HOUTZ et al v. STATE FARM FIRE AND CASUALTY COMPANY
Filing
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MEMORANDUM AND/OR OPINION. SIGNED BY DISTRICT JUDGE JUAN R. SANCHEZ ON 10/23/2024. 10/23/2024 ENTERED AND COPIES E-MAILED.(sg)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
DENNIS HOUTZ and
NANCY HOUTZ
v.
STATE FARM FIRE AND CASUALTY
COMPANY
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CIVIL ACTION
No. 23-3579
MEMORANDUM
Judge Juan R. Sánchez
October 23, 2024
Plaintiffs Dennis and Nancy Houtz bring breach of contract and bad faith claims against
Defendant State Farm Fire and Casualty Company (“State Farm”) after State Farm rejected the
Houtzes’ request for an appraisal following a disputed loss amount. State Farm now moves to
dismiss the Houtzes’ Second Amended Complaint under Federal Rule of Civil Procedure 12(b)(6).
Despite multiple opportunities to amend their complaint, the Houtzes have failed to sufficiently
plead their claims. Accordingly, the Court grants the motion with prejudice.
BACKGROUND
On July 18, 2021, Dennis and Nancy Houtzes’ property—a home at 753 Claire Road
Warminster, PA—was damaged in a fire. Second Amend. Compl. ¶¶ 5-6. The Houtzes were
insured by State Farm at the time and provided notice to State Farm of their losses. Id. ¶¶ 5, 7.
State Farm accepted coverage of the loss and issued the first payment to the Houtzes in August
2021 based on an estimate provided by the Houtzes’ public adjuster. Id. ¶¶ 8-10. State Farm made
additional payments in September 2021 and March 2022. Id. ¶¶ 12-13. Roughly one year later, in
March 2023, Plaintiffs provided State Farm with an estimate for additional losses, for which State
Farm issued another payment in May 2023. Id. ¶¶ 25-26. The May 2023 payment led to a dispute
between the parties regarding the loss amount, prompting the Houtzes to seek an appraisal on July
13, 2023. Id. ¶¶ 27, 31. One day later, State Farm denied the appraisal request, claiming it was
time-barred by the policy’s suit limitation provision: “Suit Against Us. No action will be brought
against us unless there has been full compliance with all of the policy provisions. Any action by
any party must be started within one year after the date of loss or damage.” Id. ¶¶ 34-36. The
Houtzes now bring this case alleging breach of contract and bad faith claims against State Farm.
STANDARD OF REVIEW
A motion to dismiss tests whether a plaintiff has plead sufficient facts to plausibly entitle
the plaintiff to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). In analyzing a motion to dismiss, a court must (1) determine
the elements required to plead each claim, (2) identify which allegations are conclusory and
therefore, may not be accepted as true, and (3) assess whether the remaining, non-conclusory
allegations plausibly entitle the plaintiff to relief. Connelly v. Lane Const. Corp., 809 F.3d 780, 787
(3d Cir. 2016). A complaint survives a motion to dismiss if it “allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.
DISCUSSION
In their Second Amended Complaint, Plaintiffs Dennis and Nancy Houtz bring the same
two claims they have previously pled against State Farm: breach of contract (Count I) and bad
faith, in violation of 42 Pa. Const. Stat. § 8371 (Count II). Despite their amended pleadings, neither
claim is sufficiently pled to survive the motion to dismiss. The Court first addresses the breach of
contract claim, followed by the claim for bad faith.
The Houtzes bring a breach of contract claim for State Farm’s alleged failure to pay out
the full policy benefits to which Plaintiffs were entitled and for State Farm’s refusal to submit the
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dispute to appraisal. Plaintiffs’ breach of contract claim is time-barred by the suit limitation
provision, which the Court again finds to be enforceable. The claim is therefore dismissed.
Under Pennsylvania law, claims for breach of contract are governed by a four-year statute
of limitations. 42 Pa. Cons. Stat. § 5525. However, parties may contract to shorter limitations
periods if those periods are reasonable. Swan Caterers, Inc. v. Nationwide Mut. Fire Ins. Co., Civ.
No. 12-0024, 2012 WL 5508371, at *4 (E.D. Pa. Nov. 13, 2012); Com. v. Transamerica Ins. Co.,
341 A.2d 74, 76 (Pa. 1975) (“This Commonwealth has long recognized the validity of a policy
provision limiting the time of bringing suit under its terms . . .”). One-year suit limitation
provisions—such as the one at issue in this case—have repeatedly been found to be reasonable
under Pennsylvania law. See, e.g., Long v. Farmers New Century Ins. Co., 267 F. Supp. 3d 530,
534 (E.D. Pa. 2017) (“The validity of the one-year limitation of suit provision in fire insurance
policies has been consistently upheld by [Pennsylvania] courts.”); see also Prime Medica Assocs.
v. Valley Forge Ins. Co., 970 A.2d 1149, 1156 (Pa. Super. 2009) (collecting cases). Indeed, in the
context of fire insurance policies, Pennsylvania law requires insurers to adopt a one-year suit
limitation provision. See 40 P.S. § 636(2). In interpreting these provisions, courts have repeatedly
held that the limitations period begins to run from the date of loss. See, e.g., Long, 267 F. Supp. at
535; Blackwell v. Allstate Ins. Co., Civ No. 14–0878, 2014 WL 4375592, at *2-3 (E.D. Pa. Sept.
3, 2014); Warren v. State Farm Fire & Cas. Co., Civ. No. 23-3908, 2024 WL 3201663, at *3 (E.D.
Pa. June 26, 2024).
While generally enforceable, suit limitation provisions will not be enforced where the
insurer’s conduct constitutes waiver or estoppel, essentially indicating to the insured that the suit
limitation is no longer at play. Long, 267 F. Supp. at 534. Waiver arises “by express declaration
or else by conduct so inconsistent with the defense that there is no reasonable ground to infer that
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the insurer relies on the suit limitation defense.” Id. (citation omitted). Estoppel arises “if there is
clear and convincing evidence that the insurer induced the insured to justifiably rely, to the
insured’s detriment, on the insurer’s words or conduct reflecting a decision not to invoke the
defense.” Id. (citation omitted).
As set out in the Court’s previous opinion, the suit limitation provision is reasonable and
therefore, enforceable here. See ECF No. 12. Again, the Court finds that State Farm’s continued
adjustment of the Houtzes’ claim past the one-year mark does not constitute waiver nor estoppel,
especially considering that State Farm informed the Houtzes of the applicable suit limitation
provision as early as August 12, 2021—one month after the date of loss. ECF No. 15-5 at 2. In
their Second Amended Complaint, the Houtzes allege no new facts to indicate otherwise. They do,
however, now argue the suit limitation provision should not apply because it violates the Supreme
Court of Pennsylvania’s ruling in Erie Insurance Exchange v. Bristol, which held that the
limitations period for uninsured/underinsured motorist (UM/UIM) claims should begin to run at
the date of breach as opposed to the date of loss. 174 A.3d 578 (Pa. 2017). In relying on Bristol,
Plaintiffs argue the limitations period in this case should have started to run when the dispute first
arose—May 11, 2023—and not when the loss occurred—July 18, 2021. ECF No. 16 at 24-25. But
Bristol does not apply. The Supreme Court’s analysis in Bristol was limited to the specific context
of UM/UIM claims, animated by its own specific set of considerations. This Court finds no
justification to extend Bristol to a wholly separate context: a situation in which insured
homeowners are covered by a policy with an explicit suit limitation provision. This is especially
true given the well-established caselaw finding that in cases like this one, the limitations period
begins to run at the date of loss. Nor do the Houtzes offer the Court a compelling reason to diverge
from that caselaw, even noting at oral argument that no court has yet applied Bristol in this context.
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See ECF No. 21. The Court finds the suit limitation period in this case began to run at the date of
loss, July 18, 2021, and because the Houtzes filed the instant suit on August 14, 2023—more than
one year after the loss—their claim for breach of contract is time-barred and dismissed.
Next, the Court turns to Count II, in which the Houtzes allege State Farm acted in bad faith
by refusing to send the claim to appraisal and by failing to inform the Houtzes of the impending
suit limitation, in violation of the Unfair Claims Settlement Practices. Because the Houtzes do not
meet the pleading standard for bad faith, Count II will also be dismissed.
Every insurance contract is governed by the well-established duty of good faith. Berg v.
Nationwide Mut. Ins. Co., Inc., 235 A. 3d 1223, 1232 (Pa. 2020). Relief for bad faith insurance
dealings is afforded by 42 Pa. Const. Stat. § 8371, which permits a court to grant relief where the
insurer has acted in bad faith. 1 To demonstrate bad faith, a claimant must meet a two-part test,
showing: “(1) that the insurer had no reasonable basis for denying benefits under the policy and
(2) that the insurer knew or recklessly disregarded its lack of reasonable basis in denying the
claim.” Berg, 661 Pa. at 386 (quoting Rancosky v. Washington Nat’l Ins. Co., 170 A.3d 364, 377
(Pa. 2017). Bad faith also encompasses an insurer’s failure to communicate with the claimant and
properly investigate their claims, but not mere negligence nor bad judgment. Nelson v. State Farm
Fire & Cas. Co, No. 23-1793, 2024 WL 1132765, at *5 (3d Cir. Mar. 15, 2024). To establish a
bad faith claim, plaintiffs must put forward evidence that is “clear and convincing.” Rancosky, 170
A.3d 364, 377 (Pa. 2017). Such evidence must be “so clear, direct, weighty and convincing as to
enable a clear conviction, without hesitation about whether or not the defendants acted in bad
faith.” J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 367 (3d Cir. 2004) (citation omitted).
1
Claims for bad faith are not subject to contractual limitations periods and instead, carry their own
two-year statute of limitations period. Gold v. State Farm Fire & Cas. Co., 880 F. Supp. 2d 587,
594 n.6 (E.D. Pa. 2012). The Houtzes have pled within that two-year period.
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In their Second Amended Complaint, the Houtzes provide a long list of actions which they
argue demonstrate State Farm’s bad faith. Second Amend. Compl. ¶¶ 60-64. However, the bulk of
these allegations are conclusory. See Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009)
(conclusory allegations will not survive a motion to dismiss). For example, nowhere do the
Houtzes describe how State Farm “fail[ed] to complete a prompt and thorough investigation of
Plaintiff’s claim before representing that such claim is not covered under the Policy” nor how it
“conduct[ed] an unfair and unreasonable investigation of Plaintiff’s claim.” Second Amend.
Compl. ¶ 64.
The more central allegations of bad faith revolve around State Farm’s rejection of the
appraisal request based on the suit limitation provision and State Farm’s failure to inform the
Houtzes of the impending limitation. But these claims also do not entitle the Houtzes to relief. In
the prior opinion, this Court found that State Farm’s rejection of the appraisal request did not
amount to bad faith because State Farm did not lack a reasonable basis in doing so and, even if it
did, there was no showing that State Farm knew or recklessly disregarded its lack of reasonable
basis. See ECF No. 12 at 5-7. The Houtzes allege no new facts in their Second Amended Complaint
to change this analysis. The Houtzes do, however, raise a new bad faith claim against State Farm
for its alleged failure to inform them of the impending suit limitation provision in violation of the
Unfair Claims Settlement Practices (“UCSP”). Yet this claim also fails.
The UCSP sets forth minimum standards for settlement practices. 31 Pa. Code § 146.1. Of
its many protections, the UCSP requires insurers to provide notice to unrepresented claimants of
impending contractual or statutory time limits when an insurer seeks to continue settlement
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negotiations. 2 Courts across this Circuit have held that while a violation of these requirements may
support a claim for bad faith, a violation in of itself does not amount to bad faith per se. See, e.g.,
White v. Travelers Ins. Co., Civ. No. 20-2928, 2020 WL 7181217, at *4 (E.D. Pa. Dec. 7, 2020);
Pecko v. Allstate Ins. Co., Civ. No. 16-1988, 2016 WL 6614191, at *6 (E.D. Pa. Nov. 9, 2016);
Williams v. Hartford Cas. Ins. Co., 83 F. Supp. 2d 567, 576-77 (E.D. Pa. 2000); Gallatin Fuels,
Inc. v. Westchester Fire Ins. Co., 244 Fed.App’x. 424, 435 n.5 (3d Cir. 2007) (citing Romano v.
Nationwide Mut. Fire Ins. Co., 646 A.2d 1128, 1233 (Pa. Super. 1994)); Dinner v. U.S. Auto. Ass’n
Cas. Ins. Co., 29 F. App'x 823, 827 (3d Cir. 2002).
Setting aside that a UCSP violation alone is not enough to show bad faith, the provision
the Houtzes rely upon is also not applicable. First, the provision only applies where insurers seek
to “continue negotiations for settlement of a claim,” but there is no indication that State Farm
sought to continue negotiations with the Houtzes. Two time periods are relevant to this dispute:
(1) August 2021 to roughly March 2022 3 and (2) March 2023 onward. From August 2021 to
roughly March 2022, the parties were in the process of adjusting the Houtzes’ claim. See Second
Amend. Compl. ¶¶ 10-13. The Houtzes did not then reenter into communications with State Farm
until approximately March 2023, once the suit limitation had already run. Id. ¶ 25. The Houtzes
allege no facts to suggest that settlement negotiations were ongoing past March/April 2022, nor
that State Farm sought to continue them. Even assuming State Farm had continued settlement
2
The relevant provision reads: “Insurers may not continue negotiations for settlement of a claim
directly with a claimant who is neither an attorney nor represented by an attorney until the rights
of the claimant may be affected by a statute of limitations or a policy or contract time limit, without
giving the claimant written notice that the time limit may be expiring and may affect the rights of
the claimant. The notice shall be given to first-party claimants 30 days, and to third-party claimants
60 days, before the date on which the time limit may expire.” § 146.7(e).
3
At oral argument, Plaintiff’s counsel also noted there was communication between the parties in
April 2022. See ECF No. 21. Whether the communication between the parties ended in March
2022 or April 2022, the Court’s analysis remains the same.
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negotiations, the provision only applies where insurers are negotiating “directly with a claimant,”
whereas the Houtzes worked with a public adjuster, 4 a role not covered under the Act’s definition
of claimant. 31 Pa. Code § 146.2 (defining claimant as “a first-party claimant, a third-party
claimant, or both, and including the claimant's attorney and a member of the claimant's immediate
family designated by the claimant.”); see also Spagnolia v. Farmington Cas. Co., No. CV 12-2501,
2013 WL 12248093, at *5 (E.D. Pa. Apr. 30, 2013) (finding the provision did not apply where
plaintiffs had retained a public adjuster); c.f. Culbreth v. Lawrence J. Miller, Inc., 477 A.2d 491,
497-98 (Pa. Super. Ct. 1984) (“the public adjuster ... represents not the company but the insured”).
The invocation of the UCSP is unavailing and as a result, the Court also dismisses the Houtzes’
claim for bad faith.
CONCLUSION
Despite multiple opportunities to amend their Complaint, the Houtzes have failed to meet
the pleading standard for both their breach of contract and bad faith claims. Accordingly, the Court
dismisses both claims with prejudice.
An appropriate order follows.
BY THE COURT:
/s/ Juan R. Sánchez
Juan R. Sánchez, J.
4
See id. ¶ 10; ECF No. 14-3 at 2-5. At oral argument, Plaintiff’s counsel clarified that the Houtzes
worked with a public adjuster throughout the adjustment process, confirming the Court’s
understanding of the pleadings. See ECF No. 21.
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