Ridolfi v. State Farm Mutual Automobile Insurance Company
Filing
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MEMORANDUM OPINION (Order to follow as separate docket entry) re 23 First MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM filed by State Farm Mutual Automobile Insurance Company. Accordingly, for the foregoing reasons, the motion to dismiss the second amended complaint (Doc. 23.) will be DENIED.An appropriate form of order follows. Signed by Magistrate Judge Martin C. Carlson on March 24, 2016. (kjn)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
TRACEY RIDOLFI,
Plaintiff
v.
STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY,
Defendant
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Civil No. 1:15-CV-859
(Magistrate Judge Carlson)
MEMORANDUM OPINION
I.
Statement of Facts and of The Case
This case, which comes before us for consideration of a motion to dismiss filed
by the defendant, involves a dispute relating to a claim under an automobile insurance
policy, and began its life as an action filed in state court that was later removed to
federal court. The plaintiffs’ initial complaint, which was filed in the Court of
Common Pleas of York County, names State Farm Mutual Automobile Insurance
Company as the defendant and brings two legal claims against State Farm: a claim
of breach of an insurance contract between the parties; (Doc. 21, Count 2.), and a
companion claim of breach of a state statutory duty of good faith in investigating and
paying this insurance claim, violation of 42 Pa.C.S. §8371. (Doc. 21, Count 1.)
In support of these two legal claims, the plaintiffs’ second amended complaint,
the current operative pleading in this case, contains a detailed 48-page, 65 paragraph
factual recital, with accompanying exhibits. (Id., ¶¶1-65.) According to the second
amended complaint, the plaintiff was injured in a 2008 automobile accident and
pursued claims against both her own insurer, State Farm, and the insurance carrier for
the tortfeasor who struck her. Since August 2013, the plaintiff alleges that she has
been trying to resolve this insurance claim with State Farm. During this two and onehalf year period, Ridolfi alleges that State Farm has misstated its policy limits on at
least two occasions; made repeated, redundant and unnecessary requests for medical
records; ignored correspondence from the plaintiff and her counsel for months; and
attempted to improperly subpoena medical records of the plaintiff without providing
the plaintiff proper notice. (Id., ¶¶13-39.) The plaintiff alleges that this conduct
violates state insurance claims processing laws and regulations, (Id., ¶¶43-49), and
has led to months and years of delay in resolving this insurance claim.
Presented with this state court complaint, State Farm removed this action to
federal court, (Doc. 1.), and moved to dismiss Count I of the second amended
complaint which alleges a breach of a state statutory duty of good faith in
investigation and paying this insurance claim violation of 42 Pa.C.S. §8371 in its
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entirety, arguing that the complaint fails to state claim upon which relief may be
granted under 42 Pa.C.S. §8371.
This motion is fully briefed by the parties and is, therefore, ripe for resolution.
For the reasons set forth below, the motion to dismiss will be denied.
II.
Discussion
A.
Motion to Dismiss–Standard of Review
A motion to dismiss tests the legal sufficiency of a complaint. Rule 12(b)(6)
of the Federal Rule of Civil Procedure provides for the dismissal of a complaint, in
whole or in part, if the plaintiff fails to state a claim upon which relief can be granted.
The moving party bears the burden of showing that no claim has been stated, Hedges
v. United States, 404 F.3d 744, 750 (3d Cir. 2005), and dismissal is appropriate only
if, accepting all of the facts alleged in the complaint as true, the plaintiff has failed
to plead “enough facts to state a claim to relief that is plausible on its face,” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The facts alleged must be
sufficient to “raise a right to relief above the speculative level.” Twombly, 550 U.S.
544, 555. This requirement “calls for enough fact[s] to raise a reasonable expectation
that discovery will reveal evidence” of necessary elements of the plaintiff’s cause of
action. Id. at 556. Furthermore, in order to satisfy federal pleading requirements, the
plaintiff must “provide the grounds of his entitlement to relief,” which “requires more
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than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do. Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008)
(brackets and quotation marks omitted) (quoting Twombly, 550 U.S. at 555).
In practice, consideration of the legal sufficiency of a complaint entails a threestep analysis: “First, the court must ‘tak[e] note of the elements a plaintiff must plead
to state a claim.’ Iqbal, 129 S.Ct. at 1947. Second, the court should identify
allegations that, ‘because they are no more than conclusions, are not entitled to the
assumption of truth.’ Id. at 1950. Finally, ‘where there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement for relief.’ Id.” Santiago v. Warminster Tp., 629
F.3d 121, 130 (3d Cir. 2010).
As the court of appeals has observed: “The Supreme Court in Twombly set
forth the ‘plausibility’ standard for overcoming a motion to dismiss and refined this
approach in Iqbal. The plausibility standard requires the complaint to allege ‘enough
facts to state a claim to relief that is plausible on its face.’ Twombly, 550 U.S. at 570,
127 S.Ct. 1955. A complaint satisfies the plausibility standard when the factual
pleadings ‘allow[ ] the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.’ Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550
U.S. at 556, 127 S.Ct. 1955). This standard requires showing ‘more than a sheer
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possibility that a defendant has acted unlawfully.’ Id. A complaint which pleads
facts ‘merely consistent with’ a defendant's liability, [ ] ‘stops short of the line
between possibility and plausibility of “entitlement of relief.” ’ ” Burtch v. Milberg
Factors, Inc., 662 F.3d 212, 220-21 (3d Cir. 2011) cert. denied, 132 S. Ct. 1861, 182
L. Ed. 2d 644 (U.S. 2012).
In considering a motion to dismiss, the court generally relies on the complaint,
attached exhibits, and matters of public record. Sands v. McCormick, 502 F.3d 263,
268 (3d Cir. 2007). The court may also consider “undisputedly authentic document[s]
that a defendant attached as an exhibit to a motion to dismiss if the plaintiff’s claims
are based on the [attached] documents.” Pension Benefit Guar. Corp. v. White
Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Moreover, “documents whose
contents are alleged in the complaint and whose authenticity no party questions, but
which are not physically attached to the pleading, may be considered.” Pryor v. Nat’l
Collegiate Athletic Ass’n, 288 F.3d 548, 560 (3d Cir. 2002); see also, U.S. Express
Lines, Ltd. v. Higgins, 281 F.3d382, 388 (3d Cir. 2002) (holding that “[a]lthough a
district court may not consider matters extraneous to the pleadings, a document
integral to or explicitly relied upon in the complaint may be considered without
converting the motion to dismiss in one for summary judgment.”). However, the
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court may not rely on other parts of the record in determining a motion to dismiss.
Jordan v. Fox, Rothschild, O’Brien &Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).
B.
The Motion to Dismiss The Statutory Bad Faith Claim in Count I of
the Complaint in its Entirety is Denied
Pennsylvania law provides for a cause of action by insurance customers against
insurance companies that engage in bad faith claims handling, stating that: “In an
action arising under an insurance policy, if the court finds that the insurer has acted
in bad faith toward the insured, the court may take all of the following actions: (1)
Award interest on the amount of the claim from the date the claim was made by the
insured in an amount equal to the prime rate of interest plus 3%; (2) Award punitive
damages against the insurer; (3) Assess court costs and attorney fees against the
insurer.” 42 Pa. C. S. § 8371.
Under Pennsylvania law, “[b]ad faith is a frivolous or unfounded refusal to pay,
lack of investigation into the facts, or a failure to communicate with the insured. See
Coyne v. Allstate Ins. Co., 771 F.Supp. 673, 678 (E.D.Pa.1991) (bad faith is failure
to acknowledge or act promptly on the claims, or refusing to pay without reasonable
investigation of all available information); Romano v. Nationwide Mut. Fire Ins. Co.,
435 Pa.Super. 545, 646 A.2d 1228 (1994).” Frog, Switch & Mfg. Co., Inc. v.
Travelers Ins. Co., 193 F.3d 742, 751 (3d Cir. 1999). “Ultimately, in order to recover
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on a bad faith claim, the insured must prove: (1) that the insurer did not have a
reasonable basis for denying benefits under the policy; and (2) that the insurer knew
of or recklessly disregarded its lack of a reasonable basis in denying the claim.” Nw.
Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 137 (3d Cir. 2005). Case law sets
exacting standards for any bad faith claim. As the court of appeals has observed:
In the primary case construing bad faith under 42 Pa.C.S.A.
§ 8371, Terletsky v. Prudential Property & Casualty Co.,
the Superior Court of Pennsylvania explained:
“Bad faith” on [the] part of [an] insurer is any
frivolous or unfounded refusal to pay
proceeds of a policy; it is not necessary that
such refusal be fraudulent. For purposes of
an action against an insurer for failure to pay
a claim, such conduct imports a dishonest
purpose and means a breach of a known duty
(i.e., good faith and fair dealing), through
some motive of self-interest or ill will; mere
negligence or bad judgment is not bad faith.
437 Pa.Super. 108, 125, 649 A.2d 680, 688
(Pa.Super.Ct.1994) (quoting Black's Law Dictionary 139
(6th ed.1990)). Terletsky held that, “to recover under a
claim of bad faith,” the insured must show that the insurer
“did not have a reasonable basis for denying benefits under
the policy and that the insurer knew of or recklessly
disregarded its lack of reasonable basis in denying the
claim.” Id. Thus, an insurer may defeat a claim of bad
faith by showing that it had a reasonable basis for its
actions. Horowitz v. Federal Kemper Life Assurance Co.,
57 F.3d 300, 307 (3d Cir.1995). Our Court has described
“the essence of a bad faith claim” as “the unreasonable and
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intentional (or reckless) denial of benefits.” UPMC Health
Sys. v. Metro. Life. Ins. Co., 391 F.3d 497, 506 (3d Cir.2004).
Bad faith “must be proven by clear and convincing
evidence and not merely insinuated.” Terletsky, 649 A.2d
at 688 (collecting cases). As the District Court noted, this
heightened standard requires the insured to provide
evidence “so clear, direct, weighty and convincing as to
enable a clear conviction, without hesitation, about whether
or not the defendants acted in bad faith.” Bostick v. ITT
Hartford Grp., 56 F.Supp.2d 580, 587 (E.D.Pa.1999)
(citations omitted).
Amica Mut. Ins. Co. v. Fogel, 656 F.3d 167, 179 (3d Cir. 2011).
These same exacting standards apply to assessing the sufficiency of complaints
alleging bad faith claims under §8371. When considering whether a proposed
statutory bad faith claim under §8371 fails as a matter of law: “Many federal district
courts have recently been called upon to evaluate bad faith complaints in light of
Iqbal and Twombly. Under these Supreme Court decisions, plaintiffs must plead
sufficient facts to make out a plausible claim for relief against the defendant. See
Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 557). In the bad faith
context, district courts have required more than ‘conclusory’ or ‘bare-bones’
allegations that an insurance company acted in bad faith by listing a number of
generalized accusations without sufficient factual support. See e.g., Liberty Ins.
Corp. v. PGT Trucking, Inc., Civ. A. No. 11–151, 2011 WL 2552531, at *4 (W.D.Pa.
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Jun. 27, 2011); Pfister v. State Farm Fire & Cas. Co., Civ. A. No. 11–799, 2011 WL
3651349 (W.D.Pa. Aug. 18, 2011); Atiyeh, 742 F.Supp.2d at 599 (‘However, these
averments are merely conclusory legal statements and not factual averments.’).”
Palmisano v. State Farm Fire & Cas. Co., CIV.A. 12-886, 2012 WL 3595276 (W.D.
Pa. Aug. 20, 2012). See Yohn v. Nationwide Ins. Co., 1:13-CV-024, 2013 WL
2470963 (M.D. Pa. June 7, 2013)(collecting cases). Thus, the assessment of the
sufficiency of a particular complaint often turns on the specificity of the pleadings,
and calls for recital of specific factual allegations from which bad faith may be
inferred in order to defeat a motion to dismiss. Compare Sypeck v. State Farm Mut.
Auto. Ins. Co., 3:12-CV-324, 2012 WL 2239730 (M.D. Pa. June 15, 2012) with
Zimmerman v. State Farm Mut. Auto. Ins. Co., 3:11-CV-1341, 2011 WL 4840956
(M.D. Pa. Oct. 12, 2011). Where a complaint’s §8371 bad faith claim simply relies
upon breach of contract allegations, coupled with a conclusory assertion that the
failure to pay under an insurance policy was “unreasonable” or made in bad faith,
courts have dismissed such claims, but typically have afforded litigants an
opportunity to further amend and articulate their bad faith claims. See e.g., Wanat v.
State Farm Mut., Auto. Ins. Co., 4:13-CV-1366, 2014 WL 220811 (M.D. Pa. Jan. 21,
2014); Cacciavillano v. Nationwide Ins. Co. of Am., 3:12-CV-530, 2012 WL
2154214 (M.D. Pa. June 13, 2012).
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In its motion to dismiss, State Farm asserts that the plaintiffs’ complaint fails
to meet this exacting standard of pleading. However, at this stage of the proceedings,
where our review is cabined by the well-pleaded facts in the complaint, we are
constrained to disagree. In reaching this conclusion, we find that second amended
complaint, taken as a whole, goes well beyond a mere boilerplate recital of the
elements of the statute. Rather, as we construe the second amended complaint, it
provides a chronology detailing delays spanning more than a year in the resolution
of this claim, delays caused by a what the plaintiffs describe as an improper
investigation, coupled with an alleged lack of response by State Farm to numerous
legitimate requests for assistance and information from the plaintiffs. Ridolfi further
alleges that State Farm’s handling of this claim violates specific state insurance
claims processing laws and regulations, citing these statutory and regulatory
violations as further proof of bad faith. While State Farm vigorously disputes each
of these averments, and argues that the facts alleged by the plaintiffs may also be
construed to support a prudent effort on its part to thoroughly examine and resolve
a suspicious claim, these argument invites us to go beyond the pleadings themselves
and resolve essentially factual disputes concerning the proper inferences regarding
motive to draw from these disputed facts. This is a task which, in our view, may not
be performed on consideration of a motion to dismiss, where we must simply assess
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the adequacy of the pleadings. Rather, this task must await another day, another
proceeding, or another motion in the nature of a motion for summary judgment.
III.
Recommendation
Accordingly, for the foregoing reasons, the motion to dismiss the second
amended complaint (Doc. 23.) will be DENIED.
An appropriate form of order follows.
So ordered this 24th day of March 2016.
S/Martin C. Carlson
Martin C. Carlson
United States Magistrate Judge
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