RIEDI et al v. GEICO CASUALTY COMPANY

Filing 14

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE LAWRENCE F. STENGEL ON 7/11/2017. 7/11/2017 ENTERED AND COPIES E-MAILED.(sg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
WENDY RIEDI, et al.,
Plaintiffs,
v.

GEICO CASUALTY COMPANY,
Defendant.

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CIVIL ACTION

NO. 16-6139

MEMORANDUM
STENGEL, J.
I.

July 11, 2017

INTRODUCTION
This case arises out of a car accident involving Wendy Riedi and her son Cody

Chidsey. Ms. Riedi and Mr. Chidsey, the plaintiffs, filed a complaint against GEICO
Casualty Company after GEICO refused to pay them uninsured motorist (“UIM”)
benefits. GEICO filed a motion to dismiss the plaintiffs’ amended complaint. I will deny
the motion to dismiss.
II.

BACKGROUND
On June 28, 2016, Cody Chidsey purchased a 2010 Dodge Challenger from a car

dealership in Walnutport, Pennsylvania. Before picking up the car, Cody and his mother,
Wendy Riedi, contacted GEICO Casualty Company and requested to add the Dodge
Challenger to their pre-existing automobile insurance policy. A GEICO representative
told Cody and his mother that their insurance quote would be stored electronically and to
contact GEICO once they obtained the VIN number.
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After purchasing the Dodge Challenger, Cody and his mother (with Cody driving)
were travelling along Airport Road in East Allen Township, Pennsylvania. When they
came to the intersection of Airport Road and West Main Boulevard, their car was struck
by another car. The car that struck them was not insured.
Cody and his mother allege the accident was caused solely by the negligence of
the other driver who hit them. Both Cody and his mother suffered injuries as a result of
the accident. The Dodge Challenger suffered property damage.
After the accident, Cody and his mother notified GEICO of their intention to
pursue UIM benefits. They claim they fully complied with all the terms and conditions
required by the GEICO insurance policy. Cody and his mother seek UIM benefits and
property damage benefits in the amount of the policy limits. GEICO has refused to pay
Cody or his mother UIM benefits or property damage benefits.
Cody and his mother initiated this action by filing a complaint against GEICO in
the Court of Common Pleas of Philadelphia County. Thereafter, GEICO removed the
case to this Court based upon diversity of citizenship jurisdiction. The complaint sets
forth several claims against GEICO: (i) breach of contract for bodily injury and property
damage; (ii) bad faith pursuant to 42 Pa. C.S. § 8371; (iii) breach of contract for failure to
procure insurance; and (iv) negligence for failure to procure insurance.
I previously granted GEICO’s motion to dismiss the complaint in part. On May 1,
2017, the plaintiffs filed an amended complaint. GEICO moves to dismiss the plaintiffs’
amended bad faith, breach of contract, and procurement claims. In support of their
amended complaint, plaintiffs have attached a copy of an Automobile Insurance Policy
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issued to the plaintiffs by GEICO. (Doc. No. 11, Ex. A). This GEICO Policy states,
among other things, that GEICO agrees to insure any automobile owned by plaintiff(s)
“on the date of acquisition” and which plaintiff(s) “request [GEICO] to add . . . to the
policy within 30 days afterward.” (Id. at 10 ¶ 5(b)(ii)).
III.

LEGAL STANDARD
Under Rule 12(b)(6), a defendant bears the burden of demonstrating that the

plaintiff has not stated a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6);
see also Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In Bell Atlantic
Corp. v. Twombly, 550 U.S. 544 (2007), the United States Supreme Court recognized
that “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’
requires more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Id. at 555. Subsequently, in Ashcroft v. Iqbal, 556 U.S. 662
(2009), the Supreme Court defined a two-pronged approach to a court’s review of a
motion to dismiss. “First, the tenet that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not suffice.”
Id. at 678. Thus, while “Rule 8 marks a notable and generous departure from the hypertechnical, code-pleading regime of a prior era . . . it does not unlock the doors of
discovery for a plaintiff armed with nothing more than conclusions.” Id. at 678–79.
Second, the Supreme Court emphasized that “only a complaint that states a
plausible claim for relief survives a motion to dismiss.” Id. at 679. “Determining whether
a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a
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context-specific task that requires the reviewing court to draw on its judicial experience
and common sense.” Id. A complaint does not show an entitlement to relief when the
well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct. Id.; see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 232–34 (3d Cir.
2008) (holding that: (1) factual allegations of complaint must provide notice to defendant;
(2) complaint must allege facts suggestive of the proscribed conduct; and (3) the
complaint’s “‘factual allegations must be enough to raise a right to relief above the
speculative level.’” (quoting Twombly, 550 U.S. at 555)).
The basic tenets of the Rule 12(b)(6) standard of review have remained static.
Spence v. Brownsville Area Sch. Dist., No. Civ.A.08-626, 2008 WL 2779079, at *2
(W.D. Pa. July 15, 2008). The general rules of pleading still require only a short and
plain statement of the claim showing that the pleader is entitled to relief and need not
contain detailed factual allegations. Phillips, 515 F.3d at 233. Further, the court must
“accept all factual allegations in the complaint as true and view them in the light most
favorable to the plaintiff.” Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir.
2006). Finally, the court must “determine whether, under any reasonable reading of the
complaint, the plaintiff may be entitled to relief.” Pinkerton v. Roche Holdings Ltd., 292
F.3d 361, 374 n.7 (3d Cir. 2002).
IV.

DISCUSSION
GEICO argues the plaintiffs have failed to state a breach of contract claim. GEICO

also moves to dismiss plaintiffs’ failure to procure insurance and bad faith claims.

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A.

Breach of Contract

At this stage, the plaintiffs have plausibly stated a claim for breach of contract.
Accordingly, I will deny GEICO’s motion to dismiss Counts I, II, III, and IV.
A federal court sitting in diversity must apply the forum state’s substantive law.
Hunt v. U.S. Tobacco Co., 538 F.3d 217, 220 (3d Cir. 2008). Here, the parties agree that
Pennsylvania law applies to the breach of contract claims.
In order to make out a breach of contract claim under Pennsylvania law, the
plaintiff must establish: (1) the existence of a contract; (2) a breach of a duty imposed by
that contract; and (3) damages. First Sealord Surety v. Durkin & Devries Ins. Agency,
918 F. Supp. 2d 362, 386 (E.D. Pa. 2013) (citing Ware v. Rodale Press, Inc., 322 F.3d
218, 225 (3d Cir. 2003)). GEICO argues plaintiffs cannot establish the first element: the
existence of a contract. This is an issue that can only be resolved after discovery. Thus,
the motion to dismiss the contract claims must be denied.
Plaintiffs rely on a GEICO insurance policy issued to Wendy Riedi. (Doc. No. 11,
Ex. A) [hereinafter “GEICO Policy”]. This GEICO Policy also lists plaintiff Cody
Chidsey as an additional driver insured by the policy. (GEICO Policy at 1). According to
this policy, GEICO promises to “insure all private passenger autos, farm autos, utility
autos and trailers owned by you on the date of such acquisition and you request us to add
it to the policy within 30 days afterward.” (GEICO Policy at 10 ¶ 5(b)(ii) (emphasis in
original)). Plaintiffs allege that they requested the 2010 Dodge Challenger be added to the
GEICO Policy on June 28, 2016. (Am. Compl. ¶ 10). Accepting this allegation as true,
and based upon the plain language of the GEICO Policy, it appears that this “request”
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would trigger coverage thereby creating a contract between GEICO and the plaintiffs
with respect to the 2010 Dodge Challenger. See GEICO Policy at 10 ¶ 5(b)(ii).
For all these reasons, I will deny GEICO’s motion to dismiss the breach of
contract claims. 1
B.

Bad Faith Claims

Under Pennsylvania law, plaintiffs may recover interest, punitive damages, court
costs, and attorney’s fees if an insurer acts in bad faith in evaluating or handling a claim.
42 Pa. C.S. § 8371. In order to show bad faith, a plaintiff must prove by clear and
convincing evidence that: (1) the insurer lacked a reasonable basis for denying benefits;
and (2) the insurer knew or recklessly disregarded its lack of reasonable basis. Klinger v.
State Farm Mut. Auto. Ins. Co., 115 F.3d 230, 233 (3d Cir. 1997) (citing Terletsky v.
Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994)). A court
should examine the factors that the insurer relied on in evaluating a claim to determine
whether the insurer had a reasonable basis for denying benefits. Terletsky, 649 A.2d at
688–89. A bad faith claim is “fact specific” and depends upon the insured’s conduct in
connection with handling and evaluating a specific claim. Condio v. Erie Ins. Exch., 899
A.2d 1136, 1143 (Pa. Super. 2006).
To be sure, mere negligence or a lack of judgment does not constitute bad faith. Id.
However, an insurer’s reckless conduct can support a finding of bad faith. Polselli v.
Nationwide Mut. Fire Ins. Co., 23 F.3d 747, 751 (3d Cir. 1994). In making out a bad faith
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Of course, discovery may reveal the absence of a contract between the plaintiffs
and GEICO with respect to the vehicle at issue. However, at this early stage of the
litigation, plaintiffs have stated a claim for relief.
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claim, the plaintiff is not required to prove that an insurer’s delay in payment was
motivated by any improper purpose. Klinger, 115 F.3d at 233. However, in order to
survive a motion to dismiss, the plaintiff must provide supporting factual detail rather
than mere legal conclusions. E.g., Smith v. State Farm Mut. Auto. Ins. Co., 506 F. App’x
133 (3d Cir. 2012); Canizares v. Hartford Ins. Co., Civ. A. No. 16-1465, 2016 WL
3027766, at *2 (E.D. Pa. May 27, 2016); Mozzo v. Progressive Ins. Co., Civ. A. No. 145752, 2015 WL 56740, at *2–3 (E.D. Pa. Jan. 5, 2015); Atiyeh v. Nat’l Fire Ins. Co., 742
F. Supp. 2d 591, 599–600 (E.D. Pa. 2010).
The attachment of the GEICO Policy changes the landscape of plaintiffs’ bad faith
claims. Without the benefit of viewing the GEICO Policy, in considering GEICO’s first
motion to dismiss, it appeared that plaintiffs had no basis for claiming GEICO acted in
bad faith. However, the GEICO Policy expressly promises to insure the plaintiffs as long
as they request a car be added to the GEICO Policy within 30 days of acquiring the car.
(GEICO Policy at 10 ¶ 5(b)(ii). The plaintiffs allege they did just that; indeed, they allege
they requested the 2010 Dodge Challenger be added to the GEICO Policy the same exact
day it was purchased.
In light of this newly developed background, plaintiffs’ allegations as to GEICO’s
conduct with respect to their claim rises to the level of bad faith. Despite the GEICO
Policy that clearly provides coverage for any car requested to be added to the policy
within 30 days of acquisition, GEICO blatantly ignored the plaintiffs’ insurance claim
and physical injuries. (Am. Compl. ¶¶ 69, 73). For example, GEICO did not even inspect
the vehicle. The alleged actions—and lack thereof—on behalf of GEICO, in light of the
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GEICO Policy, make out a claim for bad faith. Simply put, an insurance company
ignoring its customer’s claim in the face of its own policy language clearly guaranteeing
coverage for the very claim at issue certainly forms the basis for a bad faith claim. Under
this scenario, assuming its truth, the insurer would have no reasonable basis for denying
benefits and would be recklessly disregarding its lack of a reasonable basis.
For all these reasons, I will deny GEICO’s motion to dismiss the plaintiffs’ bad
faith claims.
C.

Failure to Procure Insurance

Plaintiffs bring a breach of contract claim and negligence claim based upon
GEICO’s failure to procure an insurance policy for them. I will deny GEICO’s motion to
dismiss these claims.
In some situations, Pennsylvania law recognizes claims for failure to procure
insurance. Avondale Cut Rate, Inc. v. Assoc. Excess Underwriters, Inc., 178 A.2d 758,
760 (Pa. 1962). As expressed by the Pennsylvania Supreme Court:
[W]here an insurance agent or broker promises, or gives some affirmative
assurance, that he will procure or renew a policy of insurance under such
circumstances as to lull the ‘insured’ into the belief that such insurance has
been effected, the law will impose upon the broker or agent the obligation
to perform the duty which he has thus assumed.
Id. (alteration in original) (quoting Luther v. Coal Operators Cas. Co., 108 A.2d 691, 692
(Pa. 1954), overruled on other grounds by Jarvis v. WCAB, 441 A.2d 1189, 1190–91 (Pa.
1981)); see also Al’s Café, Inc v. Sanders Ins. Agency, 820 A.2d 745, 749 (Pa. Super. Ct.
2003) (“It has long been the law in this Commonwealth that an insurance agent or broker
has a duty not to misrepresent the coverage procured” (citing Luther, 108 A.2d at 692));
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St. Paul Surplus Lines Ins. Co. v. Fuhrman, Civ. A. No. 88-6209, 1989 WL 386, at *2
(E.D. Pa. Jan. 3, 1989) (recognizing breach of contract claim for failure to procure
insurance). Such a claim only arises, however, where the insurer’s agent makes
affirmative misrepresentations to undertake a duty to provide the insurance. Jarvis, 441
A.2d at 1190; Avondale, 178 A.2d at 760; Luther, 108 A.2d at 692–93.
I previously dismissed these claims because there was no allegation that GEICO
made any affirmative representations to provide insurance to the plaintiffs. With the
addition of the GEICO Policy, the opposite is now true. The GEICO Policy certainly
“gives some affirmative assurance” that insurance will be provided. (GEICO Policy at 10
¶ 5(b)(ii)). Plaintiffs allege this assurance was confirmed in its conversation with a
GEICO representative on the date of the accident. (Am. Compl. ¶¶ 10–12).
Accordingly, I will deny the motion to dismiss the plaintiffs’ claims that are based
upon GEICO’s failure to procure insurance.
V.

CONCLUSION
For all the foregoing reasons, I will deny GEICO’s motion to dismiss.
An appropriate Order follows.

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