MITCHELL et al v. STATE FARM FIRE AND CASUALTY COMPANY

Filing 17

MEMORANDUM AND ORDER THAT PLAINTIFF'S MOTION TO AMEND THE AMENDED COMPLAINT IS GRANTED; ETC.. SIGNED BY HONORABLE R. BARCLAY SURRICK ON 7/18/17. 7/18/17 ENTERED AND E-MAILED.(jl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MICHAEL MITCHELL, ET AL.
v.
STATE FARM FIRE AND CASUALTY
INSURANCE COMPANY

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CIVIL ACTION
NO. 17-0737

MEMORANDUM
SURRICK, J.

JULY 18, 2017

Presently before the Court is Plaintiffs’ Motion to Amend the Amended Complaint.
(ECF No. 14.) For the following reasons, Plaintiffs’ Motion will be granted.
I.

BACKGROUND
Plaintiffs Michael Mitchell and Molly Conlon purchased a Homeowners Insurance Policy

from Defendant State Farm Fire and Casualty Insurance Company. This action arises as a result
of Defendant’s partial denial of Plaintiffs’ claims under the Policy.
A.

Factual Background

Plaintiffs’ Amended Complaint alleges that Plaintiffs purchased a Homeowners
Insurance Policy from Defendant on or before January 2016. (Am. Compl. ¶ 4, ECF No. 6.) On
January 23, 2016, Plaintiffs’ property suffered damage due to a snow storm. (Id. ¶ 6.) The
interior, exterior, and roof of the main residence were damaged as a result of the ice and snow.
(Id.) The roof of the detached garage was also severely damaged. (Id.) Plaintiffs’ policy with
Defendant covered storm, ice, and snow damage. (Id. ¶ 7.)
Defendant determined that the interior damage to the main residence totaled $7,717.83.
(Id. ¶ 8.) After subtracting the deductible and depreciation, Defendant provided Plaintiffs with a

payment in the amount of $5,801.77. (Id.) Plaintiffs allege that Defendant failed to provide
adequate payment for the interior damage. (Id. ¶ 9.) The exterior damage totaled $54,180.76.
(Id.) Defendant failed to provide any payment for the exterior damage, which included the roof
of the main residence, the exterior fascia and stucco, and the roof of the detached garage. (Id.)
Plaintiffs allege that Defendant did not contact Plaintiff to inspect the damaged property
in a timely manner. (Pls.’ Mot., Ex. A, “SAC” ¶ 21.) Plaintiffs allege that they provided the
following documents to Defendant: “photographs and statements regarding the damage to the
detached garage;” an expert report detailing the condition of the garage prior to the storm; and an
expert report, which determined that the snow storm caused the damage to the exterior property.
(Id. ¶ 23.) Plaintiffs allege that Defendant did not properly investigate the claim, and that
Defendant did not provide a good faith reason for denying the claim. (Id. ¶ 15.) Rather,
Defendant “simply refused coverage based upon its inability to inspect dangerous and
inconvenient debris that was removed from the property,” despite the “overwhelming evidence”
that Plaintiffs provided to Defendant. (Id. ¶¶ 15, 24.)
B.

Procedural History

On January 5, 2017, Plaintiffs filed a Complaint in the Court of Common Pleas of
Philadelphia County, Pennsylvania. (ECF No. 1.) On February 16, 2017, Defendant filed a
Notice of Removal. (Id.) On February 23, 2017, Defendant filed a Motion to Dismiss Count II
of the Complaint. (ECF No. 4.) On March 8, 2017, Plaintiffs filed an Amended Complaint,
rendering Defendant’s Motion moot. (ECF No. 6.) Plaintiffs’ Amended Complaint asserts two
claims against Defendant: breach of contract (Count I); and violation of the Pennsylvania Unfair
Trade Practices and Consumer Protection Law, 73 Pa. Stat. Ann. § 201-2(4)(xxi) (“UTPCPL”)
(Count II).

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On April 26, 2017, Plaintiffs filed the instant Motion to Amend the Amended Complaint.
(Pls.’ Mot., ECF No. 14.) Plaintiffs seek to add a bad faith claim to the Amended Complaint.
On May 5, 2017, Defendant filed a Response in Opposition to Plaintiffs’ Motion. (Def.’s Resp.,
ECF No. 15.)
II.

LEGAL STANDARD
Federal Rule of Civil Procedure 15(a) requires that leave to amend the pleadings be

granted freely “when justice so requires.” Fed. R. Civ. P. 15(a)(2); see also Long v. Wilson, 393
F.3d 390, 400 (3d Cir. 2004). However, “[t]he policy favoring liberal amendment of pleadings is
not . . . unbounded.” Dole v. Arco Chem. Co., 921 F.2d 484, 487 (3d Cir. 1990). A district court
may deny leave to amend a complaint where “it is apparent from the record that (1) the moving
party has demonstrated undue delay, bad faith or dilatory motives, (2) the amendment would be
futile, or (3) the amendment would prejudice the other party.” Lake v. Arnold, 232 F.3d 360, 373
(3d Cir. 2000) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).
III.

DISCUSSION
Defendant argues that Plaintiffs’ Motion should be denied because their proposed

amendment would be futile. “‘Futility’ means that the complaint, as amended, would fail to state
a claim upon which relief could be granted.” In re Burlington Coat Factory, 114 F.3d 1410,
1434 (3d Cir. 1997). “In assessing futility, the district court applies the same standard of legal
sufficiency as applies under Rule 12(b)(6).” Id. (citation and internal quotation marks omitted).
“Given the liberal standard for the amendment of pleadings, however, courts place a heavy
burden on opponents who wish to declare a proposed amendment futile.” Synthes, Inc. v.
Marotta, 281 F.R.D. 217, 229 (E.D. Pa. 2012) (citation and internal quotation marks omitted).
“If a proposed amendment is not clearly futile, then denial of leave to amend is improper.” Id.

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(citation omitted) (emphasis in original); see also Huffman v. Prudential Ins. Co. of Am., No. 105135, 2015 WL 4486676, at *6 (E.D. Pa. July 22, 2015) (allowing leave to amend because “the
amended complaint is not clearly futile”); Harris v. Steadman, 160 F. Supp. 3d 814, 817 (E.D.
Pa. 2016) (same); Cardone Indus., Inc. v. Honeywell Int’l, Inc., No. 13-4484, 2014 WL 3389112,
at *6 (E.D. Pa. July 11, 2014) (granting the motion because the claims are not “obviously
futile”). “[I]n determining whether the proposed amendment states a plausible claim, the court
must accept the facts alleged in the complaint as true and draw logical inferences in favor of the
plaintiff.” Harris, 160 F. Supp. 3d at 817 (citing ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3d
Cir. 1994)).
Plaintiffs seek to add a bad faith claim against Defendant pursuant to 42 Pa. Cons. Stat.
Ann. § 8371. “To recover under section 8371,” a plaintiff must allege that “the insurer did not
have a reasonable basis for denying benefits under the policy and [] the insurer knew or
recklessly disregarded its lack of reasonable basis in denying the claim.” Wolfe v. Allstate Prop.
& Cas. Ins. Co., 790 F.3d 487, 498 (3d Cir. 2015) (citation omitted); see also Toy v. Metro. Life
Ins. Co., 928 A.2d 186, 193 (Pa. 2007). Bad faith in insurance cases is defined as “any frivolous
or unfounded refusal to pay proceeds of a policy.” Mirarchi v. Seneca Specialty Ins. Co., 564 F.
App’x 652, 655 (3d Cir. 2014) (citations omitted). Moreover, “an action for bad faith may
extend to the insurer’s investigative practices.” Condio v. Erie Ins. Exch., 899 A.2d 1136, 1142
(Pa. Super. Ct. 2006) (citations omitted); see also Dagit v. Allstate Prop. and Cas. Ins. Co., No.
16-3843, 2017 WL 395489, at *5 (E.D. Pa. Jan. 30, 2017).
Here, Plaintiffs allege that Defendant: (1) did not provide a good faith reason for denying
Plaintiffs coverage, and (2) did not properly investigate Plaintiffs’ claim. In support, Plaintiffs
allege that Defendant simply refused to provide coverage for the damage to the detached garage

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without providing any justification for its denial. In addition, Plaintiffs allege that they provided
Defendant with two expert reports, statements related to the damage caused to the detached
garage, and photographic evidence of the damage. Plaintiffs contend that one of the expert
reports determined that the detached garage was damaged by the ice and snow from the storm.
Plaintiffs allege that Defendant ignored this evidence, and failed to properly investigate the
claim.
Plaintiffs also argue that Defendant acted in bad faith by failing to provide reasons for its
denial, despite “overwhelming evidence that it was a covered loss.” (SAC ¶ 14.) Plaintiffs
allege that the only justification Defendant provided for denying coverage was that Defendant
was unable to inspect debris from the garage. Plaintiffs allege a bad faith denial because they
provided Defendant with pictures of the damaged property and two separate expert reports.
Moreover, Plaintiffs allege that their actions were in compliance with the insurance policy,
which requires homeowners to make the necessary repairs needed in order to protect the
property.
Defendant makes several factual allegations to support its argument that Plaintiffs’ bad
faith claim would be futile. Defendant refers to several exhibits that it attached to its Response,
which include letters that Defendant sent to Plaintiffs. (See Def.’s Resp. Exs. D, E, F, G.) For
example, Defendant argues that it “provided detailed and explicit reasons for the denial of
coverage for the garage roof.” (Def.’s Resp. 15.) Defendant also argues that it offered to reinspect the property, but that Plaintiffs refused this offer. The Third Circuit has noted that “[t]o
evaluate futility, we apply the ‘same standard of legal sufficiency’ as would be applied to a
motion to dismiss under Rule 12(b)(6).” Maiden Creek Assocs., L.P. v. U.S. Dep’t of Transp.,
823 F.3d 184, 189 (3d Cir. 2016) (quoting Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000)).

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Applying this standard, the Maiden Creek Court held that “[a]s with [a] motion to dismiss,”
courts evaluating a motion to amend are able to “consider only the allegations contained in the
complaint, exhibits attached to the complaint, and matters of public record.” Id. (citation
omitted); see also Yah’Torah v. Hicks, No. 15-5501, 2016 WL 6909103, at *2 (D.N.J. Nov. 23,
2016) (“To evaluate futility, the Court uses the same standard of legal sufficiency as applied to a
motion to dismiss under Rule 12(b)(6), and considers only the pleading, exhibits attached to the
pleading, matters of public record, and undisputedly authentic documents if the party’s claims
are based upon same.” (citations and internal quotation marks omitted)). In the case of Pension
Benefit Guaranty Corporation v. White Consolidated Industries, Incorporated, 998 F.2d 1192,
1196 (3d Cir. 1993), the Third Circuit determined that “a court may consider an undisputedly
authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff’s
claims are based on the document.” Subsequent to the decision in Pension Benefit, the Third
Circuit also recognized that, in evaluating a motion to amend, district courts may consider “the
allegations of the [proposed amended complaint] along with the indisputably authentic
documents upon which the complaint was based.” Shine v. Bayonne Bd. of Educ., 633 F. App’x
820, 822-23 (3d Cir. 2015) (citing Pension Benefit, 998 F.3d at 1196). Defendant’s exhibits
were not attached to the Amended Complaint, and they are not matters of public record.
Furthermore, these documents are not undisputedly authentic. Therefore, we are unable to
consider the letters that Defendant refers to in the Response, and we cannot accept Defendant’s
disputed factual allegations in our analysis.
Accepting Plaintiffs’ allegations as true, we conclude that Plaintiffs’ bad faith claim
would not be completely futile. “The post-Twombly pleading standard ‘simply calls for enough
facts to raise a reasonable expectation that discovery will reveal evidence of the necessary

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element[s].’” Connelly v. Lane Constr. Corp., 809 F.3d 780, 789 (3d Cir. 2016) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)). Plaintiffs have alleged that Defendant
provided no reasonable justification for denying their claim, despite overwhelming evidence that
the claim should have been covered. Accordingly, at this juncture, the claim is not clearly futile,
and Plaintiffs’ Motion to Amend the Amended Complaint will be granted.
IV.

CONCLUSION
For the foregoing reasons, Plaintiffs’ Motion to Amend the Amended Complaint will be

granted. An appropriate Order follows.
BY THE COURT:

_________________________
R. BARCLAY SURRICK, J.

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