Choctaw Express Mart Inc v. Employers Mutual Casualty Company et al
Filing
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ORDER granting 22 defendant's partial motion to dismiss as to plaintiff's bad faith claim; plaintiff's second cause of action for bad faith is dismissed with prejudice...the breach of contract claim remains for resolution. Signed by Honorable Joe Heaton on 03/09/2015. (lam)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
CHOCTAW EXPRESS MART, INC.,
Plaintiff,
vs.
EMPLOYERS MUTUAL CASUALTY
COMPANY; ED BERRONG
INSURANCE AGENCY, INC.;
NHI GENERAL ADJUSTERS; and
and GARY LUND,
Defendants.
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NO. CIV-14-1227-HE
ORDER
Plaintiff Choctaw Express Mart, Inc. (“Choctaw Express”) filed this action in state
court against Employers Mutual Casualty Company (“Employers”), its insurer, NHI
General Adjusters, an adjusting company, Gary Lund, an insurance adjuster, and Ed
Berrong Insurance Agency, Inc. (“Berrong”), the insurance agency through which it
purchased an insurance policy providing coverage for its property located in Oklahoma
County, Oklahoma. Plaintiff asserted various claims based on alleged damage to its
convenience store that occurred during a wind storm/hail storm in April 2013. Employers
removed the action on the basis of diversity jurisdiction, asserting in the notice of
removal that Berrong, a non-diverse defendant, had been fraudulently joined. After
removal, Employers filed a partial motion to dismiss. Plaintiff and defendants later
stipulated to the dismissal of plaintiff’s claims against Berrong, NHI General Adjusters
and Gary Lund without prejudice, pursuant to Fed.R.Civ.P. 41(a)(1)(A)(ii), leaving only
plaintiff’s claims against Employers.
Plaintiff abandoned all its claims against
Employers, other than its breach of contract and bad faith claims. The court dismissed the
bad faith claim, but granted plaintiff leave to amend it.
Plaintiff filed an amended complaint and Employers has again moved to dismiss
plaintiff’s bad faith claim pursuant to Fed.R.Civ.P. 12(b)(6).
The issue is whether,
accepting all well-pleaded factual allegations as true and viewing them in the light most
favorable to plaintiff, see S.E.C. v. Shields, 744 F.3d 633, 640 (10th Cir. 2014), plaintiff
has included in its complaint “enough facts to state a claim for relief that is plausible on
its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 555 (2007).
The court previously rejected plaintiff’s bad faith claim because its allegations
offered little “more than labels and conclusions, and a formulaic recitation of the elements
of a cause of action.” Twombly, 550 U.S. at 555. While plaintiff alleged Employer had
breached its duty to act in good faith and deal fairly with it by “[f]ailing to pay the full
and fair amount for the property damage sustained,” the court noted plaintiff had not
pleaded any underlying facts, such as the amount plaintiff thought it should have been
paid, the basis for its calculations, or the amount that was actually paid. In its amended
complaint plaintiff filled in those specific gaps, stating that Employers “has paid only
approximately $30,376.49 to date as insurance proceeds on the underlying claim,” that
“[p]laintiff’s licensed Oklahoma General Contractor has estimated the repair costs to be
$542,413.38,” and that, by “underpaying to date by a factor of more than eighteen (18) as
to the actual damages – over one and one-half years after the storm that caused the
damage – the Defendant has unreasonably delayed paying all benefits owed.” Doc. #21,
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p. 5. The rest of plaintiff’s bad faith allegations are essentially identical to those the court
previously rejected as insufficient to “raise [their] right to relief above the speculative
level.” Twombly, 550 U.S. at 555.1
The problem with plaintiff’s new allegations, as defendant points out, is that they
do no more than state a claim for breach of contract – Employers has paid plaintiff less
than what plaintiff’s contractor says it will cost to complete the repairs. Plaintiff argues
that clearly an underpayment of the magnitude of $512.036.89 “is enough to bring a bad
faith action.” Doc. #24, p. 4. The court disagrees. While that sum may be the estimated
repair costs, all of the repairs may not be covered losses. An insurer does not breach its
implied duty to deal fairly and act in good faith with its insured merely by refusing to pay
a claim or by litigating a dispute with its insured, so long as there is a legitimate dispute
as to coverage or the amount of the claim, and the insurer’s position is reasonable and
legitimate. Southern Hospitality, Inc. v. Zurich American Ins. Co., 393 F.3d 1137, 1142
(10th Cir. 2004). Plaintiff simply has not pleaded sufficient facts to support an inference
that Employers acted unreasonably. While plaintiff alleges Employers delayed payment,
the only apparent delay is Employers’ delay in paying plaintiff the balance plaintiff
claims it is owed. Plaintiff does not allege Employers delayed paying it the amount
Employers determined was due under the terms of the policy.
1
The court notes that plaintiff has once again relied on Conley v. Gibson, 355 U.S. 41 (1957)
and other cases that predate Twombly and Ashcroft v. Iqbal, 556 U.S. 662 (2009). The Supreme
Court rejected Conley’s “no set of facts” language almost eight years ago in Twombly.
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Plaintiff cites no authority in support of its argument that a disparity in payment
alone is enough to allege bad faith. It attaches three orders to its response brief which, it
asserts, “address[] the same argument raised by Defendant in this matter.” Doc. #24, p. 3.
However, in Western Medical Park Owners v. United States Liability Ins. Group, No.
CIV-14-1266-C (W.D. Okla. Nov. 24, 2014) (Order disposing of motion to dismiss), the
court noted that the defendant offered no argument challenging the plaintiff’s bad faith
claim. In SAB One, Inc. v. The Travelers Indemnity Co. of Conn., No. CIV-14-1085-D
(W.D.Okla. Dec. 5, 2014) (Order disposing of motion to dismiss), the court stated that,
while “Plaintiff argues that its pleading sufficiently states a claim of insurer’s bad faith, . .
. Travelers does not seek dismissal of this claim.” Doc. #24, Exhibit 1, p. 6 n.2. In other
words, the court did not in SAB One address the issue of whether the plaintiff had
adequately pleaded a bad faith claim. In Checkers Truck Stop, Inc. v. Southern Ins. Co.,
No. CIV-14-1296-L (W.D.Okla. Feb. 2, 2015) (Order disposing of motion to dismiss), the
defendant sought dismissal of the bad faith claim solely on the basis that the plaintiff had
failed to allege an underlying breach of contract claim. None of these cases address the
sufficiency of a plaintiff’s bad faith allegations or support Choctaw Express Mart’s
position.
The court concludes the second amended complaint does not contain sufficient
factual allegations to “nudge[]” plaintiff’s bad faith claim “across the line from
conceivable to plausible.”
Twombly, 550 U.S at 570.
Accusing defendant of
“[i]ntentionally engaging in an outcome oriented investigation” or “[i]ntentionally
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engaging in a systematic scheme designed to save money otherwise due and owing to the
Plaintiff and other similarly situated insureds as a cost-saving mechanism” without some
factual support simply is not sufficient. Doc. #21, p. 6. Stating that “[p]laintiff, through
discovery, will seek additional information to prove Defendant’s conduct is intentional
and profit driven,” Doc. #24, p. 4, also is not enough to get plaintiff past a motion to
dismiss. “[O]ur pleading standard ‘does not unlock the doors of discovery for a plaintiff
armed with nothing more than conclusions.’” Jensen v. America's Wholesale Lender, 425
Fed. Appx. 761, 764 (10th Cir. June 9, 2011) (quoting Iqbal, 556 U.S. at 678-79).
Conclusory allegations similar to those made in this case were rejected in Scheffler v.
Am. Republic Ins. Co., 2012 WL 602187 (N.D. Okla. Feb. 23, 2012). They included
assertions that the defendant had acted in bad faith by:
A. Failing to promptly investigate Plaintiff's claim; B. Delaying payment to
the Plaintiff; C. Intentionally misreading or misconstruing the insurance
policy; D. Imposing burdensome documentation demands not required by
the facts of the claim or the policy; and E. Other acts or omissions to be
determined in discovery.
Id. at *3 (internal quotations omitted).
Having concluded plaintiff has again failed to state a bad faith claim, the question
becomes whether it should be given another opportunity to amend, as it requests, or
whether the claim should be dismissed with prejudice. The court recognizes that leave to
amend is to be given freely “when justice so requires.” Fed.R.Civ.P. 15(a)(2). However,
plaintiff was given the opportunity to amend and made minimal effort to correct the
pleading deficiencies. Its neglect in that regard, against the backdrop of its repeated
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refusal to acknowledge the correct pleading standard and its reliance on cases that do not
address the issue before the court, weigh against allowing it yet another attempt to state a
bad faith claim.2 The court concludes two tries is enough. Plaintiff’s bad faith claim will
be dismissed with prejudice.
In its reply brief defendant also asks the court to dismiss plaintiff’s claims of
statutory violations. See Doc. #25, p. 4 n.1. Plaintiff alleged in the second amended
complaint that defendant committed bad faith by violating the Unfair Claims Settlement
Practices Act and not complying with obligations imposed by the Oklahoma Insurance
Code. However, it did not allege separate claims based on defendant’s asserted violations
of those statutes or the Oklahoma Consumer Protection Act, so there is no separate
statutory claim to dismiss.
Accordingly, defendant’s partial motion to dismiss [Doc. #22] is GRANTED as to
plaintiff’s bad faith claim. Plaintiff’s second cause of action for bad faith is dismissed
with prejudice. The breach of contract claim remains for resolution.
IT IS SO ORDERED.
Dated this 9th day of March, 2015.
2
The court also notes that plaintiff’s counsel has included the same, conclusory allegations
in multiple cases filed in this district. See e.g., SAB One, Inc. v. The Travelers Indemnity Co. of
Conn., No. CIV-14-1085-D (W.D.Okla. Oct. 6, 2014), Doc. #1-5, pp. 5-6; Rivera v. Hartford Ins.
Co., No. CIV-14-1082-HE (W.D. Okla. Oct. 6, 2014), Doc. #1-1, pp. 5-6; K2 Groceries, Inc. v.
Emp’rs Mut. Ins. Co.,No. CIV-14-1235-HE (W.D. Okla. Nov. 7, 2014), Doc. #1-1, pp. 5-6.
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