the above condition by stating, “[o]f course, the insured is not
required to obtain a judgment against the tortfeasor. . . . The
insured may settle with the tortfeasor, as Brainard did in this
case, and then litigate UIM coverage with the insurer.”
Id.
The facts of this case are somewhat muddled in light of the
requirements
of
Texas
law.
Plaintiff
represents
that
the
$25,000.00 primary liability policy limits of the tortfeasor’s
insurance has been tendered which may represent a settlement of
5
that party’s claims.
While Defendant Estate of Hershel has not
been dismissed from this case, the issue of breach of the UM
insurance contract with State Auto may be ripe for adjudication.
Whether it be through the claim against the Estate of Hershel or
through the breach of contract action against State Auto, Plaintiff
will be required to establish the liability and damages of the
tortfeasor at trial.
State Auto also asserts the claim for breach of contract for
the failure to pay PIP benefits should be dismissed because the
policy requires “proof of loss” and Plaintiff did not provide a
proof of loss as State Auto allegedly requested.
This allegation
necessarily requires a more significant delving into the facts of
the case which exceeds the scope of a motion to dismiss.
To confuse the matter further, State Auto contends a bad faith
action cannot be maintained without a breach of an insurance
contract, citing Smith v. Allstate Ins., 2007 WL 677992, at *5
(S.D. Tex. Feb. 27, 2007).
evaluating
insurer
bad
faith
The standard under Texas law for
is
whether
UM/UIM
coverage
was
“reasonably clear”, which does not require a judgment establishing
tortfeasor liability as a prerequisite to bringing the bad faith
claim.
See Hamburger v. State Farm Mut. Auto. Ins. Co., 361 F.3d
875, 880-81 (5th Cir. 2004).
This result would necessarily mean
that a insurer bad faith action can be brought without a breach of
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contract action since an adjudication of tortfeasor liability and
damages is required for a UM/UIM breach of contract claim but not
for a UM/UIM bad faith claim.
At this stage of the proceedings,
the breach of the implied duty of good faith and fair dealing claim
will be permitted to be maintained as a plausible cause of action
under the facts presented.
IT IS THEREFORE ORDERED Defendant State Auto Property &
Casualty Insurance Company’s Motion to Dismiss (Docket Entry #64)
is hereby DENIED.
IT IS SO ORDERED this 29th day of September, 2017.
______________________________
KIMBERLY E. WEST
UNITED STATES MAGISTRATE JUDGE
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